#

43. Conclusions.-Our conclusions as to the position of the working population may be summed up very briefly under a few heads :

(1) For the employed wage-earner it appears from the purely statistical evidence that real earnings are on the general average much the same as in 1914, and, in view of considerations affecting piece-work, they may well be higher.

(2) In relation to the working population as a whole, increased unemployment is a seriously depressing factor. On the other hand, earnings are more largely supplemented by unemployment relief, health benefits, pensions and other welfare provision.

(3) There have been great changes in the relative position of workers in different industries. Both in rates of wages and in steadiness of employment those in sheltered occupations have usually, but not always, bettered their position relatively to those in industries open to foreign competition.

(4) The earnings of unskilled labour have generally improved relatively to those of skilled.

(5) The last-mentioned fact raises a presumption that if spending and saving could be measured, spending would prove to be in a higher proportion to saving than before the War. Certain statistical evidence seems, if anything, rather contrary to this view, but it is far from conclusive.

(6) Purely statistical evidence as to the total resources and total savings of the working population may seem to suggest that rather less is being spent than in 1914. But the evidence is too defective to justify such a conclusion, and, moreover, indications as to the consumption of various important commodities tell in a contrary direction.

(7) General observation points, on the whole, to some improvement in the standard of living. Such an improvement, which we believe to exist, may be partly due to the smaller size of families, and to changes in the direction of expenditure and the quality of goods available.

(8) The evidence is insufficient to yield precise or dogmatic conclusions. Balancing the various considerations before us, we can only conclude that if the worker's average standard of living differs from that of 1914, it is probably rather higher than lower. The present position is, however, that while in some industries large numbers have secured an improved standard, in others very many have suffered a reduction. There are thus great thus great changes, and the position of the less fortunate is aggravated by the memory of the high pay in the period of boom following the War.

44. The earnings of the wage-earner and total production.We must add a note relating the earnings of the wage-earner to

*From further evidence, which has not beer before the Committee, and which depends on the use of very recent material, I bave formed the personal opinion that the statistics now available point to a more definite and appreciable improvement in real earnings and in the standard of living than is here indicated.-J. C. Stamp.

the total product of industry and the national income. Mr. Layton, who perhaps represents the most optimistic section of expert opinion, put 1923 production at 95 per cent. of 1913, and had a very strong instinct" that 95 per cent. was too low.* (Q. 2454.) Professor Bowley, on the other hand, has put 1923 as low as 87 per cent. These divergencies illustrate the serious disability under which statisticians have laboured arising from the lack of adequate data such as a census of production may partially remedy. When, however, the census now proceeding has been completed, it is not likely to necessitate a revision of the view that over the past four years the standard of production and, correspondingly, the national income have fallen as compared with pre-war, and that a larger share of the product of industry has been taken by labour. Professor Bowley suggests that this may in part be accounted for by the lower share of incomes depending on fixed rates of interest or fixed rents. There is no general evidence on the question whether the proportion received in profits or salaries has permanently changed, though there is little doubt that the share of profits in the current period of depression has been diminished." (E. in C. 12.) Mr. Layton points to similar considerations, and concludes: All that one can say is that there is a section, mainly of the Income Tax paying class, who quite clearly are worse off, and I think the loss of the national income is attributable partly to the loss of a particular section, of which I do not attempt to estimate the size, of the Income Tax paying class, and partly to the fact that there is less saving." (Q. 2534.) It is evident that no clear-cut, precise and full explanation is possible, in the present state of statistical information. It is possible that a contributing cause is to be found in the effects of high and progressive income taxation in restricting the consumption of the Income Tax paying classes (cf. para. 351 et seq.).

66

THE STANDARD OF SAVING.

45. As Mr. Layton observed (E. in C. 15 (b)), there has never been an exact test of national saving. While, however, we could wish for fuller statistics, estimates that have been made of savings before and since the War may be taken as a fairly satisfactory guide to the comparative position. For 1913 total national savings have generally been put at from £350 millions to £400 millions. There will be better material for judging of the present time, when the Census of Production now being prepared is complete. Until very recently the tendency has been to put national savings during the post-war depression very low indeed, but more mature consideration has seemed to justify an estimate of something like £450 millions to £500 millions, and a figure in this range of magnitude has won some acceptance (cf. Q. 9241). The lower figure, £450 millions, was put forward in the Economist of the 10th October, 1925. The higher was As Mr. Layton added (Q. 2461) total production ought to be 106% of 1913 in order to reach the same level per head of the population.

suggested in evidence before us by Mr. W. H. Coates, who, while he thought it was possible, in spite of difficulties, to get a pretty close estimate, was prepared to modify his figure 10 per cent., either upwards or downwards. We are disposed to think that a figure of £450 millions to £500 millions represents the best estimate than can be made with the data available.

46. The equivalent of pre-war savings of £350 millions to £400 millions would, at the mean, be some £650 millions, when account is taken of the higher prices and increased population. Thus, while nominal savings have increased, real savings exhibit a decline which may amount in present money values to something like £150 millions to £200 millions. It is fair, however, to remember that the comparison is between unlike periods, the immediate pre-war period having been one of booming trade in contrast to the recent years of depression.

47. The only detailed estimate we have had before us was given by Mr. Coates (E. in C. 20), his figures, which relate to 1924, being as follows:

£

3

9

35

Addition to National Savings Certificates

Increase in Treasury holdings of Bonds tendered in payment of Death Duties

Investments sold by the banks

...

Profits not distributed by companies and private traders
but invested in own businesses; and miscellaneous ... 194

500

It will be observed that the first two items (new issues) and the last (undistributed profits, etc.), account together for 83 per cent. of the total. We may consider these main elements of saving in the light of certain other evidence put before us, taking undistributed profits first.

The

48. Undistributed trade profits.-The estimate of £194 millions, almost entirely representing undistributed trade profits, was based by Mr. Coates upon "tentative figures which were extracted from official sources for the purpose of giving particular information asked for in the House of Commons." figure excluded investments made by traders in stocks and shares outside their own concerns, these being comprised in the new issues items (E. in C. 22). It is an impressive total, but is on a scale amply confirmed by estimates, based on sample investigations, which the Board of Inland Revenue supplied to us for 1922 and 1923, along with comparable figures for 1912. The Board were careful to point out that these estimates were subject to a margin of error which might be considerable, and that their representative character was limited by the fact that they

related to no more than one pre-war and two post-war years. Unlike the figures of Mr. Coates, the Board's estimates, which we give below, (a) are confined to company reserves, as distinct from reserves of private traders trading alone or in partnership, and (b) do not attempt to exclude investments made in outside stocks, or indeed to analyse the reserves in any way according to their employment.

The Board also gave us figures of total trading profits of companies, enabling net reserves to be related to them as follows:

49. A general conclusion from these figures, at least for the selected years, is that, although net profits have not expanded in proportion to the rise in prices, reserves have managed to keep pace. If the figures of 1922 and 1923 are reduced to 1912 values by reference to the Statist wholesale price index, the following results are shown:

50. A similar conclusion as to the maintenance of the pre-war level of this class of savings was also reached by Mr. Layton, on the basis of Economist figures for five years before the war and five years after the war. The increased percentage of net profits put to reserve as shown by the figures quoted above is noteworthy. It may be read as implying merely a determination to maintain reserves at their pre-war level. On the other hand, it may perhaps point to an increasing tendency for industry to finance itself out of its own profits. Mr. Keynes had formed the impression that such a tendency was at work (Q. 3902), and Mr. Coates was confident that it was so (E. in C. 24; Q. 9452 et seq.)

51. Aggregate company savings may then be viewed with some satisfaction. As we have seen, however, in dealing with the standard of living, the maintenance of a general level may mask a great diversity of movements up and down in particular departments. We should expect to find a marked falling-off in the reserve provision of the heavy basic industries, and a relatively improved position in the "sheltered" industries. The Board of Inland Revenue supplied us with some analysis of their total estimates, enabling us to give the following figures. Producers and manufacturers as a whole appear to have maintained their position well; the aggregate net amounts which they are estimated to have put to reserve are £48.8 millions in 1912, £87-2 millions in 1922 and £85 millions in 1923. Within this whole. group the mining, iron and steel and associated industries are in a much less fortunate position, the figures being £22 millions for 1912, £19.5 millions for 1922, and £28-3 millions for 1923; the textile industries are estimated to have put a net £8.1 millions to reserve in 1912; 1922 shows the satisfactory figure of £17.4 millions, but in 1923 there is a drop to £12.5 millions. Transport (including shipping)—taken as a second group-shows a falling off from £10.8 millions in 1912 to the low figures of £5.4 millions in 1922, and £6.9 millions in 1923. We are left with the distributive trades (wholesale and retail), and finance and insurance-all known to have been relatively prosperous -and a miscellaneous group, consisting most largely of concerns whose main assets are abroad. The estimated totals for these groups are £36.5 millions in 1912, £71.6 millions in 1922, and £76.5 millions in 1923.

52. The figures we have quoted are throughout exclusive of the allowances granted under the Income Tax Acts in respect. of the wear and tear of plant and machinery. The Board of Inland Revenue point out that these allowances, which are very considerable, " may rightly be considered as a fund, freed from Income Tax, at the disposal of companies for maintaining their industrial equipment, a fund out of which machinery, ships, etc., when obsolete and worn-out, can be replaced without drawing on reserves accumulated out of taxed profits": they add that the allowances should be taken into account, "if regard is to be had