The Press THURSDAY, JULY 20, 1939. Armaments Profits

Press, Volume LXXV, Issue 22767, 20 July 1939, Page 10

The Press THURSDAY, JULY 20, 1939. Armaments Profits

The report of Lord Samuel’s speech on the subject of the profits now being earned in the armaments industry is a reminder of an old controversy and a warning of its new urgency. When a Royal Commission on the industry brought down a recommendation, among others, that the State should assume complete responsibility through a Ministry of Supply, the British Government issued a White Paper on the report, in 1937, dealing evasively with this recommendation, rejecting as “ impracticable “ and undesirable ” the nationalisation of the industry, but indicating that “in war the “ situation might be different.” It was promised, however, as Lord Samuel recalls, that excessive profits would not be allowed. His figures are striking and, although probably picked out in no random fashion, effectively emphasise his point. Its significance has been widened and deepened in the passage of two years. The national need which the armaments industry is serving is graver. The national resources are being strained much more severely. The Ministry of Supply has come; the Civil Defence Act has been framed and enforced; the conscription of manpower has been introduced. When the Prime Minister, Mr Neville Chamberlain, announced this last decision, he acknowledged to the House of Commons that it would be “inequitable” to conscript manhood without at least laying plans for the conscription of wealth, by which, it is perhaps necessary to explain, he may be understood to have meant no more than the application of special forms of compulsion, neither in nature nor in extent amounting to capital levy. Mr Chamberlain drew attention to the already heavy rates of taxation but assured the House that legislation was to be brought down for the tighter control of armament profits and that special penalties would be imposed on profiteering, while increases in profits and in individual wealth would be “ appropriately cur- “ tailed to the benefit of the State.” It was accordingly expected -that the Finance Bill, when introduced in May, would disclose the Government’s plans in £hese respects; but they did not appear in the bill and have not yet appeared. The delay is unfortunate; the Government’s silence is equally regrettable. But more explanations than one are possible. It would be a comparatively simple matter to devise and apply the legislation which Mr Chamberlain forecast; and the Government may merely be taking a longer time than appeared necessary or wise to draw its measures efficiently. But another possibility is that the Government, once it was engaged on this task, discovered that the solution would be imperfect. What was designed might be done, and done thoroughly; but the design might not reach far enough. For one thing, it can hardly have escaped the Government’s anxious attention that a measure of profit control could hardly succeed without hampering production, which there is every need to maintain and increase. A second point, and a very strong one, emerges in a situation which, as the Government recognised two years ago, may require it to change its views on the responsibility and control of armaments production. Great Britain is not at war, but is so nearly in a state of war that every effort is being bent to achieve instant readiness for it. In this connexion it must be remembered that, after long hesitation and objection, the Government has instituted a Ministry of Supply and has thereby begun to organise the- national effort on a principle very hard to limit without sacrificing ■ its advantages. And it must be remembered, also/that the Civil Defence Act asserts the same principle, in its particular field, giving the State wide powers of compulsion over local authorities, property, employers, and others in the interests of security. If the Government has set itself seriously to consider whether simple measures of profit .limitation are adequate, it will not be surprising. There is a third point, also a strong one, which arises from financial considerations of the largest kind. Unless extraordinary precautions are taken, Great Britain faces the risk of progressive inflation through the expenditure of prodigious sums of borrowed money. Without vigorous and comprehensive control, it will be impossible to prevent a considerable part of this financial forqe, developed for an overmastering national need, from being dissipated in extraneous channels. The Government may well be considering such a control, which might be applied to capital developments and to the establishment of “priorities,” for war needs, over essential stocks and supplies and over the skilled labour force of the country. Such measures are extreme, of course; but a nation in extremity cannot afford to dislike them as such. An excess profits tax is a more moderate device, for which there is precedent. The question is whether it suffices in unprecedented circumstances.