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Budget Proposals And Economic Situation

Volume 463: debated on Monday 11 April 1949

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3.16 p.m.

I welcome the stark realism of the approach in the Chancellor's Budget speech to the economic and financial problems by which this country is confronted at the present time. As I listened to him last Wednesday I thought I discerned from time to time the echo, attenuated somewhat by the effluxion of time, of the things I myself have been saying in this House during the past three years. I am thinking, of course, of his reference to the necessity for hard work and disciplined action, to our position in regard to the development of the social services and, I need hardly add, the food subsidies.

Nevertheless, I should like to make it clear that this is not in all respects the Budget that I myself would have introduced had I been in the Chancellor's position. I think I should have left Death Duties severely alone after what was done in a previous Budget. I think I should have made, or tried to make, some substantial reduction in Purchase Tax, reflecting that reduction in action with regard to the food subsidies. I should certainly have given long and earnest consideration to the possibility of extending relief for earned income into the Surtax range, but I think I should have come to the conclusion that it would not be right to do that on this occasion. I welcome the repeal of the tax on bonus issues, a tax for which I thought there was never any adequate justification. I welcome the reduction of the Beer Duty and various miscellaneous reductions defended by the Chancellor on the score of simplification, but I think that in matters of taxation simplification can be carried too far because our tax structure must inevitably reflect in a considerable degree the complexities of our social and economic system.

I do not think that the principle of simplification should have been extended as proposed by the Chancellor into the sphere of Death Duties, already very high indeed. I think it was a mistake to get rid of the differentiation in favour of dispositions to near relatives. The maintenance of the structure of the family is something to which we should pay regard. In particular, in the case of businesses passing from father to son, the incidence of the Death Duties was already heavy and likely to produce embarrassing consequences not in the national interest. If there was in the view of the Chancellor still a margin of taxable capacity in the field of Death Duties, that margin should on grounds of principle have been preserved.

As regards the proposed increase in telephone charges, it was not clear to me from the Chancellor's lucid and obviously carefully considered speech, whether he regarded the increase he now proposes as in the nature of a tax or merely a reflection of increased costs. If he regards it as a tax, I think his proposal was mistaken. A tax on any instrument of progress deserves to be classed with the old hearth and window taxes which represented a primitive stage in our economy. I was myself once in the position of having to propose a tax on electricity. It was necessary to meet a serious financial situation in Bengal. I was not at all proud of having to propose that tax. The necessity for it was unfortunate, and the same considerations apply to the proposals of the Chancellor with regard to telephones.

I welcome wholeheartedly the step that the Chancellor has found it possible to take in developing a proposal that I made myself four years ago for giving some relief to industry in building up capital. The increase of the initial allowance from 20 per cent. to 40 per cent. is fully justified in present circumstances. A logical case could have been made out for going much further. The difficulty that I have always seen was in doing anything of that kind without unfair discrimination between one form of capital and another, and I have never been able to see a satisfactory method by which industrialists could be permitted to replace their plant and equipment at the much higher level of cost now prevalent out of untaxed income without introducing the unfair discrimination between one form of capital and another to which I have referred.

I am glad, however, that the Chancellor has seen fit to initiate an inquiry into the question of the incidence of direct taxation on the resources of industrial firms. I hope that in the reference to the proposed committee of inquiry he will see that no undue limitation is placed upon those to whom the inquiry is to be entrusted. In that connection I would refer in passing to what I think is a mistaken trend in revenue administration. Last year the Chancellor, confronted by what were admittedly grave abuses that had grown up, declared his intention of seeing that the benefits brought within the scope of taxation in the case of directors and high officials of industrial firms were extended to cover "disbursements for the benefit" of directors and others. As I have said, there were undoubtedly grave abuses that needed to be checked, but I am inclined to think that the Revenue authorities are now going too far. I have in the Port of London Authority a rather special problem with which I do not intend to trouble the Committee. I have put the arguments to the Revenue authorities, and I understand that they have been or are being passed to the Chancellor, and I hope he will consider them.

However, I want to say a word on the general question. I am referring in particular to such benefits as luncheons, and so on, that are provided in canteens or otherwise. The old rule, based on sound practical considerations, was that the Revenue authorities took no account of such benefits in kind, and the justification for that rule was that the practical difficulties of evaluating in a vast range of differing circumstances the precise amount at which such benefits were to be assessed, made the task simply not worth while. That experience will be repeated in the future if the practice of the authorities continues on what seem to be the present lines. It is not possible to make a satisfactory job of such an evaluation. If benefits are provided in return for a payment, how can the Revenue authorities make themselves responsible for determining whether the payment made is, in all the circumstances, reasonable or not? There is no clear or certain guide. The cost to the provider is obviously not a basis. The proper basis, I am sure the Chancellor would agree, is the value to the recipient, but how can that be arrived at?

My own view would be that a much simpler device should be adopted than that which is now apparently being applied, namely, that one should leave out of consideration altogether any provision made in an industrial canteen, or under some arrangement of an equivalent character, because it is very much in the interests of the efficiency of industry that the taking of meals close to the place of work should be given every possible encouragement. At the present time the inquisitorial processes that are likely to be involved can only cause a feeling of exasperation, can only tend to create a gulf between the honest taxpayer and the Revenue authorities, and it is of vital importance in the administration of a complicated tax like the Income Tax that the goodwill of respectable taxpayers should be secured by the Revenue authorities. That should be constantly kept in view.

In that connection I would ask the Chancellor whether he could give any indication of the condition of the work in the Inland Revenue Department? Is it or is it not the case that many assessments involving large sums are left unsettled because the inspectors are too heavily burdened with detail to get down to these matters? I think it quite likely. I do not speak from exact knowledge because, for obvious reasons, I do not attempt to discuss these matters with my former colleagues in the Inland Revenue. However, I cannot help thinking that there may be considerable arrears involving large sums of money. I ask the Chancellor to believe that I speak with every desire to see abuses checked wherever there are abuses. I am very much concerned about the efficiency of that splendid Department the Board of Inland Revenue, to which I went, I recall, as chairman as long as 30 years ago. That is all that I have to say on the Budget itself.

There are various matters of detail into which I do not think it necessary to enter, but I should like, in the very short period for which I shall detain the Committee, to refer to the general economic situation, to which the Chancellor rightly devoted so large a part of his speech. I shall not go into detail, however, because I want to leave adequate scope to my right hon. Friend the Member for Aldershot (Mr. Lyttelton), who will be speaking in the Debate tomorrow. We are all agreed, I think, that in these days it is necessary to look at the Budget, not in isolation, as used to be our happy position, but in its setting in the general economy of the country. I think we are also agreed that it is necessary to look at the Budget, not in respect of one year alone, as used to be the case, but to go beyond the limits of a single year. It is here that I have my main criticism to offer of the Chancellor's presentation of his case.

The right hon. and learned Gentleman rightly emphasised in his speech that, great though the progress recorded in the economic White Paper has been, we still have a very long way to go before our finance and our economy can be considered to be in a satisfactory position. But if we look beyond the limits of this financial year, certainly no very attractive prospect is held out to our taxpayers and citizens. What is the prospect as outlined by the Chancellor? Hard work, certainly; apparently, no hope of substantial tax relief in the foreseeable future, because it would seem that all potential relief must be hypothecated to sustain the developing social services. Surely, that is much too gloomy a picture. Relief from the present crippling tax burden is essential, in my view and in the view of many others, to maintain the productivity of our industry at whatever level we may succeed in reaching during the next year or two. It is, I submit, equally necessary to restore a margin of taxable capacity. I believe we are the only country in the world lacking at the present time any such margin, a margin which is essential, not only to national and international credit, but also to national security.

Let us look again at the picture presented by the economic White Paper. The Chancellor very rightly stresses the progress—the remarkable progress—that has been made in 1948 as compared with 1947, although there were, as has been pointed out, exceptional features in 1947. That should be a source, not only of satisfaction, but of encouragement for the future. We have a long way to go, and the outlook may well be grim if we are content merely to go on as we have been going. There are too many people in this country still sunning themselves in the fool's paradise into which they were led in the first flush of enthusiasm at the advent to power of a Socialist Government. The Chancellor used, in that connection, some significant words, words that were obviously very carefully chosen, and I shall, therefore, quote them. He said this:
"We must…moderate the speed of our advance in the extended application of the existing Social Services to our progressive ability to pay for them by an increase in our national income."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2092.]
How much better it would have been if that lesson had been driven home two and a half or three years ago. I said much the same thing repeatedly, and no notice was taken. [An HON. MEMBER: "Too hasty."] I said, "Too hasty"—out of keeping with the development of our economy, out of keeping with our progressive ability to pay for what we were promised. Not only was no notice taken, but a great structure of misrepresentation was based on what I had to say. [An HON. MEMBER: "Why not repeat it?"] I am not going to trouble the Committee, but I have here what I said, for example, in August, 1947. I have also the comment—the very unfair comment—in a document entitled, "The A B C of the Crisis, price 2d." Compare what is in that with what, in fact, I said.

Would the right hon. Gentleman allow me? I intervene only because of the charge of misrepresentation. I thought I heard the right hon. Gentleman say only a minute ago that what the Chancellor of the Exchequer said last week he said three years ago. Are we to infer from that that if the right hon. Gentleman had been listened to, or if he had been Chancellor, three years ago, the rate of advance in social services would have been slower; and is not that the misrepresentation of which he complains?

No. The misrepresentation is not encompassed within a single sentence. It is a colossal edifice of misrepresentations, and the inference is not what the hon. Gentleman draws. The inference is this: that if what I said two or three years ago had been said by the party opposite and rubbed in, then our economy would have been in a very much better position today to sustain the burden.

We should not have allowed things to get completely out of hand. [Interruption.] I can understand hon. Gentlemen opposite feeling a little uncomfortable. I do not want to rub it in.

The right hon. Gentleman talks of misrepresentations, then evades the point.

I do not evade it. I say, compare what I said in 1947 with what is in that leaflet.

To come to the question of social services. Do not let us exaggerate. May I remind the Committee, and the hon. Member for Nelson and Colne (Mr. S. Silverman) in particular, what I myself said about the social services? I was asked on one occasion when I was Chancellor of the Exchequer, shortly before I ceased to be Chancellor, whether I was satisfied that we could afford the social services. I said that I had come to the conclusion that we could not afford not to have them. Let us look at the picture in relation to what has been said by the Chancellor of the Exchequer, with which I agree. Much of the heavy expenditure on social services comes back in one form or another very quickly in direct and indirect taxation. That has to be set against the burden. On a long view the improved standard of health and education resulting from the development of the social services ought to increase enormously our productive efficiency as a community.

There is so far very little sign of it. If that were not true, the policy of social security, demanded, as the Chancellor said, by all parties—he said "by all parties"—would stand condemned as economically unsound.

You went ahead too fast and, instead of developing the social services and building up the economy of the country stage by stage, you concentrated everything on measures of heavily increased expenditure without attending to the pre-requisite of a sound economy. Moreover, in addition to the benefits we may expect to get from improved development of the social services over a period of time, there is all the vast expenditure which is to be incurred, that has been incurred and is now being incurred on research and re-equipment in industry. There are vast sums being spent year by year on capital development in industry although, personally, I am rather inclined to doubt whether the amount which goes into genuine development is quite as high, or nearly as high, as the economic White Paper would seem to suggest. So much is going in mere replacement at an increased level of cost, so much going to finance stocks which have to be held on a high level, stocks the increased value of which is reckoned as profit for the purposes of taxation, which in itself is a very serious matter. However that may be, the hon. Member asks if we are not seeing the benefit already. I do not know whether we can see it as yet. If one takes such an industry as coal, has re-organisation, has the vast expenditure on mechanisation as yet produced anything but pitifully inadequate results?

I do not pretend to be an expert on coal, but I thought it was agreed that the British coalminer today was producing 100 per cent. per man-shift production as compared with production before the war and that he was the only miner in the world who was doing so.

My point is that 100 per cent. is nothing like sufficient. It is not 100 per cent. increase, but 100 per cent. of the old pre-war level. Does that reflect improved service? Does that reflect the natural result of the enormous expenditure on development, mechanisation and organisation?

The right hon. Gentleman is very courteous indeed in giving way again. If we have an overall picture in which there is no miner in the world who is producing 100 per cent. of what he produced in 1938 per man-shift, and if into that picture one inserts the picture of the British miner, who alone in the world is doing that, does not that show that there has been a greater improvement here than anywhere else in the world?

I am told that the pre-war production in coal was 300 tons per man year and that now it is 270 tons. I mentioned coal by way of illustration, but we find the same thing elsewhere. If hon. Members are interested, they might inform themselves as to the results of an experiment, the first of its kind, in bringing into this country a ship laden with sugar in bulk to be handled mechanically. Hon. Members who look into that will see the kind of thing I have in mind. We must get rid of that kind of obstruction to improved methods of handling cargoes and carrying out industrial processes.

However, I have made the point I sought to make and I do not wish to detain the Committee unduly because I think the best contribution I can make—and I am not likely to have many further opportunities of contributing to Debates of this kind—is to bring out a few salient points. That is all I have tried to do and all I intend to do. I wish to declare however here and now my belief that if our affairs are wisely directed by the Government and by the community—and this is not only a matter for Governments, the community as a whole comes in—if the Government give the guidance which so far has been so sadly lacking and provide the framework within which the high qualities which our people undoubtedly possess can display themselves to advantage, we shall triumph over all our difficulties and emerge strong, prosperous and contented at no very distant date.

3.46 p.m.

Before coming to the Chancellor's Budget statement, it is only right that I should endeavour to follow the speech of the right hon. Member for the Scottish Universities (Sir J. Anderson). The House always listens with very great respect to the right hon. Gentleman who, not only has been Chancellor of the Exchequer, but has also occupied the responsible post of head of the Inland Revenue. I listened today to the alternative which the right hon. Gentleman, with experience in both capacities, would suggest to the statement made by the Chancellor, but, frankly, I was disappointed.

One realises that on these occasions one deals rather cursorily with the statement and reserves the main points for the Finance Bill. But so far as I could gather, the first thing the right hon. Gentleman regretted was tampering with the Death Duties. I cannot possibly share the mourning of the right hon. Gentleman with regard to Death Duties. There is only one suggestion I would make to the Chancellor of the Exchequer. I quite agree that the time had come to abolish this distinction in Legacy Duty, Succession Duty, and Estate Duty. But I was hoping that he would say he would abolish Estate Duty and Succession Duty and make it all a Legacy Duty. This was the first effort at getting a redistribution of income and I should have thought that having a graded amount according to the amount of the legacy, would have led to a better distribution than having one duty on the whole estate, as the right hon. and learned Gentleman proposes. However, that is a matter we can discuss later.

I was rather surprised to find the right hon. Gentleman welcoming—it may be due to his new and present associates—the lessening by one penny a pint of the duty on beer. I should have thought that with his experience he would have said, "I would prefer to maintain the duty on beer, but I would lower the duties which fall on the family in regard to matters which are more necessitous than beer." But, sitting as he does on the Conservative Front Bench, I am not a bit surprised that he has taken this line. When he came to Income Tax and Supertax—

I am very interested in what the right hon. and learned Gentleman is saying. What duties has he in mind?

I shall come to that. I have only just started my speech. I do not know how long the hon. and learned Member has been present, but, if he is objecting to the way I am trying to deal with the right hon. Gentleman, he will have opportunities later, I am sure. Turning to Income Tax and Super Tax all that the right hon. Gentleman could say was that he would give long and very serious consideration to the matter, but apparently, after having given that long and serious consideration, he would not do anything more in regard to it than the present Chancellor has done.

I did agree with the right hon. Gentleman's strictures upon what the Chancellor is proposing in regard to telephone charges. That is a retrograde step which I hope the Chancellor will reconsider either before he introduces the Finance Bill or during our consideration of that Bill. This increase will fall upon a method of communication which has become essential today not only for business but also in a part of the country that will be taxed most heavily, namely the rural areas. However, that is a matter with which we can deal much more fully when we consider the Finance Bill.

I wish again to congratulate the Chancellor on his Budget speech, which I do warmly and sincerely. It was indeed a masterly statement, quite outstanding even among the great speeches which we have learned to expect and have heard him deliver in this House. It was a clear presentation of the economic position of the country. I am glad that the Chancellor has followed the precedent which he established last year. The right hon. Member for the Scottish Universities had the opportunity when he was Chancellor of the Exchequer but he did not take that opportunity. I think that from now on that precedent must be followed by every Chancellor of the Exchequer. I mean that in presenting his Budget he does not limit himself as of old to the narrow question of the ways and means of providing the money required to meet the supplies voted by this House but rather reviews the economic position of the country as a whole and presents his Budget in the setting of the national economic position. That gives me particular pleasure because I was advocating it about nine years ago. It ought to have been done certainly during 1945–46. It has become absolutely necessary today when the Government of the day are playing such an important port not only in the affairs of the nation as a whole but in the conduct of everyday business and even in the affairs of the household.

Like the right hon. Gentleman, I congratulate the Chancellor upon a number of his warnings and, if I may so call them, copy-book axioms. I would refer now to only one of them—that we have to face our economic and financial problems with realism, and must not allow ourselves to be carried away by the quite understandable desire to court electoral popularity. That is an axiom which all of us, without exception, on all sides of the House might take to heart. How right the Chancellor was in calling attention to the undoubted fact—and I shall have to refer to this matter later—that this House has not been exercising to the proper degree its traditional role of carefully scrutinising and checking expenditure, and so defending the taxpayer against, as he so rightly described it, the rapacity of the Executive.

We have become much too complaisant. Figures have reached such astronomical heights that tens of millions and hundreds of millions convey too little to us, and we vote away the taxpayers' money almost complacently. It is the duty of the House, and indeed of every individual Member, not only to scrutinise these accounts and this expenditure, but also to see that the taxpayer is getting real value for the money which we vote.

Turning to the economic position as a whole, we can once again claim that the country has shown amazing resilience, great adaptability, good management and—again I rather differ from the right hon. Gentleman's suggestion—tremendous work and great energy. Not only has it met the enormous calls upon it in importing the vast imports which are required in increasing amounts year by year as the population is growing and the standard of life throughout has to be maintained and even improved—vast and increasing quantities of food and raw materials; it has nearly managed to pay for them by its own exports. It is succeeding not only in this way, but at the same time it has clamped down upon the dangerous pressure of inflation. It has also succeeded in redeeming the National Debt to an extent never before known. At the same time, we have been able to finance social benefits which in themselves amount to far and away more than the total Budget of a few years before the last war. That is a remarkable achievement.

A position has therefore been gained which is fairly satisfactory but still precarious. It has been gained as the result of immense, continuous and sustained effort. The question now is, and I think this is the one which the Chancellor was really putting: Can we maintain that position which has been so hardly won? The undoubted answer is that we can; what is more we should, and further, we must. Otherwise we shall deserve the harshest censure not only of this generation but of the generations which come after us.

I see no reason whatever for the almost impenetrable gloom which seems to surround the hon. Member for Chippenham (Mr. Eccles). Not much is to be gained by comparing the present Budget, still less the present economic position of the country, with the past, when certain canons of taxation could be laid down as guides to Chancellors of the Exchequer. In the old days supplies were voted in the House in the main to meet the expenditure of the Armed Forces and the ordinary administration. Prior to 1909 little attempt was made—with the exception of the Death Duties introduced in 1894 by Sir William Harcourt—to redistribute income. True, Income Tax was not levied on the lower income grades, but throughout that period they were called upon to make quite a heavy contribution in indirect taxation.

It was the Budget of 1909 which really marked the turning-point, and the Conservatives of that time showed remarkable prescience in realising that that was the danger point. They put up every objection they possibly could to that Budget in this House, and even used the other place in order to create a veto. That Budget really began the new era of the redistribution of wealth, taking money out of the pockets of some who could afford it and making it available to those who had not had it. That process has since then been continued by every Government of every party. That process has come to stay, and there is no going back on it. There can and must be, however, as the Chancellor has said, a limit to what can be done in this respect. Even the right hon. Gentleman the Member for the Scottish Universities seems to agree upon that.

The right hon. and learned Gentleman has said that this process has come to stay. "Process" means something which is continuing. Does the right hon. and learned Gentleman mean by his argument that it is to continue or that it has to come to an end?

It has come to stay in this respect, that the Budget will now always be used, as a matter of principle, for the redistribution of income. That will not stop. What can stop is the extent to which it can be used, and in support of what the Chancellor has in mind I would quote from him:

"…the redistribution of income today which is entailed in the payment of social services, already falls to a considerable extent upon those who are the recipients of those services."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2091.]
To that extent, the process is not a true redistribution of income among the people. It is merely taking money out of an individual's pocket and giving part of it back to the same individual in another form.

I do not see that the hon. and gallant Gentleman shows much sign of pauperisation at the present moment.

I am much obliged to the right hon. and learned Gentleman for his personal remark to me. He suggested that because these people are receiving those benefits now, and have to pay for them, the benefits should be rescinded. I say it is pauperising the community of this country.

The hon. and gallant Member was not listening to me. What I was suggesting was that if one is receiving back part of the money taken away from one in another form, that is not true redistribution of income. It really means that the Government have taken upon themselves the position of knowing better than the individual how the money should be spent. It is this process which today partly accounts for the fact that the total taxation, national and local, is now more than 40 per cent. of the national income. That is undoubtedly a very high ratio. In my opinion it is too high, and ought to be reduced. I gather that is also the view of the Chancellor, otherwise he would not have put so much emphasis on the need for increased production, increased national wealth and increased national income, so that if this increase in expenditure remains the same then the ratio is reduced. That, of course, is a truism, but I also understand that is what the Chancellor is aiming at. He is quite right in saying that this ratio can only be reduced in one of two ways, either by reducing the expenditure or by increasing the national income.

I listened carefully to the criticisms of the right hon. Member for the Scottish Universities, but I do not gather yet whether he is prepared to make substantial cuts in the high amounts on the expenditure side today. That was what was being put to him by the hon. Member for Nelson and Colne (Mr. S. Silverman) and I gather that we did not get a definite answer.

Oh, yes, we did. I am grateful to the right hon. Gentleman. In the end he gave me—under some pressure I admit—a very clear answer. He said that in social services the Government had gone ahead too far, which, of course, is an admission that he would have gone slower.

May I take the bigger items one by one? The first big item is the National Debt. I do not suppose that there is anyone, certainly not the right hon. Gentleman, who would make a cut or refuse to pay interest on the National Debt. That is a matter which can be dealt with only over a series of years, and dealt with gradually. Another big item is the money, amounting to over £700 million, for defence. Would the right hon. Gentleman make any cut in that? I should have thought that at a time like this, when our very liberties are being threatened, we have, whether we like it or not, to maintain our position with regard to defence. The only point I would make is that the money should be spent on the best methods to get the most efficient defences, not only for our own part, but for the part we have to play with the other free nations.

I come now to the national services such as housing and education. I gather that the right hon. Gentleman said that the whole purpose of these is that with better education, better health and conditions everywhere, in course of time—and that not a very long time—we ought to have better production and a further increase in the national wealth and income. Would the right hon. Gentleman now say that he would cut any one of those at the present moment? As the Chancellor and every hon. Member of this Committee knows, there are certain people with low incomes who are finding it very difficult to make both ends meet; especially the pensioners, whether they be war pensioners, disability pensioners or old age pensioners. Instead of a cut in that expenditure there is a general demand that it should be increased, and so I cannot see that it can be lowered in any way. I am not going through all the items; it would be wrong to do so. Those are the main items. I shall come to the food subsidies.

Before I deal with them I wish to draw the attention of the Chancellor to one statement which he made. He said:
"There are, of course, economies that we can make, and are making, in our administration…But these economies are, in the main, in terms of fractions of a million, whereas the new expenditure…as regards social services increases by tens of millions."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2091.]
Of course, the social services increase by tens of millions, but I do not believe that economies in administration will amount only to fractions of millions. Here again, I would remind the Committee, is the very matter to which the Chancellor referred earlier, and to which I referred earlier, the duty of hon. Members of this House. I believe that many millions, and not fractions, can be saved by better administration. It is the duty of hon. Members of this House to see that those economies are made effective. That is why we were asking in 1945 and again in 1946 for the appointment of a committee of hon. Members of this House to deal with national expenditure.

The Public Accounts Committee deals with a matter something like two years or at least 12 months after the money has been spent. There should be, as there was during the war, although that was not wholly effective—a committee of hon. Members of this House to go into these matters with care. It is our duty as the Chancellor rightly said, to protect the taxpayer, and I am quite certain that there is not one of us in this House who has not come across, not one, but many instances from time to time of sheer waste which would not be tolerated in any private business, or which, if tolerated, would result in the bankruptcy of any private individual.

Would the right hon. and learned Gentleman say in what way his proposal differs from the existing Estimates Committee?

Certainly, Sir. The Estimates Committee merely consider the amount it is proposed that shall be spent, that the Department is asking for—

The old Estimates Committee was exactly what the right hon. and learned Gentleman said, practically a farce. But the new Estimates Committee has actually taken over the duties of a national committee on public expenditure. One melancholy thing—looked at from the point of view of saving—is that the extravagance we do find is extraordinarily small. As an old member of the Public Accounts Committee, I am not very hopeful that a very great saving will come from the most minute examination.

That is where I differ from the hon. Member. I am obliged for his correction with regard to the Estimates Committee. I agree with him that the old one was a complete farce and hopeless, and that is why we reported against it when we were sitting on the Select Committee. But there was a Public Accounts Committee sitting during the war. It was nothing like so effective as the committee appointed by this House to inquire into expenditure and the way in which things were being conducted. But I am quite sure that the mere creation of such a committee would lead at once to the tightening up of methods of administration, and might lead to very considerable saving.

I come to the question of food subsidies. I say at once that I dislike sub- sidies as such. Too often they are a premium upon inefficiency, and give unnecessary extra money and profits to the efficient. Food subsidies were introduced during the war as a sort of palliative, temporary and immediate, for dealing with the rapidly rising costs of living, particularly of food. Subsidies were introduced in the case of food because at that time we were a beleaguered nation. Food had to be purchased from abroad for three-fifths of the population and it was being done through a Government Department.

It was felt that an easy way of dealing with the matter was to allow subsidies to maintain the prices at a lower figure than the cost to the Government and thereby induce the wage-earner not to ask for increased wages. That was never a sound remedy. I remind hon. Members who are objecting to this method being tampered with, that it was not a method of redistributing wealth in the properly understood meaning of that term. Those who do not require it, benefit from this. Not only do the poor and the wage-earners benefit, but so also do the wealthy and the salaried. They also benefit from cheaper food.

When the subsidies were first introduced, it was at a figure of £65 million. That went up in 1945–46 to £265 million. Now, if the Chancellor had not called a halt, it would have gone up to £568 million. As he says, if food prices continue to go up, we might be reduced to the dreadful position that we shall have to stop importing because we cannot afford to pay for the various commodities. That is the position. But once subsidies are granted, it would be absolutely wrong to do away with them overnight. One can grant subsidies overnight, but one cannot take them away overnight without causing immense and even agonising distress.

I should like to discuss the question of who pays for these subsidies. One of the mistakes made by the Treasury is to look upon the individual taxpayer as the unit. The truth is that the family is the unit. If the Treasury looked at the matter in that way we should get a truer picture of what is happening. The family is being taxed today to provide the subsidies. The Duty upon tobacco amounted to more than £568 million. My recollection is that tobacco brought in £620 million and beer brought in £250 million. What does that really mean? It means that out of his wages a wage earner, who is modest in his requirements of tobacco and beer, is giving less to his wife by the amount of the duties for her to do her budgeting for her household. That is far and away more than the amount which comes back in food subsidies. Again, when she gets that depreciated amount of wages, not only has she to provide food, but she has to purchase a great number of items for the family which are subject to Purchase Tax.

Therefore, all the time, the family is contributing far more in duties than it receives in subsidies. This is one of the reasons why we are finding now that taxation amounts to 40 per cent. of the national income, because there is the great sum of £500 million—or in this Budget something over £450 million—added on the expenditure side. The Chancellor of the Exchequer is interfering with the family budget. He says that he is far better capable of dealing with the family budget than is the wife herself.

Surely, this argument is only valid on an assumption which is not true, namely that the product of the tobacco and beer duties is allocated to the food subsidies. If the right hon. and learned Gentleman will now make a comparison not between tobacco and beer duties on the one hand and food subsidies on the other, but between Income Tax and food subsidies, he will find himself telling a very different story.

The hon. Member has not followed me. All these are pooled in the amount of taxation. I am pointing out that apart from this, usually when one is taxing, it is done for services such as the Defence Services, and one is not paying it back directly to the taxpayer. There is a better distribution of income. This is not a distribution of income. That is my complaint. I suggest that the Chancellor ought to go into that matter and see how they can be reduced, reducing at the same time those duties which are now falling so heavily on every family, especially the lower income families. This is a very expensive way of taking the money out of one pocket and putting it partly back into another pocket in some other form.

The Chancellor said that there ought to be a tidying up and a simplification of taxation. He said that that task, even with regard to Income Tax, was too large for the moment. He is setting up an inquiry into the method of computing net trade profits. That, although it is vital, is an inquiry within a very limited sphere. Since 1943, we have been asking for a review of the whole of our methods of taxation. That was the time when the authorities should have devoted themselves to considering what might be the position after the war. We could have considered whether we could readjust these matters so that our taxation could be put on a sounder basis. If that had been done, I am sure that we should now be meeting the burden of taxation much more easily than we are meeting it today. The Chancellor has said that he would like to tackle Income Tax, but that that would take time. Was it not a matter which ought to have been tackled years ago? By this time we should have had a much sounder scheme.

There is only one of the main items on the expenditure side which may be reduced in years to come. We are now in a period and we shall remain in a period, of high taxation and high expenditure. Possibly there is only one item which may be reduced, and that will not depend on us alone. It will depend on the attitude of the other countries of the world, and whether some way can be devised of living in peace so that there will not have to be this great preparation for war.

Finally, I come to the question of increasing the national wealth and the national income. This can only be done by the people themselves. Apart from the item of the initial allowance for wear and tear, there is little in this Budget to provide an incentive to further production, enterprise or initiative. Rather than encourage this, the Chancellor said, "You had better get on with your work and work even harder, lest worse befall you." That is not encouragement: it is only a threat. I think that if he had tackled the question of reviewing the whole position with regard to the way in which taxation should be adjusted in this country, he would now have been in a position to offer concrete benefits which would be a proper reward for those with initiative and enterprise and those who are prepared to work hard, not only for their own benefit, but for the benefit of the country.

4.20 p.m.

Like the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies), I also find singularly little in the speech of the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) even calling for reply this afternoon. We gathered that the right hon. Gentleman did not like the increase in the Death Duties. We gathered that he was not altogether happy about a method of taxing free lunches for business men. If that were possible, the right hon. Gentleman even added at some length to the amount of confusion which already exists in his mind, though I did understand at the end that he expected that there would be an increase. Then, he seemed to agree that the social services were not a bad investment, and thought they would increase production and productivity over a long period. He seemed to find that the increases in the social services which have been carried through in this Parliament have so far contributed very little to production. The right hon. Gentleman then went on to offer what I thought were some rather disconnected remarks about coal nationalisation, mechanisation, exports, sugar and the London Docks. I need not remind him that the new measures of social services came into effect only a few months ago, and he would hardly have been led to expect them to have had any causal connection with production in a few months.

Yes, the right hon. Gentleman said they should in the long run, but the Measures passed by this Government cannot be expected to add very much to any increase yet, and I am quite sure that the right hon. Gentleman did not expect it. He did, however, mention the coal industry, and, there at least, the National Insurance (Industrial Injuries) Act, recent of introduction though it may be, has played an important part in improving the recruitment position in the coalmining industry. In an industry with such a high rate of casualties, now, at least, those who work in it have some confidence that they are not, as they used to be when the party opposite was in power, going to be thrown on the industrial scrap-heap as soon as they are injured.

None of the speeches, either by the right hon. Gentleman or by his colleagues who have spoken since my right hon. and learned Friend opened his Budget on Wednesday afternoon, has made any suggestion of an alternative economic policy to the one which His Majesty's Government have been pursuing—the policy set out in the Economic Survey, in the Four-Year Plan, and my right hon. and learned Friend's Budget speech. All the criticisms made have been on detailed financial proposals, and these will be dealt with by my hon. Friend the Economic Secretary and by the Chancellor when they speak tomorrow. With the broad lines of the financial policy the Government have been following I have heard no suggestion of disagreement in the speeches of right hon. Gentlemen opposite, apart from vague demands for reductions in Government expenditure, entirely unsupported, as the right hon. and learned Member for Montgomery has just shown, by even one specific suggestion of a single supply service, whether social services, defence, pensions, housing or any of the administrative services, which they would suggest cutting.

On the general economic policy, on production, on controls, on investment, on exports, we have heard scarcely a breath of criticism of the policy put before the House on successive occasions by the Government, and certainly no suggestion that the Opposition have an alternative policy to lay before the country.

May I make an interruption which is completely friendly? I have been a Member of the Public Accounts Committee for 10 or 12 years, and, although the amount of work has often been too much for us to get down to actual details—and I do not think any Committee of this House could do it—we have from time to time found really considerable waste and inefficiency which could be put right.

My hon. Friend the Member for Chesterfield (Mr. Benson) does not agree with the hon. and gallant Gentleman, but I was not talking about the Public Accounts Committee. In the speeches of right hon. Gentlemen opposite since last Wednesday, there has not been the slightest suggestion of any alternative policy to compare with the one which we have put forward. [HON. MEMBERS: "No."] I am not sure whether the noble Lord the Member for South Dorset (Viscount Hinchingbrooke) means me to take account of his own contribution, but, in his speech there were at least a few fairly concrete suggestions, though I think the main effect of his speech, if, indeed, in the places where these things are settled, anybody would be likely to take notice of what he said, would be that they would think it was designed to shake confidence in sterling. Apart from that, and the speech of the hon. Member for Chippenham (Mr. Eccles), we have certainly not had any concrete proposition to put before the Committee.

Apart from these three speeches, the general line of the remarks we have heard from the other side has been, if not to endorse the general economic policy of the Government, at least to fail entirely to find anything to criticise in It. Gone are the days, it would seem, when they could suggest that all our production problems could be solved with a slogan—whether "Set the People Free" or any other—or that our balance of payments problems could be solved, as the right hon. Gentleman the Member for Woodford (Mr. Churchill) has so often contended, by diverting goods from export to the home consumer, and paying our way abroad with what he called the overspill from the home market. We have not even heard a word about controls, but just some nice self-assurances that all the great achievements of 1948, to which my right hon. Friend referred, and to which the facts bear witness, are due to the resilience, the ingenuity and skill of private enterprise.

What a difference from the speeches we heard two years, even one year, ago. The motif is changed. The tune is entirely different. No longer do we hear that production is strangled by the controls of which we have heard so much, that our export targets are beyond possibility of achievement because of regulations and permits. Even hon. Members opposite have come to realise that private enterprise has produced on a vastly greater scale under this Socialist Government than it ever did when we had a Tory Government. Of course, the production and export achievements of 1948 and 1949 are a tribute to private enterprise, and due acknowledgment has been made on a score of occasions by my right hon. Friend and other Members of the Government.

They are a tribute, in truth, to all our people, to private enterprise and public enterprise, to workers and managements, technicians, and salesmen, to all who have contributed to this great effort of production and export. And they are a tribute, too, to the wisdom of the economic policies which this Government have laid down and followed over the past four years.

Is it the view of the right hon. Gentleman that the more Socialism there is in this country the more successful private enterprise will be?

On the limited experience of the last few years, that is certainly so. If the hon. Gentleman would like me to develop that point, I should be happy to do so in a few moments. I do not like making bold assertions without offering some basis of support. The nation as a whole in the later months of 1948 was producing at a rate of some-think like 40 per cent. above 1935, which I take as an average pre-war year—not a slump-ridden year, but an average prewar year.

Well, of course, we were producing far more in terms of prices. The point is, as I think hon. Members opposite have realised, that private enterprise cannot function at its best unaided; it needs markets, very often organised demand, stabilisation of unstable factors, action to curb monopoly and cartel activities, and, in times of difficulty, help in the supply, and control over the distribution, of scarce materials. The year 1948 was one in which private enterprise and the nation as a whole reaped the first real dividends of the measures of control maintained or introduced by this Government, in the face of hostile attacks, and the first dividends of our earlier nationalisation Measures.

The right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) in a balanced and restrained speech the other day which we all welcomed—even more do we welcome his recovery from the illness which overtook him after making that speech—welcomed the improvement in coal exports. But the whole Committee will realise that not only would our export trade in coal have been killed, but that the whole of British manufacturing industry would have been paralysed, if we had not taken public control of the coal industry when we did. The Economic Survey—and all the facts available to us—proclaim that coal output needs to increase much more, and the costs of production to be reduced very considerably if recovery is to be achieved quickly. But when one considers the increase in production—7¼ million tons in 1946 over the previous year; a further7½ million tons in 1947; a further 11 million tons in 1948; and compares them with the steady fall year by year before 1945—and the cancer of manpower wastage in the industry before nationalisation, we can realise the disaster which was averted. On all the probabilities, what was going on in the industry before nationalisation, means that if the Government had not taken the step they did, production last year would have been little more than 150 million tons. [An HON. MEMBER: "How do you know that?"] It is not my own estimate—I could easily prove it to the hon. Gentleman if he would look at the figures as they were running—or that of Lord Hyndley.

Lord McGowan, chairman of I.C.I., who is not, as far as I know, a fully paid up member of the Labour Party—even the noble Lord the Member for South Dorset would not call him a "well satisfied nationaliser or well-paid hack"—recently said that if coal had not been nationalised, we should be getting a million tons less per week than we are getting.

So it is with controls. Had we not maintained controls on the production of non-essentials, and the distribution of scarce raw materials, both private enter- prise and public enterprise alike would have been denied the materials they needed, while luxury building and the production of profitable frivolities would have taken an unfair proportion of what was available. When production has been increased in the past, and when as a result of that, or of our national investment and financial policy supply and demand for particular materials has been brought into balance, we have removed controls, and removed them quickly and effectively. It is not our policy to maintain any control for longer than it is necessary. But as long as materials or goods are in short supply: as long as controls are needed to save dollars or increase exports, they will be retained, and we will resist doctrinaire pressure for their removal, just as we shall maintain as a permanent part of our policy those controls, whether on foreign exchange dealings, or the location of industry, or on other strategic points of the national economy, which are necessary to keep the economy on an even keel, and to maintain full employment.

It has been the improvement in production, aided, stabilised and directed by these controls, together with the sacrifices in imports, which have been responsible for the improvement in our general balance of payments position last year to which my right hon. and learned Friend made reference last week. That improvement is not merely a statistical one. Its results have been seen in the growing volume of our imports from many parts of the world, in the great and growing confidence in sterling, in the increased volume of goods entering into our bilateral exchanges. Like the hon. Gentleman the Member for Chippenham, who expressed concern about me in this connection, I attach no importance to a bilateral trade agreement except to the volume of trade which it makes possible. These trade arrangements, which the hon. Gentleman described as bits of paper, would be worthless—indeed they could never have been made—if we had not been in a position to offer valuable and increasing quantities of goods, and equally important invisible services from our side in the negotiations. They are—and I agree with the hon. Gentleman— the mirror of our improving production position: they have no substance in themselves.

Last year's trading results. The achievement of an overall balance in the concluding months, meant many achievements of lasing value to this country and those with whom we trade. The figures covered a great and most welcome development of trade with the Commonwealth, on which the economic future of this country, no less than its past, so greatly depends. Taking the sterling area Commonwealth countries—I shall be dealing at some length with the problem of Canadian trade, in a few minutes—1948 saw a great increase in both our exports and our imports. In 1948, 37 per cent. of our imports came from these countries, compared with 32 per cent. in 1947 and 31 per cent, in 1938. Forty-seven per cent. of our exports and re-exports went to them, and in January, 1949, 49 per cent., compared with only 41 per cent. in 1938. In fact, the economic links of the Commonwealth have never been stronger, or more effective, than they are today.

Our improving trade figures in 1948 included increased exports, and greatly increased supplies of capital equipment to the Colonial territories. Members of the Committee have been given figures on previous occasions of our greatly increased imports and usage of certain Colonial raw materials and foodstuffs. On the export side too, we exported £200 million in 1948, compared with £123 million in 1947, and £43 million in 1938, though there has been, of course, a big rise of prices in between. We have also greatly increased our physical volume of capital goods exports to the Colonies—in spite of shortages of steel, components and manufacturing capacity. As the Committee knows, it is planned under the Four-Year Programme to raise our total exports to the Colonies to between 2¼ and 2½ times our 1938 rate, measured in terms of volume. Therefore, there is every cause for satisfaction and encouragement, though not for complacency, in the nation's trading achievements in the past year.

When we turn to face the future, fortified though we are by our achievements, we can see the size and nature of the tasks lying ahead of us in 1949, and in the years to come. What those tasks are, is set out in the Economic Survey, and was described by my right hon. and learned Friend last Wednesday. It is, in brief, to maintain so far as possible our present rate of exports in conditions of a growing world buyers' market, and within our total of export trade, to achieve a rapid and substantial—and lasting—increase in our shipments to the dollar area. As the Economic Survey rightly says:
"We must make a major further effort during 1949 to expand still further our sales in Canada and the United States. It will be the most important single aim of our economic policy during the year to raise the proportion of our exports going to these vital long-term markets."
As hon. Members in all parts of the Committee have said, no one in the export trade today, whether manufacturer, merchant or banker, needs to be reminded of the growing difficulty of increasing, or even maintaining, our total volume of exports. Import restrictions imposed by overseas Governments, for whose removal or relaxation His Majesty's Government have been working—and not without success—financial difficulties, eased to no small amount for certain Western European countries, by the very considerable amount of sterling made available by His Majesty's Government as drawing rights under the Intra-European Payments Scheme—these represent one side of the problem. The other is the growing, buyers' market in many parts of the world, most of all in those areas, which are free for the most part of quantitative import restrictions, in which it is most vital to increase our sales, but where the competition of other exporters and, above all, the keen competition of the home producer, makes every new sale an achievement, and even the maintenance of certain existing exports a struggle.

As sales difficulties rather than production become paramount, as competing industries overseas recover and become more efficient, it is increasingly true, as the Survey makes clear, that we cannot expect the same increase in our exports over 1948, as that year showed over the previous year, when the increase was some 25 per cent. in a single year. Nor can we continue to expect the heartening increases—new records month by month—which have been such a feature of our trading returns over the past year. The House was heartened two months ago by the figures I was able to announce for exports in January, when the volume was 162 per cent. above 1938, and was at a higher rate than the target fixed for the end of this year. February, a much shorter month, was lower, 143 per cent. of 1938 volume.

I have just received the provisional figures for March. March was a long working month, and so, although the daily rate was about 3 per cent. less than in January—1 per cent. above February—the total exports for the month, £159.9 million, were £700,000 worth above January, and represent another new record in our trading history, and are likely to be 162 or 163 per cent. of the 1938 volume. These figures again are encouraging, though in addition to the length of the month, they were undoubtedly inflated by a rush to get exports to South Africa through the Customs, and shipped before the new South African import restrictions became effective. I have to tell the Committee that imports also were the highest ever in March, and the gap, on visible trade account, wider than in January and February.

It is too early to say. We have not got the detailed figures yet. It may be partly seasonal. Also, of course, some of the imports which came in March were probably expected in January or February.

In the changing circumstances of our export trade, I believe it would be for the convenience of the Committee, and of the trading community, if I were to re-state the Government's policy on the direction in which the nation's export effort should be concentrated. The first aim of our export policy is the realisation of the long-term objectives set forth in the Four-Year Programme, published as Command Paper 7572, with its prior emphasis on dollar viability, and all the means necessary to it, including overseas development. Secondly, it must be re-stated that in order to provide the purchasing power to pay for our imports it is indispensable that the export drive should continue at full strength.

Thirdly, a substantial expansion of our exports to Canada and the United States is imperative. A satisfactory solution of our dollar problem can be found only by development of markets in Canada and the United States on a scale far greater than exists now or existed before the war. The building up of exports to Canada and the United States is the most urgent task before us. It is a field where there is plenty of room, and where long-term plans of expansion are not likely to be upset by restrictions on imports. Fourthly, in addition to those markets, exporters should also take full account of our need to increase earnings from certain other markets which present special difficulties in our balance of payments, such as Belgium, Belgian Congo, Persia, Switzerland and—if and when trade negotiations with the Argentine lead to a satisfactory solution—the Argentine, to which country our exporters have made great efforts to increase their exports, in which they have been, to a considerable extent, frustrated by import restrictions over the past year.

The importance of these markets does not detract from the need to ensure that the sterling area secures its proper share of our exports, of goods of a kind which would otherwise have to be bought from outside the sterling area for gold or dollars or, alternatively, goods which would make possible the production of goods which can earn or save us gold or dollars. Of course, from time to time we shall be telling exporters of the bearing on their export plans of our obligations arising from the European Recovery Programme and from our bilateral trade and payments agreements with various countries.

In view of the fact that we have already had in existence for some time an organisation for European economic planning, has any consideration been given to setting up similar machinery for economic planning for the British Commonwealth as a whole?

That is a question which the House has discussed on a number of occasions. My right hon. Friend the Secretary of State for Commonwealth Relations has given a pretty full report of what was achieved last October in the Prime Ministers' Conference, in addition to which my right hon. and learned Friend the Chancellor has on a number of occasions given particulars of the Sterling Areas Statistical Committee.

This great task of increasing dollar exports is to be achieved not by starving other markets. But, within our total export achievement—and the Committee and the world know how great this is—exporters must now be asked to go full out to take every opportunity in the North American market, even if this means, in marginal cases, paying less attention to markets where we find no difficulty in paying our way. The first task facing the exporter is to maintain and, if possible, increase our total volume of exports. At a rate now running at more than 60 per cent. above pre-war, this is a very big task indeed—the more so when we consider that in the years immediately following the last war there was a big reduction compared with prewar volume of exports. In 1920, for instance, it was only 71 per cent.; in 1921, only 50 per cent.; in 1922, only 69 per cent. of the pre-war rate of exports. Therefore, to maintain our present rate of exports will be a tremendous achievement which will call for all the ingenuity, enterprise, skill and drive of which our exporting industries are capable.

Now I must turn to the problem which dominates all others in this year, the problem of exports to North America. My right hon. and learned Friend has given the Committee the figures of the dollar deficit, and has shown how by increased exports, by a greatly improved position on invisible account, as well as by import cuts, and a diversion to other sources of supply, the dollar gap has been reduced from £1,024 million in 1947 to the still very serious figure of £358 million in the first E.R.P year. But, as the Survey says:
"While we have established a firm foundation for a further intensification of our export drive in these markets"—
those are the North American markets—
"we must in the next two or three years greatly increase exports to Canada and the United States if we are to become independent of E.R.P. Aid without a reduction in the standard of living."
I now come to precise objectives in our North American export drive. The long-term programme estimated that in order to maintain our standard of living when Marshall Aid ceases, in 1952–53, we should be exporting to Canada and the United States at the rate of £185 million a year, based on mid-1948 prices. This represents, in itself, a very formidable task—over 30 per cent. above 1948 and more than double 1947. But we must regard it—and I am sure the Committee will regard it—as no more than an indispensable minimum. If certain other assumptions—for instance, assumptions of sterling area sales to North America, assumptions about the terms of trade or about our invisible income—turn out to have been calculated on an over-optimistic basis, then the burden thrown on visible exports to North America will be to that extent increased; and, even if all turns out well on all these assumptions, we shall still only be able to afford to import from Canada and the United States on a level much below what we and our friends in those countries would like, unless there is a striking increase in our earnings.

We therefore propose, as a measure of the gap which our direct exports have to close, to fix and publish for the calendar year 1950 specific export objectives for individual groups of commodities to Canada and the United States, and the total figure—and I do not propose to trouble the Committee with the details for individual industries—amounts to £180 million of exports to North America in the calendar year 1950.

If the right hon. Gentleman does not intend to give all the details, could he give some idea of the kind of items in the figures?

I shall make them available to the House. I have not got them in front of me at the moment and I did not want to weary the Committee, as I have a lot more ground to cover. I shall certainly make them available and, if it is desired, my hon. Friend the Economic Secretary would make them available tomorrow. I am quite sure the Committee will realise what this sort of figure involves.

Either in answering a question or, if the Committee expresses great interest, my hon. Friend the Economic Secretary could no doubt make them available in his speech, should he be so fortunate as to catch your eye tomorrow. Major Milner.

Our 1948 rate of exports was £136 million. This in itself was no mean achievement. Our exports to Canada, for instance, rose from £44 million in 1947 to £70 million in 1948; our exports to the United States rose from £48 million in 1947 to £66 million in 1948—an increase on the two markets taken together of nearly 50 per cent.

As I have made clear, the target set for 1950 means an increase over last year of a further 30 per cent. Certain industries have, of course, done extremely well in this great dollar drive. Exports of motor cars to North America rose from under £1 million in 1947 to over £9 million in 1948, and of woollen goods from £13 million to nearly £24 million. I could give other, and equally encouraging, figures for a number of other industries, but all in all we have still a very long way to go. The proportion of our total exports going to North America now is lower than it was before the war. In January and February, 1949, out of a total of £300 million of total exports, only £23 million, or 7 per cent., went to Canada and the United States.

In setting forth this target figure of £180 million, the Government recognise that North America is, of course, the most difficult market in the world. In it we face fierce competition from United States and Canadian industries. We face a large number of buyers who are in a position to pick and choose and the only factors which count in that market are price, quality and service. But it is equally a market of great opportunities. There are 160 million people waiting to be sold to. Our present exports to them hardly amount to £1 per head, whereas in the Australian market, for instance, they amount to nearly £19 per head of the total population of that country. Therefore, we have to go out and sell with vigour, aggressiveness and imagination. We have to sell them what they want to buy at prices they are prepared to pay.

Our approach, therefore, must be based on two principles. First, the Government must provide the fullest positive assistance, in its own proper sphere, to the exporter. Secondly, we must arouse amongst our merchants, manufacturers and exporters, a real spirit and awareness of what is involved. And the first of these two principles is distinctly subsidiary to the second. The task of expanding our exports to North America is one of the greatest challenges in all our history to the merchant adventuring spirit of our traders.

How this is to be done is, then, a task for industry and trade, but today I must tell the Committee the ways in which the Government can assist. The Government's rôle in this field is obviously an indirect one. It does not, and cannot lie in such expedients as the provision of direct export subsidies, nor in trying to do the exporter's job for him. What the Government must do is to seek to remove the obstacles from, and create the conditions for, the vigorous enterprise of the exporter on every venture that offers hope of profitable development.

So, for the convenience of the Committee, I should like to set out the programme of what the Government intend to do and are prepared to do, in the following eight points:

First, and this is constantly being done, to see that industry and trade get, and never forget, a clear lead as to the paramount and permanent importance of the Canadian and United States markets.

Secondly, to let industry know the export objective. As I have said, the target is to sell £180 million worth of goods to Canada and the United States combined in 1950. As I have said, we shall publish specific objectives for broad groups of commodities.

Thirdly, we shall give every help, and where necessary, open favouritism, to exporters to Canada and the U.S.A. in their production difficulties. Departments have been instructed to ensure, so far as their authority permits, that resources are made available for a smooth and increasing flow of production for the Canadian and United States markets. This is a clear and over-riding direction to Departments and will involve, wherever necessary, a departure from allocating raw materials and other production facilities on the basis of previous years' consumption or other methods alleged to be equitable; and in appropriate cases it will mean outright discrimination between firm and firm.

Fourthly, we shall aim to provide the best possible Government service to exporters. To this end, we are taking a number of steps both at home and abroad. At home, we have been seeking to concentrate our effort on the administrative side of the Board of Trade. Since the beginning of the year responsibility both for trade policy and for matters of trade promotion have been combined in a single Department of the Board of Trade and, more recently, a separate Division has been created under a single Under-Secretary in order to devote very special attention to the Canadian and U.S.A. markets.

In the United States, it has already been decided to divide the United States, for our administrative purposes, into four regions, each covered by a superintending trade consul, based respectively on New York, New Orleans, Chicago and San Francisco, and these four men are now in post. Each will be concerned solely with matters of trade promotion throughout the whole of his region, and will have no other consular duties to perform, and of course his region will be a very much wider area than the area of the consulate-general established in those cities. It is intended to give these superintending trade consuls additional support by appointing an experienced businessman in each region as trade adviser to the trade consul, and to provide facilities both for the superintending consul and the business advisers to travel freely within the areas allocated to them. The trade adviser for the New York region has already been appointed, and left for his post by air last week. Generally, we are determined to get and to give exporters all the factual information and advice they need for planning their selling campaigns in Canada and U.S.A. In my forthcoming visit to Canada I am to pay particular attention to this question.

Fifthly, it is necessary to clarify the position of the supply of dollars for sales promotion purposes. Vigorous selling methods on the other side of the Atlantic of the kind I have been urging will undoubtedly involve an initial outlay of dollars. This we fully recognise, and have recognised in the past; but lest there may be any doubt, let me repeat what is the position. No exporter need have any hesitation in asking the Exchange Control for reasonable allocation of dollars where these can be shown to be legitimately needed for purposes of effective and businesslike promotion of our exports to Canada and the U.S.A.—for such purposes, for instance, as market research, advertising, the establishment of agencies and selling and servicing organisations, in Canada and the U.S.A.

Sixthly, it will be necessary to provide special help for the special difficulties of the North American markets. I think I have indicated, and the Committee is already very well aware, that in these areas there are special difficulties on a scale much greater than those found in any other market in which we are trying to sell goods. This special help will take the form of additional assistance by the Export Credits Guarantee Department. I explained, when moving the Second Reading of the Export Guarantees Act, that we might wish to use the powers provided by Section 2 to encourage exports to specially important markets. We recognise that the genuine risks and obstacles of the North American export market have, up to now, been too great for many exporters to pursue what would otherwise have seemed to them worthwhile new ventures. Therefore, we encourage all exporters—all exporters who are out to promote sales to North America—who are faced with special difficulties of this nature, to approach the Exports Credits Guarantee Department for appropriate facilities—even if their special needs require a less conventional conception of "commercial risk" than might apply in the case of other markets.

We clearly cannot guarantee in advance to endorse any particular project; but we can ensure that every proposition which is seriously intended to assist the export drive to North America, will be carefully and sympathetically examined. In E.C.G.D.'s approach to this problem, and in their approach to the suggestions made by exporters who come before them, I think the Committee will find that they are approaching the matter with the idea that this is a time for unorthodoxy in these things.

Is the right hon. Gentleman satisfied that these very comprehensive arrangements—which I am sure are welcomed on all sides of the Committee—will cover the greatest difficulty of all, namely, the time-lag between the receipt of orders and de- livery, during which period many cancellations take place?

I have said that I cannot indicate in advance the particular types of cases which E.C.G.D. will be prepared to cover, particularly as so many of them are purely individual cases; but certainly that is just the kind of case that individual exporters might wish to take to E.C.G.D. for discussion with them to see what help might be forthcoming.

Can the Minister say whether any of these trade advisers who are to be appointed will be American or Canadian citizens?

Apart from one member appointed, who has already gone to New York, I cannot of course say who will be appointed. We shall be looking far and wide, with I know the co-operation of industry and trade, to find these people. There are many things to be said for appointing citizens of Canada or the United States, but one of the most important things is, not only that they should know the market, but that above all they should know British industry and have close contact with British industry, so that they can know what can be supplied, and what with suitable adaptation to local needs could be supplied from this country if it were drawn to the attention of British manufacturers and British exporters.

It is also important that British exporters and manufacturers should know American and Canadian tastes.

Yes, and that is why we intend to promote trade advisers with very good knowledge of that.

Seventhly, I want to come briefly to Government assistance for market research. The Committee will agree—and this has been said time after time in this Chamber—that the exports of this country to the United States must strike out beyond the traditional business outlets of the eastern sea-board, and can no longer consist only of the traditional lines of expensive consumer or even luxury goods. There is a virtually untapped market, particularly in the west and south, if only we go out and attack it in a determined way.

There is also a very considerable market in many parts of the United States and Canada for lower priced goods of good quality—goods which can be bought by a much wider section of the population than those who have hitherto been buying the high priced and high quality consumer and luxury goods, which have made up such a high proportion of our trade. The Government are already supporting the British-Export and Trade Research Organisation financially, and are ready to provide further assistance for useful market surveys. An example of what we can do to help is that the Board of Trade have recently commissioned B.E.T.R.O. to carry out a special investigation of the packaging of goods for the Canadian market—a most important survey to have made. This survey is now in progress, and we shall send the results to industry and exporters.

The eighth point is that we propose to undertake a special and energetic publicity campaign throughout the country. In this connection, this year's British Industries Fair will have a special bearing on the North American export drive. The lion's share—if that is the right phrase—of the resources spent on overseas publicity for the B.I.F. has been spent in North America, including sending special letters to each of 30,000 individual buying houses; and in the various functions associated with the Fair, the North American theme will be dominant this year. I am very glad to be able to tell the Committee that the guest speaker at the Mansion House dinner which traditionally marks the opening of the Fair will be the hon. C. D. Howe, the Canadian Minister of Trade and Commerce. That Mr. Howe should have agreed to make a special journey here for this purpose, on our invitation, is, I am sure hon. Members on all sides will agree, a mark of the high importance which the Canadian Government and the Canadian people attach to the efforts we are making to increase our exports in that market.

Can the right hon. Gentleman say whether his eight methods of assistance would also be applied, where applicable, to invisible dollar earning exports, such as, for example, hotels catering for American tourists?

Yes, Sir. I would most certainly say that they would apply to invisible exports where applicable. The services to which I have referred are, of course, open to all invisible exporters as well as those whose business consists in trade in visible commodities. So far as tourism is concerned, I had considered saying something on that this afternoon, but I do not want to go too wide. Certainly the principles I have laid down will be followed throughout our tourist industry.

In setting out these points to the Committee I hope I have made it clear that the Government are not coming forward with a rigid framework of preconceived ideas. In this national task new and even unorthodox methods will have to be used, and we stand ready to welcome suggestions from all quarters. I know very well that many in industry, in commerce, and in finance, are well aware of the problem, and soundings I have taken in many quarters suggest that there is a great keenness on the part of industry and trade to launch a new and great drive for exports to North America. My right hon. and learned Friend and I are, therefore, inviting representatives of all the organisations concerned—manufacturers, merchants, finance, and organised labour—to a special conference to be held as soon as possible after Easter. I hope that the result of this conference may be to give form and substance to ideas from all sides of the table on how the job should be tackled in detail and how best we can provide Government help.

I have made many references to the United States market. Before I sit down, I think that it would be the wish of the Committee that I should refer specially to the problem of our trade with Canada. Canada, in common with our other friends in the Commonwealth, has stood by us alike in war and in our peace-time struggle for recovery; but our trade relations with Canada, unlike our trade with our other friends in the Commonwealth, are grievously beset by the dollar problem. In spite of the heavy cuts we have had to make in certain imports from Canada, in spite of the great effort our exporters made last year to increase our shipments to Canada, we are still paying for only a third of our imports from Canada. Before the war when we paid for an even lower proportion, about 28 per cent. of our total imports from Canada by our exports. this gap was bridged by the provision by us of large supplies of U.S. dollars earned over and above our own direct U.S. dollar deficit, by the proceeds of sterling area exports to the United States.

For reasons which this Committee knows, those sterling area sales are far from being sufficient to bridge our own United States dollar deficit, and so, our inability to import as much as we would like, and as much as Canada is more than willing to let us have, has created a position of real difficulty for many of her producers who, during and since the war, have deliberately set themselves out to produce for our market, to meet our special needs—although, as the Committee realise, the actual volume of our present imports from her is still immense—she is, in fact, our largest single source of supply—there is no ready solution to this problem.

There are, of course, many commodities we would have wished to buy and which Canada would have wanted us to have. There is no ready, easy or quick solution to this problem. We have to work out, in collaboration with our Canadian friends, many methods of approach, but the method most ready to our hand and the one we have to use, is to strive with all our might and main to expand our direct exports to Canada.

Our traditional exporters—textiles, pottery, vehicles and many more—are striving today to increase their sales; but the market for engineering goods in Canada has never been adequately tackled. Recently, as the Committee know, we sent the Engineering Trade Mission, led by Sir Harry Gilpin, to Canada. This mission, whose valuable report my right hon. Friend the Minister of Supply and I have already commended to the whole engineering industry, reported that there existed in Canada a difficult but solid and undoubtedly expanding market for our engineering products. We are all grateful for the energy which the individual members of the mission and particularly Sir Harry Gilpin himself, have been and are devoting to putting the experience they gained in Canada at the disposal of other members of the industry. What started as a "Mission to Canada" they had now, to quote their own words, turned into a "Mission to Britain"—and a much needed mission at that.

I should like at this point to mention, as an example of the way in which the Government can help, one of the particular recommendations of the Mission. It was that Government assistance should be provided to enable sections of the engineering industry to maintain specialist representatives in Canada to seek out market opportunities and to carry on day by day, year by year, the work which the mission did while it was in Canada. This recommendation has been accepted by the Government on the assumption, of course, that adequate response will be forthcoming from the interested sections of the engineering industry. The Government, for their part, are ready to guarantee a substantial part of the working capital required to put the arrangements into practice, probably through the mechanism of E.C.G.D. We would hope that eventually the additional business accruing as a result of these activities would be sufficient to provide funds for repayment of the loan and to make the scheme self-supporting.

I have devoted myself this afternoon to the steps which the Government are prepared to take to assist industry and the export trade in its great venture in North America. It is a task calling for all who have anything to sell. As I have said, much is being done, not only by the large exporters or the well-known firms, but by many new firms, concerns some of which did not even exist before the war, but which have started up in the Development Areas or elsewhere since 1945. Many, especially in the ranks of the smaller exporters, have been helped by the efforts of a small number of enterprising merchant firms and merchant bankers who, after a careful study of the market, have set up regional selling organisations in various parts of the country which, after a period of initial struggle, now seem to be well established and are handling an increasing range and growing volume of British products. I think that great credit is due to those who have been the pioneers in this field as a whole, but there is still great scope for others to follow them, and there are still wide areas in the United States, as well as Canada which are not, as yet, fully covered by selling organisations of this type.

I hope that I have demonstrated this afternoon that in the North American export drive our first national task in 1949, and no doubt for many years thereafter, the Government stand ready to assist to the full extent of their powers all who can play their part in producing and selling the goods. I hope that at the conference which I mentioned earlier, and which is to take place immediately after Easter, we shall see the merchant venturing spirit of 1949 spring to life. The message that I wish to take from this Committee to that conference is that we and the country are united in our determination that the venture must be a success.

5.15 p.m.

I am sure that everyone in the Committee will agree that we have just listened to a speech of very great importance. The President of the Board of Trade perhaps will not mind if I say that the last two-thirds of it, from our point of view, was much more important than the first third. When all is said and done, those who have been responsible for private enterprise during 1948 have, with the help in many directions from the Government, which I quite admit, but in spite of very grave frustrations in other respects, succeeded in achieving what has been acknowledged.

I do not think that the Government should take too much credit to themselves. After all, where in the world should we have been without the expanding financial help given to this country by the United States? Moreover, we had in 1948 a great deal of what is left of the sellers' market. In 1949, so far as I can foresee, we shall have very little of that to assist us. With regard to the latter portion of the speech of the President of the Board of Trade, I can assure him that what he has said will be most carefully studied by those of us who are responsible for carrying on the industries of the country, and we shall welcome all the help the Government can give us in furthering the export trade to America and to Canada.

If I may come back to the Budget for a moment, I would do what many other hon. Members have done, although perhaps it may not be very helpful to him, and that is thank the Chancellor of the Exchequer not only for a masterly speech but also for bringing us hard up against what "The Times" described as "a stern and even brutal Budget." We have lived through 12 months of severe austerity and we have another year of austerity to face under this Budget. We may or we may not find our financial position strengthened by the time the next Budget is introduced. We are called upon in this country still to produce to the utmost and we are doing our best to do so.

But many other countries are engaged in exactly the same practice. While it is one thing for us all to produce, it is quite another thing to sell what the world has produced at a time when the world is becoming satiated in respect of many of its requirements. I could not disagree more with the statement made by the Financial Secretary to the Treasury on Thursday. He said:
"The outlook is not gloomy at all. The situation today is better than it has ever been for the mass of the people of this country."—[OFFICIAL REPORT, 7th April, 1949; Vol. 463, c. 2349.]
Well, I should not like to make a statement like that to a large public meeting of the ordinary people of this country. I cannot share his optimism, if he considers the outlook for the future is less gloomy, and I fear that there is no sound basis for it. I do not want to repeat the warnings given by the Chancellor of the Exchequer in his long speech when presenting the Budget, but I think it would pay Members in all parts of the Committee to re-read what the Chancellor said in columns 2069, 2071 and 2086 of HANSARD. The warnings he there gave ought to be imprinted on the hearts and minds of all of us if we are really to face the future as realists.

Will the hon. Member also read what the Chancellor said in column 2108:

"A people with that record need have no doubts as to their capacity to meet and overcome the many difficulties which must still be faced."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463. c. 2108.]

Quite right, and the Chancellor of the Exchequer also said that the whole position may change in a moment, because world circumstances do not depend entirely on what we do here; we may be affected by what happens in other countries, as in 1929 when the great slump broke out in America. If I were to venture to prophesy, I would forecast, in spite of being called gloomy, that in a year from now we may find our order books very seriously diminished by growing international competition and our financial position rather worse than it is today. Nevertheless, those of us in industry who are striving our best to do what the Government ask us to do will certainly not relax our efforts to produce to the maximum, in spite of the formidable difficulties which daily confront us, and in spite of the lack of incentive, other than the satisfaction one gets from the achievement of targets set—and there is a great deal of satisfaction when that is done.

Industry is grateful to the Chancellor for two things. The first is the abolition of the Bonus Issues Duty. That will now provide an opportunity for bringing the issue of capital more into relation with the real value of assets and of the capital actually employed in the business. The second reason for being grateful is the doubling of the initial allowance. It is probably true that this concession will encourage firms that have, perhaps, been holding back, to place their orders now for more modern equipment, to bring their industrial establishment more up to date and to enable them to produce more cheaply, a need which still exists in many workshops in the country. But this concession does not go as far as industry hoped and asked. When all is said and done, this really amounts to a temporary advance loan to enable industry to find more easily the capital required to buy new equipment. The fact remains that over a period of years the writing down will remain precisely as before, and from that point of view it is not really a great deal of help.

With regard to Purchase Tax, I suppose we must all accept the Chancellor's decision, although I am sure a great many of us do so with much reluctance no matter where we sit, that he cannot at present review this tax. The continuance of some of these taxes is resulting in a complete cessation of business, and consequential unemployment and loss of revenue to the Exchequer by way of profits that would otherwise have been earned. There is a strong case for removing Purchase Tax, or at any rate reducing it substantially on certain lines of manufacture. We can look forward with confidence, I hope, to the time when the Chancellor of the Exchequer will have found a solution of the problem of giving rebates on goods that may be in stock when the tax is put up or down, and that he will then put before us proposals for revising these taxes.

I should like to emphasise what was mentioned by the Liberal Party in connection with telephone charges. The change upwards in telephone charges is wholly unnecessary and not worth while. When all is said and done, the telephone is a great adjunct to business, and in these times it is imperative to get into touch with customers and merchants to arrive at quick decisions, which both saves time and enables more business to be done. I hope that the Chancellor, between now and the Finance Bill, will reconsider this matter, and if possible abandon this proposal altogether; at any rate, it would be wrong if he did not do away with these increased charges as soon as possible.

We welcome the Committee the Chancellor has decided to set up to go into the whole question of the tax incidence on industry. It is high time that this matter was examined further, and we welcome the suggestion wholeheartedly, in the hope that the Committee will be appointed and get to work without delay.

I come now to something that is perhaps a little more controversial. It is an enormous pity that certain Members opposite have thought it their duty to threaten the Government that if this Budget is allowed to go through as it is, there will be further demands for increases in wages, and that unless these demands are granted there will be trouble. Why should demands for increased wages be made? Presumably because of the increases in the prices of certain foodstuffs—butter, meat, cheese. What does this amount to for the average household? These increases, so I am advised by an expert statistician, amount to about 1s. 4d. per household per week.

That increase is equivalent to the price of eight or 10 cigarettes. Surely, that is a trifling sum about which to threaten the Government? I agree with the hon. Member for Nelson and Colne (Mr. S. Silverman) that this additional cost, which will be no great burden upon the person who is in full employment and who is earning good wages, will mean an additional hardship upon the retired and the pensioner.

I regret, for another reason, these threats. As the President of the Board of Trade well knows, at the request of the Chancellor those of us engaged in conducting industry have been asked for another year to agree to peg dividends—to limit the rate of dividends. I was one of those who had to take part in trying to persuade directors all over the country to agree to this for yet another year. It was not easy. It was not easy for various reasons. One was that while 97 per cent. of them had pegged their dividends and had not increased them, yet in spite of all the promises that there would be restraint in new wage demands, wages went up no less than £90 million during the year.

Another reason why there was some hesitancy about limiting dividends was that until after Whitsun we shall not know what other industries are likely to be nationalised, and if industries are to be bought on the basis of Stock Exchange quotations, obviously the rate of dividend that is declared has some bearing upon the price. In spite of those difficulties we did once again succeed in getting the great majority of the directors of the companies to agree for another year to limit their dividends, or to exercise, as the phrase was, a "policy of restraint," on condition that the same restraint on new demands for increased wages was exercised by the trade unions.

I do not think that that was part of the arrangement, speaking from memory of the correspondence which took place. I wish the Chancellor were here, because I am going to say something which I would prefer to say in his presence. When we wrote to tell him what we had succeeded in doing, he replied with a letter which was hardly gracious. The letter contained a veiled threat. He said in effect:

"I shall watch with interest how companies observe their undertaking, in the hope that it will not be necessary for me to bring in legislation to enforce it."
After all the efforts that we made to meet the Chancellor's wishes, I think we might have had, perhaps, a more encouraging reply.

The great disappointment of the Budget is that there has been no reduction in Government expenditure. The Chancellor has taken a step in the right direction to prevent any further increase by the Treasury note which he told us he was issuing, but it strikes me that this is rather a case of closing the stable door after the horse has bolted. When we criticise the Government on the fact that there has been no reduction in Government expenditure, we are naturally asked, "What would you do?" Until one is in receipt of all the information—[Laughter]—Oh, yes. Hon. Members may laugh, but it is a commonsense argument that, unless one has all the information necessary, it is foolish to dogmatise.

I wish the hon. Gentleman would help me to follow this argument. He says it is foolish to dogmatise and suggest what ought to be cut, unless hon. Members opposite have the fullest information. They cannot, therefore, suggest what ought to be cut. How do they know, therefore, that anything ought to be cut in any of the services of which complaint is made?

I venture to make a suggestion, and it is this. When industries are nationalised, as the coal industry, the railways, electricity and gas have been, and when those undertakings are handed over to national boards, in some sense independent boards, to run them, why is it necessary that, on top of them, we should have great Government Departments? Is it necessary, when we have a body to run the railways, also to have a huge Ministry of Transport—especially when all the postal services, the telephones, telegraphs, and so on, are run by the Postmaster-General with a very tiny Department? I think that is a point worth thinking about, and one to which the Government might well give some attention. The Ministry of Transport might be severely cut down, and the Ministry of Fuel and Power, and the Ministry of Civil Aviation—all these Departments which tell us here, "You must not ask us Questions about administration, for we are not responsible. You must put those points to the boards concerned." There is a proposal which, I think, justifies some consideration.

What I think worries every one of us, especially after hearing the Chancellor's speech on Budget day, is that unless Government expenditure can be cut, or unless we can enormously increase our exports—which will be mighty difficult to do with the sellers' market disappearing and competition growing more fierce—unless we can cut Government expenditure, there is no hope of any relief from taxation and yet, as everyone knows, what people are clamouring for in all walks of life is some incentive to enable them to make the spurt to greater effort that the country now requires. If we could only cut a shilling off the Income Tax, what a difference that would make to all classes. I am afraid, however, that unless the Government change their policy there is very little hope of that.

There has been a little difference expressed between the two sides of the Committee today, as to whether the country can afford, in its present circumstances, the full cost of the social services. I am not going to shirk that question. I looked up the Debates which took place on the social services in 1943 and 1944. There were a few of us who at that time urged that the social services should be brought in gradually. At that time the country was short of thousands of doctors, dentists and hospital beds, and we suggested that these shortages should first be made good, so that in all parts of the country facilities would be available, at any rate, for those people in receipt of incomes of £420 per annum—a figure which we should probably put up if we had to face the same position today. There was no reason whatever why we could not have brought in our education and health services gradually, if we had had sufficient sense to foresee what we should be faced with in 1948–49. How much better off we should have been today, if we had walked before we had started to run—

the hon. Gentleman was talking a few moments ago about incentives, by which I understood him to mean some inducement to people to work harder and produce more. Is he suggesting that it would be an inducement to the working-class to do that if we gave them fewer social services and knocked a shilling off someone else's Income Tax?

If the country had agreed, as it might well have done, to bring in these services gradually—as, I believe, would have been the right policy, if the then Government had had the courage to say so—no one would have quarrelled about receiving benefits as and when the country could afford them.

The hon. Gentleman is too fond of interrupting; he is not half so clever as he thinks he is.

I am not giving that answer. I am not quite so innocent as that.

I will say this, in conclusion: at present, very grave responsibilities fall on the workers of our country and on employers. The workers will be very ill-advised if they allow themselves to be misled by trade union leaders into strikes against the policy of the Government as expounded by the Chancellor in his Budget. I they do that, they will be betraying the true interests of the working class because, as the Chancellor pointed out, they will endanger the maintenance of our social services and standard of living. It is up to employers—and I admit it— to do our utmost to find markets which will enable us to maintain a high level of employment. To do that we must be prepared if necessary to cut our prices and to face a reduction in dividend here and there. In other words, if we are to get the country out of the mess in which it is at present, we must all pull together. If we do that, I am confident that in time we shall be able to restore not only our financial position but the position of our country generally as a great and peaceful world Power.

5.46 p.m.

May I ask the indulgence of the Committee in this my maiden speech? I especially have need of its indulgence because I find the experience of putting my foot into the waters of its controversy chilling rather than warming. During the past week-end, during which we have been greatly troubled about the Budget and its reaction in the country, I spent some time re-reading newspapers which were published both before and after the Budget and comparing them with the Economic Survey. When it is remembered that the Economic Survey was published a month before the presentation of the Budget to the public, I cannot but feel that the Chancellor was justified in his suggestion that these newspapers, each of which possesses a City editor, capable of appreciating the significance of the statistics that were in that Survey, were extremely irresponsible in leading the country to suppose that it would have been possible to present to the country a relief Budget. To my novice, but I hope not jaundiced, eye it would seem that the newspapers are following the comments made from time to time by right hon. and hon. Members opposite.

In the light of the way in which, increasingly in past years, the Budget has come to be linked with the overall economic plans for the whole nation, I believe that the Chancellor is clearly justified in expecting the Budget to be considered in the light of what the Government have achieved in the past four years, and also in the light of their long-term objectives. By this criterion many of the statements which have been made by the Conservatives and Conservative Press seem, to put it mildly, not in accord with scrupulous fact. The achievements of the Government can stand on their own feet. They have been remarkable, though it is not my intention, nor would it be in place here, to attempt to recall some of the things which all of us know, which most of the world recognises, and to which the greater part of the world's Press pays tribute when talking of the magnificent achievements of our country under a Labour Government.

Nevertheless, I think it may be profitable, in view of the great disappointment which has been experienced by people generally, to suggest that the policy of successive Labour Budgets has been to exempt from taxation large numbers of people. This relief, I am told, amounts to over £580 million per annum, and, in the Budget of last year, more than £100 million relief was given to members of our working population at the lowest levels. That being so, whatever criticism may be offered of this Budget—and I am, in some respects, critical of it—I think it is right to say that the general tendency of the Budgets of Labour Chancellors has been to give the greatest relief to those who have needed it most.

In view of the remarkable achievements of the Government and their faithfulness to their election pledges, especially in respect of the social services, I believe the Chancellor is right to ensure, so far as he is able, that the future shall not be endangered by any recklessness on his part now. Clearly any unreality in our financial situation would destroy more effectively than anything else, the value of the Government's social legislation. Members of the Conservative Party frequently say—indeed the right hon. Gentleman the Member for West Bristol (Mr. Stanley) mentioned it in his Budget broadcast the other evening—that if the Conservatives were in power they would have embarked on much the same kind of social policy as the present Government. What seems to be true, looking at it—certainly until recently—as a complete layman, is that when credit for these services is being distributed, hon. Members opposite like to get their share, but when from time to time specific bills are presented for the cost of those services, they are most likely to turn their backs and disappear.

It was not to be expected that any Chancellor could, indefinitely, under all the circumstances constantly reduce taxation, and give greater exemptions and relief from the responsibilities of such an austere time as the present, and it is clear from the figures that have been presented in the Chancellor's Budget that no great relief could have been granted. It was, therefore, unkind to say the least of it, of the national Press to lead the nation to suppose that there was any possibility of relief in this year's Budget. I have said these things to show that I have, in my anxiety to understand the significance of this Budget, tried to preserve my sense of proportion in any criticism I might have to offer.

I should like to say now that I am greatly troubled and disappointed by the Budget. Certainly, when all the factors in the Chancellor's statement are taken into consideration they justify him in the attitude he has taken up, but all the factors are not financial. There are many in such a time as this, which would make an effective Budget and give confidence to the country, but which cannot be plotted on a chart or given statistical expression. The thing which has given me personally, and I believe many Members of this House, most concern is the reduction in the food subsidies. I am not concerned with any odd item here there or elsewhere in the Chancellor's statement, nor indeed is there any great criticism to be offered of the changes that have been made purely on the financial level. It is true, as hon. Members have said from time to time, that the alterations have not been very great, yet I could not help feeling that it was a mistake to regard the food subsidies, in particular, as being primarily a financial instrument. It has always seemed to me that a Labour Government and a Labour Chancellor should regard the food subsidies as a weapon for social welfare. A suggestion that in a time of crisis and difficulty the Chancellor should cut the food subsidies seems to me to be a denial of what is a basic, fundamental Socialist claim and, if I might say so, Christian faith also: "From each according to his ability; to each according to his need."

The major criticism that can be made and has to be made from this side of the Committee is that the Chancellor, in seeking his £80 million or whatever it is, should forsake what ought to be essential to all Socialists. Whatever money has to be found, we are all agreed that it has to be found either from the citizenry of the country as consumers or as citizens—either passing the expenditure over to the buyer or obtaining it from him as a taxpayer. Whatever the source of the income that the Chancellor must have, whatever the difference in his own Budget, whether he stops an increase on the subsidies at this point or allows them to rise further, the fact is that when the money is collected, it is collected from the people of this country either as consumers or citizens. The tragedy of doing what the Conservatives have always done when they had to face an economic crisis is that the people, who will be most seriously affected and who will have to bear the responsibility and the burden of this new gesture on the part of the Chancellor, are these concerned in the 100 out of the 129 trades in this country, where wages are less than 95s. per week.

In our society there are still gross inequalities. It is still possible for many people to squander wealth obviously and blatantly. Mention has been made of taxation as high as 40 per cent. I would suggest that that is an unreal criticism, because some 22 per cent. is returned in service to the community. In spite of the high rate of taxation, it is still possible, as can be seen any week in the West End, for many people in one way or another, legally or illegally, to evade the worst effects of taxation. That being so, I must confess that I am troubled. In a situation such as we face, if it were necessary to bring home to the country the urgency of our financial difficulty and the problem which we have to face, it should have been brought home at a point where it could have been most effective. What has happened is that the people who are most inarticulate in these matters, feel that somehow an injustice has been done to them, and that a Labour Government has failed to make real its assertion of its belief in a basic minimum below which it would not permit them to go.

It may be asked whether, before I made this statement, I had considered the comment of the Chancellor himself that taxable income as a source of revenue had dried up. Because I have used up more time than I ought, may I say quite simply in reply, that three things occur to me immediately as a source of possible future income which the Chancellor ought to tackle. Firstly, no real attempt has been made to touch as taxable income certain classes of capital. It seems to me that if the situation of the country financially is grave, then clearly one of the things that ought to be taxed is capital by way of a levy. Death Duties, too, are a profitable source of income. I have always been a poor man, but it has struck me as shocking that even after what the Opposition would call the imposition of crippling Death Duties, a man who leaves £8 million can still leave to his son and heirs something like £2 million.

If at a time like this it were felt undesirable so to upset the social equilibrium, one other quite possible source of income might be tapped—the margin of profits that are earned. Many millions of pounds, by which it would be necessary to increase the food subsidies to keep them at their present level, are returned to home producers and could be recovered from this source. I think the figure is £192 million. Here is a profitable place to which the Chancellor could have looked to save at least something of his £80 million. The position is that the effect of this Budget will be most felt in the homes of the poor. When a subsidy is removed or modified, the prices of things shoot up immediately, and the poorer the housewife the more conscious she is of the new burdens that have to be borne.

I believe that the Chancellor of the Exchequer has still, in spite of the disappointment, the distress and the frustration that will be felt in many poor homes in consequence of this Budget, a fund of good will in this country. He has won from the people of this country a confidence that he can be trusted as a man of unshakable integrity. This is an asset of the greatest possible value. I believe that it is this and not any of the comments of the party opposite which will do much to check the demands for otherwise justifiable increases in wages. I beg that it be borne in mind that there are far too many people in this country who are getting much less than they need for a full life and that there are tremendous numbers of people who are getting a great deal too much.

There are still in this society two nations. In one nation, they regard it as a hardship to be robbed of some traditional luxury or some traditional privilege: to have fewer servants, to have fewer cars, to have less to spend on travel overseas. On the other hand, the great, mass of the people of this country live in a world in which there are no servants, no cars and none of the luxuries the curtailment of which is regarded as hardship by the people who live in that other world. May I, in concluding what I have to say, ask the Chancellor by his budgetary policy to make it plain to the people of this country that it is his intention, as far as possible, within the means that lie at his disposal, to make Britain a nation of equals, rather than an uneasy federation of those two nations? I believe that he will in that way do a great deal to fulfil the hopes with which his Government were returned to office.

6.5 p.m.

Only once during the time that I have been a Member of this House have I had the opportunity of following a maiden speech, and that was 28 years ago, when the second woman Member to sit in this House, Mrs. Wintringham, spoke for the first time. It is now my privilege to welcome the hon. Member for South Hammersmith (Mr. W. T. Williams) and to tell him that the House has heard him with very great interest. I am not going to venture to comment in any way upon what he said. I will leave that to the Chancellor of the Exchequer himself. We all felt that the speech was happily phrased and was modestly put. I may add that all of us hope to hear him again in the very near future.

The President of the Board of Trade has today made a very interesting and important speech, particularly with regard to our export trade. I suppose that I am one of the visit America and Canada on behalf of business interests. I went there at Christmas and I was over there in January and part of February, on behalf of my company which is trying to earn more dollars for this country. Many measures are suggested by the Government for assisting those who want to export, particularly into the hard currency markets. I found in America and Canada a great desire among the business people there to help us with our export trade. They recognise that we want to buy far more goods from them than they are prepared at the present time to buy from us. So we always have the dollar balance against us. I am sure that the American and Canadian people will listen with sympathy to any suggestions which may be put forward either by the committee which is to be set up or by the new trade commissioners whom we are going to send out there for the purpose of helping us in this respect.

With regard to the Budget, I want to refer to three different things. The first is that there was dreadful disappointment throughout the country that the Chancellor was unable to do anything about Purchase Tax. Perhaps too much hope had been built up in the minds of people. One could not go to a shop without being told: "This will be free of Purchase Tax next week." It was not so. The Chancellor explained to us why it could not be so. I want to refer to what he said with regard to his going into the matter of the hardship caused to retailers if Purchase Tax was either reduced or abolished.

As hon. Members will know, Purchase Tax is put on by the manufacturer if he sells his product direct to the shopkeeper. If he sells it to the retailer he does not levy Purchase Tax, which is then levied by the wholesaler as he sells it to the retailer. If Purchase Tax is taken off or reduced, the retailer loses the whole of the Purchase Tax that is taken off.

He loses it out of his own pocket. The Chancellor smiles and shakes his head about this. I know that if a retailer has paid Purchase Tax he is allowed to sell the article at cost, plus Purchase Tax. Now the Chancellor nods his head in agreement. Does he really think that the women of the nation would allow that to be done? Let us take the case of an electric heater. I think the price used to be £5. When Purchase Tax at £2 10s. was put on, it made a total of £7 10s. Suppose it were the case that the Purchase Tax of £2 10s. had been taken off electric heaters and that a woman went into a shop and said: "I want one of those heaters at £5." The shopkeeper replies: "Oh, no, the price is £7 10s. because on this one I have paid Purchase Tax." What does the woman say? "All right, I will go somewhere else." She will soon find another shop. It is obvious that in every case if Purchase Tax is reduced or abandoned on any product, the shopkeeper has to bear the loss.

What has that meant in the last two years? It has meant a complete dislocation of business. It was bad enough last year but worse this year, as from December onwards every trade association was telling every shopkeeper, "Keep your stock down; we think Purchase Tax may be taken off." One of the big chain store companies sent out a notice to all its suppliers at the beginning of March saying that until after the Budget provisions were known it would take no goods subject to Purchase Tax into its shops. What has been the effect in factories? Stocks have been piling up and manufacturers have not been able to keep on at the rate they would have been able to if there had been an even flow of distribution from factory to shop. I have not heard of any people being dismissed but there is no doubt that some firms have gone on short time between January and March and others have knocked off overtime which their employees would have been very pleased to do.

This is not new. It is on record that when Purchase Tax was first imposed in a Budget I pointed out that this would occur; and it will occur as long as Purchase Tax lasts unless the Chancellor can find some way of compensating the retailer who has stock in his shop from which Purchase Tax is taken off. I am told that the Treasury say, "We should lose too much money. We could not check what each shop had. The smart boys would be getting a rakeoff and we cannot afford to do it." Various ways have been suggested by which fairness could be done to the retailer at very little loss to the Treasury and I hope that the indication which the Chancellor gave in his Budget speech that he would look into the matter again will enable him to come to a satisfactory conclusion.

I want to add a word about Purchase Tax in connection with what the Chancellor said concerning the social services. He said:
"We must, therefore, recognise the unpleasant fact that these services must be paid for, and they must be paid for by taxation, direct or indirect."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2091.]
Looking through the figures in the White Paper I saw that Purchase Tax was estimated in the coming year to realise £250 million and that the health services were estimated to cost £249,302,000 in the same year. In other words, the health services for 1949–50 will be paid for by Purchase Tax which the Chancellor collects. If anybody goes into a shop and purchases an article bearing Purchase Tax they may be paying to maintain a patient in hospital or to provide somebody with dentures. An insured person paying Purchase Tax on some hosiery may be paying for his own spectacles which he is getting that week from the Health Service.

I cannot help feeling that there was one unfortunate thing—I might almost say from the party point of view—in the Chancellor's Budget, and that was when he informed the housewife that she would have to pay 4d. a pound more for cheese, 4d. a pound more for meat, 1d. a pound more for margarine and 2d. a pound more for butter, while the male members of every household would get their beer at a 1d. a pint less. That is a matter which hon. Members opposite can decide with the Chancellor himself.

From 1945 to 1947 much money was squandered and we were made to believe that we were living in a land of plenty where wages would rise and the standard of living would go up; and all the time we were living on borrowed money. I am glad that those days have gone and that we now have a Chancellor who recognises the difficulties of the situation and is willing to face them in a very brave Budget. I can only add that I think it would have been much better for the country and that we should now be in a much better position if he had been Chancellor of the Exchequer since 1945.

6.16 p.m.

The right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) congratulated my right hon. and learned Friend the Chancellor of the Exchequer upon doing something which he said he himself had advocated some three years ago; that was not to confine himself to an analysis of the Budget proper but to relate what he had to say about the finances, narrowly con- strued, of the country to the background of our general economic situation. Everybody who has taken part in the Debate shares that view, but what has not been so generally realised is that it is only possible to do that, once we have conceded the necessity for an over-all economic plan.

It is all very well to say that we ought always to have related our finances to our national economy, but, of course, until this Government got power and determined that there should be an overall economic plan to which all our resources and all our activities should be directed, there was nobody on the Government Front Bench who was responsible for these matters. That is why all Budget speeches in previous years have been unreal in the sense that they have been confined to too narrow a field, and that is why it is a little ironic, almost paradoxical, to find the arch-priests of unrestricted, unregulated, uncontrolled private economy congratulating my right hon. and learned Friend on discussing the general economic state of the nation.

That is the real issue between the two sides of the Committee—whether we ought to have an economic plan or whether we ought not. I mean an economic plan for which the Government take responsibility. It is sometimes put quite differently as though the argument were between private enterprise and collective enterprise. That is not the argument at all; it never has been the argument. Eighty per cent. of the industries of this country are in private hands, and so far as I know, there is no proposal yet to nationalise that 80 per cent. very rapidly. The question is whether that private enterprise does best when it is working according to a plan for which the Government take responsibility and to which it is invited or cajoled or ultimately compelled to conform, or when it is working in an economic jungle. I heard an hon. Member opposite interject, "Alice in Wonderland," when in reply to a question asked by an hon. Member opposite, one of my right hon. Friends said, "Oh, yes, private enterprise does work better under Government control than if it is left to itself." There is nothing paradoxical about it at all. As I understand it, the purpose of Socialist economy was to set the people free.

Having reached the position, then, when everybody accepts that the country does better working to an economic plan for which the Government take responsibility, how has the plan of the Government succeeded? First, it is clear that nobody now contends that we ought to work without a plan. That argument is dead. Nobody now says, "Go back to unregulated private enterprise"—

I was about to say there was one exception; perhaps I ought to say there are two exceptions—the right hon. Gentleman the Leader of the Opposition and his only follower in this House, the hon. Member for Orpington (Sir W. Smithers).

Is the hon. Gentleman right in saying "unregulated private enterprise"? Is it not self-regulated private enterprise?

Yes, if the hon. Gentleman likes that. I thought I had made it clear that what I was talking about was a regulated plan for which the Government take responsibility, as against what the hon. Gentleman calls self-regulated enterprise, by which I take it he means every individual enterprise regulating itself.

We on this side, do not call that a plan, so it looks as if I ought to say there are three exceptions, not two.

Would the hon. Gentleman allow me to interrupt because he seems to be fishing in troubled waters, hoping to get a bite. Will he recall that it was the right hon. Member for Woodford (Mr. Churchill) whose Government produced the economic plan to provide full employment?

It is, of course, the case that the 1944 White Paper dealing with questions of full employment was produced by a Government of which the Leader of the Opposition was the Prime Minister. However, that was a Coalition Government which produced not merely that White Paper but plans for social security, a new Education Act, and a great many other things.

That brings me to the point I want to make about the earlier part of today's Debate. Nobody has ever supposed that the Conservative Party, or even the right hon. Member for the Scottish Universities (Sir J. Anderson), are not in favour of social services; of course they are. The question is not whether they are in favour of social services, but when, and how much. It used to be said of our activities during the war that, when they were not properly planned, we produced too little and too late, and that is the trouble with the attitude of the Conservative Party to the social services. The very complaint that is directed against us today is that we produce too much too soon, is it not? Is not that what the right hon. Member for the Scottish Universities said?

No. If hon. Members opposite would listen to what my right hon. and learned Friend actually says, instead of what they think he ought to say and would like him to say, they would find less grounds for congratulating him than they seemed to have found in the course of the last few days. I did not hear him say a single word to indicate that we had given too much or too quickly. On the contrary, he said that we ought to hold things where they are now, except in so far as we can increase them by increasing the global size of the cake which we have to distribute. There is all the difference in the world between these two propositions: the first, which is the proposition put forward by the Conservative Party and which my right hon. and learned Friend did not put forward, and the second one which he did put forward. The first one is to say, "You are already spending too much upon these services; cut them down."

If hon. Members opposite wish to make a comment, I shall gladly give way and listen to it or, if I am putting the view of the Conservative Party unfairly, I shall gladly give way so that I can be corrected.

I maintain that our party put forward social services that we could afford. Now, today, with a depreciating £, the Socialist Government have sabotaged what we suggested because, as the Chancellor said the other day, the purchasing power of the £ compared with 1914 is only 7s. 1d., and soon we shall only be able to pay benefits of social services with pieces of paper.

I thought that was what I was saying, only I said it more shortly, namely, that the Conservative Party believes, because of the general state of the country, that we are paying too much, whereas my right hon. and learned Friend does not think we are paying too much; he only thinks we cannot increase it unless we can at the same time increase the total amount of what we have to distribute. That is a fundamental difference between the two points of view. Do not let it be forgotten.

The right hon Member for the Scottish Universities made another point with regard to these social services, among which I would include food subsidies. He said they were only justifiable if they contributed to increasing national productivity. I am not sure that I accept that proposition. A section of the population has always been so under-privileged that there was always a strong case for increasing their slice of the cake even if the cake remained the same size. However, even if we were to accept the criterion of the right hon. Gentleman, based on the usual Tory slogan of "Pie in the sky and jam tomorrow," even then, I say that the Conservative Party ought to be quite satisfied that they have had ample value for their money.

It is a profound pity that the casual and temporary and incidental disappointments that the actual budgetary proposals undoubtedly included, should have been allowed to overshadow the really great story of heroic achievement of this country during the past 12 or 18 months. It was a great story to have to tell. If the test of whether we are getting value for money is whether we increase our productivity and make a contribution towards easing the unbalance of our economy in relation to other economies in the world, then I say we have had ample value for what we have spent. The right hon. Gentleman used the instance of coal, which I thought was a weak instance for him, because the British miner, alone in the world, has restored his production per man-shift to no less than it was before the war. If we look at the overall picture, it is very much better than that. We are producing—I think I am right–135 to 140 per cent. of what we produced before the war; that is an overall increase.

The right hon. Gentleman shakes his head, but I think I am right. I do not mind correction, for I do not want to get the figures wrong.

Even the Economic Secretary to the Treasury shook his head, but the hon. Member could not see that.

I am sorry that I have not the Economic Survey here to quote the exact figure, but there is no doubt that, whether my figure of 35 per cent. above pre-war is too high or not, no one will deny that our total production is substantially in excess of what it was before in any comparable year.

The hon. Gentleman must be aware that our production of coal in 1938 was in the neighbourhood of 240 million tons and that last year it was somewhere about 200 million tons. I think that the target for the current year is about 220 million tons.

The right hon. Gentleman, no doubt, did not hear me say that I was passing from coal to the overall production. I am not now talking about coal, but about the value of our total production during the 12 months. I thought it was common ground that it was very substantially in excess of what it had been in any comparable year.

If the hon. Gentleman is passing to the overall position, he is taking considerable credit for achievements which were largely those of private enterprise. Would he compare the American increase in production, which is nearly double what it was?

The hon. Gentleman will not expect me to make all my speech in one sentence. I can only deal with one point at a time. I shall come to the American side of it in a moment; it is an essential part of the argument I want to advance at a later stage.

The point I am making now is that if the test of value for money is whether we have increased our productivity, the test can be accepted by the Government with confidence and this country comes out of it brilliantly. We are producing more than ever we did before. The point about private enterprise has been conceded and dealt with already. It was private enterprise in 1947, too, but that was a very different picture from the picture in 1948, and I did not observe any enthusiasm from hon. Members opposite when we were going through the worst days in 1947 to say, "Private enterprise is responsible for that."

That is exactly what I expected to be said. In the view of the Conservative Party, whenever trade is good that is because of the virtues of private enterprise, and whenever things go wrong it is the fault of the Government.

That is one way of presenting the picture to the elector and sometimes, as over the week-end, the party opposite get away with it for a short time, but not in this country for very long. The point is that we are producing more now than we did in 1935. There was no Socialist Government then. Let me quote two statements before I pass to my next point. They are from speeches made by leading Members of the Opposition. One was the right hon. Member for Aldershot (Mr. Lyttelton), who, when the White Paper was published towards the end of 1947, in which we defined what our economic targets were to be, said that those targets were unattainable. In fact, the targets were almost all reached and many of them exceeded. About the same period the Leader of the Opposition was saying that the Government's interference was paralysing the springs of productivity.

I should like to ask hon. Members opposite whether they think that our result over the last 12 months is evidence that the Government had paralysed the springs of productivity. What they are really saying is that we set our targets very high; that we set them too high; that we set them at a level which no Conservative Government could have attained, and which could not have been attained without rigid self-control, the strict application of a plan and the strict direction of our national economy towards pre-determined objectives. They said that it could not be done. We set those objectives and we did it. I see no reason whatever from those facts for any rejoicing on the other side as to the triumph of their outlook and principles in this matter. They confessed that they would have applied totally different principles. They confessed that the targets we set ourselves, they could not have achieved, and that, I think, was an abdication in the face of the responsibilities of the hour.

In spite of that there is, no doubt, considerable disappointment up and down the country with this Budget. I do not share it. I think that my right hon. and learned Friend was right and that there was nothing else he could have done. Those who are rejoicing over what they consider to be the gains accruing to them from the stark realism and honesty of the Budget statement last week, may find cause within a few months to change their minds. But that does not mean that there is not real disappointment up and down the country. The disappointment is that, having been told to work harder, work longer, consume less, show self-restraint, put all they had into the common pool because only in that way could they get more out of the common stock; having then been congratulated on the patriotism with which they accepted those directives, and the success of those efforts, they are now told that their only reward is a further period of austerity and, indeed, a slight rise in the cost of living. The disappointment is natural and the grievances are legitimate, but I suggest that they are directed to the wrong address.

There are two causes which explain why the time has not come and is not immediately foreseeable when the worker may get the reward promised to him for the abstinence and industry which he shows. The first is the total failure of our foreign policy. I am not going to discuss that now—I do not think it would be in Order to do so—nor am I concerned at present to consider whether the failure of that foreign policy is either wholly or in part the fault of this Government. Even if it were conceded that the fault lay wholly elsewhere, it would still be true that when our Defence Services are costing £760 million a year and still rising that is not a success for foreign policy. One must remember that if those costs could be reduced by one-third, a great many of the things that my right hon. and learned Friend would have liked to do last Wednesday could be done, even without reference to the other main cause to which I wish to come in a moment. I am not sure that some of them were not within our control.

I do not know how many millions have been spent so far on maintaining our right to introduce into one part of Berlin a new currency which does not run anywhere else in that country. Again, I am not discussing the rights or wrongs, or the merits or faults of it, but I know that in the document published last December it was made clear that an agreement had almost been reached which would have led to the settlement of that question and, therefore, to the saving of a great deal of money. It was a settlement of this problem which was accepted by this country, accepted by France and accepted by the Soviet Union, but vetoed by the United States of America. It seems to me that in a matter of this kind the majority might have been entitled to have their way.

I do not see, if one may be pardoned the expression, why on some occasions, at any rate, my right hon. Friend the Foreign Secretary should not be able to play the part of the Tito of the West and show as much independence as is shown by the dictator of Yugoslavia. I do not want to deal with points of that kind, but to make it clear that for a part, I think perhaps half, of the reasons for the natural and legitimate disappointment felt in this country over the failure to reap the rewards of a long period of meritorious industry and abstinence, we have to look to the failure of our foreign policy.

I cannot understand why hon. Gentlemen opposite always exempt one section of our expenditure from the principle that "you have to cut your coat according to your cloth." It is an admirable principle, which is accepted by every- body. Obviously you cannot eat your cake and have it. We cannot do that in any section of national expenditure. The principle is not limited to the Health Service, nor to food subsidies, and we cannot spend more than we have got, even on Defence Services, but hon. Gentlemen opposite always seem to assume that in the matter of defence, and in the matter of defence alone, we can always spend what is legitimately necessary, whether we have got it or not. I think that is quite wrong and that if we are having a combined effort, whether the combined effort is limited to Western Europe or whether it includes the North American Continent, the contribution each partner in the combination has to make ought to be measured according to its ability to make it.

I should like to see some ceiling put on the cost of defence, or rather some limit or ceiling put to the contribution this country is expected to make to the common effort, because we are not interested in anybody's imperial ambitions. We are greatly interested in seeing that Communism does not spread to the West of Europe and to this country, but the real answer to it and the defence against it is not that of holding it back with Defence Services, but by building up resistance to it with social services. In the county council elections the Communists did not win a single seat. Do hon. Members think that would be so if the Conservative Party had won the General Election of 1945? [Laughter.] I do not know what the hon. Member opposite finds funny about that. It is perfectly certain that if the policy advocated in Budget Debates in the past had been advocated this afternoon, we would have had extreme agitation, a series of strikes and a grave danger of the passing of power to irresponsibles and extremists.

Is the hon. Member suggesting that the defeat of the Communists by the ballot boxes is going to arrest the march of the Communist armies towards the West, without anything else being brought against them?

I did not say that at all. If there is an attack, the attack must be met and we have to make our contribution to that. I have not said anything other than that, but I say there should be a limit to the contribution we have to make in proportion to our means and, in fixing that amount, we have to remember that ideas, even wrong and bad ideas, cannot be prevented by force alone, but can be defeated only by better ideas, better philosophies, better sociologies and better ways of beating poverty and human degradation and the spread of human misery. If what we have to pay towards defence destroys the only constructive alternative to Communism that would be money very badly laid out. I am sorry to have been so long—

I think what I have indicated is one reason why rewards cannot yet be reaped. The other reason is that we in this country, as was pointed out by the hon. Member for Stockport (Sir A. Gridley), are not in control of the situation. We are only in control of the situation at home. If hon. Members opposite had their way, we should not be in control even at home, but we are in control here and propose to remain in control. We are not in control, for instance, of the economies of the United States of America and that is a very important matter—[Laughter]—I am endeavouring to present an argument limited to what might be understood even on the benches opposite and it is a little disturbing to do so in view of these constant giggles.

I do not mind interruptions, as long as hon. Members endeavour to make them intelligible, but it is extremely difficult to reply to a mere giggle.

Just remember that, next time someone speaks on this side of the Committee.

Certainly, I always do. The point I am making is that if the United States of America had controlled inflation in that country, even to the extent—which is by no means complete—that we have in this country, there would be no dollar shortage today—[HON. MEMBERS: "Oh."]—I think I am right in that. My right hon. and learned Friend did not give any figures in his speech, but he did say that, although we were continually increasing our exports to the United States of America, the value of those increases were continually being minimised by the rising cost of what we had to buy with the money. In other words—

Does the hon. Member realise that if the United States had been less generous to us, it would be much easier for them to control inflation in their country?

I think the exact opposite is the truth—[HON. MEMBERS: "Oh."] It ought not to be dismissed so lightly. I think that the exact opposite is the case. If they controlled their economy and had retained their general level of prices proportionately to that which we have retained here, the need for Marshall aid would have disappeared. In fact, Marshall aid is the price which the U.S.A. pays in the realm of international trade for having failed to control its economy or its inflation or to limit its Budget. It will be found that there is a fairly close connection there.

What is true as a principle, whatever the degree of it may turn out to be, is that if it had not been for the fact that in the three years since the war costs of primary products such as we have to buy in America—food and raw materials—have increased far more rapidly in America than the prices of the goods which we are able to export, we should have ended our dollar problem already, and the overall balance which we have achieved in the rest of the world would also have been a balance in the dollar market. The danger is now all the other way round. That is why I said at the beginning of my speech that the time may come when people who have been most critical of my right hon. and learned Friend for his restraint last week, will be most grateful to him for it.

When there is an uncontrolled economy and no attempt is made to control inflation or rising prices, the time may come when the rising prices break and drop, and when the drop is as uncontrolled as was the rise, it can be equally disastrous. The result today is that America, having for three or four years refused to restrain the rise in prices, is now having to consider subsidising the maintenance of these already inflated prices.

That is what I am saying. That is what I think is wrong. It is not only rising prices that are wrong. Falling prices can be as wrong as rising prices. What the world or any community seeks is not an uncontrolled rise, an unregulated break and an uncontrolled fall. All these things are catastrophic. What is wanted by control is stability, and that is what has so conspicuously failed to be obtained in the American economy.

That is what the danger is. That is the difficulty. We have, somehow or other, to keep our own controlled and regulated economy in step with an economy which makes no effort after stability. I do not know that there is anything that we can do about it except to extend even more and more rapidly and energetically, our attempt to make all Western Europe self-supporting. If we could only get a unitary integrated market and economy in Western Europe we might, by that stroke alone, be able to relieve ourselves of both dangers—both the overweighted and inflated expenditure on Defence Services and the tie with an unregulated economy. When that time comes, I am sure that my right hon. and learned Friend will reap the reward of the integrity which he is showing today.

6.54 p.m.

The hon. Member for Nelson and Colne (Mr. S. Silverman) has managed to cover practically every field of the Budget and of the Economic Survey. I wish to take him up on only three points out of the many which he made. He began by saying that private enterprise always tried to slide out of any blame when things went wrong. He quoted 1947. Things went wrong in that year purely because of the Government. No one else was to blame. For instance, it would be quite impossible for any blame for the fuel crisis to be placed on anyone but Members of the Front Bench opposite. [Laughter.] Hon. Members opposite may laugh. I suppose that hon. Members are going back to their old cry about "The hardest winter since 1900," and "Fewer thermometers available to the Ministry of Supply than since 1920," but for any Government—particularly on the assumption of the hon. Member for Nelson and Colne that this is a planning Government—with planning as their main theme, not to have foreseen and taken into account simple things such as the weather, is condemnation enough.

The hon. Member said that we accused the Government of paralysing the springs of productivity. That is so. What incentive is there left to anybody at the moment in whatever level of income, for increased output, increased endeavour? What is there to which to look forward in view of the present level of taxation?

The hon. Member went on to make what I thought to be rather a roundabout attack on British foreign policy. I do not know about hon. Members opposite, but if there is one single item of Government expenditure which we on this side do not criticise, it is the amount spent on the Berlin air lift. For the hon Member to criticise that and somehow to wish the Foreign Secretary to be a Tito of the West is to show himself and those who think like him as the Kerenskys of the West. With that, I am perfectly prepared to leave the hon. Member.

I am grateful that we are both content.

There has been, alas, so far, too little attention paid to one overriding factor. We can talk about figures, we can make plans and set targets, but unless the figures can be justified as something that in the outcome is real, most of the planning that lies behind them is bound to come to grief. The one thing which no hon. Member has yet tried to show in some detail—and the President of the Board of Trade did not do so—is what percentage of the figures which he has quoted for exports this year will benefit this country. It is easy enough to export if one does not mind what one gets in return for those exports. It is easy enough to find countries which will accept goods if payment is not a prime matter. It is easy enough to ship goods abroad provided that they are to be held in warehouses abroad and not sold within any immediate period of time.

For instance, to give one example in relation to America and the hard currency areas, I believe it to be true that there are at the moment 8,000 Ford cars in warehouses in America. They have been shipped to America and their total export value is appearing in our figures, but they have not been sold. For us to delude ourselves that the value of these cars is actually something tangible as shown in the Economic Survey is very wrong. If one might take another example from the motor trade of what is happening in the United States, I am informed that only a few weeks ago one of our leading motor car manufacturers went over there to dispose of 2,000 cars of his own make which could not at standard prices be sold. He has had, if not to job-lot them, to sell them at a very reduced figure. Although that transaction may have originally appeared satisfactorily in export figures, the actual amount which it will bring to this country will prove the original figures to be a snare and a delusion. We must realise as a very simple proposition that subject to O.E.E.C. commitments, all our exports must pay their way and bring us a return. If there is no return for an export, then that export is valueless. It may be a simple proposition, but it seems to be one which the Government have not yet been able to appreciate, or to make allowance for in the figures which they have given to this Committee.

I would adduce one or two criticisms. In the first place, if one looks at the economic White Paper for 1949 therein is given our current account in which we can see what we, as a country, spend and what we are earning. It is also possible to see the overall capital account for the whole of the sterling area. The one thing it is not possible to see is what the rest of the sterling area is spending on current account by individual countries. And that is very important. To take an example recently brought to the notice of this House, under the Anglo-Portuguese Trade Agreement we, as an individual member of the sterling area, had quite a profitable account in Portugal. We were earning something like £16 million surplus. But then the rest of the members of the sterling area by their individual trade with Portugal vitiated our balance and created an overdraft, which we had to pay in gold. That particular piece of trade, far from benefiting this country, because of the action of other countries in the sterling area, resulted in a temporary stoppage of trade between this country and Portugal, since we could not allow a gold drain to continue. I understand it may be possible to resume that trade and I hope that the resumption will be fairly shortly. But it shows how if one has but these two items of our current account and the overall sterling area capital account, how many false deductions may be drawn therefrom.

Then there is the question of the terms of trade and which way they are going. Much attention has been paid to the question of a fall in American prices but we have not yet had any statement from the Government as to how soon we ourselves can take advantage of this fall in prices. What are our stocks? What are our foreign bulk contracts? We know that our competitors, particularly in America, can buy raw materials at the lower prices. How soon shall we be able to do so? How long will it be before the Government will sell to manufacturers in this country raw materials at American prices? Until we have this information it is very difficult to take any great pleasure in what the President of the Board of Trade said about his policy for extending Anglo-American trade.

The right hon. Gentleman said it was his intention to promote trade between ourselves and the United States, and he gave us eight points. The sixth point was that the Export Credits Guarantee Department was in future to give exceptional facilities where hard currency exports were concerned. Listening to him I thought that that meant that the Export Credits Guarantee Department in future is to finance goods on sale or return to North America. I would ask the Economic Secretary to the Treasury to give a reply to that specific question. If it is so it is about the most dangerous thing I have ever heard. In order to try to bolster up North American trade a Government Department, with something like £500 million at its disposal, is to try to prime the pump on a sales or return basis. I would like also to know whether it is intended to give big discounts in the rates that the Export Credits Guarantee Department now charges where exports to North America are concerned? At the moment, as the Economic Secretary well knows, private enterprise can undertake risks on trade with North America at half the rate of the Export Credits Guarantee Department. There would be no reason to come to the Department at all, unless for some exceptional currency risk which was being underwritten by that Department, and which private enterprise was not enabled to do by the Treasury.

Then the President of the Board of Trade went on to talk about research with B.E.T.R.O. Surely the President knows that B.E.T.R.O. has already done a most extended survey of our sales possibilities in North America and that that has been made available to British industry. That survey contained a great many criticisms of what British manufacturers could actually provide at the moment and comments on the present restrictions on materials and financial regulations by the Treasury and so on. Before he says he proposes to do any more research I would like to get some sort of undertaking that he has studied the previous Report, and that the many criticisms contained therein have been removed. He says he proposes to have a Government service with market research and trade consuls in America. Does he think that that is wise? The Americans are very touchy people. I am not at all certain that they would like British Government officials trying to boost British goods in their own country any more than we would like it if American Government officials tried to do the same in this country. I have seen a certain amount of America. I was fortunate enough to travel from East to West and from North to South, and from that experience I am certain that if this could be done in some other way rather than by direct Government personnel, it would be much more valuable to all concerned.

Then there is the question of bilateralism. A lot has been said about that by my hon. Friend the Member for Chippenham (Mr. Eccles). I was glad to see that the President of the Board of Trade admitted that as an economic policy it was a failure; it might exist temporarily, but it was nothing on which something permanent could be built. That is very true. But the one thing we did not find in what the President said was any idea as to how soon or in what way he could anticipate any relaxation of bilateralism into multilateralism. At the moment, although theoretically we are supposed to get exact balances of trade with one or a group of countries, the policy has resulted in a great deal of unrequited exports and a great deal of waste in our productivity. I would give the Committee one or two examples, which I have taken at random out of the Trade and Navigation Accounts. Bulgaria is a country with whom we have a very restricted trade. If one takes, for instance, the years 1947 and 1948, in 1948 our imports were £90,000 up, but our exports and re-exports were £330,000 up, showing a deficit of a quarter of a million. What benefit could that quarter of a million have been to us? I hope there is an answer to that.

Again with regard to Afghanistan. If we take the two sets of figures there is another £300,000 surplus of exports in 1948. Siam is another example. There is an amount of £600,000 exports gone there. With Liberia the figure is £150,000. One could produce many more examples. These are all countries which are governed purely by bilateral agreements in which trade is extremely restricted. There seems in general principle to be this growing surplus of exports from this country which look very nice on paper, but do not promote the economic welfare of this country at all.

Presenting his Budget last Wednesday the Chancellor said:
"In this connection"—
that is, talking about the disposal of the Budget surplus—
"it should be noted that a large part of the Budget surplus has necessarily been applied to meet floating debt maturities which arise from the reduction in sterling balances of overseas holders."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2080.]
That statement has passed so far unheeded in this Debate. But it is a most astonishing statement when it comes to be analysed, because it is the first time that the Chancellor has admitted the gravity of the situation where war-time sterling debts can be used against the current productivity of this country and by such use deprive the country, in the hour of our greatest economic stress, of the earnings of those exports.

It is necessary to remind the Committee once again of the history of these sterling balances; of how they were incurred during the war between this country and our partners in the war; of how it was necessary for us, without any regard to immediate cost and immediate payment, to provide the necessary defence of Egypt, India and elsewhere; of how we supplied that money but made it absolutely clear that at the end of the war we should insist on those debts being scaled down to represent a just balance between the effort which we made and that made by the other country concerned. In spite of that being made clear, by the right hon. Gentleman the present Leader of the Opposition, as Leader of the Coalition Government, to the other countries, like Egypt and India, His Majesty's Government have never made any effort, beyond reserving their position—I think that is the technical phrase used by the Economic Secretary to the Treasury in answering the many questions I have put to him on this subject—to scale down the debts.

The result is that, year after year, countries such as Egypt and India are granted releases from these balances from our hard currency reserves. These releases are used to buy from our productivity and to buy in the Western Hemisphere, so that in fact we are paying for the war twice over. We paid first by the effort we put into it and, second, by liquifying the debts a proper share of which, under any form of justice, our partners should be called upon to bear. So long as this pumping of exports abroad to bilateral countries goes on, so long as we allow these debts to be liguited and so long is the other matters of which I have spoken continue, it is of very little use to talk in glowing terms about the success of our effort. Much of that effort is being wasted and is not producing the return which it ought to produce. I hope that before we conclude this Debate on the Economic Survey for 1949, we shall hear from the Chancellor that in future we shall not suffer from these unrequited exports and that we shall say that everything which this nation exports shall bring for us a proper return.

7.12 p.m.

In rising to address the Committee for the first time, I have no doubt that the kindness which the Committee usually shows to new and nervous Members will be shown to me. As I stood at the Bar of the House a few days ago waiting to take my seat, I remarked to one of my hon. Friends that being elected to Parliament appeared to be one ordeal after another. But perhaps I have the consolation that if I am ever asked to broadcast in "The Week in Westminster" I shall feel more at home there than I do now. The hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) will forgive me if I do not follow him in the remarks he made to the Committee. The first thing I want to do, since we are discussing the financial and economic policy of the Government, is to bear a message to His Majesty's Government of the confidence of the electors of the Sowerby Division. There, as hon. Members will have observed, the electors polled more votes for the Government and fewer against them than they did in the General Election in 1945. Yorkshire folk like plain speaking. They like to have it as man to man, they like to have facts calmly and fearlessly stated. The qualities of mind and character of my right hon. and learned Friend the Chancellor of the Exchequer are much admired among my constituents. He need have no fear that in his Budget statement last Wednesday he did any disservice to the nation or to His Majesty's Government.

The people in the home of industrial trade unionism and of the development of the friendly society movement, are able to distinguish between taxation which is a form of contribution to Britain's friendly society, and taxation which is levied to defray the cost of Defence and administration. That distinction was sharply drawn by the people among whom I mixed. The progress we are making towards recovery is being vigorously supported by the sturdy men and women of the West Riding who are putting a great deal into both export and home production.

Perhaps our first disappointment at the Budget proposals was due to looking at them in isolation and not regarding them, as we should have done, as part of a series. Many hon. and right hon. Members had been looking for what we call an incentive Budget, forgetting perhaps that we had one last year and the year before. My hon. Friend the Member for South Hammersmith (Mr. W. T. Williams) has already referred to the reliefs and incentives, which were contained in the Budget of last year. Might I be permitted to refresh the minds of the Committee on what they were? The earned income relief, to take one of them, was increased from one-sixth to one-fifth, and the maximum set-off was raised from £250 to £400, a higher figure than it was before the war. Age relief was increased to one-fifth also. The exemption limit was raised from £120 to £135, and the belt of tax charged at the reduced rate of 6s. was considerably widened. After the first £50 of tax charged at 3s. in the £, before last year's Budget the next £75 was charged at 6s., whereas after the Budget that belt of reduced rate of tax was increased to £200. Finally, married women in employment were given concessions for Income Tax which meant a considerable improvement in their position.

The cost of these changes was over £100 million a year. Actually, they did not begin until last July, though they were retrospective to the beginning of the financial year. Therefore, it is less than a year since we began to feel the benefit of those changes, and some of us remember that we enjoyed a brief but noticeable tax holiday. But that is not all. If we look at the Income Tax reductions made in the last three Budgets, we find that a single man earning £300 a year has had his tax reduced by one-quarter; a married man, with no children, earning £400 a year, has had his tax reduced by one-third; and a married man, with three children, earning £500 a year, has had his tax reduced by three-quarters. Several million of wage and salary earners were relieved of Income Tax altogether.

Turning to another aspect of last year's incentive Budget, I should like to refer to the changes in Purchase Tax. The Chancellor of the Exchequer declared himself to be most anxious to make some contribution to a lowering of prices by reducing Purchase Tax on many goods which most concern the hard-pressed housewife. He reduced Purchase Tax from 50 per cent. to 3⅓ per cent. on a wide range of household goods. This brought about a price reduction of 10 per cent. on £500 million worth of goods mostly consumed in the home, and cost the Exchequer £50 million. So much for the incentive Budget of last year.

Let us see what has happened to wages in the meantime. Like the hon. and gallant Member for Central Hull (Captain Hewitson), I am the secretary of a trade union of 36,000 people who have never yet gone on strike, though some folks perhaps wish they would. I am the secretary of the Inland Revenue Staff Federation. We are affiliated to the Trades Union Congress, we have endorsed the Government's White Paper on Personal Incomes, Wages and Prices and have voted accordingly at the Trades Union Congress. Like the hon. and gallant Member for Central Hull, I am concerned with the level of wages and the purchasing power of wages, but I do not want to be impulsive in this matter. I see that, on 7th April, in this House, my hon. and gallant Friend said:
"I have in my hand a list of industries numbering 151; in 122 of these 95s. or less is the average weekly basic wage."—[OFFICIAL REPORT, 7th April, 1949, Vol. 463, c. 2278.]
My hon. Friend the Member for South Hammersmith (Mr. W. T. Williams) has referred to these figures in his own speech. I have made a careful study of the "Ministry of Labour Gazette" for March, 1949, and I am unable to find a single industry, in which the average earnings were less than 100s. per week. In fact, the average earnings for men of 21 and over in the last pay week of October, 1948, was no less than 137s. 11d., and for women of 18 and over the average earnings were 74s. 6d.

It may have been that my hon. and gallant Friend was drawing a distinction between basic wages and actual earnings. May I suggest that it is misleading to refer to basic wages if, in fact, actual earnings are consistently above the basic rates? Anyhow, the point I want to make is that, since the Budget of last year, average earnings have risen by very nearly 4s. a week, and the average for last October was very nearly 10s. higher than the average for the previous October. Reviewing the past 12 months, it can be said that Income Tax reductions, Purchase Tax reductions and increases in earnings have amounted to something between 6s. and 8s. a week. As against that, the index of retail prices was the same on food this year as it was in April last year.

That is the background to our consideration of what my right hon. and learned Friend proposed in his Budget statement last Wednesday. Many of us are no doubt disappointed that further easements in both direct and indirect taxation are not possible. The Chancellor has described this one as the "holdfast Budget"; in other words, it is the Budget after the one before. What troubles some of us about it is not so much the absence of tax reliefs—we could bear that perhaps for another year—but what the Chancellor proposes to do about food subsidies. Here may I say that I think it is a pity that a halt in the upward movement of the food subsidies has been announced in terms which sound very much like a tax on food. It is not, of course, anything of the kind, though I realise that the effect on the purse of the housewife, and more especially on that of the old age pensioner, may be precisely the same as that of a tax on food, and it may be that the National Assistance Board will have to take these changes into account in reviewing its scale of national assistance.

Nevertheless, we should all realise that, even after the retail price of cheese has risen by 4d. per 1b., the subsidy will still be at the rate of 9d. per 1b., which is more than it was two years ago; that is to say, the subsidy, after the reduction proposed by the Chancellor, will still be more than it was two years ago. The same applies to butter. When the retail price goes up from 1s. 4d. per 1b. to 1s. 6d. per 1b., the subsidy will still be about 1s. 2d. per 1b., which is more by 4d. per 1b. than it was two years ago. In the case of margarine, when the Budget increase of a 1d. per 1b. takes place, the subsidy will still be at the rate of 3½d. per 1b. What is so necessary to comprehend about the Chancellor's proposals is that he is not reducing the subsidies but putting a limit on the amount of money he can find out of taxation to pay them. In the recent by-election at Sowerby, I defended subsidies, and I defend them now. When my opponent said that Conservative policy was to make the cost of living cheaper by reducing taxation, I challenged him to say what he proposed to do about the food subsidies, but he never answered the question. At the same time, if there is a limit to what we can afford to pay in food subsidies, there may, by the same token, be a limit on what we can afford to pay for food, and that, perhaps, is the central point.

Personally, I attach no importance to the suggestion that food subsidies falsify the true cost of food. One might say the same about the housing subsidy—that it falsifies the true economic rental—or of the National Health Service—that it falsifies the true cost of doctor and medicine and surgical treatment. These things are now part of our new conception of social services, and are bound up with the whole Socialist economy. Nevertheless, I believe that the Chancellor is justified in shedding part of the load when it gets too heavy by passing some of the higher costs to us, the consumers, if we can bear it; and, if we cannot, we buy less food. But the Chancellor must avoid load shedding of proportions which will stimulate demands for wage increases and lead us again into inflation.

Before I finish, I shall say something that may be a message of hope to the Chancellor concerning administration on the revenue side, but, before doing that, may I say a word or two about the proposals concerning National Insurance benefits and Income Tax? This proposal is virtually a tax increase. The Finance Act of 1946 laid down that benefits and allowances under the National Insurance and Family Allowances Acts should be assessed to tax under Schedule E. By the same Acts, contributions under the National Insurance Act were allowed as deductions for Income Tax purposes. The reason why the Chancellor comes forward with a proposal to exempt unemployment, sickness and maternity benefits from tax is purely one of administration. He has discovered the difficulty of which I warned his predecessor, my right hon. Friend the Chancellor of the Duchy of Lancaster, that is, his inability to tax these benefits under P.A.Y.E. with the obvious time-lag in bringing them into assessment in consequence. Now, the Chancellor admits that this has got the Inland Revenue beaten.

I think his proposal to meet the situation appears to be rather open to question. Parliament decided the principle of taxing benefits and allowing relief for contribution, and now, solely for reasons of administration, the Chancellor proposes to abandon the principle of taxing benefits and to reduce the relief from tax for a corresponding proportion of the contribution. My right hon. and learned Friend is making a virtue of a necessity, and, indeed, is determined to make a profit out of it, because the taxpayer will pay tax on another £3 of his income—which is the reduction in tax allowance for contributions from 4s. 7d. to 3s.— and get nothing for it unless he draws unemployment, sickness or maternity benefits. The Chancellor wants to abandon the tax which he cannot collect and to impose one which he can, but instead of those who draw the benefits paying the tax, it is to be paid by all who contribute by means of the reduction in the set-off.

After blessing the proposed repeal of the Land Tax, which ought to have been done years ago, along with the window tax and the hearth tax, I pass to some remarks I wish to make about leakages, which I believe to be somewhat widespread, in the field of Income Tax assessments under Schedule D on profits, professional fees, businesses, and so on. Whenever I speak on this subject I get into trouble. I have been rebuked by every Chancellor of the Exchequer except the present one, by the late Sir Kingsley Wood in public and by the right hon. Member for the Scottish Universities (Sir J. Anderson), and I am hoping to escape rebuke from my right hon. and learned Friend the present Chancellor of the Exchequer. I have no intention of casting any reflection on the zeal, ability and devotion of the already overworked inspectors of taxes, but the right hon. Member for the Scottish Universities did ask whether there were any arrears in the Inland Revenue and whether the equipment of the taxing machine was equal to the burdens now placed upon it. I would say that the answer to the last question is "No."

I feel certain that the Chancellor and probably many right hon. and hon. Members will have read a well-informed contributed article which appeared in the "Economist" of 7th August, 1948. If right hon. and hon. Members have not already read it, I suggest that it would repay the time to do so. The issue of principle here is that unless the taxing machine is effectual, it becomes very near to an abuse of public confidence. All those of us who are paying our proper share of taxation are entitled to assume that our neighbours, our competitors, our friends and our enemies are doing likewise. Millions of taxpayers pay as they earn. Every pound of wages or salary, all overtime and bonuses go into the reckoning. A smaller, but equally important, body of taxpayers do not pay as they earn. They are assessed for tax in the normal way on income or profits supported or not, as the case may be, by properly drawn up accounts.

The number of inspectors of taxes who have been trained for work in this field of Income Tax is no bigger today than it was in 1939. The staff to deal with Pay As You Earn has greatly expanded, but the number of trained inspectors of taxes devoting themselves almost exclusively to the taxation of profits, has remained the same throughout the war, despite the additional burden of Excess Profits Tax. They simply had to manage as best they could by selecting the work they could do and leaving aside the work they could not do. Much investigation and inquiry work is now long overdue. It is not being done and time is going on. By the time these outstanding cases are tackled, there will be great difficulty in ever collecting the money. I assert that the policy of the Inland Revenue Department appears to be to solve the internal difficulties of the Department by compromising with those who are in a position to evade tax at the expense of those who are not.

Another factor which contributes to the present unsatisfactory position was the abolition under the Finance Act, 1946, of the office of assessor, an officer who, by his local knowledge and his duty to acquaint the inspector of taxes with possible liabilities, was of great value. What is needed now is to set up in his place a comprehensive information service within the Inland Revenue organisation to end as rapidly as possible conditions in which it is almost a matter of luck whether some people get caught for Income Tax or not. Some estimates that I have seen of the amount of Income Tax which is slipping through the hands of my right hon. and learned Friend each year are very high. They are put at £100 million a year for the last 10 years. Here is the money for the food subsidies; all it needs is gathering in.

I am going to make the practical suggestion to my right hon. and learned Friend that, without further delay, he should cause a proper survey to be made over a limited experimental area so that some evidence may be obtained, firstly, of the number of likely taxpayers who are not in the Income Tax net at all, and, secondly, the number in which closer scrutiny of returns and accounts is judged to be necessary, but which at the present moment is left aside through lack of time. Finally, I suggest that there is a body of intelligent officers already there who might well be turned on to this work, and who at present are pursuing more or less trivial things which crop up on Pay As You Earn. What we do not want are two Income Taxes—Pay As You Earn and "pay as you like." If my right hon. and learned Friend will set about this problem at once, the present tenuous estimated surplus may be so much bigger than he ever thought it would be, and then next year, perhaps, we can all look forward to another incentive Budget.

7.37 p.m.

I think that the whole Committee has listened with interest, sympathy and respect to the speech of the hon. Member for Sowerby (Mr. Houghton). He has delved into the mysteries of Income Tax which have always baffled plain men. We know a little of what goes on behind those scenes, and if he will consider at some time or other whether it will be consistent with his Parliamentary duties to withdraw the labour of his friends in the Inland Revenue union, say, from January to March, we shall not feel that his time here has been wasted. I am sure that we all hope to hear from him on many future occasions similar well-informed expositions to that which it has been our privilege to listen this afternoon.

I wish to draw the attention of the Committee to two or three important points in the Budget which seem to deserve some examination. The acid test of this Budget and of the Budget which preceded it, of which it is a complementary part, and of the Economic Survey is whether the inflationary spiral has been arrested. I think it will be agreed in all quarters that uncontrolled inflation is the greatest evil which can befall any economy. There is a considerable difference of opinion among economists whether or not the inflationary spiral has been arrested, but as economists always differ on every single subject under the sun that fact need not puzzle or worry us too much this afternoon. But, accepting the rough and ready explanation that inflation consists of too much money chasing too few goods, that situation, for the moment, has passed. It is sometimes said that the battle against inflation has been won. Do not let us accept that delusion. One of the speeches made on Budget day, and at least one speech made today, and thousands of similar speeches being made all over the country, will tend to drive the Chancellor and his advisers on to the disastrous road to inflation unless he has the courage to resist them.

I think we can see some signs of a deflationary process. There are more goods in the shops than there is purchasing power to absorb them. That may have been due to a certain extent to the uncertainty about the Purchase Tax in this Budget, but it is a factor which will have to be considered. In order to maintain a policy of full employment, on which we are all agreed, any revision in the export demand will mean that goods will have to be released for the home market, but it will rather puzzle the wit of man to find where the resources are to come from with which to absorb them. After considering all the tremendous structure in the Budget based on industry, there are many factors in our industrial position which cause us some disquiet.

This country, with the co-operation of every class of the community, has made great strides towards economic recovery, but it will be admitted on all hands that it has been vastly assisted by world conditions—a world starved of capital goods of every description, avid for capital goods of almost any quantity and at almost any price. That state has now gone for ever. While the hunger of the world for capital goods still exists, the power to pay for and absorb them has markedly diminished. In every direction restrictions have been set up simply because of the baffling state of the exchanges. Do not let us be insensible to the other factor—the rapid growth in many of our consuming markets, of secondary and even primary industries, a movement which began before the war, which was strengthened during the war and which will have a very great effect on world trade in the future. So we come to the other factor, that in this buyers' market which has now been built up, we shall require qualities of a very exceptional character. We shall want courage, enterprise, the willingness to take risks and what the President of the Board of Trade indicated this afternoon—a policy of adventure. I like to think of that word "adventure," because the old Elizabethan spirit of adventure still flourishes in this country.

While it may be true to say that the overseas market is largely conditioned by quality and price, those are not the only factors. There is the factor of service, of willingness to take risks and even to incur losses. By service, I mean not only original service but a continuing service which is necessary in order to hold a market. In the vast Eastern market with which we are so closely connected, price is even more important than quality, because of very low purchasing power. In many respects, the price factor is going to be the most important element in maintaining our export trade in the whole of the world market. As a fairly diligent reader of company reports, I cannot be at all convinced that there is not room for a reduction in price to the consumer in a very wide range of goods produced in our country today.

If we are to have those qualities of enterprise, adventure and willingness to take risks and even to face losses, do not let this Committee have the delusion for a moment that those qualities are compatible with nationalised industry. Nationalised industry is destructive of every one of those qualities, whatever may be its other merits. No wise man would condemn nationalised industry in itself. What he does condemn is the tendency to make nationalisation a shibboleth, to put it in a joss-house and worship it not as an economic policy, but as a fantasy to be pursued. I say advisedly, that more courage and determination would be restored to industry if the Government gave a definite guarantee that no industry would be nationalised without a full, detailed, careful and impartial examination first. That would go a great way indeed towards restoring confidence. What shakes confidence is nationalisation first and inquiry afterwards—50 years of bleating about nationalisation and then at the end of 50 years to confess that it had never been studied and was not really understood.

What is the inescapable conclusion? Very nearly 40 per cent. of our national income is being taken by the State, and even with that 40 per cent., there is no margin. What is £14 million surplus in the disturbed condition of the world today? After this huge proportion is taken, there is no margin, and there are admitted to be rising charges both in defence and in the social services. Whither does that lead? Any impartial study of the situation must carry the conviction that if there is any way to restore incentives or maintain this precarious balance, there must be a reduction in national expenditure. It may be said: "It is all very well to talk of a reduction in national expenditure; tell us what field should be tackled first." The Government are here to do these things. The Ministers are there, drawing moderate but not inadequate salaries to do these things, and if they cannot do these difficult things, they must give place to those who will.

I mean no disrespect to Ministers, but I should like to remind them of a man who was a great administrator—Lord Kitchener. When he was Commander-in-Chief in India he issued certain orders and the adjutant-general, who was a "white haired boy," came to him and said, "Sir, it would be very difficult to carry out these orders." Kitchener said, "I am not interested. You receive excellent pay each month for doing difficult things. If you tell me that you cannot do it, I will find somebody who can. Good morning." That, I think, is an attitude which we are entitled, without discourtesy, to take up with Ministers today. Unless there is a reduction in national expenditure, whilst the State are taking 40 per cent. of the national income and we are faced with these rising charges for defence and the social services, we shall either have uncontrollable inflation or the whole magnificent services which we have built up, may be undermined and destroyed.

I wonder whether the younger Members consider what those social services mean. My memory goes back a long way. I have lived a great part of my life in industrial towns. Anybody who can compare conditions in industrial towns today with what they were 40, 50 and 60 years ago, must feel that whatever the cost, whatever the sacrifice, risks and dangers involved, the money has been spent well and truly for the good of our people. If people want to see what the social services have meant, they should go abroad and they will not find finer or bonnier babies anywhere else in the world today.

As I came into this House on Wednesday evening, somebody met me at the gate and said, "This is a terrible Budget." That is not my reaction. My reaction is that it is in no sense of the word a terrible Budget. It is an inspiring Budget because it covers up nothing. It places the state of the nation fairly and squarely before us. It tells us exactly what we have to do in order to maintain the stability of the great structure which we have built up. It is not a matter of danger. It is a matter of privilege to be able to play our part in maintaining that structure and seeing that it is never undermined.

7.50 p.m.

I feel it would be churlish to be too critical of the hon. Member for Aylesbury (Sir S. Reed). After listening to him for some time and noting certain waverings one way and the other, I concluded, on the crucial question of whether he was for or against the Budget, that on the whole he was for it. I feel he would be ill-used if, at the moment, I tried to pick too many holes in his simple solution for reducing the national expenditure, one which, at this season of the year, very many taxpayers attempt to propound to whoever is called upon to collect their taxes.

I doubt, however, whether in this House we can approach the question of expenditure quite like that. We know quite well by now what are the principal headings which have to be met and those of us who followed the Chancellor's speech the other day noticed that the leading social services which he instanced totalled almost exactly the same as the defence expenditure, now amounting to £763 million. We are told that it is our duty to be vigilant in the public interest, to see that no money is wasted, and to resume our old role of being critical, but I ask whoever is to reply to this Debate to explain to us simply and clearly how we can be critical in any detail of this very large item of defence expenditure. Is it really suggested that there is no room for economy in the Services? On the other hand, are we in a position to suggest what those economies should be with the same critical vigilance that we were asked to use in connection with the Civil Service?

Of course, that is a particular point, but of the Budget as a whole I am bound to say that when I first heard it I shared a great deal of the anxiety that has been felt in the country because, besides some unreasoning criticism, I think there has also been reasoned criticism on the lines that the Chancellor might at this moment have taken more chances and, by so doing, might have achieved better results. Yet, on the best consideration I can give to the matter, I believe he was right, and it seems to me that the choice between what someone has called a soft Budget and a hard Budget really depends upon the view we take as to whether we have reached a period of deflation. Quite definitely, the Economic Survey comes down on the other side.

If we are to define inflation as too much money chasing too few goods, then the conclusion of the Economic Survey, as I understand it is that although there are more goods in some lines, yet on the balance of the whole thing we cannot yet say that there is too little money chasing too many goods. That I take to be a definition of a deflationary position and it seems to me that once we accept it, and once we regard the risks of inflation as continuing and as imminent, as indeed it is suggested in the Economic Survey that they are, then we must have a hard Budget and we are not in a position to take any chances about it.

That being the position, I should like, on the Budget itself, to make one or two quite minor comments. One is that I cannot see how any comparison can usefully be made, as undoubtedly it is being made in the country—and it has been made in this House several times today—between two things which I regard as quite different. One is, of course, not a tax at all: that is, putting a limit on food subsidies. I am sure the Commitee will recollect that that limit was originally to be £400 million. We have passed the limit by a matter of £85 million, and surely there must be some time when we call a halt. I cannot accept the position that fourpence a head a week is, at the present moment, having regard to other food prices, any substantial general hardship. I cannot accept that.

But those figures seem to me to be an entirely different matter from the very small figure that is involved, or may be involved, in taking a penny off the price of beer. It is quite a small amount and it is really a most uncertain figure, because clearly the result will depend not only on the rate of taxation but on the result that the reduction has in the consumption of beer. I feel, and I am sure many of us feel, that the motive for the penny off beer was not unconnected with a certain decrease in the consumption of beer. I do not want to go into any controversial aspect of the matter, but I believe this is a very small concession, if ever there was one—if, indeed, it proves to be a concession at all; and I think it is entirely misconceived to suppose that by deciding not to make that concession over beer anything could have been done about the increasing price of food in the world, which is the real reason for limiting the food subsidies.

Having said that, I should still like to say this: in our approval of the Budget and in our appreciation that this burden of limiting the food subsidies is a comparatively small burden, do not let us go too far; it still remains the case that within the limits of the White Paper there are inequalities as between one trade and another, and perhaps some of us who are entirely outside the trade union organisation notice them even the more clearly from our distant viewpoint. I cannot help noticing, for instance, in my own constituency, where there are boot and shoe workers, iron and steel workers, and railwaymen, that railwaymen in particular work very long hours and seem to me not to have profited by the general increase there has been in the standard of living of the workers during the last two years—for there has been such an increase—to the extent that others have profited by it.

Speaking as an amateur in these matters—because, after all, that is what a lawyer is bound to be—I feel that there are other instances of that sort, not only in the fixed pay, rather long-hour trades, such as railwaymen, but also, of course, even with national assistance, among others who have to live on fixed payments of any kind, and I share the hope that has been expressed here today that the matter will come into consideration with regard to national assistance and to national assistance scales. I hope we shall not forget that the White Paper and the policy which that White Paper laid down was not a pegging of wages and did not preclude, in certain circumstances, adjustments as between one trade and another. I cannot see that a matter of that sort need be inflationary; I cannot see that it falls within any of the dangers which were suggested in the Budget.

I come to one other point in connection with the 40 per cent. initial allowance which is being made for industrial plant. I have had something to do with companies, and I do not quite know at the moment whether some company with which I am concerned may not get some benefit out of that allowance; but I feel some doubt personally whether it is really necessary at the moment. I entirely agree that new plant is needed. I agree, too, that the rise in the cost of plant and its installation makes many of the allowances that have been made for the replacement, or even maintenance, of plant rather out of date. I appreciate that difficulty. What, however, are we doing? What we are doing is to give a tax-free loan for the time being to those industrialists who are to put in new plant. We are giving them 20 per cent. loan by way of allowance now—an additional 20 per cent., for 20 per cent. has already been given—instead of spreading it over years to come. I am wondering whether it is necessary.

What makes me wonder—and I hope we shall get an answer during the Debate—is the figures which have been given in the White Paper on National income and expenditure, which in Table 6 show that additions to free reserves of companies have risen from £285 million in 1946 to £545 million in 1948. I should have thought that in present circumstances there was a good deal to be said for some concession of this kind; but the necessity for it at the moment ought to be rather more fully justified than we have had it justified so far. I recognise it to be a matter of which the Chancellor has sufficient knowledge—and, probably, he is the only person who has sufficient knowledge—to form a definite opinion one way or another, but we as Members of Parliament have to defend this concession, which has met with a good deal of approval from the other side of the Committee, as well as from some people on this side of the Committee; we have to defend it in the country, and we should like to be satisfied that it is not only good in itself but necessary at the moment. Otherwise, we are open to the comment that a concession made now might, perhaps, have been used by way of keeping the food subsidies a little bit longer. I put that question in that form because I think it ought to be answered.

It leads me to one suggestion, and one only, about the whole position of plant and taxation. It always seems to me a very peculiar question, how to allow for obsolescence and depreciation of plant for tax purposes. In the boot and shoe trade, of which I have seen a good deal since I sat for Kettering, plant is a rather remarkable business. It never belongs to the owner of a factory—or hardly ever. One enters a factory to find that the plant in is it let out by a company which specialises in that business, and which maintains and modernises the plant, and gives the factory the benefit of a good deal of special experience. That curious arrangement—because it is a curious arrangement in some ways—has been approved unanimously by the working party on the boot and shoe industry.

I should like to make the suggestion that there is room for the Government to consider some action by themselves as regards industrial plant on the lines of the company which supplies, hires, maintains and improves the plant in that particular industry. It is not, of course, a matter for any immediate action, but as a long-run proposition it seems to me to have advantages, and to provide the possibility of encouraging enterprise where enterprise is needed, and of allowing people who have that enterprise to start in some old and other new industries where otherwise they may be prevented from starting by lack of their own resources, and to fill, in that way, a gap which is not altogether met by the financial provisions for those cases which the Government have so wisely supplied already.

That is all I want to say. If I have seemed slightly critical on one or two points in this Budget I yield to no one in regarding it as a courageous Budget. I think, as I have said, that it is right at the time. Robespierre was called "the Sea-green incorruptible." The Chancellor is undoubtedly incorruptible. There are moments when we wish he was a little less sea-green, and could "put it over"—I am sure he will not mind my saying so—with some airs and graces. There is something to be said for graces in these matters. But for incorruptibility, for courage, and for what I believe to be real wisdom, he has our respect on both sides of this Committee; and I believe he gets and he is getting the country's respect, too.

8.8 p.m.

The hon. and learned Member for Kettering (Mr. Mitchison) criticised the Government for helping in the renewal of plant. If I understood him aright, he thought that that money might have been used to increase the food subsidies, but whether the Chancellor liked doing this or not, he was compelled to do it, because he has made us export a lot of up-to-date machinery to other countries that are now in competition with us, and we have got to make our industry as efficient as possible, to export goods at world competitive prices in order that we may buy food.

There has been much talk on detail in this Debate, but there is much more than detail at stake: there are big principles at stake. "Man proposes, God disposes." I ask the Committee to consider that we are talking in millions of pounds and to consider what we mean by "pounds." What is their purchasing power? The whole recovery of this country depends on the restoration of confidence and stability at home and abroad. Will any businessman in this country ask his accountant to assess, in a yearly balance sheet, the value of confidence and stability? It cannot be done, yet they are basic to material prosperity.

My reaction to and the lesson I learn from the Budget and the Chancellor's speech is this: That the game is up; Socialism has shot its bolt, especially in England. I shall refer to why I said "especially in England" in a minute. The orange is squeezed dry, and there are no more rich to soak. The hon. and learned Member for Kettering has referred to the courage of the Chancellor of the Exchequer. He had to be courageous and stand up to the extremists of his own party because the very existence of our land is at stake. In saying that I am for once supporting the Prime Minister. In the "Daily Mail" of 11th April he is reported as saying after the years of political nonsense which he has talked: