Surveying the present situation in retrospect, I think it will be agreed to be common case that, until January of this year, nobody appears to have realised fully the possible repercussions on this country, neutral as it is, of the war situation which is developing around us. Since January, certain revelations have been made, but up to that period complacency was distinctly the mood of the Government. It stifled whatever possibility there was of energetic effort on their part to cope with growing difficulties and from them that complacency flowed out into the country. The people were lulled into a mood of false security. Since January, there have been certain shattering blows struck against that complacent mood and certain Ministers have been called here to make their bow before an awakened people. The people have thus been allowed to see what has been done by the few Ministers who have been paraded in that fashion to meet the difficulties of the situation. Very few Ministers have either merited or gained any applause for what has been revealed as to their activities.
The Minister for Finance now makes his bow. I do not think that, viewed in retrospect, this Budget will win him much in the way of applause. There seems to be prevailing an idea that a Minister's duty is discharged when he tells the people the worst, or such part of the worst as no longer can be kept from them. It is no longer regarded as any part of ministerial responsibility to try to exercise imagination or face up to difficulties; they do not appear capable of casting aside old and out-of-date methods of approach if they do not fit the new task. Ministers are content to say that such a situation exists, and whatever errors there may be are errors of the past, but, nevertheless, there is no amendment or promise for the future.
The Minister for Finance is one man who has responsibility for a good deal of the situation with which this country was confronted prior to the war. Due to the activities of himself and his Party before the war started in 1939, this country was in a position in which we had a very heavily increased, and still increasing, cost of living. Rates had risen to a very high degree; taxes had been increased without appreciation of the capacity of the people to pay; markets had been destroyed or weakened and no substitutes had been found. There was a marked increase in the dead-weight debt on the shoulders of the people and that was allowed to increase, even though repeated warnings were given about it.
Offsetting that, there was some case of an immediate type in the form of increased migration. It was in full tide, but, of those who remained behind, the number who could not get work and who had to depend on relief, unemployment assistance, or other means of preventing destitution, had been stabilised at a fairly high figure. The indications were that there was going to be an increase, and the retort of the Government was greater expenditure out of an unexpanded national income. The natural result was a still further increase of those who had to depend upon what were euphemistically called social services. Relief, doles, the handing out of money—that type of thing was apparently regarded as an excellent substitute for work. The Government appeared to have come to the conclusion that it was better to dub these as social services, and they took a pride in them instead of relying on the old idea of giving men work out of which they could earn enough to keep themselves and their families.
In that weakened structure we approached the war situation. That war was heralded months ahead. It might have been said that the warnings were not heeded by the majority of the world, and were not even heeded here sufficiently, but, at any rate, there were indications given here, to placate the populace, that there was a realisation of the danger. We had an announcement early of the setting up of a supplies department for the Department of Industry and Commerce. This later became the Department of Supplies. The Minister for that Department told us he had to devote himself to making ready against a state of emergency. That was the appearance of the Government plan many months before the war broke out.
War itself, as has been said elsewhere, is a bitter medicine, but sometimes has an excellent tonic effect. It failed to have that tonic effect here. We were told that preparations were being made, and supplies were being laid in, but when we did find ourselves in a war situation, and when, even though we were neutral, we were surrounded by these warring countries, and found ourselves in what amounted to a beleaguered situation, we found that we had nothing in reserve. We have, temporarily, a convention to the effect that the situation in regard to defence is not to be discussed openly, and that there is no good in entering into that matter in detail. Now, it is common knowledge that nothing in the way of a real preparation in connection with our defence had been made against a war situation. The population of this country—its young men— are still as willing and ready to sacrifice their liberties and their persons as they have always been, but modern war takes no account of persons unless they are properly equipped, and it is now evident that the Government had taken no steps to provide our Army with anything in the way of proper equipment for the conditions of modern war, and these unfortunate young men were evidently expected to be prepared to sacrifice their persons in such conditions as that.
There is also the shortage in regard to certain essential foodstuffs. There had been a boast about the policy of self-sufficiency, but that was swept away once the war came and we then realised, and have continued to realise with ever-increasing anxiety, that this boasted self-sufficiency was only a myth and that we are all dependent to an enormous extent on supplies that come in from outside. The Ministry of Supplies was set up earlier and it is more particularly the duty of that Minister than of any other Ministers to look after our supplies and to announce from time to time any shortages that have occurred or may be expected to occur in respect of supplies, and the people expected him to make such announcements from time to time. That question of supplies, to anybody with imagination, must have gone to the point of including raw materials for industrial production. One would have thought that a Minister who was so proud of industrial production would at least have taken care that some little sufficiency of industrial raw materials would have been here so as to enable the so-called self-sufficient industries to continue for some little time. There is a bitter realisation here now, 20 months after the war started, of the inadequacy of the efforts of various Ministers to deal with this matter, but more particularly of the inadequacy of the efforts of the Minister for Supplies. We know now that no provision was being made. No warning was given in time to the people as to how badly the supply situation had been tackled. Warning should have been given with a view to getting people to see what they could do in the way of producing at home substitutes for what cannot be procured from abroad.
The governmental device against that is, of course, two things. We have this loose phrase used about blockade, so as to divert the minds of the people away from the sins of the Government and make them believe that there is some sort of deliberate effort on the part of some of the belligerents that is stopping us from getting what we had a right to expect—something that no Minister for Supplies could have expected would come or should come, and, therefore, need make no preparation against. Second, we have the device of closing down on all statistical information to the people so that boasts which are false can still be made, that in the months between, say, Munich and the outbreak of the war, or even between the outbreak of the war and the fall of France, efforts were made to get in stores of foodstuffs, raw materials, or other essentials for industry. The Government know that the statistical information that has been asked for from time to time, if given, would blast away for ever the statement that that interval was seized upon and utilised to bring in the things that were necessary for the people of the country.
At the beginning of the war, in the early days of it, this House was summoned to discuss the emergency situation, and this House granted to the Government of the day certain powers. I insist again that it was a Party Government and there was no request made that there should be a change in Party Government, nor any suggestion from the Government that any such change should be made. To that Party Government other Parties gave the most drastic powers that were ever given even to a national government, and I think these powers included such things as that people who made money out of the chances of a war situation would be dealt with. I think there was unanimity in the House when it was pointed out that there was one part of the emergency powers which indicated that there was going to be some way of dealing with a man who tried to make money during a period of the exhaustion of his fellows.
I heard a phrase to the effect that a profiteer was the loathsome product of most wars, and there was a certain amount of joy that something would be done to people who would set out to make profits of an extravagant type during the war situation. Afterwards, when we asked what use was being made of these powers we were always told that there was price control. The method of price control was derided by those who have had experience of it, and it was pointed out that most countries that had experience of price control, looking back on their attempts to enforce it, said that these attempts were fruitless. It was said here that the only way to get at the increased profits was to take them when they were made, with a very small percentage allowed to enable people to go on and keep in production. This Budget, in any event, is, at least impliedly, a confession that the attempts that were supposed to have been made through price control have failed. We were told all the time that prices had been controlled and that excess profits at least had not been made. Now the Budget has revealed to us that about half the extra money that is to be gathered in is to be taken from excess profits that were made by profiteers. Look at the way it is being done. We do get to a point where men must balance their minds between the present and the immediate future, and in the immediate future as it presents itself to us there are many warnings of what may come and what must be done in regard to the possibility of people continuing in production, to which more attention should be paid than to the extra amount they may make. We have to consider the question of keeping people in production and in employment. In this situation we are now going to view the war situation from the point of view of when it started in September, 1939, and an attempt is now being made retrospectively to get back and collect 95 per cent. of the excess profits made in that time. Take the phrase used by the Minister in page 24 of his speech, which is as follows:
"The accounts now available indicate that a considerable number of business concerns have been making substantially increased profits since the outbreak of the war and that these concerns are mainly in the hands of limited companies."
Then this was the preamble:
"I therefore propose to make certain changes in the corporation profits tax and these changes include a modification designed to give the Exchequer a very substantial proportion of the increased profits which have accrued as a result of the war."
If we were starting back at the beginning, or if this were starting merely at this point, nobody could disagree with it or with the fact that the Exchequer was to get a very substantial amount, even let us say, 100 per cent., of the increased profits accrued as a result of the war, but at the end of that page we get the first device:
"Corporation profits tax at present is not charged on the first £5,000 of profit. I propose to reduce this exemption limit to £1,000."
Then the amount that was charged was either 7½ per cent. to 10 per cent. or 10 per cent. to 12½ per cent., and these are being increased. It is, of course, clear that that is going to apply to a company which has not made increased profits and that it cannot apply to a company which may have made increased profits as a result of enhanced business but not as a result of the war.
Take that last phrase. A company that made £10,000 may have its profits dropped by half. It is going to pay more and is going to pay that "more" from September, 1939, and that is put under the heading of "increased profits that have accrued as a result of the war." If the Minister were getting at the real excess profits, at the people who have made money and have made it out of the exigencies of the war and were going to take 50 per cent.—he shows later that, by the addition of certain other matters, in the end, he is going to get 75 per cent.—again, if he were starting from this moment, his attempt to get 75 per cent. of these increased profits, where it can be shown that they are increased profits due to the war, I think his effort would be welcomed by any public-spirited citizen, and, if he increased it to 80 per cent. or 90 per cent., or anything he liked, he would be encouraged. But he tails it back to the start of the war and that has apparently to be paid this year. I do not see why, if he is going back, he should stop at the outbreak of the war. The worst profiteering brought to the notice of the public was profiteering which took place prior to the war. It was profiteering which was made easy, for people who were so minded, by Governmental activity. We had commissions which reported on these matters. The Ranks business and the bacon curers are two that stand out. Attention was called to this over and over again and Ministers were asked to search the pockets of these people, and to take back even such moneys as were found in these reports to have been dishonestly taken from the people, but there was no attempt made then, nor is there any attempt made now, to get these moneys.
As a matter of fact, the lucky person is the person who had successfully profiteered up to September, 1939, because he will have two good standard years, and it is only if he has made superhuman efforts and got really good fat profits since the war, that he will be penalised at all. The man who got his chance and seized on it prior to 1939 is the lucky man. Take the business man who got a tariff which he used moderately pre-war. He had only just begun to get his feet under him and had what would be described in normal times as an expanding business. He was beset with all the difficulties which surround the start of a business and he did not make much in the way of profits in the three years preceding the war. I take the case of a man who could say, on evidence shown by his accounts, that he was, in the normal course of events, going to do bigger business, going to have a bigger turnover and, therefore, more profits as the years rolled on, and going to give more employment because of his activities which was the aim and object of the tariff policy. That man is now put in the same gallery with the profiteer, and the Minister's whip will be laid as effectively on his shoulders as upon those of the rogue who deserves no mercy.
Take the other situation. Take the man who has an expanding business and who made something in the way of profits for the three years prior to the war. He has increased his business since; he utilised the increased profits accruing to him from that business to build up his business still further. He is, say, a man who felt he was not fully equipped to do the business he should be doing, and who put his money into plant and machinery. Maybe the Finance Bill will reveal that some account will be taken of such a case, but, in the Minister's bald statement, there is no evidence that that is to be taken account of. Suppose that man has involved every penny he made in equipment. He is now asked to pay retrospectively over, say, two years—and he has to make it one payment—an amount of taxation calculated on the two years' business trading. Where is he to find it? Does the Minister want to drive such a person into liquidation? Does the Minister feel that if he goes to a bank and indicates what his situation is, the bank will readily accommodate him? Does he think it right to drive people to borrow from banks in order to meet his demands?
Take the case of the person who did a good trade, who was running an expanding business and who, having more forethought than the Minister for Supplies, put back every shilling he was making into goods and lined his shelves. That man, in fact, was obeying, except that he was anticipating in his obedience, the exhortations of the Government recently, but he will find himself in the position one of these days in which he will have a fair amount of goods which he can turn into cash some time or other, and then the Minister's demand note will come down upon him. What is he to do? Suppose we take the case—I have an individual case before me—of a man who, when his accounts are paraded, will show that his net profit increased from the year before the war from about £600 to four times that figure now. He, as I say, now stands in line with Ranks, the bacon curers and all that class of folk. Suppose he is able to show that his turnover increased enormously in the period, that the amount he paid in wages had increased very largely and that his other overheads, excluding wages, had by him been kept low. If he has given employment, and increased employment, and if he has packed every shilling he made in these increased profits into still further expanding his business, what is going to be done for that man? Is it proper that that fellow should be put out of business, or should even be hampered in the running of his business because the Minister this year finds himself short of cash and must get this sum of £1,720,000, which he is to get from corporation profits tax, income-tax and sur-tax?
I suggest that the Minister might at least do this: let him take the war period, whatever it may be, starting in September, 1939, and running to the end of the war, or even longer. If there is going to be a period of business confusion, of industrial upset of a severe type, even when the war ends, let him regard that as part of the war period. We have already done it from the constitutional angle, clearly contemplating that the confusion caused by the war will not finish with the mere outbreak of peace, and we are going to allow an extension of the period of emergency so far as constitutional matters are concerned. Economically, the confusion will be still at least as great. Let the Minister contemplate, and announce that he is contemplating, that, in the period called the war period, not necessarily brought to an end by the termination of hostilities, he is not going to allow excess profits to be made, and that he will see, in a leisurely, unhurried way, that people will pay on the profits made over all that period, but let him also announce that, inside that period, because this is a matter to which we must pay some attention, he will test out this matter of excess profits in a variety of ways.
I suppose it would be common case that if a man did make a little extra out of the people of this country, and, at the end of the war, left himself with a better business unit, a better factor of production, that man is not to be derided and looked upon as a chap who made money, but as a man who will be in a better position to serve the country economically. There is something to be said in favour of that man and he ought to get good marks for that. Suppose that, after all the war period, that man has increased his employment, has increased the amount of purchasing power which he scattered amongst his employees—or, as possibly may be the case, if it gets to the lower level, that he maintains his employment, because all the signs are that people are going to go out of productivity under the impact of this Budget as well as other things—suppose he is a man of whom it can be said that he made money in certain of the years of the war, but that he kept his business going, and kept people from getting on to the backs of the State, that he did not make them persons to get in line for the dole and for assistance of different types, surely, again, some sort of good marks ought to be given for that type of thing, when this whole period has been surveyed. I suggest to the Minister that he ought to pay some attention to that.
As he does this thing at the moment, it is crude. I think it is going to be inefficient in its application. The Minister simply says: "I am taking the period since September, 1939, and, irrespective of the harm that may be done to future production, I am going to get 50 per cent. or 75 per cent. of all the extra moneys made, whether made through good business or through profiteering. I am going to get the money whether it causes businesses to crash or not." Supposing it does cause a few to crash? Will the Minister not lose a bit in the end? Suppose there is a vast decrease in production, that in fact supplies fail along the lines which the Minister's forebodings ran towards the end of his speech, will not the man who keeps his business alive and people in some sort of occupation be almost a national hero? All those people, simply because they made some more money since the war broke out, are to be dubbed the same—profiteers —and it is thought justice and equity that 75 per cent. of all they took should be taken from them.
I realise the Minister's other difficulty, that he must get this money and get it this year. I am taking it for the moment that that is the situation, but I doubt if it is. He has to get certain moneys this year and he has to meet certain expenditure. He has two ways of doing that so far as this is concerned. There is a third way which he brushed aside. He can economise, cut down, and pare somewhere. He can borrow, he can get the money through taxation, or by forced loans or something like that. He said here that he will borrow. There is a funny distinction made between what it is proper to borrow for and what it is not. In any event, £5,000,000 has to be found this year by the Minister by way of borrowing. £1,000,000 odd of that is supposed to have assets against it. Almost £4,000,000 is going to be borrowed simply because we cannot find it in any other way.
If production goes down and the Minister cannot economise, the Minister will have less revenue-bearing items in the State. What is he going to do? Is it a question of increasing the borrowing if the amount raised by taxation falls? If that is the situation, would it not be better to borrow a little more now when production is still maintained at some point, rather than to have to go to people and ask them to lend money because production has broken down? If that is the situation, should not the Minister here and now contemplate the possible effect of this grabbing of £1,700,000 out of the future business and industrial productivity of the country?
I do not know whether the Minister could not make some use of the repayment device adopted on the other side. Let it be estimated that the Minister must get £1,700,000 this year. Is it not possible, having in mind that other plan, for some scheme to be made out, with an allowance for meritorious conduct of a financial or industrial type, by which he will get the extra profits made out of the war period? Is it not possible for him to recognise that there will be great difficulty in taking from firms retrospectively 75 per cent. of their excess profits over nearly two years? Could he not make some arrangement whereby there would be the possibility of repayment? Repayment would certainly have to occur if in later years, because of his activities, losses are incurred. Surely the Minister must contemplate the possibility that here and there a firm, because of his attack, will make a loss next year. Will he take that into contemplation? Will he balance that possibility of a loss eventually against the profits that he said have been made over 20 months? Will he so equate the bill eventually, as was done in connection with the previous excess profits tax, that a loss will be balanced against a gain, and that in the end the industrialist will pay, not upon the ephemeral profits of one or two years, but upon the whole period of the war, on what he succeeded in extracting from the people in that time?
I suggest to the Minister that this is the most serious part of the Budget, because we have a situation in which, owing to the break-down in other Departments, the country is not provided with supplies. The country has not even supplies of certain foodstuffs that it needs. There certainly is a large deficiency in the supplies required to keep whatever industrial production there is running. Materials are running out; prices are rising and no effort is being made to control them. I think it somewhat realistic at least that, coincident with the Budget, there has been issued an order stabilising wages at a certain point. However much that may be disliked, it is at least based upon the realisation that, when the Budget gets going and these moneys are extracted from the people, as much as possible will be passed on to the poorer elements of the community and that prices will rise. The Ministry, seeing that that is the natural outcome of the Budget, have decided: "We can stop that in a brutally inefficient way by simply saying, irrespective of what people's feelings may be, irrespective of the distress we will cause, irrespective of the outbreak that that may provoke and which may cause expenditure far greater than anything in the Budget, we will allow no increase no matter what case can be made."
Supposing we take this order as being founded entirely upon the exposed profiteer. It is notorious that he is getting away with 25 per cent. of the moneys. Is there any allowance in the wage rate to equate for that? It is also clear, of course, that part of the increase in the cost of living was caused not since the war started, but before it; that it was caused by a lot of people who made money passing on the burden and raising the cost of living to people who could not offset that in any way. They are now being allowed to take their excess profits of previous years as their standard, and base their future upon that. The wages clause simply rules in a particular way.
The Minister must know that there is a bad situation developing in the country. So far as food is concerned, although the signs are the other way, there may be only inconvenience and a change over from one type of food to another. The country is certainly not as well endowed as it is expected to be as regards provisioning. So far as fuel is concerned, the situation is extremely bad. I have seen calculations made that, if all the turf the city requires was now cut and saved and lying in the bogs, provision has not been made for transporting into the city more than one-third of what the city's requirements will be during the winter. Of course, it is notorious that the turf is not cut and saved, and the transport difficulty, which will only arise when that point has been reached, does not emerge as a really serious matter. The thing that does emerge as a serious matter is the cutting and the saving of the fuel. But no serious approach was made to this either.
The Government were content to throw out a few exhortations to parish councils, and to publish advertisements to the effect that any turf cut now would be purchased from the people and would not be left on their hands. There was, however, no attempt made to give central direction or to marshal forces for a definite assault on this very serious problem. The Government were content to sit at the top and exhort. The country requires more than that. When winter comes, if the situation develops as badly as it promises, it will be no excuse for the Government to say that they asked the parish councils and the local authorities to do certain things. The Government must be aware, from the evidence they have, that the work is not being done, and that the amount of fuel that will be required for this city will not be there when the demand is made for it. I speak only for the city.
In regard to foodstuffs, some embarrassment is certain to be caused when people are put on a changed kind of diet which they may resent. They may tolerate it, but that will not prevent recrimination as to whether some better attempt could not have been made earlier to get some other kind of provisioning done for them. If, in addition to that, there is a dearth of fuel, if people have not the way of cooking food, and have not a sufficient store of fuel of some other type to take the chill out of their system, that certainly will be a bad enough situation. Suppose, in addition, that firms go out of work, that the number of people now profitably employed decreases, and that the number who have to resort to Government aid increases, then, with prices soaring, the situation is going to be bad. The workers who have a bit of money will find that its purchasing power has decreased. In these circumstances, does the Minister think that this is the time to try to extract, irrespective of what harm it may cause to business, his excess profits? He says that he proposes to get that, no matter what occurs. I suggest to him that, in the critical times in which we are living, production should be the key note of his Budget and not taxation.
The Minister said there was one other field for economy and that was the Army. He had there a promising field for economy. He said that all his attacks to reduce the Army Vote were repulsed. "I suppose I am revealing no secrets," he said, "when I say that not even was succour forthcoming on my side from the Council of Defence." Whatever the Minister may mean about not revealing any secrets, he is certainly not revealing the truth in this because Deputy Norton, a member of the Defence Conference, said that he did not remember the Army Vote being brought before it.
