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THE NEW PRINCIPLE OF GOVERNMENT MANAGEMENT OF THE ECONOMY
Now I would like to turn to the basic features of the White Paper itself. The White Paper naturally draws distinctions between the measures proposed for the aftermath of war, and those for application later when we have arrived at more stable conditions. The basic problem of the post-war period will not be the maintenance of demand and a high level of employment, but the orderly change-over of our productive capacity. There will be an enormous demand. It will outstrip supply for a time. To this I shall refer later. I propose, in the first instance, to deal with the long-term side and return to the transition period. It may be an advantage if long-term proposals are looked at with minds attuned to a normal period, because that brings out more clearly the approach to the problem on the whole economic front. It will be seen in paragraphs 39 and 41 that the Government wholeheartedly accept the proposition that total expenditure on goods and services must be maintained at the level necessary to prevent general unemployment. This involves a complete reversal of the policy of the years between the wars, when it was held that the onset of industrial depression must be met by cuts in public expenditure and economies in all directions. Diminished purchasing power was diminished still further, and the depression thereby accentuated, with results which are only too familiar.
In future the Government's policy will be to meet the onset of any depression at an early stage by expanding and not contracting capital expenditure, and by raising consumption expenditure and not reducing it, by such means and devices as may be found most effective. Paragraph 62 declares that this is a policy directed to the deliberate ironing-out of the slump and the boom, but that it will involve more economic control by the State than has hitherto been experienced. There are three elements to be considered in this matter; there is capital expenditure, both private and public; there is consumption expenditure, both private and public; and there is the foreign balance. In the case of private investment, one has to admit that this covers the greater part of the field at the present moment, because it is the most subject to fluctuations and is, admittedly, the most difficult to control. Various devices, such as variations of interest rates and that kind of thing, have some effect, but we cannot rely on that, because the policy of the Government is to maintain our policy of cheap money. That must be the set purpose and direction of our efforts. I will leave that to the Chancellor to deal with to-morrow. It is impossible to see very far ahead, but, in any case, as at present advised, cheap money is our policy.
Mr. MacLaren (Burslem) It will not stop a slump.
Mr. Bevin Nothing, by itself, will stop a slump. It is necessary to have a combination of activities to stop slumps. Private enterprise will be encouraged to follow the Government's line in timing investment. Then we want submitted for further consideration, a proposal of deferred tax credit, or similar devices. I do not object to an equalisation of Budget finance. It is not an uncommon thing to-day, in every business in the country. The practice hitherto in local authorities, and in the Government, has been to reduce taxation when we are doing well, and to increase it when we are hard up. I would rather pay it when I am doing well, than when I am hard up. There is nothing wrong in that, surely, and the fundamental principle behind this is to use every possible device, in order to check any possible slump. The public investment is more easy of control and it can be more easily organised, but if we are to encourage local authorities and public utilities to submit their plans in advance, that will involve a change of procedure in this House. One of the great troubles hitherto when these things have come upon us, and public works and other things have been advanced, has been that the procedure is so long, that the effectiveness of the thing is lost before you have your Bill through to remedy it. I submit, therefore, that in considering this matter and encouraging local authorities and public utilities to advance their plans and have them ready to be turned on, Parliament must adjust itself to some new procedure in order to be effective.
The idea is that these plans will be coordinated and that a target will be set each year for performance in the following year. This is not to be regarded as a public works policy, as understood in the old sense. I well remember when Ministers sent round to the Departments to show how few people could be employed in public works. The works then envisaged were either the building of a dock or the cutting of a road, but this is intended to include the whole range of public activity, using developments of all kinds—just as, when there is a slow down in industry, every wise management turns on the maintenance for the next turn of the wheel and improves the productive capacity of its undertaking. This sort of thing is being translated into this public works policy—to turn on national capital at the right moment to improve our country, and improve our health and efficiency for future developments. It is in that sense that we should use the Public Works Fund, and we want to adjust it in order to meet those ebbs and flows which are, to a very large extent, outside our control.
Mr. MacLaren What?
Mr. Bevin The ebbs and flows of overseas trade, harvests and such things are very largely outside Governmental control. We cannot control the harvest failure in the Argentine, or something of that kind. The Coalition can do a lot of things, but not that. Past experience has shown, however, that speed is essential, and we want to urge the House to help in carrying out this programme in that sense, and to be parties, with the local authorities, the utilities, and the Cabinet of the day, in giving effect to it. The other advantage is that it will be a continuous process. It will not be sporadic. The State will know what is needed, and will have available the plans for development which I have already mentioned. It does not mean, however, that we shall hold back every kind of public building, waiting for the slump, or waiting for the fall. Schools, hospitals and similar amenities and all urgently-needed work following the war, will have to be tackled, together with certain housing. I cannot enumerate every item, but there are wide developments of public enterprise far beyond these.
The second line of defence is consumption expenditure. If we are not successful in preventing a decline in capital investment, purchasing power for consumers goods will inevitably decline, and we must avoid the vicious downward spiral. It is important, at this moment, to realise that the various methods of adjusting money wages and production which have obtained in the past were very uneven in their application. I have already mentioned the effect on the export trades, when adjustments are made in coal, and it is worth repeating that the method of avoiding a fall in consumption, is one of the vital things which has a bearing on many problems, including the distribution of industry. When people tell me that there is a great population in London, with a great purchasing power, what they are really saying is that between the two wars there was not the purchasing power in certain other areas with an equal population. Therefore, the adjustment of these things, on a vast scale, has a very big effect, from the point of view of purchasing power, and a greater equilibrium over the whole area.
We venture to suggest that there might be a variation in social insurance contributions. In the past, when these events overtook us, the only way has been the cutting of wages, which affects the whole family. Contributions under the social services, as we have seen from the Beveridge proposals, will be raised, and spread over the whole community universally. After further study, it may be worth while making an actuarial calculation of which carries the greater load in good times because, if you can work it successfully, it has the effect of lowering the cost on the employer's portion, and increasing the consumption on the man's portion, by leaving greater purchasing power in his pocket. That is a device well worth studying and I hope the House will give it careful consideration. There are, of course, variations of other arrangements, which I will leave to the Chancellor tomorrow, because he is the expert on these things. I want to express very sincere thanks to the much abused Treasury officials. No one has been more helpful than they, in trying to evolve the plan of the change-over we are now proposing.
Mr. Shinwell (Seaham) It is a change for them.
Mr. Bevin I believe in giving credit where it is due. If we had not had the help and experience of these men who, for years, have never had very much kudos, I doubt if the papers could have been produced. Therefore, I pay my tribute to them. Of course, there will be turn-over of labour, and I hope, in the future, to devise a method which will distinguish between the ordinary turnover of labour and unemployment. I think the two things need to be segregated. I do think—and I will refer to it again in a moment—that in the social services plan, in connection with unemployment, the method of using social service benefits as a subsidy to wages, and as an excuse for inefficiency in industry itself, is wrong. It should be designed for the special purpose of unemployment, and industry must undertake the other obligations.