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Full Text

iGV5 to 2e
IV 0 4-

HOUSE OF COMMONS, April 2, 1947 [Extracts] /

Deputy Leader of the Opposition (Mr. Eden): The main purpose of
the Debate upon which we are now to engage, is to obtain from the Gov-
ernment a clear picture of fuel prospects for the weeks and months ahead,
and, in particular, further information as to the provision of fuel for
industry, and the restriction of fuel for the domestic consumer.

I think I can best begin by outlining the picture as it presents itself to
us today, on the basis of the information which the Government have
recently given. In the first place, we are told by the Government that the
coal target for 1947 is 200 million tons. This, in itself, as a target is woe-
fully inadequate, as representatives of both the Federation of British
Industries and the Trades Union Congress have already pointed out.
Moreover, it represents, as far as deep-mined coal is concerned, a produc-
tion of some 15 million tons less than we achieved in 1941 by a labor force
no greater and with less mechanization than we have today. I know that
all sections of the House will feel that this is a very disappointing figure.
So much, for the moment, about the target for 1947 as a whole. Its impli-
cations will be clearer as this Debate goes on.
Let us examine the outlook for the next few weeks and months. As I
understand the statements made to us by a number of Ministers, the inten-
tion, as far as hard fuel is concerned, has been to restart supplies at a figure
of 3381/ per cent of the original allocation. They also propose to build up,
if possible, from this level of 331/s per cent to the 50 per cent level proposed
in the so-called Cripps plan. They hope to do that by the beginning of the
coal summer, 1st May. We have also been given some calculations by the
President of the Board of Trade and the Prime Minister, to cover the six
summer months.
The upshot of these various Government statements appears to be this:
Our total requirements-I am dealing at the moment with the summer
months including the full requirements of industry but, of course, not
allowing anything of importance for export-will be about 100 million
tons, after making allowances for a saving of two million tons as a result
of conversion to oil firing. This calculation of 100 million tons includes
10 million tons for restocking. This is the total that will be required to
build up our stocks by the beginning of next winter to 15 million tons,
a figure the adequacy of which, I am sure the House will agree, is very
questionable. At any rate, it is the absolute minimum. That is the
target for the six summer months. The production likely to be available
in the opinion of the Government-I base it on their statement-to meet
this demand, falls short of this figure of 100 million tons which, as I have
shown, is a very low estimate of what we need. There will be a deficiency
which the Prime Minister told us might amount to as much as 10 million
tons. I take this to be the difference between the requirement of 100 mil-
lion tons and the estimated production of 89 million tons, which the Presi-

House of Commons, April 2, 1947

dent of the Board of Trade laid down when he opened the Debate on the
Economic White Paper a while ago.
I ask the Government first, what do they propose to do about that?
It is the intention of the Government, so far as we can ascertain up to date
-and we will be glad if any further information can be given-to try to
close this gap of 10 million or 11 million tons, by savings of about 2,500,-
000 tons from domestic consumption of gas and electricity and about 250,-
000 tons from restriction of passenger train services. By far the greater part
of the shortfall, three-quarters of it, will have to be borne entirely by in-
dustry. I do not know whether that is a correct reading of the intentions
of the Government, but all the facts are drawn from their own statements.
I want the House to observe that this deficiency of industrial coal sup-
plies for the summer, which the President of the Board of Trade esti-
mated at 8,800,000 tons, is a very serious figure indeed. It is the equiv-
alent of one-third of industry's total requirements for those six summer
months. That is the picture as I understand it to be today, upon the
latest information we have had from Government spokesmen.
Before I go on to speak of the effect of that shortfall on industry and
on the domestic consumer, there is one remarkable point to which I must
call the attention of the House. The estimate of the President of the
Board of Trade for production for the six summer months was 89 million
tons, without taking into account the improvement we hope to get. Of
this 89 million tons, six million was to come from open-cast coal, and the
remaining 83 million from deep mines. Yet in the six months of last year,
which nobody would regard as a good year for production, the production
of deep-mined coal was, itself, 89 million tons. In other words, the Gov-
ernment, from their own figure, are budgeting on a production of deep-
mined coal this summer which is six million tons less than that of last
year. That is to say, they expect a million tons a month less production
during this summer than there was last year. This will be with increased
manpower, certainly with more first-class miners back from the Forces,
and with increased mechanization. I confess that that Government fore-
cast is quite inexplicable to me. I cannot understand on what it is based
and why it is made.
Let the House look at it in another way. The estimate of the Presi-
dent of the Board of Trade works out at a weekly average of less than
3,200,000 tons of deep-mined coal a week. Yet last week, as we were all
very glad to see, production exceeded 3,900,000 tons. Even allowing for
extended holidays, or any other proposals there may be, it is a very wide
discrepancy. The House is entitled to a clear explanation of these figures.
Why is there such a vast difference between the estimate of the President
of the Board of Trade of what industry can produce in the summer months,
and what it is in fact producing even in the present week? Why is the
Government estimate of production for the summer so pitifully low?
I turn from that to the effect of these deficiencies, as the Government
have described them, on the industrial and on the domestic consumer.
There cannot be any doubt that at present industry is suffering, in all its
branches, from a shortage of coal and the failure to provide more than

The Fuel Situation [Ma. EDEN)

33Y3 per cent allocation for many industries. I could quote many ex-
amples of the difficulties experienced, for example by the cotton spinners,
paper manufacturers and others. Hon. Members may feel, at first sight,
that paper does not seem to be of such vital importance. None the less,
shortage of wrappings and packing materials can be a great handicap to
our export drive, as the President of the Board of Trade would agree.
I received one letter which particularly struck me from a representative
of the leather trade. He tells me that the allocation they are receiving
now, means the equivalent of standing idle for two weeks and then work-
ing for one week. I am willing to hand the letter to the Minister of Fuel
and Power if he would like it. But that is not all. Some firms cannot
even do this, because of difficulties such as the length of processing, which
are inherent in their particular industries. So my correspondent tells me-
and I have no doubt at all about his bona fides-the result may well be
to force some firms out of business altogether. That is an example of the
real difficulties which are at present being experienced by industry.
I, therefore, ask the Government, what are the prospects of improve-
ment? We have been told that the total fuel available for industry in the
summer months is likely to be a little more than two-thirds of what is
required. How is that available coal to be apportioned as between indus-
tries and different activities? This is of fundamental importance to in-
dustry. The general principle of the Cripps plan, as it was called, was,
I think I am right in saying, that a basic ration should be guaranteed to
all industries, and so far as I am aware nobody in industry today knows
what that basic ration is to be from 1st May next. The Cripps plan also
provided that over and above the basic ration, there would be a pool
available in each region to make up allocations to the more important
undertakings or processes. I ask the Government, and the right hon. Gen-
tleman who is to reply, on what basis of priorities are supplies from these
regional pools to be allotted? Is this to be determined centrally in White-
hall or in regions; if it is to be done regionally, are any principles laid
down to guide the regions, and if so, what are those principles? On what
list of priorities are the Government working? For instance, have they
devised any plans for relating coal supplies to end products and for re-
lating coal allocations to available supplies of other scarce raw materials?
I take an example to explain what I mean. I take the most impor-
tant example I can, that of steel. Let us see what the position is there.
Under the Cripps plan, the steel industry received an allocation of 75
per cent of its requirements. I understand that is the rate which the in-
dustry is receiving at the present time. What is to happen after 1st May?
Will the allocation continue to be 75 per cent or will the iron and steel
industry get its full 100 per cent? It is already well known to many hon.
Members that the shortage of steel will cause almost as many difficulties
to industry this year as the shortage of coal. Yet the production of steel
is limited in its turn by the availability of coal. What priorities have the
Government in mind for allocating available steel production? Will ade-
quate steel be available, for instance, to achieve our export target of 135
per cent of the 1938 level-[HoN. MEMBERs:"140 per cent."]-140 per cent

House of Commons, April 2, 1947

of the 1938 level by the end of the present year which is laid down in the
White Paper? If the Government decide that the steel industry must have
100 per cent of its coal allocation to enable it to do that, what will be. the
effect on coal allocations to other industries? I really think the House
must know these things, and industry must know these things too. The
uncertainty facing industry today creates great difficulties. I must remind
the House that 1st May is only four weeks off, and it does not seem un-
reasonable that we should now ask what industry is to receive on that date.
So much for industrial consumption.

I turn now to the domestic consumer. The President of the Board of
Trade told us recently-quite rightly-that there has already been a very
large reduction in domestic coal allocation. It is, no doubt, in consequence
of this, as the House can see for itself, that there was an increase in the
consumption of electricity by the domestic consumer before recent events
took place. The Government have decided that it is necessary to impose fur-
ther reductions on the consumption of fuel this summer, in this case on the
consumption of gas and electricity. This is a very serious business. No one
should overlook the immense burden which the housewife is now carrying
after six years of war. She is now called on to endure a further restriction for
a long period. I have received-no doubt the Government and hon Members
in all parts of the House have also received-many heart-rending letters
about the conditions under which the housewife will have to work if these
restrictions, imposed by the right hon. Gentleman originally for a very short
time-at most a week-have to be continued all through the long so-called
summer months. I use the word "so-called" advisedly, because we know
very well what a British summer can be like.
There are housewives and their families who have no access, for instance,
to industrial canteens. They have to manage as best they can, on the
rations of the present day, and with the perplexities that cooking entails
with the present allowances. Then there is the problem of household
washing, especially in the case of families with small children. If on top
of all this, they have to look forward to fuel rationing, with its effect on
domestic cooking and washing, throughout the summer months, it is hardly
surprising that they should feel deep indignation. I do not think the right
hon. Gentleman will dispute that. The Prime Minister told us on 27th
March that the Government's target for domestic fuel restrictions is a
saving of 2,500,000 tons of coal during the summer in respect of domestic
consumption of gas and electricity. How is this to be done? So far, 1
must confess, I have found the Government's statement of their intention
very vague and unsatisfactory. I hope we shall hear a good deal more
about those intentions today.
Before I deal with the problem of rationing, I should like to ask who-
ever is to reply for the Government what consultations there have been
with the electricity supply industries. One of the most serious criticisms
of the Government, in respect of the sudden shutdown of electricity an-
nounced on that black Friday afternoon, was their lamentable failure to

The Fuel Situation [Ma. EDEN]

consult with the industry, until it was too late, on the practical problems
that would arise. I know, as does the Prime Minister, that the question
of fuel rationing was raised during the war, and the Government were
given the views of the electricity industry. Here I must turn aside for one
moment to say that I hope we have now heard the last of blame being
cast on some hon. Members on this side of the House, for criticizing the
wisdom of fuel rationing during the war. There have been many attempts
to make party capital out of that, but it is perfectly clear now that the
Government have been compelled to come to precisely the same conclu-
sion as some of my hon. Friends and the Coalition Government. I know
that the electricity supply industry was then consulted, and I know the
Government have recently, quite rightly, been in touch with the Central
Electricity Board who represent the generating and wholesale side of the
industry. I read in the press that over last week-end, telegrams were sud-
denly dispatched by the Ministry of Fuel to the supply undertakings in-
viting them to a conference. I ask the Government to give us any informa-
tion they can about the results of that conference. It would be good
that we should be told.
At the same time, could we also be told what is intended about gas?
Is it intended that gas also shall be affected? If so, how and when? We
ought to know so that there, again, the consumer may at least have a
chance to make his plans ahead. Clearly, there must be every possible
economy in the domestic use of fuel, but I doubt very much whether a
rationing scheme is practicable.
The saving to be achieved-2,500,000 tons of coal-represents only four
days' output at most, and less than half the six million tons which the
Government's own estimate of these summer months shows the reduction
to be, as compared with last year. That is a very remarkable thing. Can
the Government tell us their estimate of the present domestic consumption,
and what percentage of saving this 2,500,000 represents? The rationing
scheme would mean a vast staff, an additional burden of officials, and,
above all, a grave new burden on the household and the housewife. Even
with the Government's well-known power of popular and lucid explana-
tion, I doubt whether it will be very easy for consumers to estimate their
consumption, and to calculate the best basis on which to interchange
points for the various fuels, or to know, until too late, whether or not
they are exceeding their ration. There, I am in agreement with the Gov-
ernment about the rationing scheme.
What is the alternative? I believe that the best method of tackling
this problem of the summer months, as far as the domestic consumer is
concerned, is by the voluntary method of appeal, and by giving the public
all the facts. I say to the Government, as I said before, that it is their
duty to tell the people all the facts all the time, and to trust them. I
know that it is very difficult for Ministers to put themselves into the posi-
tion of ordinary folk like us, but it is also difficult to expect people to give
of their best, when, for example, they find that the Government's coal
production target has been set so very low. It is difficult to expect people
to do that when, for instance, so little effort has been made to restrict the

House of Commons, April 2, 1947

sale of electric fires, or, shall I say, when every encouragement has actually
been given to the purchase of electric fires. The Government must have
known that for every one kilowatt domestic fire which may be sold, and
which may cost only about 1, the community is faced with a capital ex-
penditure for new generating plant of not less than 40. I hope that we
may hear from the Government a clearer account of this matter.

I have dealt with the position as we see it, and the effect of the coal
position on domestic and industrial consumption. I would ask the Gov-
ernment some further questions about the practical steps they are taking,
or should be taking, to bridge the gap between requirements and the sup-
plies of coal. It is very gratifying to see the increase in recruitment for
the mines. We all hope that this will continue, but, at the same time, I
must ask the Government what progress is being made with the obtaining
of Polish or other foreign labor, and what is being done about imports of
coal, on which subject there appears to be, shall I say, a certain divergence
of emphasis, if not of view, between the Prime Minister and the Minister
of Fuel and Power, and, indeed, the Minister of Transport. Nobody
denies the importance of the European Coal Organization. I should cer-
tainly be the last to do that, but, if we have a case to put, why should we
not put it to that organization as forcibly as anybody else?
Are the Government instructing the National Coal Board to give
urgent attention to the very serious problem of the quality of coal, and
to the proportion of ash and other impurities which it at present contains?
It is really most misleading to continue to base all coal statistics on ton-
nages alone, without making any allowance for the amount of extraneous
matter, shall we call it, that now appears along with coal. I believe that
some unfriendly persons describe this extraneous matter as "Shinwellite."
However that may be, the calculations which I have seen, and which have
been obtained from a wide range of industries, suggest that since 1939
there has been a decline of more than 5 per cent in the calorific value of
coal. Is that true? Look at all the waste that that involves in respect of
transport, deterioration of plant and loss of thermal efficiency. I ask the
Government whether they could not publish figures of the calorific value
of coal produced, to be read in relation to the coal budget figures. That
would give us a much more realistic picture of what has happened. I
would particularly ask them to pay the closest attention to reducing the
percentage of impurities in coal at present being supplied to consumers.
I would also ask whether something cannot be done to reduce the con-
sumption of coal by the colliery undertakings themselves. If the figures I
have seen are correct, the colliery undertakings at present take about one-
sixth of the total used by all industrial consumers. I place coke ovens
with the all-industrial consumers. That seems an extremely high per-
centage, and I wonder whether some substantial economies could not be
effected there.
Before I close, I must say a word about electricity generation. Here,
of course, the position is extremely serious. I would like to ask the Gov-

The Fuel Situation [MR. EDEN]
ernment what steps they are taking to achieve the most rapid possible
expansion of. our generating capacity. The main problems appear to
be how to get the most out of our existing generating plants, how to in-
crease production and to speed up the building of power stations, and
the ever-pressing problem of exports. I referred just now to the question
of the quality of coal. If we are to get maximum efficiency from our ex-
isting generating plant, it is of the utmost importance that electricity un-
dertakings should be supplied with coal of a type and quality which will
ensure maximum thermal efficiency. As the right hon. Gentleman knows,
this problem is of great importance to the electricity generating industry.
How are the Government proceeding with their plan for spreading the
load over our generating stations?
Now I would like to ask the Minister of Supply to give us some in-
formation about the staggering of the industrial load, and then there is
the question-perhaps the most important of all-of the construction of
power stations. We were told that it now takes twice as long as it did
during the war to complete a power station of comparable size. Can that
really be true? If so, it is a most alarming fact. Can the Government
tell us whether it is true, and, if so, what action they propose to take to
improve the rate of construction which is of such critical importance?
If we could do these things in the war-in fact, had to do them in the
war-surely we ought to do them today, when the life of our industry and
the continuation of our export trade are at stake? On the question of
the provision of generating plants, I understand that the Prime Minister
has recently been having discussions with representatives of the industry.
May I ask him what is the upshot of those discussions? Are the Govern-
ment now going to ensure that the necessary priorities of fuel, and so
forth, to all those engaged in constructing generating equipment are made
available, whether they are direct contractors or sub-contractors?

I want to say a word about the export of mining machinery and of
generating equipment which we need for our own industry. I recognize
how important it is to maintain our overseas connection for the future
development of our exports of these commodities. No doubt, as time
progresses, they will have to play an increasing part in our export pro-
gram. But I am not at all convinced of the wisdom of exporting these
goods at the present time, in the quantities which have ruled in recent
months. In particular, I would like some information about the exports
of wagons, and the proportion of construction of wagons for home use and
for export at present being carried out in the wagon industry. It is increas-
ingly clear that transport is going to be a complete handicap in the main-
tenance of coal supplies, and, indeed, of steel supplies to industrial con-
sumers in the course of this year. I have put a number of questions this
afternoon to which, I trust, we will in the course of the Debate, be success-
ful in obtaining answers.
I should like to finish by emphasizing that the margin between our
coal requirements and the production which the Government anticipate

House of Commons, April 2, 1947

in their figures is relatively small. We cannot, at present, increase our
exports of coal. How valuable it would be to the Secretary of State for
Foreign Affairs if we were in a position to export a few million tons of
coal at this time. How pleased the President of the Board of Trade would
be if he could send some coal to Scandinavia in exchange for timber.
What would not the Minister of Food give to be able to send coal to the
Argentine in exchange for fats and feeding stuffs. If only we could get
back to our pre-war level of exports, how much better off we should be in
many ways. Apart from all this, I feel that the gap between the Govern-
ment's estimate of production and the minimum requirements for home
requirements and essential exports, which both sides of industry agree to
estimate at 220 million tons, can be bridged by increased production.
The Government's targets are so astonishingly low that I would ask
them what it was that determined them in making such estimates. If we
want the nation to make an effort, as we all do, surely it is better to put
up our sights, rather than to place them so low as to dishearten all those
whose effort depends on the production of coal. If only we could get
the level of production back to what it was in 1941, we should get 215
million tons as against our minimum requirements of 220 million. But,
far from getting back to the 1941 level, the Government, apparently, have
calculated on the basis of one million tons a month less deep-mined coal
than was produced last year. The gap to be closed is relatively small,
but the injury that is, in consequence of this present gap, being inflicted
upon our industry, upon our export trade and upon the unfortunate
domestic consumer, is out of all proportion to the amount of coal involved.
It is the Government's duty to spare no effort at home or abroad, to bridge
that gap. On no account can we contemplate a repetition next winter of
what the nation has been called upon to endure this winter. On that, we
are all agreed. But are the Government facing up to the situation? All
that we can do is to make the constructive suggestions that lie in our
power. The House awaits an account of the Government's stewardship
and of their plans for the months that lie ahead, so that our industries
may be given the best opportunity to raise the standard of life of our

The Minister of Fuel and Power (Mr. Shinwell): The right hon. Gen-
tleman will, I hope, acquit me of discourtesy if I deal with the minor ques-
tions which he put to me in the first instance. Before I conclude my
speech I hope to be able to deal with the major and more substantial issues
which he presented. He asked me a number of questions of which-
though I make no complaint-I had had no notice. Therefore, it may be
that while I am able to give an answer in general terms the details will
have to be filled in at a subsequent stage .
I was saying that the right hon. Gentleman had addressed to me a
large number of questions, some of which are within the province of other
Ministers. Nevertheless, I shall do my best to give him a reply.

The Fuel Situation [MR. SHINWELL]

To begin with, on questions of export of mining machinery and
wagons, although it is true that last year a substantial amount of mining
machinery was exported, it is not the intention of the Government to per-
mit such exports to continue this year, other than those exports which
are on order, and which, in the judgment of the Government, are neces-
sary so that we may receive essential imports in return.
As regards the export of wagons, it must be understood that large
orders for wagon supply for oversea countries were placed many months
ago. Many orders were placed towards the end of the war. For the most
part, those wagons are intended for gauges different from the gauge in
operation on the railway lines of this country. Those contracts must be
complied with. So far as possible, however, the Government intend to
discontinue exports of that character. We are aware of the essential needs
of the mining industry in respect of machinery, and of the railways of the
country. Indeed, I say by way of digression-although it is a point of sub-
stantial importance-that there is not much use in our producing large
quantities of coal this year unless we have increased transport facilities.
The Government have the matter in hand. In this, as in other matters,
there is, I can assure the right hon. Gentleman, a sense of urgency.
As regards the staggering of the load in electricity supply, because of
inadequate generating facilities, this is a matter now in the hands of the
Minister of Labor. He has had frequent consultations with the appro-
priate organizations on both sides, and I understand that a scheme has
been prepared. It. now appears that certain modifications of that scheme
will be required for the purposes of summer requirements. The require-
ments of the summer are somewhat different, so I am informed, from those
of the winter, but, be that as it may, the Minister of Labor is giving con-
stant attention to the matter.

Now I turn to the subject of the quality of coal, to which the right
hon. Gentleman referred. I say at once that he is pushing at an open
door. I am fully conscious of the inferior material that sometimes passes
for coal. I have to use it myself when I can get coal, and I am in precisely
the same position as other coal consumers both as regards quantity and
quality. The facts are these. Before the war there was an inadequate
number of washeries for the cleaning of coal, and those washeries have
not been increased. Over and above that, some of them were disused
during the war and they require reconditioning and the replacement of
essential machinery. That is not always possible. In the old days when
coal was got by hand, there was very little dirt; the miners picked the
coal and, more often than not, picked it clean; occasionally some dirt was
sent up out of the pit, but there were very few complaints and when there
were complaints they could be rectified. Now, however, when more coal
is got by mechanical means, the coal comes down along with the dirt, the
rock, the shale and the like, and it is not possible for the miner, particu-
larly when he is dealing with small coal, to separate the dirt from the
actual coal itself. So both coal and dirt come up the pit, and unless the

House of Commons, April 2, 1947

coal is cleaned and screened adequately, obviously some of the dirt finds
its way into the hands of the consumers .... The National Coal Board
are giving this matter their attention, but it can hardly be expected that
the National Coal Board, who have just had the assets of the mining in-
dustry transferred to them, should be able to deal with every one of these
problems as soon as hon. Members wish. As regards the price of coal, it
is very difficult to fix a price for coal which is different from other prices,
because there happens to be a certain amount of inferior coal or dirt in
the supply the consumer receives. It would be impracticable to adopt a
system of that kind, and that is the answer to the hon. and gallant Member.
Colonel Lancaster (Conservative): I do not know why the right hon.
Gentlemen says it is impracticable. Pre-war sales of coal were based, in
great measure, on calorific value, and there were penalty clauses if that
value was not maintained. Now that coal is sold by the State, there can
be precisely the same penalty clauses. It is not a new problem; it is a
very old one.
Mr. Shinwell: The hon. and gallant Gentleman is quite right, it is an
old problem. But he had to deal with it as the general manager of a
group of collieries during the war, yet we received many complaints during
the war about the inferior quality of coal and its low calorific value. He
was quite unable to deal with it. The matter cannot be dealt with until,
as I have said, we get the machinery essential for the purpose. [An HON.
MEMBER: "And more manpower."] At the same time, I agree that the coal
is not always suitable, and that is particularly so as regards the coal sup-
plied to electricity undertakings. Undoubtedly, if the coal supplied to
those undertakings were of the right calorific value, we should be able to
save a considerable amount. There the matter must rest for the time being.
Mr. S. O. Davies (Labor): Will my right hon. Friend see to it, through
that Coal Board, that more attention is devoted to the conditions of the
screening plant in many collieries in this country?
Mr. Shinwell: No doubt the Coal Board will take note of that observa-
tion, but I assume they are aware of these difficulties. There are high-
powered technical experts associated with the Coal Board, and they are
fully aware of the nature of the problem.

Now I come to the question of electricity generating plant. Undoubt-
edly there is a shortage; there has been a shortage for some considerable
time, for the obvious reason that during the war it was impossible to pro-
ceed with the construction of the necessary plant, and it will be some con-
siderable time before all the requirements of the electricity undertakings
are fully met. Over and above that, it is obvious, because of the high con-
sumption of electricity as compared with pre-war years-there is a great
disparity-that more generating capacity is required. We have discussed
these matters with the Central Electricity Board and the Electricity Com-
missioners, and recently the Prime Minister with other Members of the
Government had discussions with the managing directors and other per-
sons associated with the electrical plant industry. They promised co-

The Fuel Situation [MR. SHINWELL]

operation in order to ensure a speeding up of the manufacture of the
necessary. plant. The matter is now being dealt with by the Heavy Elec-
trical Plant Committee, and, in addition, arrangements are being made
for progressing at each of the works where electricity plant is being manu-
factured, in order to ensure that there should be no delay or bottlenecks.
I can assure the right hon. Gentleman that nothing is being left undone
to ensure that, as soon as possible, the necessary plant will be at our
Mr. Logan (Labor): Is there any idea of importing plant from the Ruhr
to this country to save manufacturing it here, and the delays involved?
Mr. Shinwell: We have made inquiries and have discovered that there
is some electrical gear in the British zone in Germany, and we shall take
steps very shortly to acquire it, but it may well be that it is not altogether
suitable to be placed in generating stations in this country. The matter
is, however, being closely inquired into.
I think that covers the rather minor points raised by the right hon.
Gentleman, and now I turn to the more substantial issues he presented to
the House. The first is the question of production, because that is vital
to our future fuel prospects. I am grateful to the right hon. Gentleman
for raising the matter. From the first moment I entered the Ministry of
Fuel and Power I have never sought to conceal my opinion that produc-
tion was the vital element in this problem. Indeed, that is obvious to
everybody; we can attempt to secure savings by this means or that, and
I shall show later tlTat we are endeavoring to secure savings in certain
directions, but the essential prerequisite of supplying industry and the
domestic consumer, and providing a surplus for export, is that we should
attain the highest amount of production. As the right hon. Gentleman
remarked, the Government have set a target figure which was referred to
in the recent Economic Debate. That target figure is 200 million tons
this year.
Mr. R. S. Hudson (Conservative): Including open-cast?
Mr. Shinwell: Yes, deep-mined and open-cast. There has been some con-
fusion as to what is meant by "this year," and perhaps I might remove that
confusion, or attempt to remove it. When we speak of the coal year we mean
the year beginning on 1st May and ending in the following April. It may be
that when the right hon. Gentleman and others have spoken about the
amount of coal to be produced this year, or the target set for this year, they
had in mind the calendar year. We prefer to take the coal year, because it
may represent a difference. I will venture to indicate where that difference
lies. In the last three months, in spite of the severe climatic conditions-no
one will dispute them now, though there was some doubt on the subject
some six or seven weeks ago-[An HON. MEMBER: "Rub it in."] I am not go-
ing to rub it in; with respect to my hon. Friends behind me, I am very much
more concerned about the future than I am about the past, and, though
a great deal might be said about the past if I had a mind, I will leave it
there. Undoubtedly, in spite of the severe climatic conditions which

House of Commons, April 2, 1947

have had the effect of making some collieries inaccessible, and prevent-
ing miners getting to their work, and in some cases have closed down col-
lieries entirely, the trend of output is favorable. Output last week, in the
circumstances, was excellent, for several collieries are actually closed down
because of flooding.
I do not want to be misunderstood. I am not suggesting for a mo-
ment that the output is satisfactory: it will not, in my judgment, be sat-
isfactory until it enables us to meet all our requirements. But the trend
is satisfactory having regard to all the circumstances. We have to face
certain adverse factors in relation to coal output, and it is no use trying
to conceal them. One is that we are not certain whether the five-day
week which has now been agreed on between the National Coal Board
and the National Union of Mineworkers, and which is to come into oper-
ation at the beginning of May, will have an adverse effect on produc-
tion. We are aware that an average of 350,000 tons is produced on
a Saturday when coal is won that day. If we were to base our calculations
exclusively on the statistical information available, then the outlook is
far from favorable as to its effect on production. We have, however, to
concern ourselves with another very vital factor in regard to the five-day
week. I put it to the right hon. Gentleman, if he were in my place, re-
sponsible for the administration of the mining industry, and in particular-
I emphasize this-for creating a favorable atmosphere in that industry,
would he, in face of the quite proper demands made by the National
Union of Mineworkers, having regard to the arduous nature of their oc-
cupation, have denied them this privilege in such circumstances? More-
over, if we sought to deny the miners this long-awaited and long-demanded
reform, it might have an adverse effect on production on a six-day basis.
Furthermore, now that the Essential Work Order has gone and we
cannot direct labor, we have no means at our disposal of compelling the
mineworker to work on a Saturday. I can now disclose the fact-it was
very unpalatable at the time, and it presented me with considerable
anxiety-that in many of the coal districts, the mineworkers took Satur-
day off, and in some of the coal districts they worked a short Saturday.
We did everything possible to dissuade them from taking that course, but
the men said, "We have worked five full shifts, and look at the coal we
have produced. This is a hard job; you cannot expect us to work on a
Saturday." I would add that the miners feel that they have as much
right to have a Saturday off as have those workpeople who are employed
in other industries where the work is less arduous. In those circumstances,
it is quite impossible-indeed, quite impracticable-to deny the miners this
The question we have to consider is whether, when the five-day week
operates, we can secure the coal we need. The National Coal Board and the
National Union of Mineworkers have not only agreed to a five-day week to
commence in May, but they have attached stringent conditions to the oper-
ation of the five-day week which, in my view, are satisfactory, and are all the
more satisfactory because I myself laid down these conditions with the con-
sent of the Government last year, when the matter was under review. One of


The Fuel Situation [MR. SHINWELL)

the conditions is this. The men are to receive a bonus for the sixth day, but
they will not receive it unless they work a full five shifts. In other words,
they will receive six days' pay-with a certain deviation in the wage limits
according to the class of worker-but only on the condition that they work
five full shifts. The only exception is in the case of a man whose accident
is of a serious character and is, therefore, reportable. In the case of sick-
ness or absence on local authority business, where the men formerly did
receive some payment, that no longer will obtain. In addition to that
very stringent condition, the men have agreed to work longer shifts, which
means they will remain longer in the pits in some districts than was pre-
viously the case, and, in consequence, we believe that if those conditions
are fully applied there is every reason to believe that we shall get the coal
we need. On the other hand, if men do not turn up for work, thus losing
the extra day's pay, obviously output will correspondingly reduce.
If we promote the right atmosphere in the industry, and if the men
are properly handled by the officials in charge-I am glad to say there is
evidence all round the coalfields of a better spirit of comradeship among
the men and managers than ever there was-I believe we are likely to
have at least as high an output as we have had in recent weeks. I readily
admit that even that would only represent a figure of about 4 million tons
a week, and that may not be regarded as sufficient for our purpose. I
have in mind the figures stated by the Trades Union Congress-a figure
"which, in my view, is essential if we are to provide for all our needs.
Frankly, I do not believe we can achieve that figure this year. What I do
say is-and this is the point I was leading up to when I spoke about the
difference between the calendar year and the coal year-that whatever
disadvantages we may suffer from during the summer, or immediately fol-
lowing the beginning of the five-day week, there is no doubt that with the
increase in the rate of recruitment at the present time, after October, all
things being equal and everything proceeding smoothly, we shall be pro-
ducing coal at the rate of rather more than 4 million tons a week, and to
that extent it may make up for the short fall preceding it. At the present
time we have got 705,000 men in the industry; we expect 710,000 by the
beginning of May, and the Government hope for 730,000 by the autumn.
Major Lloyd George (Liberal National): May I ask a question with
regard to the coal year, in order that we can make some examination of it?
Does the figure of 200 million tons, which appears in the White Paper,
refer to the calendar year, or to 30th April next year?
Mr. Shinwell: My impression is that it is the calendar year, ending 31st
December. There is a further point which I must make in this connec-
tion, which affects the coal year. We expect that if the trend is as favor-
able, as I have just indicated, when the. autumn begins, it will carry over
into the three or four months following the end of the calendar year,
before the end of the coal year. That will give us a higher production
and will assist us in meeting our requirements. But it does not solve our
problem. The real problem to which the right hon. Gentleman referred
-perhaps the most substantial problem of all, and one that presents the
greatest difficulties-is, how are we going to raise stocks of coal in the sum-

House of Commons, April 2, 1947
mer in order to make a beginning in the winter which will carry us
Mr. Eden: This is very important, and what the right hon. Gentleman
is saying is very valuable to us. If all the assumptions he makes are cor-
rect-and I do not dispute them; I hope they are all correct, with regard
to the consequences of the new recruitment and so on-I cannot see where
the President of the Board of Trade gets his very low figure for the six
months of this summer of 89 million tons. It does not appear to make
any sense in relation to what the right hon. Gentleman has said.
Mr. Shinwell: I think I can explain it. When I spoke of the favorable
factors, which I hoped would operate after the beginning of the five-day
week in May, I had in mind, first, that there is a possibility that it might
not operate as I have indicated. The second point is that the miners
will take their holidays in the summer months. As happened last year
in the summer months, they took rather longer holidays than was antici-
pated. I make no complaint about it; they had very few holidays during
the war years, and certainly few holidays during pre-war years, because
they could not afford it. Small blame to the mineworkers when they found
themselves, perhaps, with a little more money and decided to have a fort-
night's holiday, even if one week was at their own expense. Therefore, it
may be that if holidays are rather more extensive this year than we hoped
they would be, there will be a reduced output accordingly. We shall do
everything we can to avoid that situation, but we must be prepared to
face it.
My right hon. Friend the President of the Board of Trade, in arriving
at his figure of 89 million tons, had in mind, first of all, 83 million tons
of deep-mined coal and six million tons of open-cast coal. The right hon.
Gentleman asked why the disparity in the estimate this year, as against the
actual output during the summer months last year. Let us look at those
figures again. The estimate for this year, according to the President of the
Board of Trade, is 89 million tons, deep-mined and open-cast. Last year
we produced in the summer months 94 million tons-89 million tons of
deep-mined and five million tons of open-cast-a difference of five million
tons. Why the disparity?-asked the right hon. Gentleman. I am bound
to admit that the disparity appears to be because, having regard to the
factors I have mentioned-the five-day week and the holiday periods-
we are not quite satisfied that we can reach the figure which we reached
last year. We had better face the facts. When I say "face the facts," I
mean let us face the situation as it appears to us. It may be, on the other
hand, that this is much too cautious an estimate. But we have been
accused-I, at any rate, have been-of being much too optimistic, and on
this occasion I prefer to be a little conservative. Undoubtedly, all this
means that we shall have great difficulty in reaching our stock target by
the end of the summer period. That stock target is 15 million tons, and
there are some who believe it is too low a figure. Nevertheless, there it is.
It is a minimum figure of 15 million tons. We shall end the coal year at
the end of this month with five million tons. We might end the coal year
with 51/ million tons.

The Fuel Situation [MR. SHINWELL)

Now I have to say something which bears on what the right hon.
Gentleman said about the condition of industry. He is quite right; in-
dustry is suffering severely because of the shortfall of coal. The steel in-
dustry, the textile industry and many others want more coal. They are
receiving 31/3 per cent, 50 per cent, some 75 per cent, and so on. I think
before long it will be discovered-perhaps the right hon. Gentleman will
not ask me for the details-that those industries are able to receive a
higher allocation which, if it will not enable them to resume their previous
full-time operations, at any rate, will relieve them of some of the difficul-
ties which present themselves. But the position will be that we shall be
left at the end of this coal year with a bare five million tons-the lowest
stock figure we have ever had. We have to build up that stock figure to
15 million tons by the end of the summer period; that means 10 million
tons. As the right hon. Gentleman rightly said, we shall be able to effect
some savings with oil fuel conversion to the extent of two million tons.
I would like to say this about oil fuel conversion. It may be that because
of the rate of progress, we shall be able to reach a figure in saving of round
about eight million tons of coal by this time next year, but, of course,
that depends to some extent on whether the materials, tankage and so on
are available. How are we going to meet this pay of 8,800,000 tons?
Clearly, we cannot expect industry to bear the whole of the burden.
Mr. R. S. Hudson: I thought the Minister said 10 million tons.
Mr. Shinwell: The right hon. Gentleman is quite right but his right
hon. Friend the Member for Warwick and Leamington has dealt with the
point. There is a 10 million gap, but we expect some savings, one of
which I have just indicated. Another is, there will be a saving of 250,000
ton on the railways, and there may be some minor savings. The deficit
with which we are faced will be 8,800,000 tons. How is that to be met?
It can be met partly by increased production-and I emphasize that. I hope
the right hon. Gentleman will not regard me as optimistic when I say that
we are going all out to get that production. If we get the men, if the
present rate of recruitment continues, if we get the right spirit into the
industry, and if mining machinery comes along, as we hope it will come
along-there is at present a great scarcity, but we are stepping up produc-
tion as fast as we possibly can-it may well be that we can get some fur-
ther production which will enable us to cover a part of that deficit. But
I am bound to say, that is speculation; we can have no firm conviction on
that head. All I can say is, the miners are in good heart; they have offered
us full co-operation, and they are well aware of the facts. We must, there-
fore, hope for the best so far as output is concerned. ...

I come to the question of restrictions on the domestic consumer. I en-
tirely agree with the right hon. Gentleman, that if it is at all possible, we
should not impose any further burden on the domestic consumer. I have
no desire to weary the House by furnishing statistics relating to the gradual

House of Commons, April 2, 1947

reduction in the amount of domestic coal consumed. There has been a
very steady reduction-a drastic reduction, in fact-in solid fuel. Although,
to some extent, it is made up by increased use of gas and electricity, un-
doubtedly the domestic consumer has suffered very severely in recent
years, and continues to suffer. The position was aggravated this year be-
cause of the severe weather conditions. Hon. Members may be interested
to know that we provided a higher allocation of domestic fuel for London
and the south this year than had ever been allocated before, and we built
up our stocks last year. Unfortunately, it was far from sufficient. In a
normal winter we might have got through; but because of the abnormal
weather conditions, it was natural that the domestic consumer should con-
sume more. The result was that his supply was inadequate; he suffered
inconvenience, and, what is even worse, our stocks have diminished con-
siderably, and we are in a worse position than we were in this time last
year. Although we actually built up stocks and provided a larger alloca-
tion, we are worse off this year as regards stocks than we were last year.
Therefore, it is not our intention to impose any further restriction on the
domestic consumer as regards solid fuel. That would create an impossible
In his statement on 27th March the Prime Minister told the House
that we could not count on a coal production during the summer months
sufficient to meet current need and to build up stocks; and he said that
the deficiencies may amount to as much as 10 million tons. Now industry,
as I have already remarked, cannot bear the whole of the deficiency, and,
therefore, domestic and non-industrial consumers must make a contribu-
tion towards closing the gap. I am very sorry to have to say that, but it
is inevitable. What is the Government's aim? I want to emphasize that
it is only an aim, and no more. It is to save 21/ million tons from this
source during the coming summer months. This might be achieved by
adopting a scheme for rationing domestic and non-industrial consumption
of electricity and gas. Ever since February we have considered several
schemes, but in no case were we satisfied that a solution of the many dif-
ficulties had been found. This problem of rationing is very difficult in-
deed, particularly as regards electricity and gas. It is quite otherwise with
clothes and food, in regard to which the consumer can be issued with coupons,
which he can present at a shop; if the supplies are there, that is very well,
but if they are not there, then the consumer goes without. But when
electricity and gas are laid on, and it is very difficult to impose a check,
that is a horse of another color.

We first considered a ration based on a proportion of the previous
year's consumption of electricity and gas by the householder. That was
the first scheme we considered. But it was open to criticism, because it
allowed those who had been extravagant to benefit from their previous ex-
travagance. It may have been said, "We will use a certain amount of elec-
tricity and gas this year, and we can use 50 per cent of it in the following
year." If they had consumed in excess, obviously they would be better off

The Fuel Situation [Mn. SHINWELL)

than those who had not consumed in excess. On the other hand, it would
operate very unfairly, in our judgment, against the poorer consumer. We
also considered rationing on a scale based on the size of the household. This
scheme avoided the difficulty of placing a premium on previous extrava-
gance and a penalty on previous economy; but it presented the difficulty
of a scale which, while low enough to secure a saving from the average
household, might be far below the requirements of those with special
fuel needs. Without experience of the nature of those special needs
the Government feared that they might be faced with the impossible
administrative task of dealing, individually, with millions of cases. We
have to deal with 11 million consumers on the domestic side. If the scale
is set very low, as a result of which there is gross violation, the administra-
tion becomes impossible.
Another scheme suggested was a combination of the first and second
schemes, under which the general ration would have been on a household
scale, with the alternative, if more favorable to the householder, of a pro-
portion of previous gas and electricity consumption. We might have set
a scale which, although very low, might have met the case, providing an
alternative, namely a certain proportion of what they consumed last year,
whichever was the greater. This appeared to lessen some of the disadvan-
tages of the other schemes. But, again, in the absence of experience of the
nature and extent of special fuel needs, it was impossible to judge whether
injustice could be avoided without great administrative difficulty. We
considered a fourth scheme, which might be described as a price "disin-
centive" scheme, providing for a steeply graduated tax on gas and electricity
consumption over a certain minimum. This scheme has been widely can-
vassed, but it was open to the criticism that at one end of the scale, the
well-to-do might, notwithstanding the tax, be able to enjoy far more than
a fair share of the nation's fuel resources, whereas on the other hand the
poorer family-and in particular those with large fuel needs-might, if the
family was large, find the tax too burdensome.
All this does not mean that a compulsory fuel rationing would be en-
tirely impracticable. It could be done, imposing hardships, of course-
indeed, severe hardships. But there is insufficient knowledge at the present
time to enable anyone to say, with any degree of certainty, whether a
scheme of rationing could be worked fairly as between different house-
holds. Moreover, it would impose an impossible burden, as we think, on
the local fuel overseers, and would require the recruitment of additional
staffs, some thousands strong, at a time when manpower is required for
other purposes. Having said all that, I must tell hon. Members that two
things are urgently needed. I have remarked on them already, but I must
emphasize them. We must save fuel this summer, and gain the experience
needed to say whether a rationing scheme can be applied later on-it may
be necessary to do so; it depends on what happens this summer as regards
production and the needs of industry-and, in the light of such experience
as we gain, to decide which scheme is the most practicable.
The Government, therefore, are now considering an alternative plan
in the hope that the fuel saving will be sufficient to make it unnecessary

House of Commons, April 2, 1947
to introduce a compulsory rationing scheme. But should that hope be
disappointed, we hope to gain experience that will be needed to frame a
rationing scheme which will work. Before finally deciding upon the de-
tails of this plan, including such statutory and other restrictions as may
be required, we are, at the present time, holding discussions with represen-
tatives of the gas and electricity industries. At this stage, I should say
that all along we have had discussions, if not with the individual electri-
city and gas undertakings, with the Central Electricity Board and the Elec-
tricity Commissioners. We had frequent discussions with them last year
on the subject of consumption, of their coal needs, and other matters. We
shall also be meeting representatives of the various classes of consumers,
not least the women's organizations. Hon. Members will see the need for
this. We have to ascertain the views of the women. They have to do the
washing and the cooking, and have to remain at home. We want to
obtain the necessary information, and we shall cover a wide field. We
want to ensure full and active co-operation of the people I have mentioned,
in what is a most vital national task, and I am confident that that co-opera-
tion will be forthcoming to the full. When we have completed our con-
sultations, and considered the advice given to us, we shall announce our
plan in full. I hope we shall be in a position to do this as soon as pos-
sible after the Easter Recess. Meanwhile, the existing restrictions on the
use of electricity will continue until the new scheme is announced. We
did consider whether we should reconsider the existing restriction scheme,
but in the circumstances we thought that, as it might only last another
week or two, it was hardly worth while either amending or revoking the
Order. That is the position as regards restrictions .

Now, I must come to the point raised by the right hon. Gentleman
respecting imports of coal. If we cannot fill the gap by economies, restric-
tions, or imposing hardships on certain industries, or by further production,
can we fill the gap by importing coal? I have made some rather caustic
remarks about this question of the importation of coal .
But there is no difference of opinion at all. It was suggested by the
right hon. Gentleman the Member for the City of London (Mr. Assheton),
the right hon. Gentleman the Member for Woodford (Mr. Churchill),
and the right hon. Gentleman the Member for Bromley (Mr. Harold
Macmillan) that the gap between requirements and supplies could have
been filled, if we had imported a certain quantity of coal. I need not
state the coal amounts. The Prime Minister, it is true, made a statement
on this subject on 12th March. He said that, if we could get the coal
from abroad to relieve our necessity, we should by all means do so, but
he gave no indication then that coal would come from the United States
or elsewhere, and his statement was limited to the practicability of obtain-
ing coal from abroad. He also said in his statement on the fuel position
on 27th March that this question would depend on whether it would
"prove possible to import coal into this country without unfairness to our friends in
Europe."-[OFFICIAL REPORT, 27th March, 1947; Vol. 435, c. 1416.1

The Fuel Situation [MR. SHINWELL]

That is a consideration we cannot get over.
As I said on the 20th March, in a speech which has been heartily criti-
cized-the right hon. Gentleman described my remarks as derisory, though
I detected nothing derisory in them-this question has been under con-
stant examination. I said the matter would remain before us; that prac-
tical difficulties had been encountered, but that it would remain before
us. I can now inform the House that I have discussed this question with
the United States Ambassador, and with the South African Minister of
Mines and Economic Development. At the time I made that speech, that
was my intention, but it was probably better to have my discussion with
the United States Ambassador before I informed the House. I have now
had that discussion, and can inform the House of it.
In my discussion with the United States Ambassador the question of
obtaining coal through the European Coal Organization, through which
this country could receive a share, was considered. The United States
authorities have shown every desire to help us in our present difficulties,
and they have made special inquiry into the possibility of stepping up
their coal exports to Europe as a whole. But they have now reported that,
in view of the limitations on movement within the United States, arising
particularly from a serious shortage of wagons, they believe that any signi-
ficant increase in the present export rate to Europe of 2,600,000 tons a
month in the second quarter of the year, is highly improbable, and that,
in any case, this quantity has already been allocated by the European Coal
Organization on a basis agreed with the United States, to European mem-
bers of the organization whose needs are no less pressing than our own.
The position can be explained in this way. The program through the
European Coal Organization for the first quarter of the year was 2,100,-
000 tons. For the second quarter the program was 2,600,000 tons. That
takes us up to the end of June. I frankly tell the House that there appears
to be no hope whatever of getting anything out of that allocation. I can
say that the matter of receiving direct supplies without the European Coal
Organization was considered, but there were plain indications that there
was no hope of receiving direct supplies.
Mr. Eden: After June?
Mr. Shinwell: After June. When I say "after June" I must qualify it
to this extent-immediately after June. It may be that next year some new
arrangements may be made or proposed. It depends largely upon the at-
titude of the United States authorities, and their relations with the Euro-
pean Coal Organization. In spite of this, the United States authorities
are continuing vigorous efforts to increase coal exports to Europe to the
highest possible level in the third quarter of this year, and, in the event
of additional coal being made available, they emphasize that their policy
continues to be, that coal exports to Europe will be in accordance with
recommendations from the European Coal Organization, whose recom-
mendations are made by mutual agreement among the various coal im-
porting countries. It will, therefore, be necessary for the United Kingdom
to make a bid to the European Coal Organization for a share of any addi-
tional United States coal. It may be that if the United States authorities

House of Commons, April 2, 1947

step up their allocation from 2,600,000 tons in the second quarter to 3,000,-
000 in the third quarter, we shall be able, as a result of arrangements with
the European Coal Organization, to get something out of it. For the
moment that appears to be the best we can do, except that I would say
this: We are not unmindful of the possibility of other arrangements being
made, if there are new developments. I cannot go beyond that. But the
Government will do everything possible to secure coal from the United
States of America, in order to assist in filling the gap.
Viscount Hinchingbrooke (Conservative): Can the right hon. Gentle-
man say what countries get this 2,600,000 tons of coal through the Euro-
pean Coal Organization? Is there any prospect of our getting a portion?
Mr. Shinwell: I have answered questions many times in the House and
given details. France, Belgium, and the other European countries that are
members of the European Coal Organization, and that are in short supply,
receive their share of the United States exports. As regards South African
coal, the Union Government are already providing valuable assistance by
means of coal exports to certain bunker depots, which, hitherto, have been
supplied from the United Kingdom. After all, if our bunker depots are
supplied from abroad, from whatever source, to that extent we are relieved
of the burden. I took the opportunity of the presence in this country of
the Union Minister of Mines and Economic Development, Mr. Water-
son, to discuss the matter with him last week. He was very sympathetic,
very anxious to help; but it appears that, as in the case of the United
States, South Africa is unable to expand her coal exports without addi-
tional wagons. The position in the Union is that the mines are about
200 or 250 miles from the coast, and that they are very short of wagons.
Mr. Waterson informed me that they have 8,000 on order, some in this
country, a large number in Canada; and that if we could expedite delivery
of the wagons, they might be able to assist us. It almost appears as if the
wagon problem is indivisible. At the same time, this aspect of expediting
delivery of the wagons is being explored with the Ministry of Transport,
and I may say that the Minister of Transport was with me when we met
Mr. Waterson. But I am bound to say the prospect of any success from
this quarter is not hopeful ....
Questions were asked as to whether we could obtain coal from other
sources. In fact, there is very little prospect. For example, the hon. and
gallant Member for Basingstoke (Squadron-Leader Donner) said we should
import coal from Nigeria, but the hon. and gallant Member was not
aware that the total coal output of Nigeria is less than 700,000 tons per
annum, the whole of which is required for internal and coastwise bunker
consumption. The same might be said about other suggested sources of
supply. I have dealt at some length with these matters because I have
been very anxious to furnish information for which the hon. Members
asked ....
I said, when dealing with the more substantial points raised by the
right hon. Gentleman opposite, that production was the vital considera-

The Fuel Situation [Ma. SHINWELL]

tion, and on that note I conclude. If we cannot secure, in a coal-producing
country, the coal we need, then, obviously, there is something very far
wrong. No one, no matter in which quarter of the House he resides, can
dispute that one of the difficulties in recent months, indeed, in the last 18
months, has been the fact that certain elements were introduced into the
mining industry towards the end of the war, who were of little value to
that industry. Over and above that, many pits were closed down. What
is even worse-and this has a direct relation to the question of recruitment
and I hope hon. Members will take note of it-if coal faces are closed
down, as so many were, either because men were not available for face
work, or for some other reason, which was in the hands of the colliery com-
panies, then obviously, these coal faces must be reopened before we can
absorb the men now entering the industry.
It is no use hon. Members talking about putting 100,000 new men into
the industry. We must be able to absorb these men and at the right kind
of work. Opening up new coal faces is a matter which we have taken up
very urgently with the National Coal Board. They have recently con-
ducted a manpower survey, and they have had a report from every one
of their districts as to how many coal faces can be reopened and how many
others can be opened. This problem requires labor, and that is another
consideration. If, in the next six months, we are able to absorb a large
number of additional coal face workers, with the good will of the men,
we can get the coal we need. I rely on that, and I say to hon. Members
that, anxious as I am to promote the utmost economy, and the utmost fuel
efficiency-because far too much coal is wasted in this country, in industry,
some of which is obsolescent and requires new equipment, and also in the
domestic sphere-anxious as I am to promote economy and efficiency, I ask
hon. Members to understand that my primary task, my responsibility, is
to get the output. I may fail at that, but, at any rate, I am going to make
the effort.
[House of Commons Debates]


HOUSE OF COMMONS, April 15, 1947

The Chancellor of the Exchequer (Mr. Dalton): The Budget deficit
in 1944-45, the last full year of war, was 2,825 million, and in 1945-46, the
year when peace broke out, it was 2,200 million. Twelve months ago, I
forecast a sharp fall in the deficit to 726 million for 1946-47, the first year
of peace; and this, I said last year, would be a pretty quick recoil towards
a balanced Budget. In fact, the recoil has been even quicker. The deficit
last year was only 569 million, 157 million less than I had anticipated.
This is not, I think, a bad starting point for today's excursion.

House of Commons, April 15, 1947

Looking back over the Revenue for the past year, the Budget estimate
of 1,187 million for Customs and Excise was reduced to 1,184 million
by concessions which I gave, following most persuasive representations, in
Committee, during the passage of the Finance Bill. The exact receipts
were, almost exactly, 1,184 million, to the nearest million. We hit
the target exactly, in spite of the fact that I lost E2 million on beer, owing
to the fact that there was less barley for brewing. That was not my fault.
But this loss of revenue on beer was almost exactly balanced by a series
of surpluses from tobacco, entertainments, Purchase Tax and other import
duties. Tobacco brought in 446 million, 21 million more than the
estimate. Entertainments Duty, in spite of remissions which I gave in my
last Budget on a wide range of sports, none the less yielded 53 million, or
3 million more than the estimate. Purchase Tax yielded 181 million,
23 million more than the estimate. The duties under the Import Duties
Act yielded 29 million, or 7 million more than the estimate.
Turning to the other great branch, the Inland Revenue, these duties
last year yielded 1,777 million, a surplus of 91 million over the estimate.
Income Tax at 1,156 million beat the estimate by 45 million. Excess
Profits Tax and Profits Tax together, at 358 million, beat the estimate
by 33 million. Stamps, at 38 million, beat the estimate by 9 million.
On the Stock Exchange, there was a high, and sometimes even hectic,
level of activity during the year. Stockbrokers have done very well under
this Government. They have almost the least cause of all to complain.
Death Duties at 148 million beat the estimate by 8 million. Surtax at
76 million, alone of the Inland Revenue duties, fell short of the estimate
by 4 million, but, even so, it brought in 7 million more than in the
previous year, although the rates of tax were still the same-[Inter2 uption.]
No; the right hon. Gentleman must not assume that. The higher rates-
I was about to emphasize this to the Committee-which were imposed in
my Budget of October, 1945, in partial compensation for reliefs in Income
Tax, only come into effect for the first time this year. They will normally
be paid in January next by those happy persons entitled to pay them.
This increase in Surtax is, therefore, all the more satisfactory, from the
revenue point of view. I have made inquiries regarding Surtax collection,
and I find that there are considerable arrears of Surtax still to be gathered
in. I have given instructions to the officers concerned that these overdue
contributions from well-to-do people shall be energetically collected.

Miscellaneous Revenue in 1946-47 brought in 380 million, 92 million
more than the estimate. This substantial surplus was made up of 4 mil-
lion more than the estimate for motor vehicle duties, 6 million more from
the sale of war stores, 9 million more from the trading surpluses of Gov-
ernment Departments-for which I have to thank, principally, my right
hon. and learned Friend the President of the Board of Trade; 5 million
more from wireless licenses, 12 million more from repayment of the so-
called "Sundry Loans," and 56 million more from Miscellaneous Receipts

The Budget [MR. DALTON)

-a number of small items. Therefore, last year's total revenue from all
sources was 5,341 million, or 180 million more than the estimate. The
revenue was indeed buoyant, and we have nothing to regret in this state
of affairs. We collected 180 million more than the estimate for the rev-
enue last year.
Turning to expenditure last year, the total was 3,910 million, which
was 23 million more than last April's estimate of 3,887 million. Defense
expenditure, which I estimated at 1,667 million, amounted in fact to
1,653 million, a saving of 14 million on the estimate. Supplementary
estimates for the Army and Navy were offset by meritorious savings of 60
million by my right hon. Friend the Minister of Supply. Civil expenditure
I put at 1,652 million last April. The actual expenditure was 1,679
million, or 27 million more than the estimate.

Let us halt at this point and see what we have done. During this last
year we have made history in the Social Services. We have mounted, with-
out halt or hesitation, the great social program which the electors voted
for, when our majority was returned. The National Insurance Act, the
National Health Services Act, and the Industrial Injuries Act have been
placed upon the Statute Book. Family Allowances have been paid as from
Ist August, 1946, and the higher Old Age Pension has been paid as from
the beginning of last October. We are entitled to say that the new Britain,
represented by this House of Commons, has taken the cost of Social Security
proudly in its stride; the money has been found, the Measures have been
passed, and the benefits are being enjoyed by those entitled to them.
Including Supplementary Estimates, we provided last year no less than
441 million for Social Services, or 117 million more than in 1945-46.
For education, we provided 139 million, or 31 million more than in the
previous year. For training and resettlement, we provided 22 million,
or 9 million more than the previous year. For housing subsidies, we
provided 27 million, or 10 million more. [Interruption.] The houses
were built, or the subsidies would not have been paid-the right hon.
Gentleman must not be in error about that. For a variety of health serv-
ices, we provided 7 million, or 6 million more than the year before. For
health and unemployment insurance we provided 50 million, or 9 mil-
lion more. For Old Age and Widows' Pensions we provided 156 million,
or 14 million more; and, for the first year of payments of Family Allow-
ances, we found 38 million. All that is, I think, very pleasing to all hon.
Members of the Committee, because we feel that those who are deriving
benefits from this expenditure fully deserve them.
Less pleasing to me are some of the other Supplementary Estimates
which we have had to vote-39 million for the Control Office, in addi-
tion to the original estimate of 80 million, to feed and administer the
Germans in our zone. Our military costs are, of course, extra to these.

House of Commons, April 15, 1947

And 19 million more than we bargained for in Greece. I would empha-
size that, unhappily for us, food prices have gone on rising all over the
world, and we have, therefore, had to vote a supplementary sum of 50
million for purchases by the Ministry of Food. We are glad to have the
food, but are sorry that it costs so much. Consolidated Fund services at
578 million, were 10 million above the estimate. Thus, if I may sum up
in a sentence, with the expenditure 23 million more, and the revenue 180
million more than the estimate, the deficit, at 569 million, was 157 mil-
lion less than I had foretold.

Before I leave 1946-47, I think that I should report briefly to the Lom-
mittee on the first year's working of the National Land Fund, which we
established last year. None of the principal of this Fund, which amounts
to 50 million and is safely and properly invested in Government securi-
ties-it is a proper Fund, not just a bookkeeping entry-and a large part of
which, as I told the Committee last year, I regard as a nest egg for national
parks and similar projects in the future, has yet been spent; and our com-
mitments up to date will be well covered by the interest on the capital-
which is sound finance. But these commitments already cover payments
to the Inland Revenue from the Fund in respect of five properties which
have been accepted in satisfaction of Death Duties. The first of these five
properties consists of 33,000 acres-a large acreage-nearly half the county
of Merioneth, including Lake Bala and some adjacent mountain slopes,
an area of great beauty in the heart of Wales, and in the heart of Welsh
culture. I contemplate that this estate will be most sympathetically owned
and administered, I hope, as a whole and as a unit, with a special care for
increased food production, for the welfare of the present tenants of the
estate, and also for improved facilities, hitherto rather neglected in this
area, for visitors and holiday-makers.
The second and third properties are both in the Lake District, 1,800
acres including Lake Brotherswater, a beautiful lake, and a smaller area
of 800 acres, not far away at Troutbeck, including a picturesque 17th cen-
tury farmhouse among the hills. Both these properties, it seems to me,
could best be handled by the National Trust, which has an ever-growing
holding of land, of course, in the Lake District. The two remaining prop-
erties are in the West Country. One is Cotehele, the medieval mansion of
the Mount Edgcumbe family, 12 miles up the River Tamar from Ply-
mouth. This is one of the oldest inhabited houses in Britain, and is a
very fine example, both in its exterior and its furnishings, of one of the
great periods of English architecture. It would have been a great pity if
it had been lost. It will be held, together with 1,300 acres, on behalf of
the nation by the National Trust. Finally, I am handing over to the
Youth Hostel Association a modern seaside house, with three acres of land,
on the North Cornish cliff, near Padstow. This house is specially suited to
be used as a hostel, for the enjoyment of young people with not much
money to spend, and it completes the chain of hostels held by the Associa-
tion in this part of the country. I hope and believe that this is only the

The Budget [MR. DALTON]

first of a series of such arrangements which we shall be able to make for
the benefit, not only of these bodies I have named, but for other non-profit-
making bodies of the same kind. England and Wales have made a good
start in this first year. Scotland, I hope, is going to give us something in
the second year.
I turn from these retrospects to the prospects for 1947-48. I estimate
expenditure this year-that is, of course, the year which began on 1st April,
a fortnight ago-at 3,181 million. That is a reduction of 729 million, or
19 per cent on the actual expenditure of last year-not on the estimates, but
on the actual expenditure. As the Committee knows, this expenditure falls
into three parts. First, there is Defense; second the Civil and Revenue
Departments; and, third, the Consolidated Fund Services, mainly the in-
terest on the National Debt. Defense expenditure-including the military
element of the Ministry of Supply, which has a civil element also-will be
899 million. Last year, it was 1,653 million and we have, therefore, made
a reduction of no less than 754 million, or 46 per cent on last year. If
we exclude terminal charges-gratuities to soldiers, sailors and airmen on
discharge, release leave and clothing, the termination of contracts, and so
on-the reduction is, indeed, less, from 1,091 million to 780 million, or
a reduction of 28 per cent. As we all are, I am counting on a further sub-
stantial reduction next year.
Civil and Revenue Departments, including the civil element of the
Ministry of Supply, will cost this year 1,726 million, or 47 million more
than last year's actual expenditure, that is, of course, a final figure, after
many pluses and minuses, and many changes, some up and some down, in
the Estimates of Civil Departments. We are getting big savings in the
wartime services, which are now fast fading out of the picture. We shall
be providing 40 million less this year than last for the hire and operation
of ships on behalf of the Ministry of Transport. We shall be saving 6
million on the provision for Civil Defense and the emergency services of
the Home Office, and-a very substantial economy-we shall need to find
this year, as a final contribution, only 1 million for UNRRA, which last
year cost 90 million, a saving of 89 million. On the other hand, we shall
be providing more in various other directions.

We shall be providing 29 million more for education this year, includ-
ing such things as school dinners, further education of demobilized men
and women, more scholarships, and the raising of the school-leaving age.
The raising of the school-leaving age, which is an educational reform long
promised and, with a variety of excuses, too long withheld, represents, in
the view of the Government, a fresh social investment in the minds, the
bodies and the characters of our young generation. I am quite sure that
we shall reap rich rewards, and soon, from this new educational adventure.
Looking back, it is interesting to recall that this would have come about
in 1932, but that Sir Charles Trevelyan's Bill to raise the school-leaving
age, having passed through this House, was thrown out in another place.

House of Commons, April 15, 1947

Those who did that have kept the children waiting 15 years, and, in our
view, it is time to put an end to this folly. Included in the educational
increase is an additional 3 million for the universities. The total estimate
for the universities of 12 million of public money this year is more than
five times the pre-war figure. It includes 8 million for current grants and
31/2 million for capital grants. The universities must be enabled to play
a fuller part than ever before in our national life, and to double the pre-
war total of their students within a period of 10 years. We have set that as
the target, and we believe that money spent on a planned expansion of this
kind will be money very well spent in the national interest.

We are providing this year 25 million more for housing and for the
preliminary expenses of the National Health Service. We have provided
23 million more for the Ministry of National Insurance, for a full year's
provision, this year, of Family Allowances. The Committee will be glad
to know, in regard to these allowances, that they are costing us this year 4
million more than we had expected. And I am told that there are some
200,000 more eligible babies than were allowed for by the actuaries. The
actuaries thought, however, that the school-leaving age would have been
raised sooner. So they were doubly wrong. Even actuaries may err. We
may sum it up by saying that we have done worse than they expected in
education, but better in procreation. And, of course, there is an extra pay
day for mother in Leap Year, next year being a Leap Year. So much for
family allowances at this stage.
We shall also provide 4 million this year for the Development Areas,
in regard to which, and only in regard to which, I often hear the phrase
about what the right hon. Gentleman the Member for the Scottish Univer-
sities (Sir J. Anderson) so originally called my "cardiac murmur." It is in
regard to expenditure here, and only here, that I will find all the money,
with a song in my heart, to build factories and to employ the men and
women in these areas. We shall provide 4/ million more this year for the
Development Areas, especially the acquisition of land for building new
factories. My right hon. and learned Friend the President of the Board
of Trade and I have been in consultation on the matter, and we both agree
that this factory proposal has been marching too slowly. Those responsible
are now being prodded by my right hon. Friend, and we hope soon to have
a rather quicker rate of advance. In these days of widely advertised labor
shortage, we cannot tolerate the continuance of local unemployment in
these areas. Therefore, we are doing our very best to speed things up, and
we are very willing to be stimulated and criticized in this regard, as it will
only urge us on to do even more than we are seeking to do at the present
We are providing 10 million this year for roads, of which I am glad
to say 2 million are going to be spent in the Development Areas; and we
are providing 2 million more for State forestry which I warmly commended
to the Committee last year as a very good Socialist investment in land and
young trees. I am also pledged-and I am happy to be pledged, though

The Budget [Ma. DALTON]

"happy" is not quite the word; I am very content to be pledged-to pro-
vide a sum, the total of which I cannot yet determine, to carry out the
Government's promise to help make good, as soon and as completely as
possible, the loss and damage to agriculture and to other interests caused
by the recent snow and frosts. We shall not be niggardly about this. We
shall find whatever money is reasonably required.

The Ministry of Food estimate shows a large increase of 50 million
over last year's expenditure. This is due to the increase in the cost-of-
living subsidies, on which, perhaps, I might conveniently interpolate some
observations at this stage .
I am anxious to speak frankly to the Committee about these subsidies.
I have estimated their total cost this year at 425 million, of which 392
million are for subsidies to food prices, as against 348 million last year, and
33 million are for subsidies to utility clothing and footwear prices as
against 19 million last year. This is a most formidable total, which has
grown very rapidly in the last few years. Last year in my Budget Speech
I said that we could not go on holding the cost of living steady regardless
of the cost. I added:
"We shall have to reconsider this matter next year. We might even have to do so
earlier, if prices of our necessary imports, or home supplies, rose steeply."-[OFFIcuL
REPORT, 9th April, 1946; Vol. 421, c. 1811.]
We have now reached a point where, in any case, it would be necessary
to consider very carefully whether we could face any further increases in
the total cost of these subsidies. Otherwise, this element, alone in all the
total of our public expenditure, might seem to be passing out of our own
control, and we might seem to be dragged along by rises in prices all over
the world, independently of our own decisions, and hitched to a most out
of date and generally discredited index of the cost of living. This would
be a very unfortunate and ignominious situation.
The wisdom of any policy, including this one, is relative both to its
practical effect on the one hand, and to the practical possibilities of con-
tinuing it unchanged. I have no doubt at all that, up to this point, the
policy of stabilizing the old cost-of-living index, as we have hitherto known
it, has been wise, and has been abundantly justified. It has helped to stop
inflationary pressure from becoming an inflationary break-through. It has
carried us through the first chapter of this very difficult transition from war
to peace with an added sense of social security to the general body of con-
sumers. It has helped the housewife, and it has helped the farmer. It
has prevented many automatic wage and price increases from taking place,
in cases where wages under collective agreements are linked with the cost
of living. Up to now it has, in my submission, paid good dividends.

So far, though the pursuit of this policy of stabilization has become
more and more costly, it has remained practical. But now I have no doubt
that we must pause and review it afresh-particularly since, now, the scene

House of Commons, April 15, 1947

changes, in the light of the announcement by my right hon. Friend the
Minister .of Labor on 20th March, in this House, that the present index
number, which has been a natural target for so much criticism, is to be
revised. The present index-it is extraordinary that this should be so and
while I have no doubt most hon. Members of the Committee are aware
of it, I will restate the present position-relates to prices paid by an aver-
age working-class family in 1914, for a selection of articles of ordinary
working-class consumption in the year 1904, nearly half a century ago.
This selection of articles included flannelette-then a favored costume ma-
terial for ladies' dresses-and candles, by which, in 1904, people lit their
rooms. But it did not include either rayon or electric light. We have
moved forward since then. This is a fantastic basis for a definition of the
cost of living in this year, 1947, and it is now intended by my right hon.
Friend to bring the index a generation nearer to the present time, and to
base it, as an interim measure, until things have settled down in the post-
war period, on the household expenditure of the average working-class
family, not in 1904, but in 1938, 34 years nearer today.
This new index will take account of a much wider range of prices than
the old one did; many more articles will be included. For this reason,
the new index will give considerably less prominence than the old to food
items, because a considerably smaller proportion of the average working-
class income was spent on food in 1938 than in 1904. I read in the report
that has been published by the committee which has advised my right
hon. Friend, that only 40 per cent was spent on food out of an average
working-class family's expenditure in 1938 as against 60 per cent in 1904.
It follows that any given change in food prices, either up or down, will
have a good deal less effect upon the new index than it had upon the old.
It follows, also, that the policy of holding the index steady, as we have
done, principally by variations in food prices, has ceased to be practical in
view of the smaller relative weight of food items in the new index. The
new index, covering so much wider a range of commodities, will, by rea-
son of its changed composition, be much less subject than the old index
to our present controls, which have, therefore, to be revised and looked
at again.
The old policy, of using food subsidies to keep the old index stable,
cannot be applied to the new, for the reasons I have given. This means
we shall have to devise, in due course, a modified policy, which will no
longer aim at an absolute stability, and will, I hope, cost the taxpayer less
money, but will still continue, at a lower cost, to exercise a stabilizing in-
fluence upon the index. In particular, I suggest to the Committee-I make
no commitments on this point; it is a matter for consideration in due
course-that there is much to be said for carrying further a practice which
we have begun in the last year, of concentrating food subsidies-having
determined what is a reasonable sum to pay on them-on a smaller num-
ber of commodities which will be of greater importance to the housewife,
instead of scattering them over a wide range of articles, many of them not
of first importance in a household budget. That, I think, is a policy which
should be examined.

The Budget [MR. DALTON]

It is the intention of my right hon. Friend the Minister of Labor to
bring this new index into operation in the near future. He is now holding
consultations with the two sides of industry on various matters-wage ar-
rangements, and so on. After these discussions, my right hon. Friend hopes
to bring the new index into operation within the next few months. Mean-
while, we shall continue the old index. It is my purpose to keep this old
index steady and stable, as we have kept it until now, until it passes out of
use in a few months' time, and, thereafter, to continue to exercise a sta-
bilizing influence upon the new index along the lines which I have been
indicating. There will, I imagine, be a suitable occasion on which to dis-
cuss this a little later, when we are nearer to the point of change-over.
The estimated expenditure on all these cost-of-living subsidies for this
year, 425 million, was based on certain assumptions-the estimate was
drawn up a little while ago, and things have moved since then-which are
no longer real. It was based on the assumptions that the old cost of living
index would be kept in operation-the estimate was drawn up before we
had the report, that it would be held stable throughout the year, and that
prices would rise no further. These assumptions must now be revised, and
new arrangements must be made in due course. But I shall hope, in any
case, to keep the cost to the taxpayer this year within the estimate, even
though the assumptions have, in fact, changed. What would suit us best-
but paradise is not so easily attained in this post-war world-and what for
several years I have been working and hoping for, would be that prices,
especially of imported foods, should begin to fall, instead of going on rising,
so that the cost-of-living index, whether the old or the new, could be kept
stable, in a period of gradually falling prices, with a diminishing cost to
the taxpayer. That is what would suit us best; but it does not look as
though we could yet confidently count upon that happy state of affairs
coming to pass.
I turn to the Consolidated Fund Services for this year. These I put
at 556 million, 22 million less than last year. Last year, I provided
50 million under this head for the National Land Fund. This year, the
Debt Charge will require 525 million, an increase of 26 million over last
year. But, of this 26 million, 8 million represents interest on borrowing
to repay Local Loans Stock, which the Committee will remember we con-
verted. This sum is offset on the revenue side of the account by a corre-
sp6nding item in Miscellaneous Revenue paid into the Exchequer from
the Local Loans Fund. The other Consolidated Fund Charges, apart from
the Debt Charge, will cost us 31 million. So much for the expenditure
this year.
I now turn to revenue for 1947-48 on the existing basis of taxation. I
shall lose some revenue, of course-as a result of the snow, frost and floods
of February and March. I cannot yet say how much, and it would be ab-
surd to give a firm estimate; but there will be some losses there. That is
one of the uncertainties which must be borne in mind in looking forward

House of Commons, April 15, 1947

12 months. I have not heard even a single plausible speech which blamed
the snow, frost and floods upon His Majesty's present Government. None
the less, we shall lose some revenue by reason of those events. But in view
of much that has been written in the press, the Committee may be sur-
prised to learn that my advisers do not expect any appreciable loss of rev-
enue this year-I emphasize "this year"-as a consequence of the three weeks
stoppage of industry over part of England, through the cutting off of elec-
tric current last February. This unhappy event raised the total of the
unemployed for one week to over two million, the figure which used to
be regarded as normal, year after year, in the deflationary 'thirties. Un-
employment on this scale, even for only a short time, might have been
expected to make serious inroads on the revenue. But here P.A.Y.E. came
to the rescue, acting as a most helpful stabilizing factor.

I must say a word in defense of P.A.Y.E. Too many people attack it,
while not offering any suitable substitute. P.A.Y.E. provides a welcome
cushion of purchasing power, in times of short-term unemployment. If
wages are not paid as a result of unemployment, the tax that would have
been payable on these wages is, of course, not collected; but over and above
this, the tax already paid is partially refunded to unemployed workers,
over and above any unemployment benefit to which they are entitled.
Working-class purchasing power is thus kept relatively steady, and this pre-
vents any serious fall in revenue from Customs and Excise. A man can
still afford a drink, even in these conditions. The loss to the Inland Rev-
enue, on the other hand, of Income Tax on wages, was probably about 5
million during the last two months of the last financial year, February and
March. The three weeks' partial stoppage of electric power, together with
the continuation of certain restrictions on fuel consumption, did not, of
course, affect the yield, last year, of Income Tax and Profits Tax on business
profits, because those profits had been made long before these events hap-
pened. Nor will these fuel shortages much affect the yield of these taxes
this year, since, this year, the tax will be based mainly upon profits attribu-
table to accounting periods of past years. But-and I am anxious to be
quite frank with the Committee about this-there will be a loss of revenue,
which cannot yet be estimated, but may be large, from Income Tax and
Profits Tax in the financial year 1948-49. That is when we shall feel it.
It is too early yet to give an estimate. But that is when we shall feel it,
not this year but the year after. That has a bearing on something I shall
say to the Committee later on.

I turn to Customs and Excise, on the existing basis of taxation this year.
I count on 260 million from the Purchase Tax, 450 million from tobacco,
350 million from beer, spirits, and wine, and 240 million from other
Customs and Excise Duties. That makes a total of 1,300 million, 116
million above the yield last year, or roughly a 10 per cent increase, which
I think is very satisfactory.

The Budget [MR. DALTON]

If we take the Inland Revenue this year, on the existing basis of tax-
ation, the yield of the Income Tax will be less by about 48 million than
it would have been but for the Income Tax concessions made in my last
two Budgets. The main part of the effect of these concessions has been
felt already, but I must now allow for their effect in a full year, and there-
fore, for a decline of the Income Tax yield, which I put at 48 million
this year. On the other hand, I count upon a growth-or my advisers count,
and I accept their judgment in these matters-of 42 million over last year
due to a further growth of taxable incomes-we are not all broke yet-and
particularly of trading profits. Therefore, balancing the 48 million loss
against the 42 million gain, I assume a total yield from Income Tax this
year of 1,150 million-quite a comfortable sum. From Surtax I count on
an increase over last year of 4 million, making a total of 80 million; and
from Death Duties an increase of 7 million, making a total of 155 mil-
lion. I count on an increase of 2 million from Stamps, making a total of
40 million, and I count on a small item of 1 million from miscellaneous
Inland Revenue duties.
Excess Profits Tax and Profits Tax, which we commonly assess together,
yielded, last year, 358 million; this year, I expect only 200 million from
those two duties together. The Committee will, of course, recall that the
rate of Excess Profits Tax was reduced as from 1st January, 1946, to 60
per cent and that, as from 1st January this year, this wartime duty was
finally dropped. We shall get a bit for a number of years, but it will not
be much better than a trickle, from E.P.T.; but in this coming year I still
expect a substantial figure, namely, 200 million from E.P.T. and Profits
Tax together.
Therefore, the grand total for the Inland Revenue Duties adds up to
1,626 million, a drop of 151 million, or just on 9 per cent, on last year's
yield. The Committee will, I think, be interested to know that the pay-
ment of E.P.T. refunds is now nearly completed. We spent much time
last year discussing the details and the conditions of those repayments,
184 million was paid last year under this head, and I hope to pay a fur-
ther 60 million this year. Allowing for a small residue of cases that will
take longer to settle, we shall, this year, reach the end of this refunding
operation-so beneficial, it will generally be agreed, to British industry.
The Committee will remember that it is a condition of these refunds that
they shall be used for the re-equipment and development of industry, and
shall not be dispersed in dividends.

Now, after Customs and Excise and Inland Revenue, I turn to other
revenue. I count on 50 million this year from the motor vehicle duties,
the same as last year. I count on 11 million from wireless licenses, an in-
crease of 1 million. The sale of surplus stores should yield 95 million
this year, as against 156 million last year. The main work of our disposal
machine has now been done, and it is, very naturally, running down; the
bulk of the stores have been dispersed very efficiently. I expect 55 million,

House of Commons, April 15, 1947

as against 59 million last year, from the trading activities of State Depart-
ments-mostly from the Raw Materials Department of the Board of Trade.
The total of these items of other revenue is therefore 211 million.

So far so good, we may say, within the bounds of reasonable expectation;
but I now have a further and, I think, an unexpected, revelation to make
to the Committee, and to the writers in the financial press. I feel I must
apologize to them; I always try to keep my relations with them very bright
and good, but I must now apologize to them for not being able to give
them private notice, for the purpose of their expert prophecies, of what
I might call the litter of rabbits which I am now about to produce out of
my Departmental hat, or, if you will, out of Mr. Gladstone's old box.
I am advised, and I am sure the Committee will be very delighted with
what I am now going to say, that I shall receive this year, over and above
the Other Revenue to which I have already alluded, no less a sum than
292 million-quite a windfall-of Miscellaneous Receipts. This will help
us on our way. These represent, in large part, repayments to the Treasury
of advances made under various heads of Budget expenditure in past years.
In achieving this remarkable total of recaptures, the officers of the Treasury,
never wholly inactive-not even on the Riviera, lately-have displayed most
conspicuous qualities of enterprise, endurance, and ardor in the chase.
This year will be a record year for these recaptures by the Treasury. I
remember that the present Leader of the Opposition, in one of his dra-
matic Budget speeches which it was my honor to listen to, sitting on the
other side of the House, once used the phrase "We are clawing back large
sums of money." I always remember that phrase-it is most apt. This
year we are clawing back, from Paymasters and Quartermasters all over
the world, no less a sum than 112 million of unspent Votes of Credit,
voted in previous years. In addition, we are recovering 23 million from
the U.K.C.C., which is being wound up. We are recovering 18 million
from surplus Appropriations-in-Aid; and we are recovering 10,500,000
from N.A.A.F.I., not to speak of many smaller recoveries. The full total
will be published, but I will not go right through the items now; we
shall be very happy to furnish the Committee with the full total of these
recaptures. They also include the 8 million-this is less dramatic-from
interest on Local Loans to which I have already referred, a balancing item
associated with the repayment of Local Loans stock.

The 292 million of Miscellaneous Receipts, added to the 211 million of
Other Revenue which I mentioned just now, gives us a total of 503 million
for revenue other than Customs and Excise and Inland Revenue. I, there-
fore, estimate the total revenue for 1947-48, on the existing basis of taxation,
at 3,429 million as against an expenditure of 3,181 million. This gives me
a prospective surplus of 248 million. The Committee will, I think, be sur-
prised and gratified at this result, which is so much better than even the most
wishful of our friends would have expected. Last year, I prophesied that we


The Budget [MR. DALTON)

should find ourselves, this year, "within striking distance" of a balanced
Budget. Those words of mine now seem, in retrospect, to be a characteristi-
cally cautious understatement. "Within striking distance," I said, Major
Milner. We have already struck! We have already taken this objective of a
balanced Budget, and we are now advancing into open country, well beyond
it. This year, we shall not only balance the Budget; we shall have a good
balance in hand. I trust this surplus will act as smelling salts under the
noses of those who, both in this country and outside it, have lately been
showing signs of despondency, if not of fainting fits, at the thought of our
financial future. We have, and I make no concealment of this, a very
tough external problem to face, of which I shall speak later; but as far
as our domestic affairs are concerned, this Budget surplus of close on
250 million, is a clear sign of our internal financial strength, which all
the world should note.
Putting it another way, I pointed out, 12 months ago, that in 1944-45,
the last full year of war, for every pound of Budget expenditure we paid
10s. 8d. from revenue, and thought that was a good show. In 1945-46 for
every pound of expenditure we paid 12s. from revenue. In 1946-47, the last
year, which has just closed, a fortnight ago, we paid 17s. Id. from revenue.
This year, on the existing basis of taxation, we shall collect no less than
21s. 7d. of revenue for every pound of Budget expenditure. That, I think,
is not too bad.
I must, however, at once warn the Committee that this prospective sur-
plus cannot be regarded as available for wholesale tax reduction this year,
and this for two reasons. In the first place, many of the receipts are non-
recurrent; many of them will come in once for all. It is not yet clear
whether, on the existing basis of taxation, we should have another surplus
next year. We cannot yet see sufficiently clearly the pattern of next year's
financial yield. This year the surplus is real; it is as real as last year's
deficit, but it might, like some of the elements which have gone to create
it, be non-recurrent.

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

House of Commons, April 15, 1947

Next year, my right hon. Friends the Minister of Health and the Sec-
retary of State for Scotland and I will have to rearrange-we are pledged
to this-the relationship of national to local finance, at a cost to the Treas-
ury perhaps of a little less money, because local authorities can be exi-
gent and greedy sometimes. In any case, we are all agreed that we need
to have a new block grant, better arranged and costing less to the Treasury,
and, so far as its distribution among local authorities is concerned, acting
to a greater extent than heretofore as a rate equalizer, giving more to the
poorer authorities, and much less, in many cases nothing at all, to the
richer, having regard to the rating relief which they will gain from the
transfer of hospitals. That is one reason why we cannot regard this sur-
plus as being available for wholesale tax reduction.
There is a second reason. This is a year when we ought, in any case,
to have a Budget surplus. I have already stated several times, inside this
House and outside that the aim of His Majesty's Government is not, as
used to be thought the right rule, to balance the Budget each year, re-
gardless of circumstances. Not at all. Our purpose should be to bal-
ance the Budget over a series of years. Each year we should consider, in
the light of the financial and economic situation, the movement of prices,
the level of employment, the relative dangers of inflation or deflation,
whether, in that particular year, there should be a Budget surplus or a
Budget deficit. I submit to the Committee that there can be no doubt that,
on this test, this is a good year for a good surplus. There is a high level of
employment. Prices are still rising-faster than we like. Unemployment,
such unemployment as there is today,-is due not, as in the old days, to a
general shortage of purchasing power, but to shortages of particular things
-of factories in the development areas, of coal, of electric power, of spun
yarn, whether cotton or wool, or of particular kinds of skilled labor.

Today there is plenty of purchasing power. That has been our aim.
We have sought to lubricate the economic system with a sufficiency of pur-
chasing power, much more evenly spread than before the war. That has
been our aim, and we have achieved it. Therefore, deflation is no longer
the immediate danger today. The immediate danger is of an inflation
going beyond bounds, and 'breaking through the various controls that we
have set up. So far, our price controls, our financial and physical controls,
our production and our savings have held the inflation reasonably well in
check. There has been inflationary pressure, as some of the writers in the
press say; but there has been no inflationary break through the dams. In-
deed, there is much more inflation in many other countries than there is
here. Let that not be forgotten. We have managed our affairs with rela-
tive wisdom and competence, compared with some other parts of the world.
That is the position now. But another year, particularly if a trade de-
pression started somewhere else in the world outside this island, deflation
rather than inflation might be our pressing danger. In that case, if I were
still Chancellor of the Exchequer, I should not hesitate to ask Parliament
and the country to approve a Budget deficit, if need be, a large one, in

The Budget [MR. DALTON]

order to redress that deflationary lack of balance. That is not the posi-
tion now. If we are to balance the Budget over a series of years, we must
earn the right to a Budget deficit in another year by recording a Budget
surplus this year. Therefore, though I shall later propose to the Commit-
tee certain changes in taxation, some up, some down, the net effect of it
all must be to fortify rather than to weaken the revenue, both for this
year and even more for the future years to which we must look forward.
The Committee will recall that in my first two Budgets, within six months
of each other, I made net reductions of taxation, which the Committee ap-
proved, of more than 500 million a year. The possibility of any further
net reduction must now wait till next year.

Next after the Budget surplus, in the line of our defenses against infla-
tion, I put National Savings. This great Savings Movement of ours, solid,
undramatic, typically British, has been a tremendous source of material and
moral strength to this country for more than 30 years, under all Govern-
ments, in war and in peace, in all political situations. The National Sav-
ings Movement has achieved, under an all-party leadership-my right hon.
Friend opposite and I spoke together, only last year, in the Albert Hall in
support of it-a truly national character. The critics and the carpers have
been few; here and there a stray political dingo has barked in the dusk;
but the national caravan has moved on .
Last year the Movement accepted my challenge to raise 520 million
of new money before 31st March last. I took them at their word, and wrote
that figure into my Budget estimate. My confidence was not misplaced.
They passed their target; indeed they raised substantially more than they
had undertaken. In the last lap of the race, Scotland took the lead.
They reached their target on 14th February. England and Wales followed
on 13th March. Finally Northern Ireland, who, with great pluck, had set
themselves a target of exceptional severity, got home in the last week of the
financial year. The final total was more than 560 million. It was the re-
sult of hard and sustained effort by the Savings Movement. I wish today
to pay my tribute, not for the first time, to the leaders and all the volun-
tary workers in the Movement, who have so patriotically devoted their time,
energy, and enthusiasm to this work. .
I must call upon the Savings Movement again in the coming year. We
shall depend upon them, to a very considerable extent, to meet the Ex-
chequer's need for new money. In particular, I would like to commend to
them and to their voluntary workers, as a national object, the full support
of the local authorities' housing programs which seems to me to be a very
good object, hardly to be surpassed in importance for our people all over
the country. So, once more I ask the National Savings Movement for an-
other effort of continuous saving right through the financial year. I am
glad to say that the leaders of the Movement have promised me that this
effort will be forthcoming. They have pledged themselves.
Now I come to the point which the hon. Member for Orpington (Sir W.
Smithers) has in mind-to find for the Exchequer a net increase in small

House of Commons, April 15, 1947

savings of 366 million by 31st March next year, an average of 1 million
a day net. I emphasize that this increase will be net. Hitherto, the figures
for National Savings, as the hon. Member for Orpington knows, because
he has asked Questions about them, have been published in a total which
has been gross for Savings Certificates and Defense Bonds, but net for de-
posits in the Post Office and Trustee Savings Banks. This form of mixed
presentation is of long standing. I inherited it from my predecessor, who
used to authorize publication of statistics in this form. It was very reason-
able in itself. But although most people have clearly understood it, never-
theless it has puzzled others. Some hon. Members have asked Questions
about it from time to time, and some writers in the press have not always
clearly understood it. Therefore, to remove all grounds of misapprehension,
we shall henceforth publish the net subscriptions. The target of net sav-
ings which I have mentioned, 366 million, compares with a net saving of
330 million last year. We had a gross saving last year of just over 560
million; but it was a net saving of 330 million when withdrawals are
offset. As against that 330 million, we are aiming at 366 million this
year. So we are aiming to do even better this year than we did last year.
I shall also propose-this is a small technical point-a Resolution to put
the backing of the Consolidated Fund behind the deposits of the Savings
Banks. That is a technical matter, which I shall explain in Committee.
The effect will be to tidy up our accounts, and to give depositors even better
security than they have at the present time. The more we can attract into
National Savings, money which might otherwise join in the chase for still
scarcer goods, and so increase the inflationary pressure, the steadier will be
our passage through this difficult transition. If you put money aside now,
Major Milner-if you personally, and any others do so-there will be more
to buy a few years hence.
I am also anxious to make big inroads this year into the outstanantg
claims for war damage. Many of the victims of the German bombs have
been waiting a long time for their money. And so, at the request of my
right hon. and learned Friend the President of the Board of Trade, I am
finding 60 million this year for war damage payments under the Business
and Chattels Scheme. Further, following the Debate the other day, the
House approved the payment, as soon as may be-I hope it will be substan-
tially all within this year, administrative provisions permitting-of the war
damage value payments. In addition, as the work is done, the war damage
Cost of Works payments will, of course, continue to be met. The Value
payments now stand at about 100 million, and they will cost us nearly 150
million when increased by the percentage additions to which the House
agreed when this matter was discussed a few weeks ago. To this sum must
be added a further 20 million interest on these Value payments as from
the date of damage to the date of payment. The Cost of Works payments
last year amounted to 94 million. This year they will run about the same
level, say, 100 million. Therefore, the Value payments and the Cost of
Works payments as a whole, taken together, will cost some 270 million
this financial year.

The Budget [MR. DALTONJ

I appeal to all those who receive lump sums, whether tor damage to busi-
ness and chattels or as value payments, to save as much as they can during
these next years. This will help savings and hinder inflation, and there will
be better opportunities later on than now for spending much of this money
to good purpose. I must apologize to the Committee if I have been going
into detail, but I thought it was my duty to deploy the position fully.

I would now like to say a word or two about the program of Govern-
ment borrowing for 1947-48 and to emphasize in the first place, that this
year's Budget surplus, together with the supporting weight of the National
Savings that have been promised, will much more than cover-and this is
important-that part of what is called by some of the experts "expenditure
below the line," which does not directly create new capital assets. Therefore,
thoughtful and instructed persons should be reassured to know that all fur-
ther internal Government borrowing this year will be either for replace-
ment of maturing debt, which is always occurring, of course, or for definitely
new capital development. None of it will be merely to bridge a gap between
current income and expenditure. That phase is finished.
Under the heading of new capital development we expect to borrow some
50 million for the capital requirements of the National Coal Board. All
our future depends upon coal, and nothing must be allowed to stand in
front of the re-equipment of the now publicly owned mining industry. The
other public boards, the Air Transport Corporations, the Electricity Au-
thority and the Transport Commission, when set up, will finance their
development by the issue of stock bearing their own name, not part of the
National Debt but under Treasury guarantee. On the other hand, the
Treasury will advance to the local authorities this year from the Local Loans
Fund at least 200 million for housing and for other capital schemes. We
shall also borrow a further 90 million for temporary houses, and other
charges of a capital character, for which the Ministry of Works are primarily
responsible, which are not financed through the Local Loans Fund.
There will also be large financial operations, which consist, when
stripped down to their essentials, only of the exchange of one piece of paper
for another, in connection with compensation to private shareholders in the
industries and services which are now being taken into public ownership-
coal, electricity, transport, and cable and wireless. These are very large
financial transactions in the total, but they do not involve either new
borrowing in the market or any addition to the net capital liabilities of
the nation which is becoming possessed as the result of our Socialist meas-
ures, of an impressive range of properties which were previously under
private ownership. These are assets which, whatever may be thought about
the policy-I am not now speaking of policy-can properly be set off against
the debt created.
Further, we must deal with such existing debt as may mature this year.
As regards small savings, maturing Certificates should be more than covered
by new purchases. The first issue of the 3 per cent Defense Bonds began
to mature in November, 1946, and, by the end of this month, 32 million

House of Commons, April 15, 1947

of these will have been paid off and 27 million converted into the 21/2
per cent series, with a saving of interest. A further 160 million will
mature this year. But-and this is important to me as Chancellor of the
Exchequer-apart from the maturity of these Defense Bonds and the
recurrent maturities of the Floating Debt from week to week, we have a
good clear run, with no large maturity to be met until 1st March, 1948,
when 300 million of 3 per cent Conversion Loan 1948-53 becomes redeem-
able. Now, therefore, is a favorable opportunity for consolidating the
great advance which we have made in the last 18 months in reducing the
rates of interest on Government borrowing. ...
Let us turn to the local authorities. The capital needs of the local
authorities are met in two ways. They borrow either on the credit of the
State through the Local Loans Fund, or on their own credit in the stock
market or by mortgage. Since the present Government took office, the
amount drawn by local authorities from the Local Loans Fund is 117
million. Of this, 100 million has been drawn since June, 1946, when,
on my instructions, the rate of interest was reduced from 31/2 to 21/ per
cent, a lower level than it had ever stood at before.
Therefore, on this 100 million drawn since that time, the local
authorities enjoy an annual saving of over 500,000 a year. To this must
be added the further saving to the ratepayers of more than 1,000,000 a
year if this year's drawings on the Fund run as I estimate. Further, on
their own credit the local authorities have converted 29 million of stocks
in the market since our cheap money drive began, to rates of 23/4 per cent
loan in the early stages, improving later to 21/ per cent. The saving so
far on these conversions has been 600,000 a year. The local authorities
have been helped to make these welcome savings for their ratepayers
because they have had behind them the strong arm of the National Debt
Office, which has underwritten all these conversions, without charging any
commission, but has made a useful profit for the taxpayer by well-timed
unloading of stocks which some of the previous holders were too slow-
witted to take the offer to convert. These add up to a considerable total.
The interest savings to private industry have also been large-let this not
be omitted-both on the conversion of debentures and on new issues.
Indeed, many industrialists admit that cheap money has enabled them to
put their house in order, by reducing the interest rate on their prior
These are not only substantial gains; they are enduring gains. They
are gains which stand high out of reach of the tides that ebb and flow
from week to week on the Stock Exchange. Apart from the Floating Debt,
all these are long-term issues, and the lower rates of interest will, therefore,
apply throughout the whole long lifetime of these loans, no matter what
may happen between now and their terminal dates. Finally, I repeat these
are gains which benefit the whole community, section by section, right
throughout the national life. But I would add that these are only a begin-
ning. The volume of borrowing which has taken place so far, during the
period of the cheap money drive, is small compared with that which we

The Budget [MR. DALTON]

have in prospect during the next few years. It is in the years ahead that
the nation will derive still more substantial and lasting benefits from a
resolute adherence to the cheap money policy. It is our intention resolutely
to adhere to it. So long as the National Debt endures-and that may be
for a long time yet-the Chancellor of the Exchequer must be on the side
of the borrowers of money as against the money lenders, on the side of
the active producer as against the passive rentier.
There has been a long Debate about cheap money. The late Lord
Keynes, to whom I personally, and the country as a whole, owe a great
debt for his public work, was very definitely in favor of cheap money.
Now that he is dead, I can say that his advice to me was to persevere with
it. I have done so. He was most decidedly on one side in this contro-
versy, though some of the smaller pundits who have survived him take
another view. Lord Keynes wrote a famous Tract on Monetary Reform,
in which he said:
"The active and working elements in no community, ancient or modern, will con-
sent to hand over to the rentier or bond holder class more than a certain proportion
of the fruits of their work. When the piled up debt demands more than a tolerable
proportion, relief has usually been sought"
either in straight-out repudiation of the debt or in devaluation of the
currency. I believe that to be an accurate summary of history, politics
apart. But there is another way of partial relief from these tremendous
debt burdens, aid that is by the pursuit of cheap money and low interest
rates. If rates of interest now were what they were at the end of the First
World War, where should we be? What would be the annual cost of the
National Debt? What would the Income Tax be? What would the other
taxes be? I am sure we are pursuing the national interest in seeking
gradually to condition public opinion to the idea of 21/ per cent as the
maximum rate of interest on long-term loans to the British Government,
and I expect to have public opinion increasingly behind me when it is
realized that on the continuance of this maximum rate of 21/2 per cent
long-term-and lower rates for shorter terms-depends all hope of serious
tax relief in the future. There is no other way in which the circle can be
squared and the Budget balanced.
There has been much talk-not so much in this House but in some
of the columns of the financial press-of deflation as a sovereign remedy
for the ills from which it is thought we are suffering. I have a very poor
intellectual opinion of those who take that view. They seem to me to be
baleful Bourbons, who have learned nothing and forgotten nothing
from the financial follies and economic crimes, as they seem to us now,
committed between the wars. Let us be clear. If we were to follow
through this policy of deflation, preached by some who sit in office chairs
in the City of London, we would bring back dear money; we would bring
back depressed trade; we would bring back mass unemployment; and we
would bring back a clamor for cuts in wages and social services and for
indiscriminate short-sighted economy campaigns of every sort. In my
view, this must be resisted. It is intellectually wrong and morally reprehen-

House of Commons, April 15, 1947

sible. This faction of whom I speak would enthrone the usurer over all,
trample the common man in the dust, and consolidate catastrophe in our
national life.
So far I have assumed that these opinions are not held in this House.
I have assumed that these are the more irresponsible babblings of persons
not of a representative quality. But if it should so be that in this House
these views are put forward, we will most gladly debate them and join
issue, quite confident that the national interest is on our side. Therefore,
if there be any deflationists in this House, we say to them, "If that be
your view, come out and let us have debate and political battle in the
open." The division is not entirely according to political opinions. I am
greatly heartened by a remarkable letter which I have received from a very
distinguished historian, who will be well known in all parts of the House,
Mr. Arthur Bryant. He wrote to me-and I quote his words-
"an historian who-his Tory background notwithstanding-is deeply grateful to you
for your stand against the attempt to force this country into the same deflationary
course that proved so fatal after both the last war and the Napoleonic wars."
He is an expert historian, quoting from the records. He says:
"Working as I am on the tragic aftermath of the Napoleonic wars, I have reached
the conclusion that had the Government at that time corrected deflation when defla-
tion set in, most of the social disasters from whose consequences we are still suffering
could have been avoided."
He ends by saying:
"I feel this strongly, and the horror of seeing thinking men, despite the appalling
lessons of the last 30 years, resorting to the same fundamental fallacy, has impelled
me to write to you in gratitude."
[Interruption.]-He has a Tory background and I think it is only reason-
able that I should quote that passage. I too am very grateful to Mr.
Arthur Bryant-many of whose writings I have read with great apprecia-
tion, for he is a great master of English and of his subjects-for this very
powerful and expert testimony on the side of truth.
Let us look at the thing directly. Is there really a British citizen who
is either too avaricious or too frightened of the future to lend money to
his country at 21/2 per cent on long-term? It is more attractive on long-
term, a term which would exceed the life of this Government, and the
next, and the Government after that. If there be any such persons in
this House-I cannot believe it, but if there be-I hope they will stand up
in the course of our Debates and confess frankly their lack of faith in the
future of our native land and theirs.
I turn for a moment or two to the question of our overseas deficit. I
have promised to speak of this most tough, external problem, and I will
speak of it quite frankly, and seek to deploy the facts before the House
without concealment. Our internal finance presents many difficult prob-
lems, but they are all easy, relatively speaking, compared to the external
problem of our balance of payments on overseas trading account. That
is much the biggest headache which must beset any thoughtful person, no
matter what his politics or what his economic circumstances may be. No


The Budget [MB. DALTON]

other country in the world, without exception, faces so tough an external
problem as we do. It is the result-I have remarked on this before, and
I repeat-it is the strange and ironical result of our tremendous effort over
six long years of war, an effort in which we in this little island, who were
in it from the start, distorted the whole of our economy, without any
thought either of the cost or of the consequences, to save many others who,
without us, would never have been delivered from defeat and from a
slavery worse than death-
Earl Winterton (Conservative): Even the Tories took part.
Mr. Dalton: Even the Tories took part in this national effort, of course.
We all did. It was a common, national effort. What did we do? We
ruthlessly cut down our exports, we sacrificed the great part of our overseas
investments, and we incurred vast expenditure, all over the world, for the
import of munitions into various areas in order to defend the inhabitants,
who often took a minor part in the operation, and for the provision of
services for our own troops-expenditure which now, as part of the accoun-
tancy of victory, is hung round our necks as "war debts." These large and
swollen sterling balances-I do not speak of the smaller sterling balances,
which arise in the course of trading-would never have arisen had Lend-
Lease been the common rule among all the Allies. These great balances
can never be discharged, or even diminished, except by unrequited exports,
exports unbalanced by imports. And these unrequited exports are-and
I speak bluntly, looking at the facts as they represent themselves to me-
a luxury of which we can afford very little for many years to come.
That is the background. In 1946 we had an overseas deficit of 400
million-a total overseas deficit; I will distinguish in a moment the hard
currency deficit within it. In 1946, 400 million was the total overseas
deficit on trading account. I am talking now not about the Budget deficit,
but about the overseas deficit on trading account, on exports and imports.
This was 400 million, which has to be compared with the 750 million
which I forecast a year ago. So far that is a good result. The actual total
overseas deficit was little more than half what we forecast. But our total
overseas deficit for 1947 may, I fear, be a good deal higher unless we take
vigorous action to reduce it. Occasion for debate on such action will
occur later.
So much for the total overseas deficit. But, as everybody knows and
realizes, there is the much more acute problem of the hard currency deficit,
and that is, substantially speaking, the deficit on our balance of payments
with North and South America, Sweden, Switzerland and Portugal. A hard
currency is currency which it is hard to come by; that is as good a definition
as any other. It is hard to come by because it is the currency of a country
which buys so little and wishes to sell so much. In 1946, our hard currency
deficit on current trading accounts was about 400 million, that is to say,
about equal to the total overseas deficit. From this follows the interesting
fact that our overseas account with the rest of the world, outside the hard
currency area, just about balanced last year. If more of what we wanted
was being produced outside the hard currency area this would go a long
way to solving our difficulties.

House of Commons, April 15, 1947

In 1947, the hard currency deficit is likely to be substantially higher
than last year owing to the steep and continuous rise in prices, particularly
dollar prices, and particularly the prices of goods which we may most wish
to import. .. .Dollar prices have been rising, and even tending to some
extent to outrun the increase in the prices of our exports. And we are thus
placed in this exceptionally disadvantageous position which I have been
describing-we are drawing much faster than we intended and than we
wished on the United States and Canadian lines of credit. In the United
States, dollar prices, after a temporary decline last September, have since
risen more steeply than ever, and the United States wholesale price index
is now some 40 per cent higher than it was when the Anglo-American Loan
Agreement was approved by this House. They are not the same dollars
today; their purchasing power has to that extent diminished.
The slow recovery of the non-dollar world, to which I referred to
just now, is a very great misfortune for us all. We had hoped for a much
quicker recovery, but we underestimated the wicked destruction done by
Germans and Japanese and their satellites all over the world. There have
also been mariy acts of God and natural disasters since the war came to an
end, out of all proportion to man's average fate in these matters. Droughts,
floods and bad harvests have been widespread. Therefore, because the
non-dollar world recovers so slowly, we are most uncomfortably dependent
still upon the dollar world. This is the essence of the problem-we have
to buy too much for dollars because too little comes forward from the rest
of the world; and we are selling too little for dollars up to now, although
we hope that the results of the International Trade Organization Con-
ference, which my right hon. and learned Friend the President of the
Board of Trade has been attending, will help here by increasing the flow
of international trade including the trade between ourselves and the rest
of the non-dollar world.
Moreover, I regret to state that the two new international institutions-
the International Bank and the International Monetary Fund-from which
much was hoped, have made a very slow start and have not yet effectively-
formally perhaps, but not effectively-begun operations.
May I be permitted, to summarize our situation, to quote a few words
which I used just a month ago in a speech at Swansea. I said then:
"We must either export more or import less, or both. Our imports include large
quantities of food, tobacco"-
I will say a word on that later-
"and raw materials-such as cotton, wool, hides and timber. If, therefore, we must
reduce our imports, it will simply mean"-
and I emphasize these words-
"that we shall have less to eat and less to smoke and fewer clothes and boots and
shoes to wear, and fewer houses, and less furniture, and less employment in many
industries. In other words, we shall all have a lower standard of living and more
unemployment. That is the danger we have to defeat."
I sought to portray it as dearly and as concisely as I could. I desire to
conceal nothing and to diminish nothing in the telling of what threatens

The Budget [MR. DALTON)

us all. Cromwell once said to his Ironsides-and his words have been
quoted again the other day in the press:
"Well; your danger is as you have seen. And truly I am sorry it is so great. But
I wish it to cause no despondency; as truly, I think, it will not; for we are English-
And Scots as well. And, after heavy battle, the Ironsides won through,
and so shall we. But our need to increase exports is more urgent than ever,
and no one but a scatterbrained fool decries the export drive. [An HON.
MEMBER: "You did."] We are now in more extreme necessities than in the
pre-war days. In this little over-burdened, over-crowded island, we must
export, or we shall expire. I cannot put it more simply. In the months
ahead, our exports and our imports must be much more nearly brought
into balance. Our import program also, therefore, must be severely limited
and much of this will be disagreeable. Later on, His Majesty's Govern-
ment will inform the House of the conclusions they have reached on this
issue. But in this dual effort to encourage exports and to discourage need-
less imports, taxation can play a most important part, and in the proposals
for tax changes which I shall now make to the Committee, I shall have in
mind, along with other considerations, the need to operate thus on both
sides of our overseas trading account.

I have already given reasons why the prospective surplus of 248 million
on the existing basis of taxation, cannot be regarded as large enough. The
changes in taxation which I now propose have been framed accordingly.
I will begin with a series of proposed reductions, leaving increases until
later. I propose to repeal the Excise Duty on artificial silk as from the
1st May next. This, I have always thought, was a stupid and inappropriate
tax in modern conditions. It dates back to a time-I remember Debates in
the 'twenties about it-when artificial silk was something of an exotic
luxury, and had not then become a normal part of the garments of so
many of our fellow .citizens. Nowadays the tax places an unfair burden
on one of the liveliest and most hopeful of our industries, a particularly
hopeful industry for export. And here I reach what I said just now. This
industry is widely dispersed over the country, it does not suffer from undue
localization. It is also setting about the construction of new factories,
and new projects of factories, many of them set in the development areas.
Therefore, I propose to repeal the Excise Duty. There is a complicated
system of Customs Duties on imported artificial silk products which gives
some advantage to home-produced material. I propose to adjust those
Customs Duties, corresponding to the repeal of the Excise Duty, but leaving
the advantage to the home produced material undiminished. I shall with-
draw the allowance, which was granted last year in the Finance Bill, but
is no longer necessary, on duty-paid artificial silk used in the manufacture
of tires. I estimate the cost of these changes in Customs and Excise on
artificial silk, which the Board of Trade will take into account in consider-
ing future rayon prices, at 2,250,000 in a full year, and about 2 million
this year.

House of Commons, April 15, 1947

Next I take heavy hydrocarbon oils. Last August I announced that,
to encourage the conversion of coal-burning plant to oil-burning plant,
I proposed to repeal, in this year's Finance Bill, the duty of Id. a gallon
on fuel oil and gas oil and that pending the repeal, a subsidy of Id. a
gallon would be paid to consumers of such oils whether imported or home-
produced. I shall carry out that undertaking now. I estimate the loss
of revenue to be about 4,250,000 in a full year, and 4 million this year.
I shall continue for the present, and with no immediate intention of extin-
guishing it, the existing subsidy on home-produced fuel and gas oils, and
creosote pitch mixture, which will cost about 250,000 a year. It is not a
joyful thing, but it is a national necessity, to import more oil to make good
the shortage in our own supplies of coal. This ought not to be, and let us
hope that when new habits have taken root, it will not be any more. But
for the time being, it is necessary to do this. These imports are a further
burden on our balance of payments, and they can only be justified-as
they must be justified-if they increase, to an even greater extent, our own
production of other goods for export.

I turn to the Purchase Tax. In both my previous Budgets, I have
lightened the burden of the Purchase Tax. But I cannot go much further
along this road today. The Purchase Tax falls only on goods sold in the
home market; it does not fall on exports. Therefore, any reductions or
remissions in the Purchase Tax discourage exports proportionately, and
we cannot afford such discouragement just now. There are many things
which we would like to keep for ourselves, but which we must send abroad,
to pay for our own food, raw cotton and the like. But, I can do just a little.
I have recently agreed with the President of the Board of Trade that silk
stockings-I am told they are very good silk stockings-should be added to
the very wide range of tax-free utility clothing. This will not require new
legislation and will not, therefore, be included in the Budget Resolutions.
I am told that these stockings will be in the shops before very long, and
that they will give every satisfaction. I propose to reduce the Purchase
Tax of 331/3 per cent to the minimum rate of 162/3 per cent on linoleum,
and similar floor coverings which are much needed just now. This reduc-
tion should help the housewife, and all holders of priority dockets issued
by the Board of Trade.
I should like to do something more this year for the young and active
members of the community, and those not yet too old to take vigorous
exercise. I propose, therefore, to reduce the tax from 33Y3 per cent to
16V per cent on sports requisites for football, cricket, hockey, boxing and
rowing. I was much impressed by the keenness with which Members
pressed the case for reduction for sports gear last year. I regret that I
cannot go further than the list I have mentioned today, because I must
maintain the present rate of tax on many sports articles which are very
good export lines. This applies particularly to golf and tennis. I am told
that many sports requisites are very good export lines indeed, and we

The Budget [Ma. DALTON]
must not stand in the way of the export trade. I hope and believe that
the reductions I have proposed will be welcomed by those who play these
games, and just as my last Budget contained a reduction of Entertainments
Duty for the benefit of British sport, I am happy that this year's Budget
should contain a second concession on behalf of the young and active.
Finally, the Budget Resolutions will provide for a number of small
miscellaneous reductions in Purchase Tax. Dental sticks, razor strops and
sharpeners will be reduced from 100 per cent to 331/i; hot water bottles-
[Laughter]-we want to look after the old as well-and certain other articles
of domestic chinaware, will be reduced from 331/ per cent to 162/3 per
cent; and water filters, now taxed at 3310, will be completely exempt. I
am also making an order to exempt from Purchase Tax certain special
kinds of heavy cloth used in mechanical plant. Full particulars of these
changes, including precise definitions of the articles concerned, of which I
have only mentioned some, will be found in the White Paper. The new
rates provided for in the Budget Resolutions will apply to goods delivered
by registered manufacturers and wholesalers to retailers from tomorrow,
and as soon as retailers' existing stocks have been cleared, the price of new
supplies should reflect the tax reductions. The exemption of utility silk
stockings has been taken into account in my calculation of the yield of
Purchase Tax on the existing basis. It will cost 1,250,000 in a full year,
and 1 million this year. The cost of the other Purchase Tax concessions
is 2,500,000 in a full year, and 2 million this year. Therefore, summing
up on Customs and Excise as a whole, I propose tax reductions to cost 9
million in a full year, and 8 million this year.
I turn to the Income Tax, and I am sure that I shall interpret the
decided preference of the vast majority of taxpayers in selecting this as the
principal field for such modest reliefs-and they must be modest-as I can
give this year. Most people dislike the Income Tax more than any other
tax they pay. Such is the evidence we everywhere meet. First, let me
remind the Committee of a relief which, though I introduced it last year,
only takes effect for the first time this year-namely the allowance as deduc-
tions for Income Tax of the National Insurance contributions. When
Old Age Pensions were increased last October, insurance contributions were
increased as well. This year, therefore, the tax free allowance for these
increased contributions will be 5 a year, as compared with only 1 last
year. And next year, when the full contributions become payable, this
tax-free allowance will rise to 12 a year. The effect of this is just the
same as that of an increase in the personal allowances for Income Tax.
I have considered carefully which, among the various alternative forms
of Income Tax relief, should be my first choice. I have decided in favor
of an increase in the earned income relief, which I increased last year from
one-tenth to one-eighth, maintaining the maximum at 150. I now propose
further to increase it from one-eighth to one-sixth, lifting the maximum
from 150 to 250, and thus, bringing this relief back to where it stood in
S 297

House of Commons, April 15, 1947

1940, before the introduction of the post-war credit arrangements. This
will give every worker an additional incentive. I estimate the cost of this
relief at 62 million in a full year, and 55 million this year.
In the second place, I propose to increase the Child Allowance from
50 to 60 a year, and thus restore this allowance to the pre-war figure, not
merely the 1940 figure. This will cost 15 million in a full year, and 13
million this year. These last two increases together, will relieve 750,000
people who now pay Income Tax, from all payment in the future; and
will, of course, noticeably reduce the tax paid by millions of others.
Mr. Gallacher (Communist): Very acceptable.
Mr. Dalton: Following these reliefs, I would like to give the Committee
some figures, because I am not sure that it is always understood what is
the tax free income of various sections of the community, and what is the
income above which standard rate at 9s. in the first becomes chargeable.
There is a bit of loose, defeatist, talk about incentives sometimes. People
talk about there being no incentive to work if they have to pay anything
in Income Tax. And it is especially for this reason that I want to give the
facts and figures to the Committee.
Following the reliefs I have indicated, a single man will pay no Income
Tax until he is earning 2 12s. a week, and he will not begin to pay tax at
full standard rate, which is now only 9s. in the until his earnings exceed
5 10s. a week. Even then, of course, he only pays at the standard rate on
the excess over this amount. The corresponding figures of other types of
taxpayers are as follows: a married man with no children will pay no tax
if he earns below 4 5s. a week, and no tax at standard rate below 7 2s. a
week; for a married man with one child, the figures are, 5 12s. and 8 10s.;
a married man with two children 7 and 9 18s.; with three children
8 8s. and 11 5s.; and with four children 9 15s. and 12 13s. a week.
Finally, that paragon of good citizenship, the married man with five chil-
dren, pays no Income Tax unless he earns more than 11 3s. a week, and
he only pays the full standard rate on the excess of earnings over 14 ls.
I have another Income Tax relief to offer, which, I hope, the Committee
will think well to accept. This is in regard to the Dependent Relative
Allowance, on which I have had a lot of correspondence, and on which I
know there is considerable feeling of possible injustice. This allowance
depends on the income of the relative. It is an allowance of 50 a year
-that is the general sum-and, according to the income of the relative, the
allowance tapers off. At present, if the income is less than 30 a year, the
allowance is 50, and it gradually tapers off, and ceases altogether when the
relative's income exceeds 80 a year. I propose that, in future, if the rela-
tive's only income is an old age pension, the maximum allowance of 50
shall still be given. If the relative has other income, giving more than
70 altogether, the allowance will taper off as before, but will not disappear
until the income of the dependent relative is over 120 a year. This change

The Budget [MB. DALTON]
is in recognition of the increase in the old age pension last year. It will
cost 10 million in a full year, and 8 million this year, and I am glad to
think that it will benefit one million taxpayers with dependent relatives.
The increases in the Earned Income Relief and in the allowances for
children and dependent relatives will mean a recasting of the P.A.Y.E. tax
tables, and a recoding of the taxpayers affected. People are always asking
me to set up Commissions and Committees to inquire into P.A.Y.E., but
I much prefer to do the job myself. We have made continuous improve-
ments in the administration of this scheme. To recast tax tables of the
old type for P.A.Y.E. used to take five or six months, but as the Committee
will know, the new Single Table, as it is called, which has been in use
since the beginning of this year, means a great saving in every respect-a
saving in paper, in printing labor and in time. This new Table can now
be recalculated, printed and distributed within 10 weeks from Budget day.
I hope, therefore, that the recoding, in accordance with the changes I have
indicated, will be finished, and the new tables be in the hands of all
employers in time to give effect to the changes which I have just proposed,
in the pay packet for the week beginning 7th July.
The relief then given will date from 6th April, the beginning of the
current income tax year, and there will, therefore, be not only a smaller
deduction of the tax, week by week, from the second week of July onwards,
but also a repayment, in the week beginning 7th July, of the tax deducted
during the previous three months in excess of the new rate. It will be
another of those wonderful weeks, like the first week of last October, which
many people still remember, when "P.A.Y.E." becomes "re-P.A.Y.E.", and
when the Chancellor of the Exchequer meets smiling faces everywhere.
I next turn to the Income Tax Post-War Credits. Last year, we repaid
the first three years, out of a total of five years, of these Credits to old
people, men over the age of 65, and women over the age of 60. I thought
that this would cost about 26 million. We have, in fact, paid out more
than twice as much, just 58 million, to no less than 1,750,000 old people.
We had, of course, no reliable information last year to show the distribution
of the Post-War Credits between the different age groups. There is no
age evidence upon the Post-War Credit. It is evident that the old people,
and we were very glad that it was so, had accumulated more than twice as
much in Post-War Credits as we had supposed. This year, I propose to
go a step further, and to complete the payments to the old people. I
propose to arrange to pay the last two years of their Credits, and, in the
light of last year's experience, that should cost another 70 million. There
is more credit in the fourth and fifth years than in the first three.
Actually, repayment cannot start until the autumn, but it will, I hope,
be finished before Christmas. Any man reaching the age of 65, and any
woman reaching- the age of 60, will thenceforward be able to claim, in one
single payment, all his, or her,.Post-War Credits for the five years. I cannot
go further this year, and I hope the Committee will not press me to do so,

House of Commons, April 15, 1947
in the repayment of Post-War Credits. These are a great reserve of purchas-
ing power, which we must only release slowly, while inflationary pressure
continues. If deflation were to threaten, this reserve might be one of the
first to be called upon to counter it. Last year, the old people, when they
drew their Post-War Credits, reinvested a considerable proportion in the
Post Office Savings Bank-and in other forms of savings. I appeal to them,
as I appeal to other citizens, to do the same this year and put the money by,
so far as their personal circumstances permit.
I have two further quite small reliefs to announce. In order to assist
Approved Amalgamations in Cotton Spinning, to which my right hon.
and learned Friend the President of the Board of Trade attaches great
importance, I propose to reduce to half the standard rate the Income Tax
charged when, as a result of such amalgamations, machinery or plant is
sold for more than its written-down value. My right hon. and learned
Friend hopes that these amalgamations will be substantially complete in
three years, and I estimate the cost of this concession over this period to
be 2,500,000. None of it will accrue this year. It will, I hope, help to
get the cotton industry on its feet.
Finally, in this section, I have an announcement to make in respect of
Probate Fees, following up the exemption last year of small estates from
Estate Duty. Probate fees are prescribed not by legislation, but by Order
of the Supreme Court. Following discussions which the Lord Chancellor
has had with His Majesty's Judges, I am glad to have been able to agree
to a new scale of Probate fees as from 1st May. The minimum grant fee
of 15s., now applying to estates of up to 200, will, in future apply to all
estates up to 2,000. There will also be some reduction in the fee on estates
up to 6,000. The new scale is to be calculated on the net value of the
estate, including realty, and there will be some adjustment of the scale
for estates above 6,000. The charge for services in the Personal Appli-
cation Department on Estates up to 2,000, and the jurisdiction of the
Customs and Excise officers, are unaffected by this arrangement. It is not
a big matter, but I am glad to think that the new scale of fees will mean
a small saving in legal expenses to poor people, and the total loss of
revenue from the new arrangement is only about 20,000 a year.
I have come to the end of tax reductions. The total cost of those I
have proposed will be 96 million in a full year, and 84 million this vear.
The Income Tax reliefs will cost 87 million in a full year, and 76
million this year. This does not include the cost of the repayment to old
people of their Post-War Credits, which, being repayment of credits, will,
as before, be borrowed.
I turn to increases in taxation. My task now is to recover all, and more
than all, the revenue I have lost. I have carefully studied, as I promised
last year I would, the possibility of a tax on betting. At first sight this is


The Budget [MR. DALTON]

an attractive proposition, though it would unite against it strong and
varied resistance ranging from bookmakers to bishops. But I would
advise the Committee to face even this powerful combination if it seemed
likely that I could get substantial revenue from this new tax. But I am
convinced that I could not. It would, indeed, be possible, and not very
difficult, to tax the "totes," both horse and dog, and the football pools.
But we stand, and most of all the Labor Party stands, for justice; and to
tax "totes" and pools alone, and let the bookmakers go free, would be
wrong, it would be unjust, it would be repudiated by all right-thinking
men and women. On the other hand, to tax all forms of betting would
present the most formidable administrative difficulties. In 1929, when the
present Leader of the Opposition repealed the Betting Duty, which had
been imposed in 1926, he told us that:
"In practice the duty has failed. The volatile and elusive character of the betting
population, and the precarious conditions in which they disport themselves, have
proved incapable of hearing the weight even of the repeatedly reduced burdens which
we have tried to place upon them."-[OFFICIAL REPORT, 15th April, 1929; Vol. 227, c. 49.]
These gentlemen have become no less volatile, elusive and precarious today.
I have no hope that where the right hon. Gentleman failed, I should
succeed. In order to cope with the very serious difficulties of collecting
a tax on bets placed with bookmakers I should need to divert a number of
trained Excise Officers from the collection of other existing taxes, and so
should lose revenue. I am against adding to the Civil Service what are
sometimes called "hordes of officials," even in the high mission of tax
collectors. It is a defect of every tax that it requires new officials to
collect it. Therefore, I have regretfully decided to reject a tax on betting,
and, in the best conservative spirit, to look for my increase of revenue this
year from well-tried, existing taxes, to which we have become accustomed.

I turn to motor taxation. In my first Budget, adopting a provisional
decision of my predecessor, and following, according to the best evidence
then available, the wishes of the great majority of the motor manufacturers,
I changed the basis of taxation of private cars, by substituting, for the
cylinder bore, the cubic capacity of the cylinder. I made it clear that the
change must be so arranged that I lost no revenue, though I asked for no
more than I was then getting. This new tax came into effect for new cars
less than four months ago, but many of the manufacturers, to whom some
of the epithets applied to the betting population could be applied, now
seem to have changed their minds once more. Many of them-although
even now they are not unanimous; they never are-urge me to base the
tax not on the cylinder bore at all, but on a combination of a flat rate
license fee and an increased petrol tax. That is a debatable and discus-
sable proposition. But they also ask for a reduction in the total weight
of taxation. That, for me, is not a discussable matter. I can hold out
no hope of a reduction in the total weight of taxation for the present.
Whatever form motor taxation may take, the present revenue must at
least be maintained, for the time being. As to the basis of the tax, I am

House of Commons, April 15, 1947

very anxious to do all I can to help the motor industry, and most of all
to help their exports to reach the highest possible figure. There are serious
difficulties-I have looked at this question several times-in the way of
adopting these latest proposals, which I cannot enlarge upon today. I
make no commitment at all one way or the other, except to say that I am
prepared to examine the whole question, in consultation with competent
people who know the problem, between now and the Committee stage of
the Finance Bill, subject to losing no revenue.

I turn to Death Duties. Last year I made some changes in the Estate
Duty which brings in more than 90 per cent of the total Death Duty
revenue. By raising the exemption limit from 100 to 2,000, I exempted
last year three quarters of the estates annually liable, and, by regrading
the duty on the other quarter, I brought in 22 million more revenue. I
have already referred to the adjustment of the Probate Fees to be made
this year. To follow up this lightening of the burden on small estates,
I now propose to make an excursion, with the same ideas in mind as I had
last year, among what I may call the minor Death Duties. I propose to
increase the rate in the Legacy and Succession Duties, while increasing the
exemptions and reliefs for small inheritances. The Legacy and Succession
Duties fall, not, as the Estate Duty does, on the total property passing at
death, but on the portions of such property inherited by particular persons
or by charities. To use legal jargon, for which I apologize, personalty
pays Legacy Duty, realty pays Succession Duty. Both duties are based on
consanguinity, which means the relationship of the deceased person to
the beneficiary. The rate of duty now is one per cent for widows and
children; five per cent for brothers, sisters, nephews and nieces; and 10 per
cent in other cases.
I propose to double all those rates, making them two, 10 and 20 per
cent respectively, but, at the same time, to give the following reliefs. Now
when the total estate is less than 1,000, no Legacy or Succession Duty is
charged on its distribution. I propose to raise this figure to 2,000, the
same figure as the new exemption limit for Estate Duty which I introduced
last year. At present, in the second place, if the total estate is less than
15,000 no Legacy or Succession Duty is payable on bequests to widows
and children. That will remain unchanged. Thirdly, at present, no
Legacy or Succession Duty is payable on bequests or benefits of less than
2,000 to a widow, 2,000 to an infant child, or 1,000 to a child of full
age. I propose to retain these reliefs but, in the case of a child of full age,
to raise the limit from 1,000, to 2,000. Fourthly, I intend to provide
that all benefits of no more than 100, no matter to whom accruing by
inheritance, shall be exempt. Finally, I propose no increase in the rate
on charitable bequests; this will remain at 10 per cent. I propose that
these changes shall apply to deaths occurring after today. I estimate the
increased yield at 9,000,000 in a full year. The yield this year will be
very small, since these duties are normally collected a year or more after
the date of death.

The Budget [MB. DALTON]

I turn next to the Stamp Duties, in which there has been no important
change since the late Mr. Austen Chamberlain, as he then was, doubled
most of the rates in his Budget of 1920, two years after the end of the First
World War. I now propose, following his example, at this corresponding
point after the Second World War, to double a number of the Stamp
Duties, which I shall specify in a moment, though over a less wide field
than Mr. Austen Chamberlain did. Mr. Austen Chamberlain doubled
the duty on cheques and receipts; I think that is a futile proceeding, and
I do not propose to repeat it. I start with Stock Exchange transactions.
I propose to double all the Stamp Duties relating to stocks and shares,
namely the Contract Note Duties, the Transfer Duty, and the duties on
bearer securities, debentures and Letters of Allotment. Most of these
duties are payable on graduated scales. Full details of the changes will
be found in the White Paper.
I propose also, subject to relief for small transactions, to double the
Stamp Duty on transfer of property. This duty was not doubled by Mr.
Austen Chamberlain in 1920, because it had been doubled in 1909 by Mr.
Lloyd George, who then increased it from 10s. per cent to 1 per cent.
On small transfers, of 500 or less, the Stamp Duty has stood for nearly a
century at 10s. per cent, and I propose to leave it there, and also to leave
the present duty on transfers of between 500 and 1,500 unchanged at
the existing rate of 1 per cent. Above 1,500, the rate will rise gradually
up to 2,000 when the new full rate of 2 per cent as against 1 per cent
will become payable. I propose likewise to double the present Stamp Duty
on leases and mortgages, except on ordinary tenancy agreements at a rental
of less than 100 a year on which the existing rate of duty will be con-
tinued. I estimate that these various increases in Stamp Duties which I
have so far mentioned-I have another to come-will produce another 20
million in a full year, and about 12 million this year. These increases
cannot come into force until the passage of the Finance Bill into law, and
I propose that they shall operate from 1st August next, by which time, I
hope, the Bill will have become law.

I have given further special thought to one type of transaction which
has attracted much attention, some of it uncomplimentary, namely, the
bonus issue. These issues may sometimes be a defensible method of capi-
talizing reserves or genuine profits. They may be. But often they are
nothing more than a watering of capital, a method of concealing profits,
and so misleading customers, employees, and the general public, and head-
ing off demands for lower prices or better conditions of employment. My
two predecessors at the Treasury forbade bonus issues altogether during
the war, save in very exceptional cases; and there is something to be said
for maintaining this prohibition. I have heard much argument about
this question; I have taken much advice; I have consulted many experts.
In a quiet way, I have been looking round to see how I might, at the same
time, both give a little pleasure and collect a little revenue. It seemed

House of Commons, April 15, 1947 \
to me that there was a case for my being a little more forthcoming in per-
mitting bonus issues, on condition that the public also participated in a
reasonable rake-off from these somewhat debatable operations.
I intend, therefore, to impose an additional Stamp Duty of 10 per cent
on the value of all bonus issues passed by the Capital Issues Committee, to
which well-trusted body I propose to give an extended discretion in regard
to these issues. I should, perhaps, remind the Committee that a bonus
issue may take either of two forms.
First, there is the bonus issue proper, which is a gratuitous issue of
new shares to existing shareholders in proportion to their holdings. The
characteristic of this type of issue is that no new money whatsoever is sub-
scribed. This, if one may use a colloquialism, is sheer "money for jam."
The second type is an issue of new shares, containing a "bonus element,"
to existing shareholders; that is to say, an issue of new shares, for which,
indeed, the shareholders pay something, but less-and, sometimes, very
much less-than their market value. Here, indeed, some new money is put
up by the shareholder, but, often, relatively speaking, not very much.
Last year I gave the Capital Issues Committee discretion to recommend to
the Treasury that consent should be given to bonus element cases-that is,
to the second of the two types which I have described-when having regard
to all the circumstances, the issue price appears to them to be fair and
reasonable. I now propose to give the Capital Issues Committee a similar
discretion to recommend consent or refusal, as the case may be, in the case
of bonus issues proper.
I am prepared to give the bonus issue this degree of benefit of the doubt.
But I should make it clear that this concession is not meant unduly to en-
courage these transactions, even though I can expect revenue from them;
and I ask all promoters of such issues to think carefully before making up
their minds that a bonus issue is really essential to the proper management
of their business. The new Stamp Duty will, in the case of public com-
panies, be at the rate of 10 per cent on the excess of the market value of
the bonus share over the sum, if any, which the shareholder pays for it.
The market value will be taken as the Stock Exchange valuation for the
shares after the issue. In the case of private companies, whose shares are
not quoted on the Stock Exchange, the charge of 10 per cent will fall on
the excess of the par value of the share over the sum, if any, paid for it.
This duty will be payable by the company making the issue, and will be
levied on any bonus issue made from today. It is estimated to yield
5,000,000 in a full year and the same amount this year. Therefore, from
Stamp Duties as a whole, I expect to get a further 25 million in a full
year, and 17 million this year.

I pass to another topic. Last year I announced in my Budget speech
that the Excess Profits Tax would be finally repealed on 31st December,
1946, but that the National Defense Contribution, which was then re-
christened the Profits Tax, would go on. I said then, a year ago, that I
had been carefully considering whether, when repealing Excess Profits Tax,

The Budget [MR. DALTON]
I should either increase the Profits Tax or introduce some new form of
tax on profits or excess dividends. I added that I should be guided in my
decision, this year, by a number of considerations, by the general budgetary
and financial situation to a large extent, and, to some extent, by the con-
duct of private enterprise in the meantime. I cannot pretend to be satis-
fied with the large increases in distributed profits and the higher dividends
which have been paid out in so very many cases in the last 12 months.
Too much, in my judgment, has been distributed, and too little plowed
back into the business. These increased dividends are the clearest case,
anywhere in our national economy, of an inflationary element.
I am very doubtful of the wisdom of affording, in this inflationary.
atmosphere, to any section of our population, an increase of money income,
without a proportionate increase in output or in services rendered in. return.
I make exception here for increased incomes through Tax reliefs on im-
proved social services: that is part of public policy. But, generally speak-
ing, we are entitled to think twice, in our present situation, before paying
people more money even for the same work. And these increased dividends
are a case of paying more money for no work at all-and that is very hard
to justify, and, in my view, clearly calls for some fiscal correction. There-
fore, I propose to leave the Profits Tax at its present level of 5 per
cent, or one shilling in the pound, on undistributed profits which are added
to companies' reserves or otherwise reinvested in the business. But I pro-
pose to increase the Tax to 121/ per cent, or from one shilling to 2s. 6d. in
the pound, on distributed profits.
The case for this increase of Tax is threefold. In the first place, I must
collect, as I indicated last year, some additional revenue to replace, at least
in part, the loss of Excess Profits Tax. The second argument I have already
given. Distributed profits have been too high and too inflationary. In
the third place, this increase of Profits Tax does rough justice within the
broad field of investment income. The cheap money policy has reduced,
though with great advantage to the nation as a whole, the income of many
rentiers or other persons living on redeemable fixed-interest-bearing securi-
ties. The equity stockholder has suffered no such disadvantage, and in
some cases, may have actually gained through capital reconstructions which
have improved his relative position. There has also been, I am told, much
switching from gilt-edged into equities in search of yield. An increased
Profits Tax, therefore, whatever may be said about it generally, has a special
justification in these days of cheap money, in order to do justice as between
one section and another of those who receive income from investments.
I propose to exclude from the Profits Tax individuals and partnerships
which are now liable to pay at the rate of 4 per cent. This is fair, I
consider, because the profits of individuals and partnerships are liable to
Surtax as well as Income Tax, but Surtax does not fall on the undis-
tributed profits of a company. The cost of the concession is small, since
individuals and firms provide less than 5 per cent of the total yield of the
tax. This increase in Profits Tax will give me an additional 36 million
in a full year. But, since Profits Tax, like E.P.T., is a deduction for In-
come Tax, the increase of the Profits Tax means a loss of Income Tax

House of Commons, April 15, 1947

which I put at 16 million at the present rate; so that I get a net gain,
from the increased Profits Tax on distributed profits, of 20 million in a
full year. The additional yield this year will only be about 1 million
net since the tax is collected a year after the profits are made. These three
sets of changes in the Inland Revenue field-the increases in the Legacy
and Succession duties, Stamp Duties and Profits Tax-all taken together,
will provide a net gain to the Exchequer of 54 million in a full year and
18 million this year.

I have two more unpleasant topics to touch upon in the field of tax-
ation. In my first Budget, a few months after the end of the war, I took
the Purchase Tax off a number of domestic cooking and heating appli-
ances. At that time, everybody welcomed it. No one opposed it, in any
part of this House. Indeed, I was pressed to extend the exemptions more
and more widely, to include, among other things, electric irons and electric
washing machines. [An HON. MEMBER: "Electric chairs?"] I am sure the
Committee would wish me to admit them, along with the other articles,
in order to yield a little revenue with an accompaniment of justice. At
that time, everyone welcomed the concession; everyone pressed for more.
The gift of foresight is sometimes denied, not only to Ministers of the
Crown and Members of Parliament, but to the whole community. Lord
Baldwin once said, in another connection, that "We were all wrong." So
we were. It is quite clear we were all wrong-all of us-about these elec-
trical appliances.
In present circumstances, the exemptions can no longer be justified.
Most of these appliances make heavy demands on the public gas and
electricity services, where the effect of the fuel shortage is most acute and
the need for economy most urgent. I propose, therefore, to bring them
all back under the tax at the rate of 662/ per cent-on new articles, of
course; anybody who has got an electric iron is all right. The tax will be
662/ per cent of the wholesale value. This is a new rate of duty inter-
mediate between the maximum rate of 100 per cent, which now operates
in some cases, and the 331/3 per cent rate, which is the rate most widely
imposed. I propose also to tax at the same rate of 662/ per cent a fur-
ther group of gas and electrical appliances, some of which are at present
exempt and others taxed at 331/3 per cent. I will not weary the Com-
mittee with the full definition of the articles, which will be found in the
White Paper; but among the appliances which will not be affected will
be lighting appliances, wireless sets, and electric clocks.
These increases will apply to goods delivered by registered manufac-
turers and wholesalers to retailers from tomorrow. This is an unpleasant,
but a necessary, method of fuel economy. I hope it will also lead to a
considerable increase in the export of these articles, which, I am sure, will
be much appreciated by persons resident in other parts of the world. The
additional revenue from these increases of Purchase Tax will be about
18 million in a full year, and about 13 million this year. The Purchase
Tax concession which I mentioned earlier will cost about 2,500,000 in a

The Budget [Mn. DALTON]

full year and 2 million this year. On Purchase Tax as a whole, there-
fore, there will be a net gain to the Exchequer of about 15,500,000 in a
full year and 11 million this year.

Finally, in this field, I have something to say about tobacco. We are
now smoking one-third more than before the war. Current consumption
exceeds 250,000,000 pounds weight a year-an enormous amount-or more
than 100,000 tons of tobacco a year. This represents, though it is hard to
credit it, about 100,000 million cigarettes, and about 700 million ounces
of pipe tobacco, to say nothing of cigars and snuff. About 80 per cent
of our tobacco is imported from the United States; and, to satisfy this
insatiable demand, we are drawing heavily and improvidently on the dol-
lars which we earn with our exports, as well as on the proceeds of the
American line of credit. It is hardly to be believed, but the whole total
of our exports to the United States at this time barely exceeds, in value,
our own consumption of American tobacco. The thing has become fan-
tastic, and must be stopped. It is quite clear that we are smoking much
more, as a nation, than we can afford, and I have been pressed, from many
quarters for some time, to cut down this much too heavy bill. I now,
therefore, propose, and I believe that both the Committee and the country
as a whole will back me up in this, to make a very steep increase in the
tobacco duty.
Most of our tobacco imports come in as unmanufactured leaf, on which
I propose to raise the Customs Duty from tomorrow by about 50 per cent-
from 35s. 6d. a pound to 54s. 10d. a pound, with corresponding increases
in the rates for other kinds of tobacco. The existing preferential margins
will remain unchanged. The effect of this increase will be that the price
of a packet of 20 cigarettes will be raised from 2s. 4d. to 3s. 4d., or from
ls. 9d. to 2s. 6d. The price of most kinds of pipe tobacco will go up
by about ls. 2d. an ounce. When the Tobacco Duty was last raised,
in 1942 and in 1943, Members of the Armed Forces were allowed to buy
limited quantities of cigarettes and tobacco in their canteens at pre-Budget
prices. In present circumstances, I regret that this special arrangement
can no longer be justified, and I propose that it should now be discontinued
from the 27th of this month.
It is not easy to estimate how much of a drop in smoking might be
expected to result from this deliberate and very heavy increase in the duty.
[Interruption.] I mince no words; I tell the hon. Member the truth. It
does him good to hear it for once. In the jargon of the professional econ-
omist, the demand for tobacco is highly inelastic, which means nothing
more than that men and women will give up quite a lot to get a smoke.
They would spend more money on tobacco, if the price went up, even if
it meant spending less on other things. This is the time when we must seek
to influence, in the national interest, the individual inclinations of tobacco
smokers. I regard the saving of dollars as much more important than an
increase in the revenue in this connection, and I suggest to any smoker
who may feel a grudge against the Treasury, or against myself personally,

House of Commons, April 15, 1947

that the best way to satisfy himself is to knock off smoking altogether, thus
depriving me of one of my principal sources of revenue. If that seems
too stringent, he might cut down his smoking by one-third. He will
then be spending about the same amount of money as now, and I shall
only be getting very little extra revenue. Even this, however, might seem
too great a sacrifice to some smokers. So I set my target, at a reduction
of 25 per cent, or one quarter, in the total national consumption of tobacco.
I hope that it will be regarded as a national duty to reach this target, espe-
cially in view of our most difficult overseas deficit. Nothing else will be
much good. I appeal, and I hope others who have pressed me on this
subject will support my appeal, to all our fellow-citizens to regard this
particular economy as a minimum and as a patriotic duty at this time.
When this appeal has been made before, it has not failed. I do not think
that anyone need suffer seriously, even in morale, if he should smoke this
year three cigarettes, or three pipes, instead of every four last year. All we
need to do is to smoke a little slower. We must throw away our stubs a little
shorter, and knock out our pipes a little later. All this might even be
quite good for our health and the state of our nerves.
On the basis of the 25 per cent reduction, for which I ask, I estimate
that I shall get 77 millions more revenue in a full year, and 75 millions
more this year, but-and this is far more important-I estimate that we
should save some 30 million dollars this year, and a bit more if, as a con-
sequence of slower sales, we could run down our stocks. I do not hesitate
to emphasize once more that I would much sooner get a large saving of
dollars and less revenue, but I cannot exclude the possibility that things
might go the other way, though I hope they will not.

I come now to sum up the results of the various tax changes which I
am proposing. The tax reductions will cost me 84 million this year, and
96 million in a full year, of which the Income Tax reliefs this year will
cost 76 million and 87 million in a full year. On the other hand, tax
increases will bring in 106 million this year and 149 million in a full
year. Therefore, on balance, I gain 22 million this year and 53 million
in a full year, and my prospective surplus for this year will rise from 248
million to 270 million.
The final picture which I would wish to leave with the Committee is
one of sharp contrast. Our internal financial position is much better, and
our external trading deficit is a good deal worse than it would have been
reasonable to anticipate two years ago. In this Budget, I have proposed
measures which, 1 hope, will strengthen both the internal and the external
position. If these measures prove not sufficient, stronger and more drastic
measures will have to follow, and His Majesty's Government will take the
responsibility for proposing these in due course.
These are serious times. But I recall some words, which were written
about halfway through the last century, I think, by one who, though not
a native of our country, knew us and wished us well. He said that he
saw Britain "not dispirited, not weak, but well remembering that she has


The Budget [MR. DALTON]
seen dark days before; indeed, with a kind of instinct, that she sees a little
better on a cloudy day, and that, in storm of battle and calamity she has a
secret vigor and a pulse like cannon. I see her, in old age, not decrepit,
but young, and still daring to believe in her powers of endurance and
expansion, with strength still equal to the time." Let us, then, be of good
courage; let us go forward, with obstinate will and clear purpose, to
conquer the hard tasks which lie ahead.
[House of Commons Debates]

Address to the International Trade Organization by
SIR STAFFORD CRIPPS, President of the Board of Trade
Geneva, April 11, 1947: We have come together at this meeting, after
considerable preparation, with the object of taking a very definite step
forward towards the sound and secure organization of the economic future.
It was while we were still in the middle of the great war that many of
us became convinced that a new economic international organization was
absolutely vital for the future peace of the world. It was then that the
design upon which we are now working first found its international
Many of us had had a vivid experience of the tragedies which beset the
world during the years between the two wars, and the slow but inexorable
drift which led us into the ghastly experiences of the Second World War.
It was these experiences of the mishandling of the world's economic prob-
lems in the inter-war years and their influence upon the coming of the
Second World War that strengthened our conviction that some wiser and
better organization of our international economic relations was urgently
You will perhaps allow me, therefore, to make a short examination
of what it was that was wrong with our policies in the years between the
two wars, since we may learn much from those mistaken policies.

For almost 50 years before 1930 world output and standards of living
had-with the exception of war years 1914-18-been steadily rising. In
1929 it might have seemed that the world had almost completely recovered
from the setback of the First World War and that we were once again
marching forward to a progressively prosperous future.
But by 1932 we found ourselves in a world depression of unexampled
severity, with heavy and almost universal unemployment.
In the following years, though a considerable degree of recovery seemed
to have been achieved, it was only at the cost of a great deterioration in
international economic relations and an alarming growth of trade barriers
of every kind.
The volume of international trade never recovered its pre-depression

Geneva, April 11, 1947
level, although world output in 1937 had reached 30 per cent above that
of 1929. In the years immediately prior to the Second World War the
decrease of unemployment was due, to no small extent, to the rearma-
ment policies in many countries.
Why was it that we suffered from this great depression and failed to
recover from it?
I think the first answer to that question is because we all failed to
appreciate sufficiently the direct relation between international economic
policies and the danger of war. We imagined that we could each deal
with our own economic problem without regard for their effect upon the
economies of all other countries. We considered them'to be largely inter-
nal problems affecting primarily our own national economy and so we
failed to appreciate the disastrous effect that the totality of all these
national policies might have upon world trade as a whole.
It was not until each of us felt the repercussion of other nations'
economic policies upon our own national position that we realized, when
it was already too late, that we had all of us allowed ourselves to be
driven by our internal economic difficulties into policies which in the
aggregate were fatal to our own prosperity.
Instead of concerting to raise the volume of total world trade so that
we might each have a share of a larger total, we did exactly the reverse.
We competed with one another in devices to restrict the total volume of
world trade and then fiercely competed with one another for a greater
share of the smaller total.
Once demand started to fall off with growing unemployment in many
countries we tried by successive steps of restriction each to protect our
own national economy against the impact of world unemployment with
the result that we continually tended to worsen the situation.
Since a consistently adverse balance of payments could not be restored
by competitive devaluation and the adoption of a policy of deflation
meant increased unemployment, the only solution appeared to be to
impose tariffs or quantitative controls so as to discourage imports with, in
some cases, the addition of subsidies to encourage exports. Exchange con-
trols were imposed to guard against undesirable movements of capital
and to help in the control of current trade. Primary producing countries
which suffered particularly from the lack of all stability in the prices
of primary products, and from the tendency to an undue increase in agri-
cultural protection in the importing countries, were driven to accelerate
their natural industrial development at high cost and behind raised tariff
walls as an alternative to dependence on an unstable and restricted market.
Producers' restriction schemes to maintain prices stable in limited markets
were similarly encouraged.
Towards the end of the 'thirties there was some reaction from this
ever-growing trend towards throttling world trade. But the barriers still
remained very high and the world thus found itself being largely
deprived of the benefits which new and improved methods of production
should have provided.
Though we had discovered that in our national economies the division

Expansion of World Trade [SIR STAFFORD CRIPPS]

of labor and the development of specialization had led to an increase of
real wealth, we behaved as though exactly the opposite policy could be
adopted as between nations without adverse effects. The nations of the
world were tending in the direction of autarky and self-sufficiency.
The fundamental principle that we must, therefore, accept is one that
has undoubtedly been proved by our experience, that our national pros-
perity depends upon a world policy of trade expansion to be based upon
an extensive international division of labor, with the consequent possi-
bility of satisfying the needs of all our peoples.
Our present objective, therefore, is to promote the expansion of trade
in future and as a start to secure a reduction of these barriers to trade
with which countries have in the past surrounded themselves. But we
recognize that, if in spite of our efforts, untoward conditions should recur,
we must provide by international agreement more certain and less harmful
means of protection than were used in the past.
It is most important that in the Draft Charter of the International
Trade Organization the members pledge themselves to work for full employ-
ment through the maintenance in all countries of high and stable levels
of effective demand and real income. This recognition by Governments
of their responsibility for pursuing domestic full employment policies
will if carried into effect reduce the danger of a future major depression.
But if such a depression should develop in one country, the Draft Charter
provides the means of restricting its effects.
With this and other safeguards in mind countries need no longer feel
that they must deprive themselves permanently of the real benefits of
international trade in order to protect themselves from the effects of depres-
sions occurring outside their own borders.
As I have said, we must avoid at all costs the mistakes of the inter-war
period. I can assure you that the United Kingdom is conscious of her res-
ponsibilities in this matter. In some ways she stands in a special position.
Not only is she by long history one of the world's greatest trading coun-
tries, but she is also a partner in a Commonwealth of Nations having a
special relationship towards each other.
For us, in the task which lies before us, this special relationship must,
of course, be an important consideration. Much has been said of prefer-
ences within the British Commonwealth, though others also employ the
preferential system. The Commonwealth, I need hardly say, does not
derive from the preferential system nor does the system come merely from
a political relationship. It is an expression of an economic fact. The
economies of the United Kingdom and the other Members of the Common-
wealth have grown up to be interdependent. That is factual and historic.
Our Commonwealth economy has been subjected to the most violent stresses
and strains in the past three decades during two world wars but its stability
has made it possible for us to stand fast to save ourselves and others through
these critical periods.

Geneva, April 11, 1947

If there is one lesson we should all have learnt it is that of inter-
dependence. The Commonwealth is a family, but so too is the world a
larger family-economically as well as politically. We know that ultimately
we all stand or fall together. The world family must be the poorer if any
one of its members fails and it would be the poorer politically as well as
economically if there were any failure on the part of ourselves or our part-
ners in the Commonwealth.
In a high degree the economic vitality of the United Kingdom, which
is so important for others as well as herself, depends upon the traditional
economic ties and channels of trade which have long linked us with certain
other nations. But as with individuals so with nations there is no need
for a special relationship to be an exclusive relationship. And that does
not apply to the Commonwealth alone. A special relationship is, we
believe, healthy only so long and so far as it is not exclusive but makes for
the strength and stability of the world as a whole.
Without that trade with Commonwealth countries it would be quite
impossible for us to maintain our trade with the rest of the world, just
as without our trade with the rest of the world we could not possibly
maintain our trade with the Commonwealth. The two are complementary.

Thus we all have to reconcile two great economic facts. One the value
of the stable and traditional channels of trade, more delicately balanced
than some seem to realize, judging from the suggestions for its "direction"
into new channels at short notice. The other, the need for development
and change in the interest of progress. If we are to attain success we must
take full account of both these factors. We must neither be destructive of
the trade which exists, nor content with trade as it now is. We of the
United Kingdom want to maintain our trading relationships with our
fellow members of the Commonwealth as also with the other countries in
the world. But we hope too to develop new trade relationships, new chan-
nels which will add to the total flow of trade to our own advantage and to
that of others.
I recall that, at the opening meeting of the Preparatory Committee in
London last October, the delegate of the United States observed that if
the trade of the world were to be governed by rules the opposite of these
contained in the suggested Charter, the United States would deeply regret
it but could adapt itself to the resulting situation. Other nations, he said,
were less fortunately placed. For the United States the strangulation of
trade would necessitate a difficult readjustment; for other countries it would
spell catastrophe.
While we in the United Kingdom would question that the failure of
this grand attempt would spell catastrophe for us, we would agree that it
would mean a lower standard of life, a giving up of things we had hoped
for, and a withdrawal from the wider economic life of the world into a
more limited circle. That would be most unpleasant for us, but I believe
that such a result would be even more unpleasant for others. With our

Expansion of World Trade [SIR STAFFORD CRIPPS]

large population and small country we must remain one of the world's
greatest importers. In other words, the prosperity of our country means
the maintenance of effective demand for the products of many others.
If the Charter were not to give us the opportunity we need, or if the
whole project were to fail, then I suggest that the inevitable contraction
of our powers to import, which would follow from obstacles put in the
way of our exports, would be felt everywhere in the world.

The rapid change of the United Kingdom from a creditor to a debtor
nation in itself is a potent reason for a readjustment of world economic
relations. Another factor is, of course, the development of the creditor
position of the Western Hemisphere, particularly of the United States. It
is the hope of all of us, not that the United States will have to face the
difficult readjustment of which Mr. Wilcox spoke, but that by maintaining,
and satisfying, a demand for the products of the rest of the world, it will
make it possible for all of us to join in this great new project. But we
meet here not to consider the effects of failure, for we are determined upon
success. We are attempting a task of greater complexity than has ever before
been attempted by international agreement. But we come to it after long
preparation and with much of the groundwork already done. Our object
is to play our full part-and it is as we know from our experiences between
the two wars a vital and essential part-in bringing peace and happiness
to mankind. We must succeed, as indeed we can if we are imbued through-
out our discussions with a deep sense of responsibility to the peoples of
the world and determined, as I am sure we all must be, so to organize the
future economic relations of the world as to make available to our peoples
those ingenious and remarkable human inventions and discoveries which
have all too often in the past been used for our mutual destruction instead
of for the building up of a better and happier civilization.
[Oficial Release]

The first hour of every sitting day in the House of Commons is devoted to
answering questions which Members of Parliament put to Ministers. A
selection of some of the questions asked during April, 1947, is included
below, together with the Ministers' answers.

Mr. Sorenson (Labor) asked the Secretary of State for the Colonies
which of the Phillips Report recommendations on labor unrest in
Mombasa, 1945, have been accepted and operated by the Government of
Kenya; on what dates; and which recommendations have been accepted
in principle but not applied.

Question Time in the House of Commons

Secretary of State for the Colonies (Mr. Creech Jones): The Phillips
Report comprises interim recommendations dated 5th June, 1945, and
second interim recommendations and a final report dated 25th June, 1945.
The first interim recommendation was for an increase of 5s. per month
gross wage, exclusive of housing, for Kenya and Uganda Railways and
Harbors employees. This was adopted by the railways and by Govern-
ment with retrospective effect from 1st April, 1945, and was also accepted
by all the major employers of Mombasa Island. The second interim recom-
mendation was for permanent machinery for assessment and constant
review of cost of living of African workers. This was accepted in prin-
ciple, but attempts to establish effective machinery proved impossible owing
to the lack of reliable data and the difficulty of securing properly qualified
staff to provide it. Information is, however, now being collected by an
expert who has recently arrived in Mombasa.
The recommendations in the main report, which may be grouped under
five heads, include:
1.-(a) A Social Survey; this has been accepted in principle but not
carried out owing to lack of qualified investigators, and the fact that it is
awaiting the result of a pilot survey of the conditions of railway workers,
which is at present being conducted by a research team working under the
aegis of the Colonial Social Science Research Council and is to be used
as a basis for guidance in ensuing surveys;
(b) A Cost of Living Committee which has been accepted in principle
but not yet implemented owing to the lack of reliable data and qualified
staff hitherto available.
(c) A Minimum Wages Board which was accepted in principle but
only recently implemented for the same reason; and a special investigation
of wage paying capacity in relation to National Income now being carried
out by a Committee under the Economic and Commercial Adviser.
2.- (a) A recommendation that there should be a marriage allowance
and increment scheme has not yet been accepted in principle but is being
investigated by the research team referred to above and by the expert now
carrying out his survey in Mombasa. It will be brought to the notice of
the newly appointed Central Minimum Wage Advisory Board.
(b) The proposal that there should be fortnightly advances of pay was
accepted in principle and implemented late in 1945, without much success
owing to unpopularity among Africans themselves.
(c) The provision of a house allowance was also accepted and imple-
mented in 1945 when a survey was carried out. A further survey made in
February, 1947, indicated that the cost of a room was between 8s. and 10s.
a month and allowance is now established at 8sh. 25 cents a month.
3.- (a) The proposal that a rationing scheme for foodstuffs and con-
sumer goods should be introduced was not accepted by the Government,
and alternative action was taken to strengthen price control and establish
approved shops.
(b) The provision of firewood is being effected by the establishment of

Question Time in 'the House of Commons

two fuel depots where fuel is obtainable in sufficient quantities at con-
trolled prices.
(c) No definite recommendation was made about water supplies, but
the number of water kiosks is being increased and the hours during which
they are open to the public extended.
(d) Communal feeding for children is being applied by the free issue
of milk daily to 240 infants, and during term time to 944 school children
at a total cost of 1,500 per annum.
4. The recommendations regarding the provision of minimum addi-
tional accommodation are being met by the provision of housing estates
by Municipal and Railway authorities and by private enterprise. So far
4,683 Africans have been housed and plans for accommodating 8,540 more
have been approved in principle.
5. The recommendation that labor officers should be appointed to the
Kenya and Uganda Railways and Harbors Administration has been met
by the appointment of a full-time labor officer in the port area and the
railway has appointed an officer with trade union experience as staff and
welfare assistant. The recommendation regarding casual labor has also
been accepted in principle and considerable progress made. By agree-
ment with the railway and stevedoring companies, the one existing pool
is being increased from 900 to 1350 and arrangements made to place 600
daily paid stevedores on a guaranteed minimum monthly retainer not less
than the legal minimum wage.
I regret that the exact dates on which the recommendations referred to
above were first implemented are not available to me.
[April 2, 1947]

The Minister of Agriculture (Mr. Thomas Williams): I will, with
permission, make a further statement about agricultural losses due to
snow, frost, and floods, and the steps which the Government are taking to
assist farmers to recover as soon and as fully as possible from these grave
setbacks to food production.
Taking the country as a whole, the pressure of flood waters on our
embanked river systems has greatly eased in the past 10 days. Most of
the breaches in the embankments have been closed or are in process of
being closed, but the position remains one of great difficulty on the east
bank of the River Trent below Gainsborough and in the Yorkshire Ouse
Catchment Area. My Department has been in constant contact with the
catchment boards concerned with a view to providing all possible help.
Material assistance from Government resources has been sent to the Trent
Catchment Area, where it is essential that the breach at Morton should be
closed before the high tides at the end of this week.
Many waterlogged areas in the Fens have already been cleared or will
be cleared in the next few days. It will take longer to clear those areas
which have been deeply inundated through breaches in the embankments,

Question Time in the House of Commons

but the work is being pressed on night and day. Some 75 heavy pumping
units mobilized by my Department have already been sent out and are
working or being erected. Many more are being prepared and will be
brought into early operation.
It is still only possible to give a rough interim estimate of losses of
stock and crops due to winter weather and floods. The losses of livestock,
particularly hill sheep and lambs, due to exposure and starvation cannot
yet be accurately assessed; losses of crops and stock due to floods are still
taking place in some areas; even where the floods have started to recede it
is still too early to estimate the extent of the damage.
My present information, however, is that losses of sheep and lambs in
England and Wales total over 2 millions. About 32 per cent of hill sheep
and 7 per cent of lowland sheep have been lost. Some counties have lost
half their sheep. About 30,000 store cattle have also been lost.
Floods in 31 counties have inundated some 600,000 acres of agri-
cultural land, that is, an area to the size of the county of Kent. About
70,000 acres of winter corn-almost all wheat-have been destroyed by
floods and about 200,000 acres by frost. About 50,000 tons of potatoes
have been destroyed by the floods, and a further 30,000 by frost in the
Losses of this magnitude would in any circumstances constitute an
unparalleled disaster to the agricultural community and the nation. Com-
ing at the time of food shortage as well as dollar shortage they bring us face
to face with a situation which will require all our energy-and resolution
to meet and overcome. The Government have given earnest and urgent
consideration to the many problems which arise.
First, there is the human problem of the personal distress and losses
caused by the floods. The Prime Minister informed the House on the 24th
March of the immediate relief measures set in operation to assist in reliev-
ing distress. As further announced by the Chancellor of the Exchequer
on 25th March, the Government are contributing 1 million to the Lord
Mayor's Fund. This fund is available for the relief of farmers and farm
workers, as well as urban householders, who have lost personal belongings
and household goods in the floods. The loss of crops and stock and the
means of production is a purely agricultural problem which the Agricul-
tural Disaster Fund, launched by the National Farmers' Union of England
and Wales, is designed to alleviate. Losses of this description are a matter
of grave concern to the nation, not only by reason of the hardship involved
to individual farmers, but because of the serious effect on food production.
The Government consider that it is a matter of national importance
that food production in the areas which have suffered these heavy losses
should be restored at the earliest practicable moment. To this end they
will contribute to the Agricultural Disaster Fund a sum approximately
equivalent to that raised by subscription and will co-operate closely with
the National Farmers' Union in the administration of the Fund. Urgent
interim payments will be made from the Fund. A suggestion is being
explored with the National Farmers' Union and the other organizations

Question Time in the House of Commons

concerned that farmers throughout the country should be invited to con-
tribute either by way of specified deductions over a period of 12 months
from payments due to them on the sale of their products to a Govern-
ment Department or Marketing Board or other central agency, or from
acreage payments, or in other cases through appropriate channels.
In addition, in order to encourage maximum production for the forth-
coming harvest, the Government have decided to assist farmers whose lands
have been subject to abnormal flooding to carry the risk of a poor crop
which may result from late sowing and the condition of the land. A scheme
for making special acreage payments in such cases is being worked out in
consultation with the Emergency Advisory Committee which I set up 10
days ago and the details will be announced at an early date. While reduc-
ing the farmer's risk, this payment will give him every incentive to produce
the best crop he can. The rates of payment will be based on a rough
estimate of what the general loss of yield is likely to be as a result of the
late sowing or planting and the state of the land as a result of the floods.
Farmers can, therefore, make their plans on the assumption that the pay-
ments will make it well worth their while to grow crops where the land
is in reasonably fit condition for cultivation, and where the date of sowing
or planting is not hopelessly late.
Hill farmers will be eligible for relief in respect of direct losses from the
Agricultural Disaster Fund. But the rebuilding of their flocks is necessarily
a slow process. The Government have, therefore, decided to adapt the
hill sheep subsidy scheme to deal with this entirely abnormal situation.
Hill farmers can, therefore, be assured of suitable relief and will, I hope,
be encouraged to start recovery from the wreckage caused by this disastrous
winter in the knowledge that they will not be without financial assistance
in their difficulties. Details of this scheme will also be announced shortly.
So far as we can, we are redistributing stocks of fodder and feeding-stuffs
to give as much immediate practical aid as possible.
To supplement other sources of credit the Agricultural Goods Services
Scheme will continue to be available. The scheme will be widened to
include livestock, so that it may be used for restocking sheep farms. It is
proposed under the Agriculture Bill to extend the scheme, both for live-
stock and other goods and services, beyond 31st December next, when it
is due to expire.
In successive broadcasts over the past three weeks the President of the
National Farmers' Union, the President of the National Union of Agri-
cultural Workers and I have explained the gravity of the food production
position in this country both to the general public and to the farmers and
farm workers. The Government are doing their utmost to help. In addi-
tion to the measures of financial assistance which I have outlined above,
action has been taken to secure high transport priority for urgent agricul-
tural requisites, improved rations for farm workers, and, for the immediate
future, the diversion of machines from export to the home market. I am
confident that the agricultural community will do all in their power to
respond to the nation's need, as they have always done in the past.
[April 3, 1947]

Question Time in the House of Commons

Mr. Erroll (Conservative) asked the Minister of Fuel and Power how
much coal mining machinery and how many mechanical coal cutters have
been produced during the most recent convenient statistical period; and
what quantities were for British coal mines, for export to the Empire and
to foreign countries, respectively.
The Parliamentary Secretary to the Ministry of Fuel and Power (Mr.
Gaitskell): During the period 1st January, 1946, to 28th February, 1947,
4,066 coal cutters, conveyors, and power loaders were provided, of which
1,184 were mechanical coal cutters. Of the 4,066 machines, 3,327 were
ordered for British mines, 100 for export to the Empire, and 639 for export
to foreign countries.
[April 3, 1947]

Mr. Janner (Labor) asked the Secretary of State for War to what extent
there is still danger to the public and to children from unexploded bombs,
drifting mines and exposed ammunition.
Secretary of State for War (Mr. Bellenger): About 230,000 acres of
land in this country are still retained owing to the presence of explosives.
Notices round the perimeters warn the public of the danger of interfering
with objects found in the areas. As regards drifting mines, this is a matter
for my hon. Friend the Parliamentary Secretary to the Admiralty. Some
ammunition is still stored in roadside dumps which are regularly patrolled
by mobile guards. These dumps will be cleared as soon as possible, but
owing to shortage of manpower this will take some considerable time.
[April 15, 1947]

The President of the Board of Trade (Sir Stafford Cripps): With
your permission, Mr. Speaker, I should like to make a statement about
Anglo-Russian trade. The House will remember that in reply to a Question
by the hon. Member for Cheltenham (Mr. Lipson) on 4th February, it was
stated that we had proposed to the Russian Government that the Secretary
for Overseas Trade should go to Moscow for discussions. When my right
hon. Friend the Secretary of State for Foreign Affairs saw Generalissimo
Stalin on 24th March, he referred to this proposal, and said we should
like talks to begin between the Russian Minister for Foreign Trade and
our representative so as to see to what extent the two countries could help
one another on trade matters. I am glad to be able to announce that
Generalissimo Stalin shared this view, and said that he believed that the
basis for mutually advantageous trade could be found.
My hon. Friend, the Secretary for Overseas Trade, is accordingly arrang-
ing to leave for Moscow on 18th April. The purpose of his visit will be
primarily to have a general exchange of views with Mr. Mikoyan about the

Question Time in the House of Commons

possibilities of future trade between the two countries. We are, of course,
especially concerned that everything possible should be done to bring about
a resumption of the flow of those raw materials, such as timber, which we
used to import from Russia and the Baltic States before the war. The
Russian Government are no doubt anxious on their side to obtain from
this country supplies of the machinery and equipment which they need for
their reconstruction.
I should perhaps make it clear that it is not the intention that my hon.
Friend should at this stage conclude any formal trade agreement, but, by
reaching an understanding on questions of principle, he should facilitate
the negotiation of specific contracts between the buyers and sellers on both
[April 15, 1947]

Mr. G. Roberts (Labor) asked the Minister of Fuel and Power how many
recruits have been obtained for the coal mining industry during each
-monthly period this year; and how many have been accepted by the
National Coal Board for employment.
The Parliamentary Secretary to the Ministry of Fuel and Power (Mr.
Gaitskell): Provisional figures of the numbers of new recruits (including
ex-miners returning from the Forces and other industries) starting work in
January to March this year are:
January (4 weeks) .............................. 7,500
February (4 weeks) ............................. 7,750
M arch (5 weeks) ............................... 12,680

No information is available of the number of persons who have offered
themselves for employment and have not been engaged.
[April 15, 1947]

Major Bruce (Labor) asked the President of the Board of Trade whether
his attention has been drawn to an announcement by the Caterers Associa-
tion advising overseas visitors to stay away from Britain this year; and
whether he will make an announcement as to the Government's attitude
on this question.
The President of the Board of Trade (Sir S. Cripps): As I informed
the hon. Member for Sutton Coldfield (Sir J. Mellor) on the 13th March
last, there has been no change in the policy of His Majesty's Government
in encouraging overseas visitors to come to this country during 1947. Any
statements which might have the effect of deterring would-be visitors are
unjustified, and are greatly to be deplored.
[April 17, 1947]

Question Time in the House of Commons

Lieut.-Commander Hutchison (Conservative) asked the Chancellor of
the Exchequer if he will issue a statement giving a list of the monetary
gifts received from the Dominions of Canada, Australia, New Zealand and
South Africa between 1st August, 1945, and 1st April, 1947, and showing
the dates when such gifts were received, their value in sterling, and the
specific purpose to which they have been applied.
The Chancellor of the Exchequer (Mr. Dalton): (1) Mutual Aid.
Mutual Aid from Canada to the United Kingdom continued to 1st Septem-
ber, 1945. The total from 1st April, 1945, to the 1st September, was 670
million dollars, equivalent to 150 million. There is no separate figure as
from 1st August, 1945. The United Kingdom for the most part received
munitions and military supplies, foodstuffs, and farm products. (2) Writing
off liability under British Commonwealth Air Training Plan. Under
Article 7 of the Financial Agreement between this country and Canada of
6th March, 1946 (published in Cmd. 6904), the Canadian Government
agreed to cancel an amount of 425 million dollars, equivalent to 96 mil-
lion, owing by the United Kingdom in respect of the British Common-
wealth Air Training Plan. This Article was brought into effect by a
Royal Proclamation in Canada dated 16th July, 1946.
On 5th March, 1947, the Australian Government announced a gift of
A25 million, equivalent to 20 million, as a contribution to the war costs
incurred by Britain in and around the Pacific. This sum has not yet been
received, but will be applied to the redemption of debt.
New Zealand
The Government of New Zealand on 5th March announced a gift of
N.Z.121/2 million, equivalent to 10 million, in recognition of the mag-
nificent and unprecedented effort of the United Kingdom in maintaining
freedom and making possible its expansion in the years to come, and of
the enormous burden that the United Kingdom have carried and are bear-
ing during the post-war period. This sum was paid over on 25th March,
1947, and is being applied to the redemption of debt.
South Africa
A gift subscribed by the people of South Africa amounting to 1,180,000
was presented by Field-Marshal Smuts to the Prime Minister in October last.
The above takes no account of further contributions raised by private
subscription or on private initiative, of which no comprehensive record
is available.
[April 28, 1947]

Question Time in the House of Commons

Mr. Wilkes (Labor) asked the Secretary of State for Foreign Affairs the
total economic and financial contributions to world recovery made by the
United Kingdom Government since the end of the late war through
UNRRA and other international organizations.
The Secretary of State for Foreign Affairs (Mr. Bevin): The United
Kingdom contributed altogether 155 million to UNRRA. It is not pos-
sible to separate contributions made before the end of the war from those
made after it. I would point out, however, that this sum represents only
a part of the United Kingdom's total financial contribution to world re-
covery, for much of this contribution was made not through international
organizations, but in direct grants and loans to foreign countries and
colonial territories which had suffered as a result of the war. It must be
borne in mind that credits not immediately repayable impose, while they
are outstanding, the same strain on the United Kingdom's balance of pay-
ments as outright grants of similar amounts would impose. The follow-
ing is a statement of the United Kingdom's total contributions to world
recovery in grants and credits. These amount altogether to about 750
(Figures in
(a) Non-recoverable expenditure-
UNRRA contributions ............................... 155
U.K. share of non-recoverable cost of Combined Civil
Affairs supplies (Military Relief) .................... 38
Malta ............................................ 30
Greece (maintenance and initial equipment of Armed
Forces) .......................................... 29
Greece (surpluses) ................................... 2.5
Italy (estimated value of surpluses after allowing for pay-
ments from Italy in respect of this and other U.K. claims
under the Financial Agreements of 17th April, 1947)... 55
Austria (supplies to British zone before UNRRA under-
took supply responsibility in April, 1946) ............. 10
Austria (estimated non-recoverable portion of 81/ million
post-UNRRA assistance to Austria) .................. 6
Austria (surplus machine tools) ....................... 0.1
Hungary (surplus machine tools) ...................... 0.2
Total (round figures) ........................ 325
(b) Repayable Loans and Credits-
.U.K. share of recoverable cost of Combined Civil Affairs
supplies (M military Relief) .......................... 62
Burma (Grants to 31st March, 1947) .................. 30
France (under Financial Agreements) .................. 100
Greece (Stabilization Loan) .......................... 10

Question Time in the House of Commons
(Figures in
(b) Repayable Loans and Credits-Continued
Netherlands (Government Loan and estimated value sub-
ject to adjustment, of military equipment and surpluses) 60
Czechoslovakia (credit for commercial purposes) ........ 5
Czechoslovakia (surplus goods credit) ................. 2.5
Austria (estimated recoverable portion of post-UNRRA
assistance, including raw material credit) ............ 4
Hungary (wool credit) .............. ................. 0.5
Total (round figures) .......................... 275
(c) Germany-
Approximate total cost to 31st March, 1947 of assistance
to German economy (excluding occupation costs) ..... 140
Total (a), (b) and (c) ......................... 740

[April 30, 1947]

SOther Speeches and Debates

IN APRIL, 1947
Texts can be consulted in the Library of British Information Services:
those speeches delivered in the House of Lords or the House of Commons
are published in full in "Hansard," copies of which may be bought
through B.I.S. For prices see page 324.

House of Commons, April 15. Mr. Anthony Eden.

House of Lords, April 17. Lord Tweedsmuir.

House of Lords, April 22. Viscount Jowett; Lord Vansittart.

House of Lords, April 23. Viscount Samuel; Lord Hall.

House of Commons, April 24. Mr. Peter Freeman.


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