BEER (EXCISE DUTY AND DRAWBACK).

HC Deb 10 September 1931 vol 256 cc313-412

Motion made, and Question proposed, That—

(a) except in the case of beer of any of the descriptions specified in Sub-section (1) of Section two of the Finance Act, 1930, there shall, on and after the eleventh day of September, nineteen hundred and thirty-one, be charged in addition to the duty of excise now payable in respect of beer brewed in the United Kingdom the following duty:

	£	s.	d.
For every thirty-six gallons of worts of a specific gravity of one thousand and fifty-five degrees, a duty of	1	11	0

(b) in addition to the drawbacks of excise now payable there shall be allowed on the exportation from the United Kingdom as merchandise, or for use as ships' stores, of beer on which it is shown that the increased duty aforesaid has been paid, the following drawback:

	£	s.	d.
For every thirty-six gallons of beer of an original gravity of one thousand and fifty-five degrees, a drawback of	1	11	0

and so, as to both duty and drawback, in proportion for any difference in quantity or gravity.

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."—[Mr. P. Snowden].

Mr. WILLIAM GRAHAM

The Committee will agree that I am not usually the centre of such excitement, and I rise this afternoon, after the statement which has been made by the Chancellor of the Exchequer, not to make a full review of the Budget proposals, because that will be undertaken in a day or two when the detailed Debate begins, but to offer one or two general observations regarding our opinion on this side of the House. The usual practice on these occasions is for the Chancellor of the Exchequer to open his Budget, to have one or two brief formal speeches, and to reserve the detailed Debate until hon. Members in all parts of the House have had an opportunity of considering the official and other papers which are circulated in connection with the statement.

It would be idle, on the spur of the moment, to attempt a detailed analysis, and if I succeed in catching your eye, Sir Dennis, on the first day of the Com- mittee stage, I propose to offer a review of the plan which the Chancellor of the Exchequer has unfolded to the House. There are one or two points of purely general interest which, in brief form, I desire to make. First of all, I entirely repudiate the suggestion—fortunately not contained in the speech of the Chancellor of the Exchequer—that there was ever the slightest hesitation among those sitting on this side of the House—those charged with responsibility—about balancing the Budget. We have always recognised that an unbalanced Budget in this country would not only expose us to very great difficulty in our international trade, but would, in fact, defeat the very objects of the industrial change for which this movement stands. But we always made it clear, in the difficult and delicate discussions when we were called together in the early part of August, that we refused to submit to any outside pressure shading into dictation. [Interruption.] I am well aware that hon. Members on the opposite benches think immediately of the Trades Union Congress. The views of the Congress were presented to the Committee of the late Cabinet in moderate and in temperate terms. The manner in which they tendered their evidence was fully recognised by the Chancellor of the Exchequer, and there was no suggestion of any form of pressure.

Now, for the first time, the House of Commons is given, by a representative Minister, the aggregate figure of a deficit of £170,000,000 as applied to 1932–33. That was the figure which confronted us when we were called together for the study of this problem. It is not disputed that the May Committee painted the picture in very black terms, and no one has denied that the publication of that report did very serious damage abroad. It fell, however, to the monthly journal of Lloyds Bank, which will not be accused of socialistic tendencies, to point out that that large figure included the full provision of between £50,000,000 or £60,000,000 for the Sinking Fund. While I am well aware that there has been a great body of criticism which set alongside that the borrowings for Unemployment Insurance, the fact remains that that provision for Debt redemption on a full scale was included in that figure, and was, most unfortu- nately, not understood in other parts of the world only too anxious to weaken the credit of Great Britain.

May I say one or two words about the broad plan which the Chancellor of the Exchequer has unfolded to the House. Taking a full year, he proposes to provide for approximately £170,000,000, and the House has been informed that that includes about £70,000,000 of economies, but not a single word of explanation has been given by the Chancellor of the Exchequer as to the nature and scope of those economies, or as to the classes of the community upon which they are designed to fall. [An HON. MEMBER: "That would be out of order!"] I do not dispute that the new taxation has been distributed over a very wide field, but I think the House was entitled to some summary, however brief, as to the right hon. Gentleman's plans, because it was on the nature of the make up of those economies that the late Government ultimately resigned. In describing the £70,000,000, the Chancellor of the Exchequer made the statement that nine-tenths of that total was agreed to. [Interruption.]

Mr. SNOWDEN

No. I was most careful not to say that. What I said was that nine-tenths of the items which would be found enumerated had been approved.

Mr. GRAHAM

I have the clearest recollection of the speech, but in any event I gather that it meant that the great bulk of the economies to be proposed by the Government had been approved of or agreed to by us before we left office—approved and adopted. The precise figure was given a day or two ago by the Leader of the Opposition. There was a figure of £56,000,000, but that figure was never finally accepted, and it was always subject to the presentation of a complete picture as to the sacrifices which were to be demanded from all sections of the community, and, in particular, that figure was to relate to some statement of policy regarding Debt redemption, the lowering of those charges, and a statement of policy regarding the Sinking Fund.

It is my duty this afternoon also to make it perfectly clear to those who have so widely criticised us in recent weeks that that complete picture was never provided. There was no declaration of willingness to modify the Sinking Fund; if it had been accepted, the change of Government might never have taken place. What is the essence of the present situation? We have not heard a word regarding these economies, but it will remain true that it was specifically put to us that unless one item in particular—a 10 per cent. cut in unemployment benefit to yield a saving of £12,250,000—was included in the programme it would not restore confidence, and we were told that no other item could be put in substitution. The views of other political leaders which were conveyed to us also emphasised that they reserved the right to move increases to that amount if the suggestion was not accepted in that form. That sum of £56,000,000 was criticised very largely on the ground that it did not represent real savings or reductions at all, but included increased contributions of at least £14.000,000, which was not in fact any cut in the normal rate of benefit. Let the House be under no misapprehension. It was because of an outside insistence upon that specific point, which we refused to accept, that the late Government broke.

What is the state of affairs this afternoon? There has been no statement by the Chancellor about the cuts in the social services. When we come to debate these matters next week, I will try to express our views as to the position of the Sinking Fund. There are abundant reasons in existing conditions for suspending the Sinking Fund for the time being. Why do I make that suggestion? I make it because we firmly believe that even in these difficult times the Budget could be balanced without an attack upon the rates of unemployment insurance and without an attack upon education. [Interruption.]

The TEMPORARY CHAIRMAN (Captain Bourne)

I ask hon. Members to listen quietly to the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) and to extend to him the same courtesy as was extended to the Chancellor of the Exchequer.

Mr. GRAHAM

This is only a very brief preliminary statement. I am not surprised at the excitement in the House, or even at the interruptions, because I am well aware of the tension, under which we are all working at the present time, but I beg hon. Members to bear our side of the case. The Prime Minister and others have objected to the suggestion that, by a temporary suspension of our Sinking Fund, we can avoid an attack upon the rates of unemployment insurance benefit and on teachers' salaries. They are providing, under this plan, a Sinking Fund modified to £32,500,000, and, according to the information supplied to us on these two points, the cut in rates of normal benefit and in teachers' salaries, the aggregate cost would not have been more than £22,000,000 or £23,000,000. We shall fight on that issue when we reach the detailed discussions which are to take place. I recognise, with other Members of the House, that vast new burdens are being imposed upon the community, but the principle which the Prime Minister laid down in his public utterances since the change of Government was the principle of equality of sacrifice—[Interruption]—equality of sacrifice from all sections of the community; and what form did that take? A cold calculation of 1½ per cent., as compared with 1929, at the expense of the poorest members of the community. In regard to those proposals we have a complete and an overwhelming case. We will abide by every sound principle in public finance, but we shall refuse to penalise the unemployed.

Mr. RUNCIMAN

It is quite natural that those who have just gone out of office and their colleagues who have remained in office should have different versions of the private transactions which took place in Downing Street in the eventful weeks of August and September, but I submit to the Committee that we are dealing with much graver matters than the personal controversies of my right hon. Friend the Member for Central Edinburgh (Mr. W. Graham) with the Prime Minister and the Chancellor of the Exchequer. The gravity of our present position has been described in the House, and I regret to say that in some quarters the description has been met with laughter. I must confess that the levity with which it has been received rather shocked me, when one realises how near we have been to the brink of a collapse which would have been as dramatic and as disastrous as that which overcame Germany in 1924. [An HON. MEMBER: "Who brought it about?"] Do not let hon. Members be impatient; I am going to suggest one or two directions from which it was brought about.

In the first place, I have no hesitation in saying here, as I have said outside, that the prime financial difficulties of Europe at the present moment are due to the War, and are due primarily to the continuous payment of reparations. In the second place, I believe that those difficulties were aggravated by the Budget provisions of 1925 to 1928. I have said so here and I have said so outside, and I still hold that view. I believe that the heavy expenditure, which covered not only subsidies for sugar beet but large grants for roads which we could only afford if we were living in times of great prosperity, ought to have been terminated earlier. I say this as my own personal opinion; I do not speak for anybody in this House. I regret to say that I have been very little in attendance here during the last few months, but I hope hon. Members will believe that my attention has not been drawn away from what I believe to be the overwhelming financial risks that we have been running. There have been added to those difficulties other arrangements of an official character which have aggravated the evil. The rapidity with which advances were made under the Trade Facilities Act is one of the directions in which we have been impairing our own financial security; we made our national funds ton much dependent upon commercial values.

The risks that were run by this continuance of large expenditure, shrinking revenue, and the interruption of international trade, were bound to have a grave effect upon the wage-earners of this country as well as upon those who are interested in industry and commerce. The separation of these two interests I believe to be impossible. I have noticed that in the course of these Debates it has been again and again stated as a fact that the banks in some unstated way have brought about the crisis. I regretted to hear my right hon. Friend the late First Lord of the Admiralty say the other night that he thought that a good deal of the difficulty had been brought about by what was described in one of our public prints as borrowing short at 2 per cent. and lending long at 8 per cent. If that were an actual fact, I can quite understand that it would be repeated with great effect on platforms all over the country, and it would be a most serious charge to bring against those great institutions which are charged with the safeguarding of our financial interests. I have taken the trouble to find out exactly what the position is in this respect, and I hope the Committee will bear with me if I give them in some little detail the actual facts. I find that at no time have the financial institutions of this country—the big banks and the big finance houses—been borrowing at 2 per cent., and lending at 8 per cent. My right hon. Friend did not verify his references carefully enough—

Mr. A. V. ALEXANDER

I was careful to say that I had never used figures myself in my references to that matter. I used a statement of a Press Lord.

Mr. RUNCIMAN

The unfortunate thing is that many people will not read the quotation marks of my right hon. Friend, but will go on saying that they have been landed in their difficulties, and that unemployment benefit has been lowered, because of these pernicious financial institutions which are borrowing at 2 per cent. and lending at 8 per cent. It is no use quoting in this House what is said by a Noble Lord if he is irresponsible. If it is quoted, it must be because of the value of the statement, and it was absolutely valueless. The best information that I can obtain points out that, prior to the date of the German financial crisis, about the middle a July, the rate at which accommodation was made available to Germany was something under 4 per cent., and during the time that the bank rate was 2½ per cent. accommodation was frequently provided at £2 16s. 6d. per cent. In no case did any of these institutions at any time obtain 8 per cent. for the accommodation that they provided in Germany.

Lieut.-Commander KENWORTHY

What class of security was that?

Mr. RUNCIMAN

I am referring to the advances which were mentioned by the late First Lord of the Admiralty—loans and accommodations provided by the finance houses for German account. Starting from that point, my right hon. Friend and others who have spoken in these Debates have laid a very grave charge at the door of the banks, and in more than one quarter the suggestion has been made that our banking system was so defective as to endanger the financial stability of this country. Our banking system is not perfect, but it has the advantage of being the best in the world, and I would impress upon hon. Members opposite, if they will allow me to do so with respect, the fact that you cannot do without the banks. Even in a Socialist State you must have a bank. Even in a Socialist State, with socialised banks, you have to make provision for foreign payments; and nothing more was done by any of the finance houses in their foreign transactions than would have had to be done by a Socialist State with socialised banks under exactly the machinery which hon. Members opposite wish to achieve.

Let me turn to the attitude which has been adopted with regard to the poor who are likely to be hit under the present Budget provisions. The really important thing that we have to consider is how to safeguard for all our people of every class the incomes which they at present possess, and the facility with which they can purchase what they need and get the fullest possible value for their money. [An HON. MEMBER: "Much obliged?"] A little courtesy would not be out of place. I am not making any recriminations; I am not making any charge against anyone; and I hope that courtesy will be extended to me. Let me say how important it is that we should realise that the value of the pound sterling is a matter of universal concern. It is not only a matter for the finance houses, who wish to see the financial arrangements of the world centred in London rather than in New York; it is largely a matter which concerns the great consuming classes of this country, and the great producers. In the first place, if sterling had broken as the mark broke, and as the franc broke—and in France they are not without financial intelligence, and appreciate the safeguards which we find necessary over here—if, the franc and the mark having set the example, sterling had followed, the first people to suffer in this country would have been the consuming classes. [Interruption.] The banks can take care of themselves, and, in doing so, they are acting as trustees for the public. I have no doubt that hon. Members think that the banks are doing very well to-day, but let me explain to them that the bank with which I am connected has an average share holding of £193 per shareholder. It is not under the control of those who dominate the financial affairs of this country; the whole thing is operated as a great trust; and we as trustees do the best we can to serve all our customers, and to assure to them the full value of that which they have deposited with us and the most lenient terms possible for the accommodation that we grant.

There is a very difficult task ahead if sterling goes wrong. Once sterling goes wrong, how can you possibly arrange for your payments ahead? I have said that this will affect the consuming classes. I had the opportunity of being in Germany during the time of the break of the mark in 1923, and I have never seen anything more dramatic or more pathetic than the way in which the mark ran away from all persons, commercial houses, trading institutions, and banks. They could not keep pace with it. The very tradesmen had to employ runners going backwards and forwards between their shops and the banks to find out what was the rate of exchange from minute to minute, and finally things became so impossible that the only way in which you could purchase food in some of the great cities in Germany was to take round some clothing that you wanted to sell, or a pair of boots, and make the exchange. It had to be done by barter, because the mark had broken down; and yet at one time the mark was very little weaker than sterling.

In looking up the records of the value of the mark in 1919, I noticed that it was then standing at 184 marks to the £—not very different from the present rate of the franc. In 12 months it had reached 258; in 1921 it had reached 771; in 1922 it was 34,000; and in 1923, just at the time when I was over there and saw these things taking place, it actually slumped to no less than 18,000,000,000,000. It absolutely collapsed. [HON. MEMBERS: "Why?"] For a very good reason. Those who were charged with guarding the mark allowed it to slip off the gold standard, or rather, it did not return to the gold standard after the War, but depended entirely upon a managed paper currency, and the pressure of outside payments was so disastrous that they could not withstand it—[Interruption.] Hon. Members may not see the exact parallel—[Interruption.] Every economic fact has everything to do with it. An accumulation of misfortunes brought it about. What, happened in Germany is one of the things which I hope hon. Members will keep in mind when they think they can manage a currency without any reference to the gold on which it is based or the terms on which foreign lenders will let you have money. [An HON. MEMBER: "What is the use of democracy?"] I hope our democracy is intelligent enough to understand a financial problem and to get at the root of the whole problem instead of talking about conspiracy and a pernicious banking system, and imagining that nothing could happen here such as happened on the Continent. The truth of the matter is that, if we do not keep guard of sterling, there is nothing to prevent it slipping off the gold standard. The efforts which have been made and which have been outlined by the Chancellor of the Exchequer to-day have re-established it upon a gold basis. We have heard his speech, but it is far mare important that his speech should be heard outside. Would anyone suggest for a moment that his speech was the outcome of foreign pressure? Cast your mind back two years ago when the right hon. Gentleman was at The Hague making himself the most obnoxious fellow who had ever represented Great Britain in an international conference.

Let me take the other side of the transaction. While we are thinking about the state of sterling and realise that it may easily slide—and once it begins to slide wage earners, pensioners, those who have incomes front all sorts of investments, will all see alike—we have to remember that we cannot live on a self-supporting basis. We have to buy very largely from outside. The great mass of our food and the great bulk of our raw material come from outside, and have to be paid for. Can hon. Members really tell us any way in which they are going to be paid for abroad except in the currency of the countries from which these goods come? If you buy maize or wheat in the Argentine, you must pay for it in Argentine currency. If you buy bread or wheat from the United States, you must pay for it in dollars. It is the amount of dollars that can be purchased by sterling which gives you the measure of your capacity to purchase. That is a very elementary fact, but it is very often forgotten.

Mr. THURTLE

It is not Liberal theory.

Mr. RUNCIMAN

The hon. Member has failed to understand. You pay for what is brought into this country by the goods and services which you provide for the outside producing country. If that is inadequate, you have to fill the gap with gold. You have also some invisible exports, as they are called, to which I shall refer in a minute. When I think of the case of the consumer and the wage or income that he possesses, or, if he is a pensioner, the pension that he receives, I ask myself this very simple question: How are you going to keep him supplied with the necessities of life if you cut him off from the supplies that come from abroad? How are you going to feed him if we cannot get wheat from the Argentine, from the United States and from Russia and elsewhere—and from the Empire? How are you going to provide for him unless you are prepared to make such financial arrangements as will enable our merchants, who are the intermediaries for this purpose, to purchase these commodities abroad? How can you make any provision whatever for the upkeep of our trade and commerce unless exactly the same provision is made for raw material? There is no answer to that very simple question except that you have to pay for every one of these things in the currency of the country from which it comes, that you do so by exporting goods from this country abroad, sometimes on a triangular or even a quadrilateral basis, or by these invisible exports, which are most important, and finally, if that fails, by filling up the gap with gold.

What has happened during the last few weeks? We have been in the disagreeable position of finding that there has been a very great drain on the gold in this country. That is to say that the gap that had to be filled by gold was so much greater than we anticipated that it has drawn away from our chief central bank—even a Socialised State has to have a central bank—a great deal of the gold on which our paper currency is based. When they saw that going out, a good many people were anxious about it, but they were still more anxious about the balance of trade. There are means by which you can make some of these foreign payments for a time if your foreign trade so falls off that neither by the extent of the goods you export, nor by the services that you render, nor the invisible exports, can you make payment, but you are running the risk of a complete collapse of the exchange, and if the British exchange collapsed, how are you going to be able to buy your food and raw materials for our national needs? One only has to state the problem to see how simple it is. There is nothing very complicated about it. It is almost like a balance sheet. The right hon. Gentleman opposite asked the other night, Why not get over the temporary difficulty by mobilising your foreign investments? I forget whether he named the exact amount but it has been stated in some quarters that we might mobilise £400,000,000. [Interruption.] I am taking the most moderate figure of our foreign investments—for the purpose of providing credits abroad. In the first place, the provision of credits abroad does not get you over the difficulty. You may get three months credits, and you may renew them, but they have to be met. sooner or later, and you can only meet them out of these three categories that I have described.

Furthermore, what is the good of mobilising any investments for this purpose, if sterling is slipping away, in countries where sterling is not the currency? What on earth is the good of mobilising in the Argentine investments that are on a sterling basis, which have to be paid for in sterling? They must be paid for in pesos. What is the good of mobilising your American investments—English holdings in the Pennsylvania Rail-road or the Grand Trunk—if they are on a sterling basis? It is only those on a dollar basis that are of any use. I doubt whether we should be able to mobilise anything like that sum of money in the currencies of the foreign countries where we require credit. The second thing is that, if you mobilise them, you have even then to repay. You have to return these securities to their proprietors sooner or later. We took foreign securities during the War, but they were all handed back to their original possessors. Exactly the same thing will happen in this transaction—you have sooner or later to make provision—and all that can be said of mobilising our foreign investments is that it is an alternative to credits. To-day's declaration by the Chancellor of the Exchequer will provide us with the necessary credits for the next 12 months. We know that what he has said will resound throughout New York, Amsterdam and Paris, and will be read by every man who has money to lend, and will give him the confidence to lend it to us because the Budget we have had to-day is on a balanced basis still retaining gold as the footing on which all our currency is built.

Now I want to draw attention to another aspect of the problem. First of all, I warn the Committee that I am going to say something about the very large amounts of money which are invested by those who are known as small investors. After all, their interests must be protected. They are deeply interested in the maintenance of the full value of the pound sterling. The other night the Home Secretary said that, on a calculation that he had made, he believed there was something like £1,200,000,000 held by small investors. I have gone a, little further than our right hon. Friend. I have extended the area of my investigations and I find they work out somewhat; as follow: I will mention each of these categories one by one to show that no safeguard for thrift will be adequate if the pound sterling loses its value. First of all there is the Post Office Savings Bank. The latest figure I could obtain for this is that there is £284,000,000 deposited in the Post Office Savings Bank. These are not the deposits of rich people. The Post Office Savings Bank is not used by the rich or well-to-do but by the humble classes. The Government holdings purchased through the Post Office Savings Bank come to £190,000,000. There, again, it is not the rich who ask the Post Office to buy War Loan, or Conversion Loan or Funding Loan, or Local Loans stock on their behalf, it is those who have a very small amount and who invest it through the Post Office, very often in units of £1.

Then there come the Trustee Savings Banks, with £79,000,000. They have a special Investment Department, which can be described in almost exactly the same terms as I have applied to the Savings Bank. There are the Government holdings which are bought in the same way as in the Savings Bank. They come to £45,000,000 for special investments and £37,000,000 for Government holdings. The Railway Savings Banks have £18,000,000. I believe the Committee estimates that about half of the National Savings Certificates are held by fairly well-to-do people, who give them to their children, and so on, but at least one-half are held by wage earners, and the wage earners' portion, according to their estimate, comes to £239,700,000. The share of ordinary life assurance funds held by the small assurer comes to no less than £436,000,000. Industrial life insurance and collecting societies account for £233,000,000. We are reaching very large figures. The building societies' share capital comes to no less than £268,000,000, industrial and provident societies £221,000,000, friendly societies, including working men's clubs and miscellaneous societies, £106,000,000, and National Health Insurance approved societies—the amount contributed by the employés—£58,000,000. These are all capital holdings invested by people who are not of the rich class. They are not even middle class, if you care to use that term. They are wage earners. If you allow the pound to follow the franc, exactly the same thing will happen as happened in France, where five francs became worth only one. We had experience in this country of taking up French securities on the old basis of the exchange and finding them divided by five. If the pound follows the franc, all these people will not get their full 5 per cent. on their securities, but a fifth of that. [An HON. MEMBER: "Who wants to follow the franc?"] If the hon. Member and his friends will only realise that the pound following the franc would be a first class disaster—

Mr. TOOLE

No one on this side of the House has ever suggested that it will not be a disaster, even to the poorest section. Our dispute is simply as to those who shall pay.

6.0 p.m.

Mr. RUNCIMAN

I do not wish to take a narrow view of the problem. It concerns every class of people, the nation as a whole, those represented by the hon. Gentleman opposite, as well as those represented by us. There is not the least doubt that unless drastic steps are taken to improve the public esteem outside of this House in the pound sterling, and to assure the world that the pound sterling is not going to slip off the gold basis, that we are going to meet all our obligations punctually and provide those lending money to us with the fullest and most ample security, there is nothing to prevent the pound sterling following the franc. Everyone of those things is absolutely necessary, and therefore, there is reason for the Chancellor of the Exchequer having a revised Budget this afternoon in order to make it certain, as far as you can be humanly certain, that for the next 18 months we shall more than pay our way. These people ought also to be protected in this House. To what does the total amount? [Interruption.] The total amount in 1929, the latest date for which I can get complete figures, in these categories is £2,470,000,000. It is a rise of £130,000,000 in 12 months. The figures are perfectly plain. They are an under-statement. They do not contain a single one of the cases in which small investors have put their money into industrial concerns, banks and railway companies and the like. I submit to the Committee that in safeguarding the interest of these investors, we are not only doing something to maintain their standard of life, but are providing the only means by which we can reward their thrift in the past and secure them against misery in the future.

I turn to the last point I wish to raise, and it is concerned with a problem of far greater and more permanent importance than even the temporary accommodation of 12 months. There is very little doubt that our difficulty in dealing with foreign countries in making our purchases for food and raw materials is due to the alteration in the public esteem in which the London three months' bill is held. Before the War the London three months' bill was really the currency of the world. One of the most remarkable things that could be seen in any banking institution or in large merchants' or ship- owners' offices was, before the War, a bill of exchange with a pasted slip at the bottom and signature after signature appended to the bill as it passed throughout the world doing the service of the currency of the world. It was accepted everywhere as being worth its face value. Some doubts have been cast upon the value of the London three months' bill in recent times. The London three months' bill, I am glad to think, is still sound and good, but it requires a balanced Budget and a secure currency to enable it so to remain. The reason it is accepted all over the world is because they know that for every £100 they will get £100 value. If the pound followed the franc the London three months' bill would be no use to anybody except the two persons who carried through the transaction, and even in their case it would not be worth its value. They are the most convenient and by far the best way in which payment can be made. We get through all the difficulty of barter, and have none of the troubles of having to find currency and very often losing something on exchange. It enables transactions of the world to be done economically.

Our foreign exchanges remain at par so long as our foreign payments for imports purchased abroad can be met in three great categories of goods, services, and gold. The present values of goods and services, I regret to say, are very much less than they were. Are they enough? The latest returns lead one to believe that the time has came, unfortunately, when we are purchasing far more goods abroad than we can pay for in the normal way. We require the food from abroad in order to maintain life and to maintain, let me add, a variety of diet which is not excelled in any other country of the world. But that variety of diet may have to suffer if we are to get the necessaries of life and if we are to get our raw materials. [An HON. MEMBER: "What about a variety of diet for the unemployed?"] The hon. Gentleman is a greater authority on variety of diet than I am. It is not only foodstuffs but raw materials which are affected. Anybody who knows what, is happening in the Lancashire and Cheshire cotton trade, or in the woollen and textile industries of Yorkshire, knows perfectly well that any addition to the cost of raw material in this country which is not borne by our competitors abroad may put us clearly out of business.

Mr. SANDHAM

What will the business men say to the banks about that?

Mr. RUNCIMAN

The hon. Gentleman knows Lancashire well and he knows perfectly well that the purchase of raw material is one of the greatest and most highly skilled occupations carried through in the towns of Manchester and Liverpool, and he knows that an increase in the cost of raw cotton might be sufficient to close down the whole of the mills in an entire town.

Mr. SANDHAM

That is a beautiful suggestion.

Mr. RUNCIMAN

The hon. Gentleman imagines that in a Socialist State, with Socialised banks paying no attention to what foreign financiers say, he will get out of his difficulties. Unfortunately for him, and for all of us, we are having to borrow from abroad at the present moment to fill the gap in our own trading account. I submit that it is a very delicate situation for us to be in. We are the largest purchasers in the world and the largest producers in the world, but we are only the largest producers because we can sell at competitive prices. We shall be unable to sell at competitive prices unless we can meet foreign competition to the full. Any change which brings about an additional cost of raw material will put us out of court. I therefore, suggest that a prolongation of the present crisis will do a great deal towards delaying the recovery of our principal industries and may, indeed, endanger some of them for ever. I am not exaggerating, I am sure, when I say that a permanent addition to the cost of raw material in this country, not also borne by our competitors abroad, will close the workshops and shipyards in which hundreds and thousands of our workmen are employed.

The important thing for us at the moment is to deal with the problem of unemployment, not only by way of relieving unemployment, but by securing work. With that end, it may be, we shall have to withhold from ourselves some of the things we have been purchasing from abroad. We may have to take the line that we cannot afford to go on making purchases which can only be paid for by borrowing. If that be the case, I find only two alternatives open to us. One alternative is to peg the exchanges of those foreign countries of which we make our trade purchases. It is a very difficult and delicate operation, and at the end of the pegging we should come to the inevitable slump. We have had experience of this since the War. We pegged the American exchange at 4.84, and it subsequently went down at one leap to 3.60, which, after that, was the real value. It was only after careful operations that it was raised to its present par level. If these exchanges are to be pegged, it will not only affect New York, but it will affect the exchange of Buenos Ayres, and we shall have to make some arrangements with other countries from whom we purchase on the Continent of Europe, and I am not sure whether a series of pegging exchanges would not be the death-knell of British commerce.

The other alternative is not to buy any more than we can pay for. I do not want to dwell too much on the example of Germany, but I remember that in 1923, when troubled with these exchange problems, they thought that they would get over the whole of the trouble by the publication of ordinances dealing with the exchange. They published 39 different ordinances dealing with exchanges in a year, and the result was absolutely futile. We must not run the same risk here. I would far rather, if I may say so to the Government, see them taking the most drastic steps in advance of a need which may come upon us in future than wait until the pressure has arrived and try to apply soporifics for cure.

What is the danger I can foresee? The most recent figures show that we are purchasing far more than we can pay for. Unfortunately, the unseen exports have followed the seen exports. The earnings from shipping have gone down in 12 months from £120,000,000 to £90,000,000. The amount which is paid in this country by foreign shipping coming in has gone down from about £12,000,000 to about £8,000,000. The profits which are made by merchant houses who trade abroad but are domiciled here, have gone down enormously. Insurance which is conducted in this country has been on a smaller scale than at any time since the War. One of the reasons why the insurers in this country are cautious is that they want to be quite sure that if they have any claims they are going to get real gold value. Finally, there are the dividends on foreign investments. These foreign investments have been making a smaller yield to shareholders during last year than at any time during our lifetime. I do not know when they will recover, but it leaves a grave gap in our balance of trade. Let me say, without undue assumption of being an authority on the subject, that I believe that there are a great many things we can do very well without. We are buying from abroad far more than we need for our sustenance or the maintenance of industry. The purchases of luxuries have not abated since the prosperous days of 1920–2l. I venture to say that the tendency to spend money on luxuries is not restricted to any one class. I am not concerned with luxuries with which people enliven their life in this country, but mainly with those luxuries purchased abroad.

I have been a Free Trader all my life, and I am still a Free Trader. I am not sure that I am not the most bigoted Free Trader in the House, but I am not so much a Free Trader as to shut my eyes to the terrible risks we are running at the present time in a failure to balance our trade budget. There is nothing unusual therefore in going to extremes. May I say to hon. Gentlemen who sit behind me, I do not think that they are going to get over this trouble with a tariff. If you are going to balance your trade budget, absolutely prohibit the importation of those luxuries, as you did in war time. You have the list to work on. The war-time list will do for many purposes. You may have to revise it. You will have to examine it with very great care. You will have to see that an honest man is put at the head of the licensing department, but the thing is far better worth doing than any attempt to peg the Exchanges. My suggestion to the Government to-day is, that they should at once set on foot an inquiry by means of which they can exclude from this country luxuries purchased from abroad.

Finally, may I be allowed to say that nothing can be more gratifying than the fact that we have come face to face with our misfortunes, and that we are exercising that supreme gift of imagination which enables us to see things as they are. I believe that if all classes can co-operate, however small may be the contribution, in an effort to live within our means, we can assure the outside world that the honesty and punctuality of our payments remain the prime feature of British commerce and finance.

Mr. WISE

Before dealing with the Budget which the Chancellor of the Exchequer has opened this afternoon—the most disastrous the most grievous and I think a Budget that will be most opposed in this country in modern history—I want to say a few words on the interesting general considerations raised by the right hon. Gentleman who has just sat down. The points that he has raised as to the balance of trade are infinitely more relevant to the financial situation in which the country finds itself than most of the proposals in the Chancellor of the Exchequer's Budget. I would like, in the first place, to register a strong protest against the attempts that are being made—an attempt has been made again this afternoon by a right hon. Gentleman whose contributions to our discussions are always welcome, and an attempt was made earlier by the Chancellor of the Exchequer on the wireless and again by one of the officials of the Bank of England the other night—to delude the working people of this country into believing that the choice before them is this Budget., these economies, this deliberately organised attempt to reduce the standard of life, or a headlong flight from the pound and a disastrous collapse of currency such as happened in Germany and Austria.

The right hon. Gentleman gave us very picturesque and very interesting accounts of the difficulties experienced in Berlin and other countries during the hopeless deterioration of their currency. I was there part of the time, and what he said is quite true, but it is irrelevant to the present issue. There is no proposal that in this country the pound should be allowed to fall to an unlimited extent in a wild panic. There are proposals for devaluation to a defined and limited extent. He referred to that at the end of his speech, but that is an entirely different proposition. The position of Austria and Germany at that time was altogether different from the position of this country now. The reason why their currency went down practically to nothing was primarily because they had no capital in the country, and they had no capital or resources outside the country. They were suffering from intolerable burdens—the burden of reparations, the burden of the occupation of the Ruhr and the consequent breakdown of the German financial system. So far as Austria was concerned there was the burden of trying to retain Vienna as a capital city of 3,000,000 inhabitants in a country of only 7,000,000 of people. Those considerations are altogether different from the position of this country. We are not short of internal capital. The trouble is that we have now too much of it out of use. The right hon. Gentleman is no doubt aware of the figures that Mr. McKenna published some time ago as to the rate at which time deposits in the great banks have increased relatively to current accounts. People are hoarding their capital instead of putting it into industry.

One of the most generally accepted analyses, that of Professor Keynes, is that a main cause of the present breakdown, as shown by the wide disparity in raw material prices and in manufactured goods prices, is that money is being held up from investment, and not being used. So far as our capital position outside the country is concerned it is very relevant to the exchange situation that we still hold 30 per cent. more foreign securities than any country in the world. Our situation is entirely different from those countries, and the attempts that are being made to delude the working people of this country that the alternative is to go back to the situation in which the Germans and the Austrians found themselves I can only characterise as dishonest. Let me point out also that for the whole period to which the right hon. Gentleman referred until 1925 this country also was not on the gold basis. Has he forgotten that sterling was not then on a parity with gold? As for France, it is very significant and very interesting to note the manner in which France is used in these controversies. When we are told that we ought to save and so avoid unemployment, France is set up as our example. When we are told that we must pursue a course of honest finance and pay our debts and meet our obligations to those who have lent money to the State, it is conveniently overlooked that France, of all countries, deliberately repudiated four-fifths of her foreign obligations three or four years ago. France has resurrected her prestige in so short a time that she is now able to hold a pointed pistol at every country in Europe including this country.

The right hon. Gentleman produced some very interesting figures as to the widespread nature of the shareholding in the banks. Nobody knows who are the owners of those shares, or how many persons are individually concerned. It is a complete mystery. The banks are as ignorant as we are. If the right hon. Gentleman would like to examine the way in which capital is held in this country, I would draw his attention to the figures published by the Inland Revenue as to the number and value of estates which in any year on an average come under assessment. They do not give the number of persons who died owning less than a capital of £100 but, the number is very much larger than the number assessed to Estate Duty. Of those estates which were assessed, there were approximately 50,000 estates of less than £500 gross, with a total value of about £13,000,000. There were 14,000 estates of a value of between £10,000 and £3,000,000 with a total value of £400,000,000. These figures are very relevant and show much more really the distribution of the national capital income than the uncertain figures which the right hon. Gentleman has used.

I will not follow the right hon. Gentleman into his very interesting suggestions in regard to the prohibition of luxury imports, except to say that the best way to prevent people buying luxury imports is to increase the taxation on heavy incomes. Those luxuries are mostly bought by people whose income is above the super-tax level. [HON. MEMBERS: "No!"] Certainly to a very large extent it is so. The contribution of the Chancellor of the Exchequer this afternoon towards reducing that purchasing power in respect of excess income above £2,000 a year is about 5d. in the £. That will not go very far in reducing luxury expenditure. [An HON. MEMBER: "How does the hon. Member get at that figure?"] The total assessment of incomes for surtax is approximately £541,000,000. The total additional yield from the surtax is £6,000,000. That is just about one per cent. I have underrated the figure. It is not 5d. but about 3d.

Let me now deal with the Budget. The main difficulty in regard to the deficit is entirely the Chancellor of the Exchequer's fault. He knew perfectly well or he ought to have known when he presented his Budget in March last that he was budgeting for a deficit. He refused for two years to put taxes on capital or to put additional taxes on the heavier incomes. He did that, contrary to the view and policy of the rest of his party. Not merely myself and those who sit on these benches, but the whole rank and file of the party publicly and privately, but mostly privately, very strongly disapproved of his action. In the light of the figures one cannot see on what basis the Chancellor of the Exchequer could expect anything hut the heavy deficit which he has reached. He gambled on an improvement of trade. No one except those who seem to have advised him—I can gather from what has happened in the last week or two who were advising him, expected that improvement in trade. The actual figures for the estimate for surtax, stamp duty and Income Tax bore no relation to any published figures as to what might have been regarded as a reasonable expectation.

The Chancellor of the Exchequer has always held the view, which is the central canon of taxation of hon. Members who are now his avowed supporters—and who always were in this respect his real supporters—that the vital thing to do in taxation is not to discourage business by additions to direct taxation. That doctrine has proved to be completely false in the situation with which the country is faced to-day. Trade and business are, for reasons entirely outside the budgetary position in this country, running away and will continue to run away. When we come to examine the details of this Budget in regard to taxation within the very short time we have had to consider it, it is pretty evident that any inclinations of the Chancellor of the Exchequer and his more immediate associates, his old associates, may have had in the direction of equality of sacrifice have been quickly and completely overborne by his new allies.

He did not deal in detail with the economies, but the proposals are now circulated, and let me show by one or two examples what, in fact, is meant. The proposal is to reduce unemployment allowances by 10 per cent., that is the allowances of men now receiving 17s. per week, or about £44 a year. The equality of sacrifice from the Income Tax payer up to £2,000 a year is represented by a doubtful 6d., because there are various allowances which may have to be taken into account. That is, approximately, 2½ per cent. on their income. The proposal, therefore, is 10 per cent. on the man whose total income is just over £40 a year and 2½ per cent. on the man whose income is £40 a week. Take the Supertax case. The Chancellor of the Exchequer proposes to take £6,000,000 in a full year from those whose income is over £2,000 a year. The average income of Super-tax payers is about £5,400 a year.

Viscountess ASTOR

How many are there?

Mr. WISE

About 97,000, and their total income is £541,000,000.

Viscountess ASTOR

Not income.

Mr. WISE

Yes, the hon. Member will find it in the 73rd Report of the Commissioners of Inland Revenue. That £6,000,000 on £541,000,000 is about 3d. or 4d. in the £; an extra 1 per cent.

Viscountess ASTOR

What do they pay already?

Mr. WISE

It is, therefore, an extra 10 per cent. on the £44 a year man, 2½ per cent. on the £40 a week man, and 3½ per cent. on the 2100 a week man. That is the Chancellor of the Exchequer's conception of equality of sacrifice. Let me refer to another figure which appears in the White Paper just, issued. It is proposed to meet this grave national emergency, threatening the stability of Parliament and the whole prestige and position of London as the money market of the world—a crisis greatly if not deliberately exaggerated —by this national party by a proposal to take £13,000,000 from the unemployed, or more than twice they are proposing to take as additional taxation from the Super-tax payer. When you come to examine what this economy really means, and the probable effect of it upon our national position, the bulk of this economy is coming from the wage earner. As we know, because there is no secret about it, you will find it in the Press and hear it in the City, in the bank parlours and offices of the great employers, this economy will be entirely ineffective in meeting the trade situation, which is the real problem which the country has to face, unless it is accompanied by what is intended, and that is a general reduction in wages. The avowed purpose of hon. Members opposite, and the economic justification, as far as it is any justification, although it is an entirely wrong and harmful justification, is to make possible a reduction of wages generally.

HON. MEMBERS

No!

Viscountess ASTOR

May I ask the hon. Member whether he honestly thinks that the Prime Minister and the Chancellor of the Exchequer, two men who have given their lives to the Socialist party, have as their object the reduction of the wages of the workers?

HON. MEMBERS

Yes!

Mr. WISE

The Prime Minister and Chancellor of the Exchequer find themselves in very bad company. [Interruption.] There is no question at all as to the intention and purpose of the Government. The Prime Minister and the Chancellor of the Exchequer have told us that in all the negotiations leading up to this nefarious transaction they have been working in close touch with the Bank of England and the bankers in the City. [Interruption.] And there is no secret as to the views of those who speak for the Bank of England and guide them on economic matters.

Mr. PHILIP OLIVER

Will the hon. Member answer the question that has been put to him? Does he allege that the intention of the Chancellor of the Exchequer and the Prime Minister in introducing these measures is to depress wages in the country?

HON. MEMBERS

Yes.

Mr. WISE

There is not the slightest doubt as to that; otherwise the whole thing is without any meaning at all. It can be justified on the economic basis, and it has been argued by Dr. Sprague at a meeting of the Royal Statistical Society. The view which many people on the other side of the House hold, to the misfortune of this country, they seem to have persuaded the Chancellor of the Exchequer and the Prime Minister to accept, and that is that the only way out is by a general reduction of wages, and this Budget and these economy proposals are intended to facilitate and accelerate that process. There is not the slightest doubt about it. What is likely to be the effect of that? One of the most remarkable things about the history of industry and employment in this country during the last three or four years is that during the acute and exceptional depression which followed the year 1928, and which swept 10,000,000 men into unemployment in America and 5,000,000 or 6,000,000 in Germany, and which has brought half the countries of Europe into a state which is practically bankrupt, is that, despite the intense difficulties of our export market, the production, and therefore the employment, for the home market has largely kept up.

The last Board of Trade figures show that the index of industrial production for the first half of this year, as compared with 1928, shows a drop of 10 or 11 per cent., but during that period our export trade, which represents a quarter to one-third of our industrial activity, has fallen by over 35 per cent. If you marry these figures you find that the production for the home market is pretty well as high now in volume as it was before the slump in 1928. The world slump has hit our export market very hard, but we have not yet felt the real strain and burden of it on the home market. The main increase in unemployment has taken place in industries serving the export trade—textiles, mines, shipping and engineering, and steel—but in the trades concerned with the home market the slump has not been felt so badly. In other words, because of the existence of unemployment insurance, giving at any rate a meagre modicum of living to the unemployed—so far, on the whole, wages have not dropped, as the reductions have been resisted with some success—the purchasing power on the home market, aided by a drop in prices, has been assisted, and consequently employment has been assisted also.

What is going to be the effect on the home market of a continuance of a policy of deflation and contraction which has brought the world into its present appalling situation? The bankers for the past five or 10 years have been busily occupied in ruining agricultural and many industrial countries, and that process has reached a situation in which nearly half the world is bankrupt. They are now proposing to apply the same policy with force and vigour to the home situation in this country. This Budget, with its alleged savings, is no more sound from the financial and Estimate point of view than the last Budget introduced by the right hon. Gentleman. The effect on the home market of the forces which he is assisting and adding to will reduce the yield of taxation above that which he is contemplating, and, in addition, overshadowing the whole situation, is the increasing collapse, to which the right hon. Member for St. Ives referred, on the Continent of Europe and elsewhere. The fact is that the financial system and the banking machinery of the world are in a state of collapse. The bankers, and those who support them in this House, are trying to ward off that collapse at the expense of the lowest paid people in this country. It is a disgraceful and grievous action, hut it has not the slightest hope, as far as I can see, of being successful.

Unless some drastic and fundamental steps are taken to deal with the world trade situation, there is no hope of balancing the Budget in this or in any other country. The system of industry and finance, labouring under the burden of a gold standard which in these last years has added tens of millions of extra purchasing power to those who lend money at the expense of those who work for their money, is bordering on collapse. I do not believe that either in this country or in a good many other countries the gold standard in its present form can be preserved. They are leading a forlorn hope to save the gold standard in London when it has collapsed in practically every South American state, when it has collapsed in Australia, though the effect of going off the gold standard on a discount of 30 per cent., according to the financial papers, has been considerably to improve their financial position. The fact is that all this talk about preserving the gold standard for the benefit of the cost of living of the working classes is a delusion. It is intended to delude. The reason why they wish to preserve the gold standard is to preserve the yield which the rentier receives from a system which has brought the City of London into its present eminence and importance, and without which it believes that it cannot exist.

We have for years now, ever since 1925, sacrificed the industry of this country to the interests of the City of London. We have preferred that the City should be prosperous and the great industries dereliot. The profits of the banks and the insurance companies and of that vast apparatus which works the gold standard at its very centre in the City of London, have been maintained, but unemployment has ravaged the industrial districts. It is quite time now, we think, that the Government of this country should have regard to the interests of the working people of this country and disregard the bankers. It is because this Budget is designed to deal with a bankers' crisis, not as the Financial Secretary said, at Question Time, a financial crisis of the country but a financial crisis in the banking machine—it is because this Budget is designed to deal with that crisis at the expense of those who are not in the very least responsible for it, who have already suffered heavily from the attempts to buttress up this system in its collapse—it is because we think that, framed with that end in view, it is a bankers' Budget, we on these benches will resist it to the utmost of our power.

Brigadier-General Sir HENRY CROFT

I hope that the hon. Gentleman who has just spoken will not think that. I am lack-in courtesy to him if I do not dwell at any great length on what he said. But I must call the attention of the Committee to the fact that a certain part of his ease is unfair, and on reflection I think he will agree that that is so. He spoke of the small contribution of the Income Tax payer to taxation. He went on to point out the small contribution that the Surtax payer would make. He omitted to tell the Committee that those are the same people. He omitted to tell the Committee that each year recently we have seen increases in this particular taxation. The direct taxation in Income Tax and Surtax, on the average, as far as I can make out from the figures announced to-day, will equal 12s. in the pound to this particular class of persons, and of they are insuring against Death Duties it means, taking an average age, that they are paying something like 16s. or 16s. 6d. of every pound that they possess.

Mr. MACOUISTEN

More than that.

Sir H. CROFT

My hon. and learned Friend blames me for moderation, but I want to take an absolutely reasonable case, and I say that those people are paying at least, 16s. or 16s. 6d. in the£I know that I have erred on the side of moderation. Hon. Gentlemen opposite do not realise the position with regard to these taxpayers. I am not going to pursue the speech of the last speaker any longer except to say that I thought I saw a smile even on the faces of his own Friends when he said that there had been no slump in the home market. We all realise now that the slump is very general. We have all, as a nation, to forget sectional interests in order to see how we can end that slump. I always feel that it is a little difficult to follow the hon. Gentleman. He will not think that I am trying to be discourteous when I say that he has so largely had his interests concerned with the building up of new Russia that it is almost impossible for him to look upon these British problems with a purely local eye.

Mr. R. A. TAYLOR

My hon. Friend's activities, at any rate, have brought great benefit to British industry.

Sir H. CROFT

The hon. Member is perfectly entitled to say that, and I am perfectly entitled to say what I have said.

Mr. WISE

You are, but it is not necessary or relevant.

Sir H. CROFT

I think it is time to say it. We listened to a very remarkable speech from the right hon. Member for St. Ives (Mr. Runciman). On another occasion I would have wished that he had remained in his place, because I would have had a very jolly five minutes with him as a result of his speech. But I am not going to hark back to the old days. I see that the right hon. Gentleman has now returned. He and I, I hope, are not to-day concerned with any differences of opinion of a year or two years ago. I thank him for his courage as a patriot in coming here and making that speech and giving us that brilliant contribution and analysis of the British financial, industrial and commercial situation to-day. Let me also say one word with regard to the Prime Minister and the Chancellor of the Exchequer. I suppose it will be said that I belong to the Right. I hope that that description applies to myself. I imagine there is no one who has been divided quite so greatly from the Chancellor of the Exchequer and the Prime Minister as myself. However much I have differed from them in the past and may differ from them in future, I am intending, so long as they are carrying out their one great purpose, to back them day and night in carrying this Budget and the economies which are necessary.

There are certain tests sometimes in life, when you have to make up your mind if your courage is high enough to face your lifelong friends, and when you have to decide whether your self must be subordinated to the national good. All of us at some time have a dread of the yellow streak coming up, and the man who would surrender to that streak might so easily say, "Here is this terrible impasse in which our country finds itself. Let us get out while the going is good and hand on to someone else the job of solving the problem." As a member of the Right, let me, who have nothing in common with the Prime Minister and the Chancellor of the Exchequer and whose job I wish to see completed at the earliest possible date, thank them for having shown that they were white and putting their country before every other consideration whatever. I want to point out to hon. Gentlemen opposite who have been so extremely vocal during the last three days, that our party too has had its temptations. I do not imagine that anyone could conceive a more dramatic appeal than that we should have gone to the Government and said, "Here you are. You as a party have landed this country in this terrible plight. Stew in your own juice. Balance your budget, carry out your own reform, and then go to the country, and the wild mob's million feet will kick you from your place." That was a great temptation to us.

I do not think anyone can doubt that had that been the course of events, we should have gone to the country and would have gained a sweeping victory for a cause on which some of us rest all our hopes for the future—[Interruption.] The hon. Member for Bridgeton (Mr. Maxton), who interrupts, has an honest record. He wants to destroy the capitalist system entirely. Let the country know it. He is the red tail wagging the pink dog that at present occupies the Front Bench opposite. Now we know where we are. I beg the Committee to consider what would have happened if the Conservative party had decided to take that course and had allowed these weeks to pass by in order to secure a party or personal triumph. The flight from the pound—no one denies now that it existed —might very easily have turned to positive panic. If that had occurred, in a very few days we might have found that it was impossible to buy a 4-lb. loaf for 4s. A man might easily have discovered on a Saturday night that his £2 or £3 of wages would not buy two or three ounces of tobacco.

Mr. R. A. TAYLOR

That is how it would be if you got tariffs.

7.0 p.m.

Sir H. CROFT

Then the hon. Member should tell his leader to keep quiet. We have heard the solemn warning from the greatest brains of the country. I do not think it is denied that the greatest brains of the Socialist party are not those of the hon. Member for East Leicester (Mr. Wise), but those of the Prime Minister, the Chancellor of the Exchequer and the right hon. Member for Derby (Mr. J. H. Thomas). They are the men who have won the admiration of the country in this crisis. The fact remains that everyone who has been in the forefront of political life in this country for the last 20 years agrees with the speech that we have heard from the right hon. Gentleman the Member for St. Ives. It was a most remarkable contribution. When men of that type, such as have given their whole lives to great industrial concerns and to various aspects of political thought, come down here and tell us that these things are true, can we ignore what they say? We have seen this thing happening at our very door, in Germany, Austria and France in recent years. I hold in my hand a million-mark note, worth at one time, I suppose, £50,000. It is not worth 2d. to-day. That is what is going to happen in this country if you allow a panic to produced from which a real flight from the pound sterling would follow. You may bring in your banking reforms later on. I had an opportunity for a few days of examining what happened on the Continent of Europe, and I saw the intense misery throughout the whole of that country, the utter suffering of the women and children. The man who is ready to contemplate that now, either has not the guts of a jelly-fish or the mind of a lunatic, if he is not going to save his country from a similar collapse.

That is the only reason why we are serving under our traditional political enemies and supporting them in these proposals. I have nothing to thank the Chancellor of the Exchequer for, personally. He has got me under every rib to-day, in his taxation proposals, but that is better than having nothing.

Mr. MAXTON

He has not touched your unemployment benefit.

Sir H. CROFT

The hon. Gentleman knows that if this cataclysm had occurred he and I, and every unemployed worker, would be in precisely the same position, with nothing. Bring in your social reforms, but where is the money coming from for those social reforms? If that had occurred, England would have been going back from the position of leading social nation in the world to barbarism, and we should have had conditions like they have in Russia at the present moment. I support this Budget, disagreeing as I do with many of the Chancellor's proposals. The imperative need of to-day is to balance the Budget, but the imperative need of to-morrow is to balance our trade. I entirely agree with the right hon. Gentleman the Member for St. Ives. For four years past I have taken some considerable interest in this question of the balance of trade, and I do not mind confessing that it has been a positive nightmare to me to see the steam-roller coming along, threatening such disasters to our country. Each year we have seen a steady encroachment, and two years ago, in a Budget discussion, I remember telling this Committee that I believed that it would be impossible to give an actual balance to our trade within two years' time. I wish that I had had some power to influence opinion in this Assembly on that occasion, for we might have avoided the awful catastrophe which is confronting us at the present moment. We are borrowing money from foreign countries in order to pay fur the importation of goods and produce, a great quantity of which we can undoubtedly manufacture or produce for ourselves. What is the result of this folly? It is that financial crises will recur perhaps three or four times a year, until we have ceased buying more than we can pay for.

Hon. Gentlemen opposite criticise the people in the City of London. I, too, think that sometimes our great financiers have imagined that they were in a separate compartment from industry. I would say to those in the City of London: All your financial strength comes originally from production, and if the springs from which your wealth flows are dried up, then there is going to be no financial resilience in this country. It is absolutely imperative that finance and productive industry should stand shoulder to shoulder in facing this peril and should help each other out of their difficulty. The taxation of which we have heard from the Chancellor of the Exchequer to-day is not going to cure the disaster; it must aggravate it. The pity of it is that we have no time to wait, and that we must impose that taxation to-day, in spite of the fact that the Chancellor told us last February that the present taxation could not be increased, because that would be the last straw on the back of industry. Until we have our tariff, we have no alternative, and we must therefore support these proposals.

I see that the trade union leaders have been talking glibly about a great fresh levy on income, whether earned or unearned, as an alternative to economies. They put that forward as a definite alternative, but anyone who has studied the matter will realise that they are stultified by the report of their own committee published in 1929. That report said something which, I think, makes the speech of the hon. Member for East Leicester absolutely ludicrous. The report said: However desirable it may be to secure fairer distribution of wealth, it is fatal to national prosperity to eat up that capital which is necessary to finance present or future production. They went on to say: Trade revival is vitally dependent on capital savings and capital development.…Lack of savings was greatly hindering the trade recovery of Great Britain. Can there be any greater proof of the folly of an increased levy on income, whether earned or unearned, such as is now proposed, two years after that report was issued, by the trade union leaders at Bristol? They say, "Mobilise British wealth in the Argentine, Brazil, Germany, Austria and France." To do so means bringing the whole life of those countries to a standstill. Our answer to them should be, "Mobilise your wits and get busy with realities, instead of talking such nonsense to your countrymen."

I want the Committee to realise that when looking at the figure of £50,000,000, or, it may be, £150,000,000, of the aid that we are receiving from foreign countries, they are looking at really astounding facts. In the last 10 years we have paid out of this country, for manufactured goods alone, of a type which we are fully capable of producing for ourselves, the sum of £2,000,000,000 and, during these 10 years, we have, by deliberate policy, permitted an average of £200,000,000 worth of those foreign manufactured goods to come into our country every year and to deprive 1,000,000 of our workers of employment in each of those years. That has meant pouring down the sink £700,000,000, the cost of maintaining life in those unemployed who have been the victims of our selfish, callous policy of buying in the cheapest market even though our people perish. We hear hon. Gentlemen opposite producing their slogans, and talking about maintaining the standard of life of the people. Who are those who have deliberately championed the policy of the sweater and the dumper in all those years?—[HON. MEMBERS: "Your Liberal Friends!"] The Liberal party, at any rate, have the courage to say when their opinions have altered, and they always treat one with civility. There are hon. Gentlemen behind me who know that every time I raise this question, pointing out that it is folly for the trade unions to protect the standard of life of the workers of this country unless they are going to protect the products of labour which come into this country, hon. Members opposite always yell at me like a pack of wolves. [Interruption.] I withdraw.

Mr. CARTER

Who invested money abroad and made interest and profit out of the poor worker?

Sir H. CROFT

That, as they say in the Gilbert and Sullivan opera, "has nothing to do with the case." If I gave any offence by describing hon. Gentlemen opposite as "wolves" I was only speaking figuratively. I think a much milder form of animal would truly describe them in this House. Hon. Gentlemen opposite, and their pet Soviet the Trade Union Congress, have been meeting in conference, and we have been told that the policy which we, on these benches, have been preaching for all these years and to which we are absolutely committed at the coming election, is worthy of consideration. I am going to ask this question: Who are the worst offenders in supporting the policy which has been disastrous to the workers of this country? Surely I am not wrong in saying that the new Leader of the Opposition did more than any man to bolster up the importation of Eussian produce, which has been having such a disastrous effect on great sections of our countrymen. I think he has been run very close by the right hon. Member for Central Edinburgh (Mr. W. Graham), the late President of the Board of Trade. The Leader of the Opposition to-day declared for a 20 per cent. revenue tariff, and very shortly afterwards he reduced it to 10 per cent. The President of the Board of Trade realises with the Foreign Secretary that this policy is almost essential for the standard of life of the British workers.

Mr. LANSBURY

May I ask the hon. Gentleman to give the actual quotation of my right hon. Friend?

Sir H. CROFT

If there is any dispute, I will. I think what he really did say was that he was "prepared to support a revenue tariff."

Mr. LANSBURY

"To consider."

Sir H. CROFT

Oh, "to consider." That kind of reasoning is quite good enough for me. I hope the House and the nation will take note of this fact that, when we are going to have these economies, the right hon. Gentleman says he will be prepared "to consider" a revenue tariff. The policy which is now thought to be worthy of consideration by the trade unions has been referred to all the lodges. I suppose that word has now come back from the lodges regarding the policy to which the right hon. Gentleman to-day committed his party. But that is the policy which the President of the Board of Trade only a year ago tried to block and stultify by his tariff truce. That policy which is obviously assented to to-day by the trade union movement, the President of the Board of Trade was prepared to hamstring. He was prepared to chain up the workers of this country so that they had no freedom to negotiate on work and wages vis-a-vis foreign countries.

Our party is committed up to the hilt to the policy of tariffs. We believe that the vital thing to-day is to balance the Budget, but that no time can be lost in balancing our trade, and we believe that the tariff instrument is by far the most efficient and speedy instrument for that purpose. Not only will it restore the balance of trade but it will provide a great opportunity of putting a large number of workers back into employment at an early date. By it we have an opportunity of restoring our export trade in the Empire overseas, of raising great new revenue, and of bringing about a tremendous saving of public expenditure in unemployment pay. That is the policy to which we are absolutely committed, and when the Government have completed to-day's great purpose, we are going to march to our country upon It, and these eleventh-hour repentances from the party opposite are no good. We have nailed our flag to the mast and are going to our country to say that we are prepared to carry out that great policy of restoring the home market and uniting the Empire, and we are determined that we shall not delay, until it is too late for this country to recover.

Mr. STRACHEY

When I addressed the House of Commons a few months ago, for the first time from the Opposition benches, I scarcely thought that I should have so many imitators so quickly in crossing the Floor of the House. I crossed it some months ago because it appeared to me that the events which have since taken place, and the financial statement which we have just heard, were going to be the inevitable conclusion of the two years of office which the Labour Government experienced so recently. It seemed to me inevitable that something of this kind must happen. At the 59th moment of the eleventh hour it became clear to the vast majority of the supporters and to a majority of the actual Members of that Government that this sort of thing was going to happen. They have now crossed the Floor of the House, and they find themselves in that position as the logical conclusion and the logical result of their inaction during two years.

The financial statement which we have heard and the crisis which produced it, are not by any means the result of the profligacy of the Labour Government as is sometimes represented. In the matter of profligacy or non-profligacy there was little choice between them and the previous Government. This situation is the result not of the profligacy but of the complete inaction of the Labour Government during those two years. There is little logic in the attitude which the Front Opposition Bench are now taking up towards the results of that inaction. There is little logic but there may be much merit in their opposition to these proposals which certainly ought to be opposed. That to my mind depends upon the point of view from which they are opposed. Are we in fact, if not in name, going to have from the Front Opposition Bench the type of opposition which we have had up to the moment, which has been merely to minimise the gravity of the crisis, to pretend that it was not so bad after all and that none of these disagreeable things which are proposed need have been done?

The Leader of the Opposition admits that there was a crisis but his chief comment on it was that ho differed from the Prime Minister and the Chancellor of the Exchequer because they had approached the financial situation in a, spirit of "unrelieved and undiluted pessimism." In other words he feels that probably not very much was needed to solve this great crisis but a little sunny optimism from himself and his party. Some of us on this side cannot share that optimism, and we ask our Front Bench to tell us whether their only opposition to these proposals is that the proposals are unnecessary, that there was no real crisis, and that nothing need be done. If that be so, we find ourselves just as deeply divided from them as ever.

The truth of the matter is that it is quite impossible to pretend that there was no crisis. Whether the events of the last few weeks or days or hours before the fall of the Labour Government were engineered consciously by a conspiracy of bankers or not is largely irrelevant. The real point is, was there in the world in general and in Britain in particular a crisis in capitalism? We would be blind indeed if we denied that was so. Do right hon. and hon. Gentlemen really think that the whole trouble came from the pessimism of the Chancellor of the Exchequer and the Prime Minister? Do they deny the gravity of the position into which capitalism all over the world has got itself? Do they deny the apparently insoluble problem of reparations and interallied debts; the ruin of Germany, the ruin of almost every agricultural country in the world and the complete dislocation of the capitalist world? Superimposed on that, do they deny that Britain is unquestionably in a very real crisis of her own?

To do so would be, as a matter of fact, a poor tribute to the work which they themselves have been engaged in during their lifetime in pushing up the standard of wages and enlarging the social services in this country—a work in which to a large extent they succeeded. But when they did that, it unquestionably meant a heavier burden on the British capitalist producer than on any other producer in the world. It is natural therefore that in the general crisis of the world producer, the British producer, so burdened by the very success of the efforts to which I have referred, finds himself in the most serious position of all. There has been in fact not a single crisis but a double crisis—a general crisis all over the world, and a special crisis in British capitalism. For us on this side of the House to attempt to oppose the Budget by minimizing that crisis, by saying that we could have gone on with the inaction and lethargy of the last two years, is to my mind, to take up an absolutely untenable position.

What is the rigorous and drastic financial statement which is before us? In essence it is the desperate attempt of British capitalism to cut its cost. It is only the first step in that attempt. The costs will not be cut to a sufficient extent, of course, by the cut in Government expenditure. But that is intended as the signal for a general cutting of all costs throughout the British capitalist system. In the only commercial undertaking of which I happen at the moment to have any intimate knowledge, the morning after it became known what this financial statement was obviously going to be, the managing director came in with the statement, "Now, of course, we can impose an all-round reduction on the wages of the staff." Of course that is the signal which this Budget is intended to give. It is the signal for an all-round reduction in costs by a reduction in wages throughout the British productive system. It would be very foolish of hon. Members opposite to deny that. Their case ought to be that regrettable though it is, it is better than the consequences of inflation or the other alternatives which are proposed. But unquestionably this great cut in Government expenditure must be accompanied pari passu at every turn by a corresponding cu tin the costs of the whole capitalist system of this country.

Therefore, what is the logic of opposing the financial proposals which are before us? British capitalism is in a position of extreme difficulty. It has to cut its costs in one way or another if it is to survive. This is one way. The way of inflation would be another way. A revenue tariff would be another way. But one way or another it is obvious that it has to do this, or come to a standstill. The Opposition is now committed to opposing that attempt to cut costs—I think quite rightly—but in this situation, to oppose an attempt by British capitalism to cut its costs is, in fact, to challenge the whole existence of British capitalism. That is the inevitable logic of the situation; and what disturbs me is that I find not the faintest glimmer of recognition of that fact in any of the speeches from the Opposition Front Bench. They all appear to suppose that it is possible to avoid the unpleasant and unpalatable proposals which are now brought forward and yet that the country can, somehow or other carry on just as it did before. I cannot see any logical consistency nor indeed any honesty in that line, if it is to be maintained in the country and before the working class.

If the working class is to be told that these cuts are unnecessary, that we can get on perfectly well without facing any arduous or severe struggle, that we can go on just as before and yet avoid the proposals of the Chancellor of the Exchequer, that will be to delude them even more gravely than they have ever been deluded before. The Labour Party has been accused of deluding the workers with gaudily painted promises at elections. But those promises will be a very small deception indeed compared with the deception of telling the workers that they need neither overturn capitalism and substitute another system, nor yet submit to the necessities of capitalism. That will be the worst deception of all; hut that appears to be precisely the line indicated by the whole tenor of the speeches which we have heard up to now from the Front Opposition Bench. We must realise too, that the sacrifices which are being proposed only represent the beginning of the process. They are an attempt to make good that policy of deflation upon which we entered in 1925 and which has gone on ever since at an accelerated pace, and we scarcely realise how far that has gone or how enormous must be the reduction, not only of Government expenditure, but of every kind of costs in our productive system if British capitalism is to get out along those lines.

Therefore, I believe that if there is to be any reality in the opposition to these proposals and the whole policy of this National Government, it must quite frankly be realised by those who lend their support to the Opposition that the whole logic of the policy to which the Opposition is fully committed, is a policy to supersede capitalism by another system. Unless we do that we shall be in a more parlous logical position even than the Prime Minister and the Chancellor of the Exchequer. They at any rate have been most consistent. They have realised that British capitalism is in a great difficulty. Their instinctive reaction has been to rush to its assistance, but at any rate that shows that they realise what is happening and that there is no alternative but to rush to the assistance of that capitalism or to be prepared to replace it. [HON. MEMBERS: "What with?"] That is the whole question, and on another occasion I should be prepared to answer it, but the Opposition Front Bench appears to consider it quite unnecessary even to think of such a possibility, and that is my complaint to-day.

I wish that we may have from the Opposition Front Bench some view of the situation as a whole, instead of some rather miserable rant as to who has suffered the greater sacrifice—the Prime Minister in his salary or the Leader of the Opposition in giving up his work. This is to reduce what is after all a very great and historical crisis in our country's history to tiny personal differences. I await sonic attempt on the part of the official Opposition to take up tenable ground, to tell us what is the alternative to these proposals. I believe that the alternative is the mobilisation of the whole working class in direct opposition to these economies by a simple programme putting forward their traditional demands—for shorter hours, not longer hours, for higher wages, not lower wages, and for complete work or maintenance; but at the same time to tell them frankly that this programme cannot possibly be implemented unless they are prepared for the struggle for the overthrow of the capitalist system by whatever means history and destiny may propose. But unless we do that, and unless we are prepared to go that far, we shall once more delude the workers, more gravely than they have been deluded before.

Mr. DIXEY

It is with considerable trepidation that I rise to support a Budget introduced by the present Chancellor of the Exchequer, whom I have always looked upon as opposing everything that I considered was for the benefit of trade in this country, but this situation is one which one has to encounter from an entirely different point of view from that which would normally be held. I consider that the economical situation which has arisen in this country is one which is both the particular and the peculiar responsibility of right hon. Gentlemen opposite who have held the destinies of this country in their hands in the past two years. It is almost criminal that with that responsibility gentlemen drawing competent salaries should have presided over the destinies of this country for the last two years and, up to the last couple of months, have been apparently in entire ignorance of the financial position of the country. The right hon. Member for Bow and Bromley (Mr. Lansbury), who has taken a large amount of trouble in giving the youth of London various pleasures, held a responsible position in that Government. Had he been a director of a company trading in the ordinary way, he would have had a responsibility to his shareholders to see that the income of his company was properly applied to meet its expenditure.

To my mind, the right hon. Gentleman has a criminal responsibility to the nation in that he has been party to a conducting of its financial affairs which has landed the whole of the population of this great country into the present, mess. He sits on the Front Bench opposite in a comfortable position and groans when he hears about a cut in unemployment allowances. Let me tell him frankly that none of these cuts would have been necessitated had he and his confreres taken proper consideration of the finances of the country during the past two years. [Interruption.] These sneers and gibes across the Floor by hon. and right hon. Gentleman opposite, and the gesture they make to the unemployed that they are prepared to risk anything rather than that there should be a decrease in unemployment benefit, are farcical, because their own actions during the last two years are responsible for the present position. They knew quite well, or their responsible leaders, including the right hon. and complacent Gentleman opposite knew quite well, if he had any knowledge of what went on inside, that the whole finance of this country was going rapidly worse and worse, and it was up to him to have taken his part in devising some concrete plan for the re-invigoration of the finances of the nation.

Let me remind hon. and right hon. Members opposite that for ages in this House a large number of Members interested in the trade and industry of the country have pointed out, on Budget occasion after Budget occasion, that we could not possibly restore the industrial position of this country without giving this country an equal chance in competition with its foreign competitors. We have pointed out that every other nation in the world is competing with us on an entirely unequal basis. We have endeavoured to show members of trade unions in this House that the only logical corrolary to protection of labour must be protection of the capital and the trade that employs that labour, but we have been laughed at for the last two years in this House, and our tariff arguments have been dismissed by the present Chancellor of the Exchequer with a wave of the hand. I would point out that had those tariff doctrines been applied—whether you call it a revenue or a protective tariff does not matter—two years ago in a large number of the big industrial districts of this country, you would have had a considerable decrease of unemployment, and to-day it is clear that had the heavy trades got a protective duty, the steel districts particularly would have been in a far better position as regards employment.

We are faced with a very difficult position. Some of us are compelled to support the present Government even with a Free Trade Budget. We quite realise that the Budget has to be balanced at the moment, but we are fully alive to the fact that it is very unfortunate that the present Government are not entitled to use the weapon which we consider must eventually be used. We feel confident that it would be far better had we a Chancellor of the Exchequer who had at his disposal, with a united Cabinet, the weapon which we have suggested for a considerable number of years. It is a very funny thing that we should have had a statement made by the right hon. Member for Burnley (Mr. A. Henderson), the present Leader of the Opposition, that he is prepared to-day to consider a revenue tariff rather than to have cuts and economies. If that is his position to-day, at the last moment, when a Budget has been introduced, why did he not, having known of this crisis for months, come forward as a, responsible statesman with that suggestion months ago? The country would then have had a chance of taking a decision upon it.

It seems to me iniquitous, in regard to a weapon like the tariff, which is generally admitted on all sides to be the weapon to he applied rather than a decrease in unemployment benefit, that at this stage of the proceedings the right hon. Member for Burnley, who has been a Cabinet Minister in many Governments and held responsible honours and dignities and high offices in the State, should have the impertinence to come along now and say, "I am in favour of a revenue tariff rather than having cuts in unemployment allowances." Hon. and right hon. Members opposite are utterly insincere. They have realised all along that tariffs are essential. The late Solicitor-General knows as well as I do that the Labour movement are dependent for their wages upon protection of labour, and it is obvious that they cannot get protection of labour without protection of the industry that supplies the money with which to nay that labour; and if it had not been for the fact that the first demand for the institution of a tariff came from the Conservative party, there would have been no stronger adherents of the policy of fiscal reform than hon. and right hon. Members opposite.

Some of us who support the present Government believe that, although temporarily this Budget has been balanced by the proper application of duties, harsh as they may be and bad for industry as they may be, it is necessary to-day because the country has not had a chance of saving what it wants, but we are certain that there cannot be any proper balancing of future Budgets until the country realises that, in order to obtain a proper revenue and create employment, we must have an economic system similar to that of other countries. We believe that it is essential that the Budget next year shall be introduced by a Government which has full discretion to place protective duties on the trade of this country. It will be curious to see the effect of those duties on hon. and right hon. Members opposite, who talk so much about the workers, but who, when it comes to a question of party politics and the utilisation of a weapon by which they can gain votes, are always prepared to put the workers' interests in the second place.

Some of us in this House came back because we have always stood for this doctrine, and we are going to fight for it. We are not prepared to have any Government which is not prepared in the next Budget to impose proper duties to protect the British worker. I feel that it is essential for this Government to declare themselves one way or the other. If they want to remain in Office, they must come forward at this moment with a, definite tariff programme. If they do not come forward with that programme, it is essential that they should give way as soon as possible and give the people of the country A chance to declare whether they are in favour of tariffs or not. To-day every thinking man who has arty interest in business, if he knows anything about trade, is emphatically in favour of full protective tariffs. So scared are the Socialist party of this issue, that they will bring any sort of subterfuge to prevent the electors of the country taking a definite decision on it. If hon. Gentlemen opposite desire an election, they will give passage as soon as possible to the Budget proposals. If they are sincere and have a real desire to go to the country, instead of opposing in the way we saw yesterday, they would say, "By All means carry these cuts which have been agreed to by our leaders." It must not be forgotten that £56,000,000 of economy cuts, according to the right hon. Gentleman the Member for Burnley, were agreed to by the Government of which the right hon. Gentleman the Member for Bow and Bromley was one of the most distinguished ornaments.

The only issue is the plain issue of the cut in the unemployment allowance. If hon. Members opposite are to be consistent, they will allow the cuts to which their own leaders have agreed in regard to the teachers and the civil servants, to go through unopposed. The only thing they will oppose is the unemployment allowance cut, which they are entitled to oppose because their own leaders objected to it. Let us get rid of this farce of opposition and face the issue directly. I am at one with a large number of hon. Gentlemen opposite in desiring an election, including the hon. and gallant Member for Hull (Lieut.-Commander Kenworthy), who is longing to be back on the boxes of Hull to tell the electors how the teachers have lost a lot of remuneration which they ought not to have lost. I want an election, and I believe that the electors ought to have a chance as soon as possible to have the clear issue of Protection put to them. Let us get to this issue in a fortnight. The new register comes in on 15th October. Let, us have no more of this frivolous opposition, and let us get to the people who sent you and me back here, and who will send me back again, but will not send you back. It all depends on hon. Members opposite, and, if they have any opinion of themselves as Socialist Members of Parliament who want the support of their constituents, they will give us a General Election as soon As possible.

Dr. MARION PHILLIPS

I suggest to. The hon. Gentleman who has just spoken that it is no use talking to us about when a General Election will take place. It is, out of our hands. The Chancellor of the Exchequer, the Prime Minister, the Tory party, and the bankers have to decide that issue, and not us. Therefore, the hon. Gentleman should direct his remarks, to his own Front Bench. We are read to face the issue as soon as the other side, but when the time comes we will not put before the electors the type of red herring that we have had displayed before us in the last speech. We are not discussing the question of tariffs at all. We are discussing whether this Budget will save the flight from the pound, and whether this Budget will not only balance but help the country to get back to a better industrial and financial condition. Unless the financial policy of this Government makes sonic improvement in that industrial and financial condition, the. Budget, whose figures on paper balance now, will be entirely useless, and we shall within a few months—how many, it would be very difficult to say—be faced again with exactly the same crisis that faced us, a few weeks ago. We shall, however, he faced with it under much more serious conditions than we were then, for we shall have already borrowed and paid for a loan of £80,000,000 far the previous credit and will therefore be in a worse position to meet a new crisis.

The issue before the country is whether the method now being taken can save sterling at its present value. While some Members on the other side may bandy words as to whose fault it is and while it is very difficult to find among a multitude of causes the one most important, I must say that from all I have been able to find out about the subject, from everything that I have been able to gather from the statistical evidence, which is the most important, the real problem that we have to face is that we are a creditor country and that the countries that owe us money cannot afford to pay us at the present value of the pound. That is the fact from which nobody can get away by tariffs or anything else. It is the fact which Labour has to face as much as the parties on the other side. Our great quarrel—a fundamental quarrel—with this Budget is that it chooses the wrong way of dealing with that question. I do not want to talk about a bankers' ramp, since those words are so unpleasant to hon. Gentlemen opposite. There is, however, no doubt about the fact that the economic desires and the economic proposals of the leading banks are that we should get back to a state of financial health by bringing wages down to the level of prices.

You can find this running right through the banking literature of the world and the speeches of many of the experts who advise the banks, and notably the speech made to the Royal Statistical Society by Dr. Sprague, the American adviser in economics to the Bank of England. You can find it also in article after article right through the economic and banking Press of the world. There you will find the criticism that the economic blizzard is the result of falling prices for primary products, that the only way to deal with that situation is to reduce the cost of production, that the best way to reduce it is to reduce the level of wages, and that the great barrier to reducing that level is the system in Great Britain of unemployment insurance and the present level of insurance benefit.

Mr. GRANVILLE GIBSON

May I point out to the hon. Member that that is not the policy agreed to by every Member on this side of the House?

Dr. PHILLIPS

I did not say that it was the policy of Members on that side, but that it was the policy of the leading bankers in the world and the leading experts in economics who are the advisers to the banks. I do not know whether hon. Members opposite are experts in banking, but some of them who have spoken certainly are not experts in the economic questions with which they were dealing. I was speaking of the definite principles put forward and the proposals advocated by leading economic advisers to the banking world. They have said over and over again that the inelasticity of the British wage system was preventing industrial prosperity from returning, and this Budget carries out absolutely the principles that they have advocated.

Mr. MACQUISTEN

Are those principles right or not?

8.0 p.m

Dr. PHILLIPS

Look at the facts in regard to unemployment benefit. The sum involved is comparatively small unless there is something more to it than that sum—which would not of itself have been made part of the conditions on which Great Britain's position was to be assisted. It is impossible that any banks giving advice as to a loan would have said that a particular item that was so small in total compared to the whole as this item is, was an essential item, unless there were something more than the mere amount involved. There was something more, of course. There was the breaking down of unemployment insurance as a system, and the breaking down of the level of benefit which gave the unemployed person a possibility of living. But there is a great deal more to be said than that. I am asked whether those principles are right. They are not right. They are going the wrong way about it. You cannot get back to prosperity by ruining the consuming power of the people of this country. What is more, you do not by that means touch the real problem—the problem about which the financiers are getting anxious—as to whether the countries that owe us money are to be able to pay it. What has happened as a result of the very high value of the pound? We hear a lot about the balance of trade and very important it is, but the real fundamental cause of the balance of trade being against us is that the countries who are our debtors are having to pay us in goods, for they have nothing else, and with far greater quantities of goods than if the value of sterling had been different. I notice that the hon. Member for Smethwick (Sir O. Mosley) when speaking the other day, referred to us as being in pawn. It is really the other way round. Our trouble is that we are pawnbrokers, with a very large business, that we have an enormous quantity 0f goods in the shop, and that the people who put them there cannot even pay the interest that is owing in the normal and ordinary way of trade. British trade is in difficulties in the world to-day not because of the amount we are spending on unemployment insurance but because these assets of ours are beginning to look very doubtful assets, and there is nothing in this Budget which will help us to reassure the world on that point. The one thing that is reassuring to capitalism throughout the world is that Great Britain, which with her social services and unemployment insurance stood forth as an example to the whole world, is now retiring from that proud position. What we have done has given us stability through bad times; as the hon. Member for East Leicester (Mr. Wise) said earlier in the Debate, it has enabled us to maintain our home market. As regards the standard of life of our workers Great Britain had become an example to many other countries going through a period of depression. But now we have followed the bad example of other countries. We have said: "We will take the advice of the bankers and save the rentier at the expense of the working men and working women." And to what an extent we are saving them! Members of this House, from the very highest on the Front Bench to those on the back benches, have been trying to make our blood run cold, which mine does not always do, with pictures of the horror that would come upon us if there were a flight from the pound.

Mr. G. GIBSON

Does the hon. Lady deny it?

Dr. PHILLIPS

If the hon. Member will listen to me he will see whether I do so or not. I am perfectly ready to stand by everything I am going to say. The Prime Minister told us that had the Government not taken action at the exact moment they did by next morning the pound would have been worth only 10s. That was a statement without any real foundation of fact to hack it up. The value of the pound is not based on imagination. It is quite true that the sentimental romanticists who make up a good deal of the financial world are very easily overtaken with panic, but even they, however full of panic, could not have driven, the pound down to 10s. in a night.

Mr. SMITHERS

Yes they could.

Dr. PHILLIPS

And, what is more, they could not have driven it down in that way because of this very important fact. Though our assets abroad may be more doubtful than they used to be they are still of very great value, and our assets in this country are also of very great value. The financiers, the bankers, the people who deal in the money market, know that very much better than members of this House. We keep finance as a sort of closed mystery. Until now it has been. One of the good things done by the late Labour Government was the appointment of the Macmillan Committee. Their report has placed in the hands of everyone who will take the trouble to read it an analysis of the money market and finance which will be of the very greatest value in the coming General Election, because it will enable people to see at, last that what has been held to be a mystery is something which any intelligent person who will devote some time to it can understand. If people will study that report they will realise that the position of Germany when the mark fell, when there was that great period of disturbance and anxiety, was totally and utterly different from the position of this country at the present time. The dangers they had to face were totally different from any risks that we should have had to run. Of course, everyone would prefer to avoid any period of panic or difficulty, would like to see the pound maintain itself at a very high value, but we have to look facts in the face, and to consider whether we can maintain the pound at its present price, a price above its real value. The Prime Minister referred to the possibility, the certainty indeed, if action had not been taken at the moment when it was, of the pound going down to 10s. The hon. Member for Greenock (Sir G. Collins), who spoke later, was even more exact in what he said. He told us that in that night—well, I do not know whether it was one night only in which it was to happen, he may have given it a little more than one night. In any case I will give his exact words: It will be for Members of the Labour party to defend a policy which would have caused bread to rise in price by 3d. a loaf, meat by 4d. a. pound, sugar perhaps by 2d. and tea by 2d."—[OFFICIAL RFPORT, 8th September, 193]; col. 83, Vol. 256.] He had worked it out with an exactitude which, I am sure, would enable him to make a wonderful fortune by manipulating foreign exchanges. I could not understand by what possible method he gave us so exact a figure, but later in his speech we found that, after all, it was only the kind of vague, mysterious talk to which people are so much addicted when dealing with financial matters. He said later that bread would have risen to 1s. or 1s. 3d. Bread to-day is 6½d. a loaf. At one moment it was to rise by 3d., which would make it 9½d., and a little later he said the price would have been 1s, or 1s. 3d. That is the kind of inexactitude with which they try to frighten the people of this country, and try to frighten themselves, until poor women with pensions write and say that they are glad to give their sacrifice to this great and wealthy country! We ought not to stoop to such exploitation of the sentiments of the people! To talk of taking it with pride! Taking advantage of the ignorant fears of people who have scarcely anything in the world!

This afternoon the hon. and gallant Member for Bournemouth (Sir H. Croft) told us that unless we agreed to action being taken—I am not sure to what action he was referring—we would be in the condition in which Germany found herself. He took a note for 10,000 marks or a million marks out of his pocket and showed it to us. He said that would be our lot, and that those who did not agree with him were lunatics. If that is the type of financial discussion we are to have, it is not a case of regarding this House as a lunatic asylum; it will be more of a home for imbeciles. To believe that our conditions are comparable, in that sense, to the conditions which prevailed in Germany, shows ignorance to the last degree.

There is one more point I wish to make with regard to the fears about the pound. If we take the rise in prices quoted by the hon. Member for Greenock as an illustration of what would have happened had the Chancellor of the Exchequer and the Prime Minister not acted as they did, and compare them with the reductions in unemployment benefit which the Government propose to make, it will be found that an unemployed family, a man and wife, would be in just about the same position in either case. All the terrible things which we were told would happen if the value of the pound became less are going to happen if the economies which the Chancellor of the Exchequer proposes are carried out. Have we any right to say to the people that it is essential for them to make these sacrifices if at the same time we know that those sacrifices will have no effect? Have we any right to say that the people who have borne the sacrifices through all the years of bad trade are again to bear the greatest burden now? It is terrible to ask them to increase their burden when the proposals insisted upon by the bankers in order to preserve the pound cannot accomplish the object in view. We are told that we must not borrow any more for unemployment. We shall be lucky if we can borrow twice to maintain the pound. Is it very much worse to borrow in order to maintain the consuming power of your people, to distribute wealth among them, so as to keep the home market occupied, than to have to pay the 6 per cent, which we are paying on a loan in order to bolster up the pound? Would it not be better to face boldly the situation in the financial markets of the world? Not to say simply, "It used to be much better in the old days," but to realise that the old days have passed and that a new policy must be developed in order to meet the new conditions of the times.

Mr. OSWALD LEWIS

The right hon. Gentleman the Member for St. Ives (Mr. Runciman), who always makes an interesting contribution to our Debates when he speaks on financial subjects, referred this afternoon to the great difficulty of pegging the rate of exchange. The right hon. Gentleman referred to our experience during the War in regard to the dollar exchange, and pointed out that the same delicate, difficult, and indeed dangerous operation would be required to be performed not only in New York but in other financial centres in respect of their currencies as regards the pound sterling. I confess that I felt the weight of the argument which he brought forward in support of his contention in regard to that dangerous and difficult operation. There are many financial reasons that can be given in support of that argument.

The hon. Member for Sunderland (Dr. Phillips), who spoke with what I thought was somewhat remarkable optimism, told us that in her view the electors were going to read the Macmillan Report. I have read that report from cover to cover, and I confess that I found it very interesting, although it was very heavy going, and if 1 per cent. of those who read that report really understand it I think that will be a pretty good percentage. In arguing these questions as to whether the rate of exchange should be pegged, if we wish to carry conviction with the public we must find arguments other than the difficult and complex financial arguments which are to be found in the Macmillan Report. It is not really necessary to go into such deep waters, because there are several simpler methods which are more easily understood, and which will carry wider conviction. I will put one of those arguments before the Committee, and it is that we are not a self-contained nation. That is a state of affairs which, as the years pass, becomes more and more pronounced.

In the last 40 years the population of this country has increased by 45 per cent. During that period the proportion of the population employed in agriculture has steadily dwindled until to-day it is somewhere about 7 per cent. of the whole population. To-day we import four-fifths of the grain we need and three-fifths of the meat we need, and that is apart from raw materials such us cotton, wool and so forth which we import to carry on our industries. It would be difficult to maintain the food supplies of this country if the sterling exchange badly collapsed, and, even if our food supply could be maintained, it could only be done by making imported foodstuffs terribly costly to the people who have to buy them in this country.

Sometimes we hear about the danger of letting the exchange slump, and this point has been mentioned in the House and elsewhere. That argument is used by those who consider that the maintenance of our exchange is not, a matter of importance, but Germany and France allowed their currency to depreciate, and they suffered very greatly in the process. The people of this country who have not travelled widely in Germany and France do not realise the importance of the maintenance of the rates of exchange.

I would like to put before those hon. Members who are inclined to support that view that there is this great distinction between the position of this country and that of France or Germany. France and Germany can feed their own population and we cannot. If you built a wall round France to-morrow, and allowed no one to go in or one of that country for a year, you would find that the French population would be able during that time to provide themselves with food, whatever disorganisation society might suffer in the meantime. That is not true of this country. That is the principal answer to the argument that however much Germany and France may have suffered by allowing their currency to collapse they have come through it. In this country, we are not similarly circumstanced, because we are not able to provide ourselves with all the food that we require. Therefore, it is essential that we should peg the sterling rate of exchange as respects the dollar and other currencies of the world with which we are concerned.

On this point, I do not attach very great weight to the warnings which have been put forward by the right hon. Gentleman the Member for St. Ives, and, while continuing to support the policy of pegging the rate of exchange, we ought to do our best to remove, as soon as possible, the causes that make that operation necessary. By far the most important of those causes is the adverse balance of trade. The right hon. Gentleman the Member for St. Ives is well known throughout the country as a brilliant advocate of free trade, and I was surprised to hear him bring forward the suggestion that we should prohibit the importation of luxuries for the time being. It was a suggestion which I think was received with a good deal of favour in all quarters of the House. But I would go further. I would not merely restrict, or prohibit if you like, the importation of luxuries for the time being, but I would also severely restrict the importation of any article with which we can provide ourselves. I believe that if that were done it would have a very great immediate effect in strengthening our trade balance and removing one of the prime causes of the weakness of the pound in the exchange markets of the world. I would remind the Committee that this question of the importation of articles which we can perfectly well produce ourselves gets more critical and not less. One would have thought that the financial difficulties in this country would have automatically caused a shrinkage in the importation of manufactured goods of all kinds; but, if we look at the figures of recent months' trading, we shall find that any such restriction that there may have been is far over-shadowed by the restriction that has taken place in the importation of the raw materials of industry.

If we compare the first seven months of this year with the first seven months of 1929, we shall find that we have spent something like 49 per cent. less on raw materials, and only 24 per cent. less on imported manufactured goods. I maintain that that is the wrong way round. We do not want to restrict our importation of the raw materials of industry, but we do want to restrict our importation of finished manufactured articles. It is no use saying that the altered financial circumstances, the fact that people are poorer and so on, would have that effect, because the figures I have just quoted show that that is not in fact happening, but that, on the contrary, the tendency is the reverse. I welcome very much the declaration of the right hon. Gentleman the Member for St. Ives. I was very pleased to see the reception that it had in all quarters of the Committee, and I only hope that, as time goes on, in all shades of opinion there will arise an appreciation of the importance of deciding for ourselves at any rate the proportions in which we will import those things that we need and those things that we can perfectly well do without.

I would like to make one general observation on the Budget and on the situation described by the Chancellor of the Exchequer this afternoon. The emergency is a great one. I believe, with the Chancellor of the Exchequer, that the nation as a whole is prepared to face it. One of the most significant passages in the speech of the Chancellor of the Exchequer this afternoon was, to my mind, that in which he referred to the voluntary offers of help that he had had from all classes of the community, from the very poorest upwards. If there was one thing that was more remarkable than that passage in the speech itself, it was the way in which it was received in this Chamber. Those on this side cheered it; those on the opposite jeered it; and that was a striking illustration of what I believe to be profoundly true, namely, that broadly speaking we in this side of the House represent at this moment those persons in the country, in all classes of society, who are prepared to help their country in its hour of need at their own expense, while hon. Members opposite represent those who are only prepared to help their country at some one else's expense. I am glad to say I have every reason to hope that we represent a very much larger body of public opinion than hon. Members opposite.

Mr. ARTHUR LAW

From many quarters of the Committee to-day we have seemed to get the opinion that this is something of a surprise, but no student of social science is surprised at all, except at the fact that. the crisis has been delayed so long. There are certain features in the position of this country that do not apply to other countries. The War has played its part in making this question a crucial one in this country, while France, where there are hundreds of millions of pounds of war debts, is now one of our creditors. What is the position? In 1917, this was the only country that was financing the War. We borrowed nearly £2,000,000,000 from America to lend to France and other countries which were in alliance with us, and at the conclusion of the War we let them off five-sixths of their debt, but we are paying America 20s. in the £ with interest. The consequence is that we are handicapped with a debt which causes taxation in this country such as no other country has to bear. Roughly speaking, 50 per cent. of the money raised by our Chancellor of the Exchequer goes to pay debts, and that is the case on no other country. As a consequence we are brought together in a moment of so-called crisis which has always been hanging round us, but it has only just come to the surface so that we can see its head and hit it. I do not believe that anyone sacrifices anything if it merely means doing without something that you do not miss. To the man who loses 2s. 9d. a week if he is unemployed and married, or who has an extra 3d. a week to pay as contribution if he is in work, that sacrifice is more than anything that the Super-tax payer will have to bear.

As regards the teacher, I can see in my mind's eye one young boy whose parents struggled for many years to give him an education at a secondary school till he was 18 years of age, and then at college. They ran into debt to complete his education and give him a chance, and now he is to lose 9s. out of his £3, and there is no chance of repaying the debt that was borrowed in order to complete his education. That is a sacrifice; it is a sacrifice that will cause pain to the people suffering it; but I challenge anyone to say that any pain will be suffered by those who are bearing the sacrifice in the higher part of the scale of financial and social life. I cannot understand the attitude of many employers of labour, shopkeepers, and hon. Members of this House who own houses. They are expecting these people to pay their rents out of the lower incomes that they are going to receive. It would not be a bad idea if everyone who is bearing this sacrifice just knocked an equivalent amount off their rent on rent day for a few months, and let the landowners understand what sacrifice means. The shopkeeper will draw less money in his till, he will give less orders to the traveler, less orders will be given to the factories, and more people will be out of work. If that is a way to make a country prosperous, it is not a way in which I believe.

Much has been said about the balance of trade as between country and country, and when we sat on the other side of the House there ware three hon. Members who used to he continually questioning the Secretary of State for India as to when the tariffs were going to be taken off Lancashire cotton goods going into India. Tariffs have nothing to do with the ques- tion at all. If the financiers and Governments of the world would put the price of silver back to the original price, instead of deflating it from the point of 25d. down to 13d., while the 300,000,000 poor people in India receive the same coins that they got before but are only able to purchase one-half the commodities, the Lancashire cotton trade would boom again as far as trade with India is concerned. Half the mills in Bombay are closed. Some of them are owned by capital in this country and all the machinery in them comes from Lancashire. That would be one way of solving the problem of the balance of trade.

I was away on holiday when the Prime Minister broadcast his speech, which caused alarm in the little hotel I was in at St. Helier. He said that, although unemployment insurance benefit was to be reduced by 10 per cent., they would still be 1½ per cent. better off than two years ago because the cost of living had gone down. That was a direct incentive to employers of labour to reduce wages. It has happened. In Manchester only last week proposals have been made in many industries, and this week we have had pamphlets telling us that railwaymen are getting too much money. The crisis is not merely a financial crisis. It is a, crisis of the system under which we live which cannot be solved in existing circumstances. I should like to read a paragraph from Lloyds Bank Monthly, and surely no one can question the authority of such a journal. We are still fared with the main problem. How are we to escape from the difficulties that. result from the present lack of balance between tire world's power of production and the world's capacity for consumption? Superficially such a lack of balance seems absurd. The producers et wheat have bigger stocks then they can dispose of, yet simultaneously there are millions of people in the world, especially in India and China, who are unable to get as much bread as they would like to eat. The same contrast applies to manufactured goods. Cotton mills not only in England, but in other countries, are producing more cotton cloth than they can profitably sell. Meanwhile, among the poorer classes all over Europe there are myriads of men and women and children insufficiently clad. This article asks how is a better adjustment to be secured. That is the whole problem from which we are now suffering. It is a problem of fitting in production with the power to consume at the other end. If the amount of goods produced is more than the spending power of the world, the only way to solve the problem is to bring about equilibrium by lifting up the spending power to meet production at the other end of the scale. Surely, it is rank suicide for an industrial nation further to contract the purchasing power of the people when the production side is going up by leaps and bounds—rationalisation, labour saving machinery, and various other inventions at work to make production higher and higher each year and contraction in wages at the other end. That is the way to ruin. The only solution of our problems is to bring the purchasing power of the people somewhere near the level of the power of production.

It is all very well to make a jest about this line of reasoning, but the present system is bankrupt, whether you like it or not. There are 10,000,000 unemployed in the United States; in Canada there is a large supply of wheat still in the warehouses not being sold, and in the United States cotton is being dumped back into the earth. In this country there are a couple of millions of men and women willing to work and you cannot find them work, simply because they have made too much. It would suit my case to go to the country on the proposal to reduce unemployment pay. I want an election before the winter. I do not want to be driven into an election in mid-November or December, when the nights are dark and it is raining. I should like an election next month to test the question whether the people of this country are in favour of the Government's proposals or not.

Mr. G. GIBSON

I have listened with very great interest to the hon. Member's speech. I assure him that I always view with a great amount of misgiving any indications of a reduction in wages or in the standard of living, but there are difficulties that are being faced not only by the working classes. Those of us who are engaged in industry are facing a terrible struggle day by day. There are many in the north of England who year by year, in season and out of season, have been struggling against circumstances and conditions which we find almost overwhelming. I consider that this Budget is an exceedingly courageous one. It will not prove pleasant reading to the majority of the people to-morrow morning. Naturally one expects that whenever there is an increase cf taxation. At the same time, I am pleased that the Income Tax has been spread over a larger number of people.

For many years I have held firmly that every householder should he a ratepayer directly and not indirectly, so that he should recognise his responsibilities in the area in which he lives. In the same way I hold that it is for the good of the country that you should spread taxation directly rather than indirectly over as many of the people as you can, so that they will not be in such a great hurry, when election time comes round, to press their Members and candidates to go in for additional expenditure when they themselves have no direct financial responsibility in meeting it. As a result of the extension of the, incidence of Income Tax throughout the country to many thousands of our inhabitants more people will realise their financial responsibility in the country, and they will not be so ready in desiring extra expenditure to be incurred by the National Government. In my opinion, the present condition of the country is due to two reasons. The first is that we have not a balanced Budget, and the second and more important, is that our imports, more particularly in respect of manufactured goods, have been exceeding our exports.

Mr. HAYCOCK

How long has the excess of imports over exports been going on; how many years?

Mr. GIBSON

As far as one is able to ascertain, the excess of imports over exports has only come about within the last few months. As one who exports goods to 25 or 26 countries in the world I have realised that the difficulties have been increasing—a fact which hon. Members on the other side do not appear to be ble to appreciate—with regard to duties and tariffs put against me in every country with which I do business. Unless manufactured goods from abroad are purchased in reduced volume in the future there is no prospect, and cannot be any prospect, of improvement in this tour try, and nothing can prevent this country from going from bad to worse, from disaster to disaster, unless we pre- vent millions coming into this country year after year of pounds worth of manufactured goods which we can efficiently manufacture ourselves.

This afternoon the right hon. Gentleman the Member for St. Ives (Mr. Runciman) once more told the Committee that he was still a Free Trader, and at the same time he advocated, quite openly, that with which we on these benches entirely agree, namely, the prohibition of many goods which may be regarded as luxuries, and which, I believe, the Press has referred to as silk goods, watches, clocks, motor cars, wines and so on. Those of us who sit on these benches and are in favour of Tariff Reform agree with the prohibition of the importation of goods which we can manufacture. That is carrying out Protection to the most extreme point. The hon. Lady the Member for Sunderland (Dr. Phillips) stated that we are not discussing tariffs to-day, but the Budget and the flight from the pound. The right hon. Gentleman the Member for St. Ives dealt with the question of the flight from the pound in an excellent and impressive way, but to-day we must discuss the question of tariffs, their incidence, and their effect upon industry in this country.

The future prosperity of this country is indissolubly bound up with the imposition of tariffs upon goods manufactured abroad which can efficiently and economically be manufactured in this country. Why should I have to go to foreign markets of the world, as I do during the year—during the Recess I have been in Northern Europe—searching for business and find that in those countries I have to climb over a tariff wall, while they themselves can send to this country goods, which are manufactured under conditions and wages far worse than those which obtain in this country, free of duty. The hon. Lady the Member for Sunderland stated that we cannot get back to prosperity by ruining the working-class. I have stated time after time in my constituency, and I shall do so time and time again, that as long as we remain a Free Trade country there is nothing to stop wages from coming down.

Miss WILKINSON

Will the hon. Gentleman explain, if that is true, why it is that German wages have always been at a lower level than English wages?

Mr. GIBSON

Just as in Germany, Czechoslovakia, Poland, Belgium, France, and in Italy the standard of wages is much lower than that in this country, I might as well say that there are other Protectionist country, such as Australia, New Zealand, South Africa, Canada, and the United States, where the wages are the highest in the world. [Interruption.] I am stating that we are adversely affected because most of the goods with which we find it difficult to compete are coming from Continental countries where conditions of wages and labour are worse than those in this country. Last night a woollen manufacturer in the West Riding of Yorkshire came to see me at the House of Commons. He was very depressed indeed. He said that ho had spent the whole of the day travelling around London seeing nearly 20 old customers and had not received a single order. He told me that his mill is situated in Leeds and normally gives employment to 500 or 600 persons. The other day 15 cases of cloth were delivered to a clothier in the yard where his building is situated. That cloth came from Italy and had been manufactured in the main by labour subsidised by the Italian Government, against which no woollen manufacturer in this country has the slightest chance of competing. Is there any wonder he did not get orders? It is because of the fact that merchants in London—the only people who stood out against the granting of Protection to the woollen industry—are to-day buying most of their cloth from Italy, the manufacture of which is subsidised by the Italian Government. I claim that British industry should have a fair chance. This can only be done along the lines of prohibition or by Protection. In my opinion Protection for revenue purposes is only camouflage. We want Protection, not for revenue purposes, but in order to keep goods out of the country so that. our people can make them here and we can pay wages to our own people.

I was very pleased to notice that the Chancellor of the Exchequer, in his statement, referred to a concession to industrialists in regard to increasing the amount allowed for depreciation by about 10 per cent., and also to concessions which will be made in respect of obsolescence of machinery. The various Chambers of Commerce throughout the country, and the Associated Chambers of Commerce in London, with which I am personally connected, have been putting the point of view of some allowance for obsolescence of machinery before the Chancellor of the Exchequer for many years. It is a step in the right direction, and I believe that it will have a very beneficial influence in inducing many manufacturers, who have had to repair and patch up old machinery, to put such machinery on to the scrap heap and to buy new machinery. This will help the makers of machinery because larger purchases will be made in the future. I am satisfied that to the industrial community this w:11 be very encouraging news.

There is one thing which I am exceedingly sorry has not been introduced today, and that is the question of the imposition of a licence on travellers who come to this country. If I go to Norway on a business trip I have to pay £5 for a traveller's licence. If I go to Sweden I pay £5. If I go to Finland, I pay £20, and if I go to Denmark I pay £20. Why should our travellers have to pay these large amounts on going to those countries, when thousands of travellers come to this country without having to pay anything for similar privilege. It is estimated that if these licences were charged against travellers coming to this country we could quite easily raise over £1,000.000 a year. There would be no difficulty in obtaining the money, and the work could be done through the Post Offices and licensing authorities. I hope that on future occasions this matter will be taken into consideration.

It has been an exceedingly difficult task which the Chancellor of the Exchequer has had before him, but he has faced it courageously, and those who sit on these benches will fail in our duty not only to the House but to the country if we do not support him in the Measures which he has placed before the House to-day, and in doing all that is possible to see that the financial burdens which this country must bear in the immediate future are shared as fairly and as equitably as possible by all sections of the community, irrespective of the section with which they are connected.

Mr. JAMES HUDSON

The Chancellor of the Exchequer, in the opening of his Budget speech, referred to the distasteful character of the task that he has to perform. Perhaps hon. Members will agree with me that my task is also none the less distasteful. During the 25 years association with the Chancellor of the Exchequer I do not remember any important occasion until now when I felt it necessary to deviate from the line that we took. I have found it necessary to leave it at last, because I think that he cannot carry out in association with the hon. Gentlemen who are now with him, by the very nature of that association, the task that he has set himself to carry out. He has faced that task with tremendous courage. I doubt whether any other man in this country could have accomplished what he has done. Without trying to make too much of a party point, I doubt whether any man in this country could have got the party opposite, including as it does the hon. and learned Member for Argyll (Mr. Macquisten) and the right hon. and gallant Member for Burton (Colonel Gretton) to sit quiet and apparently complacent while he put a tax of 1d. on beer. I want to offer the Chancellor of the Exchequer my thanks and congratulations that he has been able to accomplish so much.

9.0 p.m.

The Chancellor of the Exchequer and his colleagues in the late Government are endeavouring to secure the stability of the pound and, in the long run, their success will be judged by that. They are also endeavouring to secure in the Budget that has been introduced the imposition of sacrifices on the shoulders of the people in such a way that all bear equally their sacrifice. History will prove whether they have succeeded or failed in the stabilisation of the pound. In practically all the speeches made from the opposite benches this afternoon there is little indication that hon. Members believe that the Chancellor has succeeded. The right hon. Member for St. Ives (Mr. Runciman) said, quite clearly, that other very serious steps have to be taken that are diametrically opposed to his fundamental principles in order to secure a more permanent stability than that which is at present secured. I must leave that matter to the judgment of history. All I can say is that, if equality of sacrifice is to be the rule in the burdens now imposed, it certainly is not there.

It has been denied that there has been pressure from outside in the way that it was laid down that the last Government should make their financial proposals. I only know that at this moment every financial interest and every political interest in this country instead of concentrating, as they pretend to concentrate, behind the Chancellor of the Exchequer in his national effort to meet an immediate crisis, are all grinding their good old axes. We have had hon. Member after hon. Member saying little about the terms of the Chancellor of the Exchequer's Budget, but everything about tariffs and the necessity of going on with the policy that they have been standing for for years. Then we have the Federation of Retail Traders laying it down that now is the time to enforce burdens on the cooperative movement. Wherever there is a chance to bring up the old demands, this national emergency is being used as the opportunity. There is a steady determination an the part of these interests both now and in the immediate future, to secure the things that we have stood for for so long, quite apart from the necessities of the immediate situation or of the end which the Chancellor of the Exchequer has set himself to secure.

Take the question of the unemployed. For many years the Chancellor of the Exchequer has done admirable service in leading the public opinion of this country to the development of a saner attitude regarding the imposition of burdens upon the various classes of the community. In my judgment he has done more service in that matter than any man in our time. I have come to understand, under the influence of his teaching and guidance, that there comes a point in a man's income below which you cannot impose any State burden at all; that is, if you are to retain the efficiency of the worker and ultimately the efficiency of the community.

When an employed man becomes unemployed he has paid an infinitely greater sacrifice by that very fact than any sacrifice hon. Members opposite are going to bear under this Budget. At the last election we all said that we were going to do something for the unemployed; we all had our schemes, and, if the number of unemployed is greater now, it is because we have all failed to do our duty in the matter. He is in that position through no fault of his own, and what bigger sacrifice can you expect of him than the one he, has already made? All parties have been compelled to admit this, for every party has made its insurance arrangements adequate or inadequate. The Labour party, although prices have been falling, as the Prime Minister reminded us, has deliberately increased the pay of the unemployed because we frankly recognise that they have made a tremendous sacrifice which was neither good for them to make nor for the community that they should make; and we have insisted upon bringing them a little nearer to a standard by which at least they could save themselves from actual penury. Now it is announced that an extra 10 per cent. is to be placed on Super-tax payers, not another 10 per cent. on their income, but 10 per cent. on what they pay; a good deal less than 10 per cent. of their income, and an extra sixpence on the Income Tax, much of which will probably go back to them under the special exemptions which are being made. I think that the unemployed men are paying far in excess of 10 per cent. on the meagre incomes which we have been allowing them.

Although the Chancellor of the Exchequer must have fought manfully to secure what he has secured, although it must have been a great struggle for him to be able to come here without taxing the food and comforts of the people, still it is true to say that he has failed, as he was bound to fail while in association with members of the party opposite, in getting a fair deal as between the unemployed on the one hand and those best able to bear the burden on the other. There is also the question of the classes in between, which must be looked at a little more closely. I have no doubt that as the discussion goes on arguments will be bandied about as to what my hon. Friends committed themselves while in the last Government and what is now being proposed in the present Budget. Taking the case of the teachers alone, who will now pay, man and wife, on an income in excess of £150 a year, as other classes will pay, and who in addition will get a reduction in their salaries of an amount which we do not yet know, but which is indicated by a 15 per cent. drop in the grants for which the Government will be responsible under the Burnham Scale, they are going to pay infinitely more than the Super-tax payers; and it is unfair that they should do so.

The proposals of the Budget, therefore, do not carry out the simple principle of the Prime Minister's appeal in his broadcast speech, and while it is utterly distasteful to me I must say that I cannot give any sort of support to that part of the Chancellor of the Exchequer's Budget which leaves the burden so inequitably distributed, as I believe it is and as I believe it will be found when the details come to be worked out. I hope the Committee will agree that I have spoken with care and moderation. I desire to add no difficulties to the terrible task of the Chancellor of the Exchequer. I can only pray that he will be there for but a short time. One hon. Member opposite said that he entered into the discussion with great trepidation to support a Chancellor of the Exchequer whom he had opposed so long. I am certain that the Chancellor of the Exchequer will read with great trepidation some of the speeches which have been made, and he will feel that the shorter the time he spends there the better for the good of his soul and the good of the country.

Mr. ATKINSON

I am not going to discuss the details of the Budget proposals except to say that for my part I sincerely sympathise with what has been said about the position of the teachers. The proposals as regards the teachers need very careful consideration. We are engaged upon an effort to secure the stability of the pound and I am convinced that the first act in the drama in which we are now engaged will not secure that result unless we can also find means to deal with what seems to me to he a most terrifying situation, and that is our adverse balance of trade. The reason for it is not far to seek. The liabilities of a State at any moment can be classified under two heads, the liabilities in respect of its paper currency and the liabilities to its foreign creditors. On a pound note the Bank of England engages to pay the whole of that pound on demand, and the value of that note depends absolutely upon the certainty of the Bank of England being able to pay. If people begin to have any doubt on that point the pound note begins to lose its value. It is not only that the people who hold the pound note should have confidence in the value of that note, but also that those people to whom they wish to pay the note should have confidence in the value of the note as well. You must have perfect general confidence in the value of that pound note if it is to be of any good. As to our foreign liabilities, they are payable in gold, but no State at any one time has sufficient gold reserves to be able to discharge its liabilities. This country is worked upon a percentage of some 27 or 28, and one only has to state that fact to see that if everyone demands payment by the Bank of England in gold, in respect of any issue, the bank cannot pay.

What is it that has caused our foreign creditors to begin to withdraw, and withdraw in gold, the indebtedness of the Bank of England to them? Of course it is our extravagance and the fact that we were not balancing our Budget. If one sees one's neighbour spending twice his income one at once loses confidence in his ability to pay his debts. So our gold reserves have been depleted. Others began to lose confidence too, and if that had continued we should have had a run on the banks such as we have seen recently in Germany. Then the country appealed to France and America for credits there, to enable us to discharge these calls without having to shift gold, and those countries naturally said "The world is losing confidence in you. We are not giving you credit unless you set your house in order, and do something to balance your Budget and put an end to this flow of gold from the country. But if this flow of gold were to continue owing to some other cause you would get precisely the same result. That is why the adverse balance of trade is to me so serious.

Only two years ago our exports of manufactured goods were double the value of the imports of manufactured goods. This year the imports of manufactured goods have exceeded in value the exports of manufactured goods. What does that mean? We used to rely in the main on our exports to pay for our imports of food and raw materials. Of course we were helped by invisible exports and the services that we rendered, but in the main we paid by the export of our manufactured goods. Now they are only just enough to pay for the imports of manufactured goods. How then are we to pay for the food and raw materials that are imported? At this particular time when one would wish to be importing less food if possible, we are importing more. If we compare July of this year with July of last year the official figures show that we imported during the month 118,000 tons more wheat than we imported last July, 18,000 tons more barley, 28,000 tons more oats, 13,000 tons more butter; and in the first seven months of this year, compared with last year, 10,000 tons more chilled beef and 56,000 tons more bacon, and so on. In other words, although we have less therewith to pay for imported food, we have been importing more food than ever before.

What must be the inevitable result of that? The right hon. Member for St. Ives (Mr. Runciman) pointed out that the moment the exports of manufactured goods and services and invisible exports cease to be enough we have to pay the balance by exporting gold, and as long as we have that adverse balance of trade there will he the flow of gold from the country. You may stop one flow of gold due to one cause, but that is not going to get you out of your difficulties until the balance of trade has been restored. Free Traders say that they do not believe in tariffs or in doing anything that will prevent the inflow of goods. But, one speaks to many of them, and asks them how they are going to deal with the situation in any other way. For my part I have never heard a single suggestion made for dealing with the matter, apart from some form of prohibition. We had the interesting conversion tonight of the right hon. Member for St. Ives, who advocated the prohibition of the import of luxuries. The reasons that made him advocate that policy, if logically followed, ought to have induced him to go the whole distance and to propose a duty of sufficient size to prevent the imports of goods which we could manufacture here.

I heard the question asked to-night, are wages in Germany and the protected countries higher than or lower than those paid here? The wages in Germany are lower than ours at the moment, and one very good reason for it is that the Germans are so heavily a debtor country that they are forced to export, goods at any price, and compelled to force down wages so that they can sell those goods. But, the question always seems to me to be an idle question. It is possible to point, to protected countries where the wages are higher than those paid here. Does, anyone suggest that if France became a Free Trade country her wages would go up? Of course they would not; they would come down. One knows perfectly well the disadvantages we are at. We have a higher standard of wages because we were the first in the field and were for so long manufacturing for the world, and with our superior skill and with the advantage of coal and shipping and the like we could afford to pay higher wages and still hold our own. But to-day, when other countries are able to do just as well as we can, we cannot hold our own with an open market and still maintain the same standard of wages.

One has had in one's profession close touch with industry at many points. In the worsted trade inquiry it was amazing to hear the evidence about the wages of our competitors. The sole reason why France could undersell us here by some 35 per cent. with the utmost ease was that her wages were only 50 per cent. of the wages paid here. Suppose that someone imported 10,000 Japanese into this country and started them at spinning and weaving cloth, and paid Japanese wages, which are one-quarter of the wages paid here. There would be an outery and the place would be wrecked, and the scheme would be described as a, gross attack upon the standard of life here. The Japanese would be turned out of the country. But they have only to go across the sea and do there what they have been doing here. That would be just as gross an attack upon our standard of living as if they were working here. You can only put that matter night and maintain our wage standard here by doing something to protect our industries and to keep out the more cheaply, manufac- tured goods. What other remedy is there for rectifying the position?

It is a situation the seriousness of which cannot be too much emphasised. To my mind it is something which must be dealt with without delay. Until it is rectified, until we have a surplus export of manufactured goods to pay for the food and raw materials that we must have, how are we to stop the exports of gold and prevent ourselves living upon our capital? The two matters really stand together. I know that to-day we are dealing only with the first chapter of the book. But it is not sufficient to think that when we have done that we have solved the whole problem. Those hon. Members who do not yet see the necessity of doing something to prevent our buying from abroad the things which we ought to be making here, should, till they can suggest some other remedy to achieve the same end, try to keep an open mind on this question of tariffs. Let them not close their minds until they can suggest some other course of action for dealing with matters which are of the very greatest importance.

Lieut.-Commander KENWORTHY

I enjoyed the speech of the hon. Gentle man. He made some very remarkable statements in very moderate language. I only hope it was equally enjoyed by hon. Gentlemen of the Liberal party. I hope they have enjoyed the whole Debate. I hope they realise that the Chancellor of the Exchequer, with his obstinacy and stubbornnes in sticking to his rigid, orthodox Gladstonian principles, has been the real cause of our undoing and has paved the way for an old fashioned Protectionist tariff Budget in the Spring unless the country is saved from that by the Labour party.

I have listened to the whole of the Debates for the last three days. I want hon. Gentlemen to clear their minds, if they will, of many of the things that have been said, and to realise what has been the cause of the trouble. There is no difference of opinion on this side of the Committee with regard to the balancing of the Budget. I hope hon. Gentlemen will understand that. I do not know why my hon. Friend the Member for Lichfield (Mr. Lovat-Fraser) does not realise the narrowness that divides us on this point. There is no desire that we should tumble off the gold standard. If we go off the gold standard by a revaluation of gold, we ought to do it by international action under rigid control, in order to get back to the 1929 price level as is recommended in the Macmillan Report. The little difference on that subject that exists is a matter for discussion in a calm atmosphere, and not for passion or interruption. What has really led to this change? How is it that hon. Gentlemen, in a solid phalanx, stood up and cheered the Chancellor of the Exchequer to-day because he reeled off a few hackneyed lines of super-patriotic poetry? Why does the Financial Secretary find himself over there again after his short absence from the Treasury Bench? Why is the Minister of Agriculture the distinguished Conservative gentleman whom we see there, instead of my right hon. Friend the Member for Swindon (Dr. Addison)?

What has been the cause of it? Simply this, that when it came to balancing the Budget there was a dispute as to the way in which it should be done and attempts were made to dictate how it was to be done. I have discussed this matter with Members of the present Government and with Members of the Cabinet of the late Government. I have taken the most careful soundings everywhere, and it is perfectly obvious to me that what happened was that we found ourselves in the situation in which our foreign creditors had taken seriously the propaganda meant only for domestic consumption—they have not been reassured by the speeches that we have heard to-night and on Tuesday from the Treasury Bench. I think the Debates have been an illustration of black pessimism, and the speeches that have come from the Treasury Bench have been scandalous in their defeatism. The only gleam of light in the darkness was the speech of the Financial Secretary to the Treasury, who was brave enough to quote from the Macmillan Report to the effect that the country's position is fundamentally sound. As I was saying, our foreign creditors took all this propaganda against the Labour Government seriously, and our timid bankers, as usual, got into a panic. They went round to Downing Street as they did in 1914, when they went to Mr. Asquith with tears in their eyes and said to him:

"You must stop this War. Think of our investments in Germany." Mr. Asquith sent them about their business, and that is what the present Prime Minister should have done. Apparently they said to him: "We and our foreign lenders must insist upon deciding how the Budget is to be balanced." That is the point.

I want hon. Gentlemen to consider another alternative that might have happened. Instead of insisting, as they did, and as we know they did from the speech of the Home Secretary, on cuts in the unemployment insurance benefit, suppose they had taken another line. Suppose that, instead of fastening on the Unemployment Insurance Fund, they had done another thing, not at all an unlikely thing, and had said we must make heavy cuts in armaments. Suppose they had said: "We will not help you, although we do not want the pound to tumble off the gold standard and that will affect all other countries very much, because we think you are spending too much on armaments." There is a Quaker President in the United States of America, and a very strong pacifist movement at the present time. They have a much larger deficit than the one which is supposed to have created the impression described by the Chancellor of the Exchequer to-day. There is a strong movement in America for the reduction of arms. Suppose the foreign bankers had said: "You must give us an earnest, of your intention. We think you should make a heavy cut in the expenditure on armaments and weapons." France, who has always found our Navy inconvenient, might very well have said the same. We all want to reduce armaments and they could have insisted on England leading the way. Suppose the Government had given way, as the Prime Minister wanted the then Government to give way on the question of insurance. What would the Conservative party have said then? They would have been singing "Rule, Britannia," all over the country.

That is not a fanciful picture. If you give way to the improper pressure of outside forces who have been put in the temporary position to dictate in matters that concern this sovereign House, where is it going to end? Another proof that that is not a fanciful picture is that when the French were discussing with the German Government. the provision of credits for Germany, they tried to insist upon the cessation of the building of pocket battleships. What would hon. Gentlemen of the Conservative party have said if such a demand, and not an unreasonable demand according to Government apologists, had been made upon us? It was upon a question like that that the split occurred in the Cabinet which has led to this extraordinary change in the position of the parties in this House. For my part, I am glad that so many Members of the late Cabinet, and of my party, realised the fundamentals of the situation. But the present Government have given way to this dictation. The Chancellor of the Exchequer, the "Iron Chancellor" of The Hague—I am glad he has come into the Committee—against his own desires has had to propose a cut, as he told us this afternoon, in the unemployment benefit, at the dictation of foreign financial interests, because they said they could not raise loans unless that was done. They did not dictate to him. I see that the Chancellor of the Exchequer agrees to that. They said they would not float the loans unless unemployment insurance was reduced.

I have given a perfectly fair account of what has been told us by the Prime Minister and by the Home Secretary, and it is admitted. The Government have been blackmailed once. Suppose the Government cannot save the pound. I would ask them: "Are you certain you have saved it?" If the pound will survive the speeches that we have heard to-day and on Tuesday it will survive anything. Suppose they have to go cap in hand again to Wall Street and Paris; what, will be the conditions then? When will dictation end? We had hackneyed verses of alleged patriotism from the right hon. Gentleman and he got the cheap cheers of the Tory phalanx. But those who really love their country are on these benches, and the country will rally to us.

Mr. McSHANE

I shall not begin my speech, like the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) by saying that I propose to speak very temperately and to say nothing provocative. I shall not try unduly to restrain what I have to say with regard to this Budget because I think that it marks not only a crisis but an epoch. The general effect of the Budget on the whole country will be one for which we cannot find a parallel within the last 100 years and when tomorrow, and as the months pass the middle class and the working class realise the sacrifices which they are being asked to make, for some extraordinary reason never explained to them, there will result such an agitation as it will be very difficult to control. When winter comes with its cold and rigours and when the unemployed in their desperation are driven to demonstrations and protests against it there will be, I suppose, the inevitable bludgeonings of those men.

I agree with the last speaker from the Conservative benches that even if the pound is made safe we are only at the beginning of the solution of our difficulties, and I wish in that, connection to point out one or two significant facts. The first is that the Labour Government, with all its difficulties, did make somewhat of an honest attempt to deal with the question of unemployment. I think that most men and women who have studied the matter dispassionately would be prepared to say so. It may be that they did not introduce tariffs. The cries that come from the United States, Canada and Australia and Germany to-day are ample answer to the question of whether tariffs in themselves are going to be of any real effect. I say the significant thing is that they did make some attempt to deal with it. The number of unemployed has increased in this country, has increased in the United States and has increased in Germany, and all over the world most countries are in difficulties infinitely greater than they have ever been in before, economically. That is a plain statement of fact. I wish, therefore, to see if I can contribute something to the elucidation of the difficulties which are at the root of this matter, and I refer hon. Members to the Strakosch Memorandum which was published last year. It is entitled, "The Economic Consequences of Changes in the Value of Gold," and it starts from the fact, which is accepted by most economic authorities that the world trade production has increased during the last 50 years at the rate of 3 per cent. per annum and that during the same period world population has only increased at the rate of 1 per cent. per annum. Before I quote from the memorandum may I point to the paradox often mentioned in the House of Commons of the extraordinary wealth being produced on the one hand, and the poverty stricken condition of millions of people on the other? On that the memorandum says: There is a superabundance in nearly three-quarters of the various kinds of raw materials which the world needs currently; there is an anxiety of the producers of each of these materials to exchange them for others and yet they are not exchanged. We are, in these circumstances, entitled to conclude that these exchanges failed to be made, not because goods generally were in excessive supply but because the process of exchange was in some way impeded. And if—as is the case—there are no observable impediments of a physical or moral character the theory of over-production fails and we are driven for an adequate explanation to the only remaining factor affecting the process of exchange, namely, the adequacy of the amount of money that is available to effect these exchanges. I wish to emphasise that point because of another quotation which I propose to give from Professor Gustav Cassel. The essential difficulty, as the Strakosch Memorandum points out, is the question of the adequacy of the amount of money available to effect these exchanges. I put a question on this subject to an eminent banker whose name I am not at liberty to give, and before I state what that question was, I had better explain the difficulty which impelled me to ask it. The theory of the Treasury and the Bank of England, the theory expressed by the right hon. Gentleman the Member for St. Ives (Mr. Runciman) on behalf of the Liberal party and also expressed by the right hon. Gentleman the Member for Epping (Mr. Churchill) is that there is a limited pool of credit, and if you take from one source in order to set men to work in another area, you will put out of work as many men as you put into work. The right hon. Gentleman the Member for Epping brilliantly enunciated that theory last year and that is a generally accepted view.

I asked this eminent banker, was it true that as years went on there is an ever increasing supply of goods on the one hand and that that limited pool of credit remained limited on the other. I asked him was it not true that as the increase in goods went on each year, those goods had to compete with each other in order to be sold in the limited pool of credit, and the reply of the banker—and if I were at liberty to quote his name I am certain that his view would be listened to with interest—was "I think there is a very great deal in the point that you have made, but how to overcome the difficulty of extending credit with extending production of goods is too much for us at the moment." I shall pursue that point a little further, and I wish to quote from an article in a magazine "The Bank Officer" of December, 1930, by Professor Gustav Cassel, the famous Swedish economist. Professor Gustav Cassel throws the whole of the onus of this world wide depression and all the suffering that it has entailed upon the policy of the financiers during the last few years. He is speaking of what we frequently call consuming power, but what he calls the world supply of means of payment, and he says: The world supply of means of payment, however, has in recent times considerably diminished, and the inevitable consequence has been the forcing down of the prices of goods which we see to-day. In the face of these facts it would appear impossible to maintain the opinion that the world supply of means of payment has been adequate and that finance bears no responsibility for the fatal turn which economiic development has taken. With the indulgence of the Committee. I should like to quote further: The very varied difficulties which have affected the economic life of the world can be adduced more justly as independent causes of the depression. But it is rather difficult to recognise the adequacy of those causes, for the majority of those difficulties were already present during the good years through which the world passed before the present crisis.…Even the mistaken attempts to regulate the market in rubber, coffee, and a few other world articles, failed to hold up the boom.…That factor is, in fact, none other than the general tightening of the supply of means of payment which began when, in 1929, the Federal Reserve System restricted credit, merely in order to check. speculation in bonds in New York, and which was further aggravated when during the following period France accumulated enormous quantities of gold.… The responsibility of the leaders of the world's financial policy for this catastrophic development is, in fact, so frightful that it is easy to understand the zeal with which the central banks deny all power to influence it. In spite of that, however, it is an established fact that the supply of means of payment constitutes an independent factor in economic life and that the manipulation of that factor entails a certain responsibility. Attempts are frequently made to relegate this central fact to the background by the emphatic representation of the control of prices as an automatic mechanism which must not be interfered with by any deliberate action. I have quoted that for this reason, that the modern paradox, which neither Free Trade of itself nor Tariff Reform of itself will in the slightest way affect, the paradox of superabundance on the one hand and lack of purchasing power or, the other, is, to all thinking men and, women, the very heart and core of the difficulty. Professor Gustav Cassel attributes the breakdown in that, the lack of the bridging of the gulf, as the right hon. Member for Epping calls it, to the wrong policy that has been pursued by the banks.

I want also to deal with another cause of this particular crisis. I have here, following much on the same lines, a quotation from the economic and statistical department of the British Electrical and Allied Manufacturers Association, and they significantly enough say this: The cause of world depression is attributed to the fall in commodity prices which has been the consequence of international gold movements. The international working of the gold standard has been rendered impossible by reparations and by the American debt settlements. The United States and France between them have absorbed the equivalent of the world's production of gold since January, 1925, and have deprived the central banks of £50,000,000, all of which was money required to finance the consumption of goods by the great primary markets and to keep trade active. Last of all, to go back to the Strakosch Memorandum: In the ease of America, the Argentine Republic, and since 1928 of France, these countries have accumulated gold reserves far in excess of their reasonable needs. It says, further, that since a great deal of that gold is sterilised, in fact it amounts to this, that the consuming power that ought naturally to be utilisable from that is also sterilised.

I want to deal with three short points further. The hon. and gallant Member for Central Hull laboured very acceptably the question as to whether or not there was dictation, and we have heard in this. House a good deal of denial that the banks do exercise undue power. I have here a quotation from a speech made by the new Minister of Education at New-quay, on the 28th of this month, emphatically denying that the present crisis was manufactured through bankers' manoeuvres. He said further: There is nobody in the country who can give a more emphatic denial to that allegation than I oan, because it fell to me to he not only in daily, but hourly, touch with those splendid men who are shaping the destinies of the nation at this juncture through that great national institution, the Bank of England. I have quoted the power that these men have, and so it is only fair that in juxtaposition to that power I should also quote something about the ability of our financial experts: City of London finance has utterly wasted more of our resources since the War than the Chancellor requires. The Macmillan Committee found that in one year—1928—the City of London had floated 284 companies, for which the public subscribed £117,000,000 of capital, and by May, 1931, the total market value of the investments was only £66,000,000—a loss of 47 per cent. of the money invested. Seventy of the 284 companies had been wound up, and the capital of 36 others had no ascertainable value. That is stated in the Macmillan report. I take this view as to one particular point in the Budget, and that is the 10 per cent. reduction of unemployment pay. An hon. Member opposite regretted that there should be any indirect taxation at all and looked forward to the day when there would be only direct taxation. The right hon. Gentleman the Chancellor of the Exchequer is helping him. He has imposed a direct tax upon the men and the women of this country who can least afford to bear it, so that he has already made a good beginning. I submit that the attack on unemployment benefit is a symbol. In many of the mining areas to-day, unemployment benefit in its total is close on the wages that some of those men receive, and it is an essential part of the attack that is going to be made on wages, and that is already being made on the teachers' wages, that unemployment benefit has to go down first of all, in order to leave room for the others to be brought down too.

I listened, at an Empire Labour party meeting one night, to the President of the Council of West Australia and another colleague of his from Australia describing the efforts being made for Australia to balance the Budget. He described the taxation that they have introduced, direct and indirect, he described the economics that they have made in social services, and he described in detail the most drastic sacrifices that the Australian continent was being asked to undertake. At the end of it I asked him, "When you have done all that, and when all the other nations have done the same, including ourselves, will you not still be in the same relative position to each other as you were at the beginning?" His reply was that they had to do it in order to capture the export trade. We are doing that, and as the hon. Member for Bridgeton (Mr. Max-ton) says, we are going in now for a policy of starvation in order that in some way we can get rid of the wealth we produce. The most significant sentence in any speech I have heard this week was a sentence used by the right hon. Gentleman the Member for Epping. He said that it was a shame that this great country should have been brought to this pass when in fact. it. need never have been in such straits at all.

The Chancellor of the Exchequer finished his speech with a piece of poetry. For the unemployed, as the winter goes on the poetry will be forgotten and the reality will be present, and I say that it is a shameful thing for this House, which consists in the main of men and women who, when they leave here tonight, will not feel one iota the sacrifice that has been thrust on men and women who are the backbone of this country. There are dangerous economies in the Government's policy—dangerous for the stability of the State. It is not without significance that a profession that has usually been looked upon as more or less isolated from the rest of the community and that has for many years past, particularly before the War, lived upon dignity alone and nothing else, should march to-morrow 3,000 strong along the Embankment to this House. That is ominous, and the effect that this has had upon them will he the effect that, as the weeks go on, will be felt in every rank of the working classes and the middle class. This Budget marks not only a crisis but an epoch. I believe in my heart that there is no turning back now from this. The Chancellor of the Exchequer expressed the hope that we would win through. Win through to what? In 1920, when the Geddes Committee reported and deflation actually began, the working men and women were told that if they worked longer hours for lower wages, and produced more, all would be well. They have done it for 12 years and they have produced too much. As Carlyle said in the middle of the last century, "You have produced too much; it is you who are to blame. We have done our best to consume. "For 12 months the working people have produced too much, end it is not true to say that all is well. Now the Chancellor of the Exchequer tells them the same as they were told 12 years ago, and they have to tighten their belts further.

10.0 p.m.

The most significant symptom of the Budget. speech is that there is no hope at all for the working class men and women in this country to-day. To what have they to look forward? What security have they got at all? If they undertake these sacrifices, is there a guarantee that next year they will not be asked to undertake more? Is there a guarantee that the following year they will not be asked to undertake more still? Neither in their jobs with rationalisation going on nor when they are out of work is there any hope for them, and it will not do to appeal to poetry to comfort them and make them realise that this is for the country. Equality of sacrifice is a myth and a farce in this Budget. I have never read such a mockery of equality of sacrifice as the Prime Minister's broadcast speech, when he said that it, was not proposed to impose this 10 per cent, cut on the unemployed man's children. What mockery! What hypocrisy! Does the Prime Minister understand how the working-class people run their homes? When a man with a wife and three children gets 32s. a week, does the man say to his wife, "This 2s. for you, keep yourself; Johnny, this 2s. is for you, keep yourself; Willie, this 2s. is for you, keep yourself"7 The working-classes do not run their homes like that. The whole 32s. is taken together, so that it amounts to this, that the Prime Minister of the greatest nation on earth broadcasts that he is going to take 10 per cent. of the food of the unemployed man's children. That is the greatness of this country. That is what we are asked to undertake.

Everything that I can do outside the House or inside in order to prevent one further sacrifice by the working-class I shall do. I have sat in patience on the other side waiting for something to be done. Thank God I never sat, on those benches while this was being done. Why does not the Chancellor of the Exchequer revise the salary of Sir Ernest Gowers? He is getting £7,000 per annum—[An HON. MEMBER: "Who gave it to him?"] The Bank of England did. The Bank of England fixed it—[Interruption.] I will describe the salary first and then I will say who made the appointment. The salary was £20 a day and expenses, and it would have taken a miner in my area 65 years to earn £7,000.

Mr. ERNEST BROWN

Does the hon. Member remember that the Minister of Mines came to the House with an estimate that did not disclose these facts, and that he had to have it dragged out of him by his own supporters?

Mr. McSHANE

Perhaps the hon. Member, who as a rule is rather impetuous, will wait until I deal with that. I want to emphasise that when this House voted £20 a day and expenses, seven days a week, to Sir Ernest Gowers—[HON. MEMBERS: "Who proposed it?"] I will come to that if hon. Members will restrain themselves. This House to-night is taking 10 per cent. off the unemployed man, whom society ought to compensate instead of asking him to make sacrifices. An appointment to this office had been already made to another man at less than 'half the salary, but the Bank of England stepped in and insisted upon the appointment of Sir Ernest Cowers and insisted upon the salary.

Mr. MACQUISTEN

Why did you allow the bankers to do it?

Mr. McSHANE

I gave up an infinitely more comfortable position than this in order honestly to try to do what I could for the men in the town where I lived. I did that because I sincerely believed, right down to the very depths of me, that we might he able to do it. I did that although I had grown up in poverty, But I promise you, Sir Herbert, that as long as I live now I will do what I can to awaken in every thinking man and woman complete and utter opposition to the whole of the ramp which has been proposed. It is unjust, it is tyrannous, it is a rank scandal, that the comfortable men and women in this House to-night should try to do what is proposed to unemployed men and women. All Christian men and women outside ought to have nothing but, contempt for those who vote for proposals of this kind.

Colonel GRETTON

The hon. Member for Walsall (Mr. McShane) has complacently looked on while the situation of which he now complains has been produced. He and his friends have acquiesced in the flow of events which have brought about this crisis. Now he comes to the House and denounces those who attempt to deal with the situation. That is a characteristic of every speech I have heard from the benches opposite. They have no solution to offer, though they complain of what is proposed by the Government. They admit there is a crisis and that something must be done, but they have no solution except not to do what is now proposed. I wish for a moment to leave the line which the discussion has followed in order to remind the Committee that the Resolution before us deals with the taxation of beer. I do not anticipate that either this House or anyone else will hear complaints from the brewing trade. The members of that trade are as patriotic as any other part of the community, and probably they understand the situation which has to be met a great deal better than do some other people; but the Chancellor of the Exchequer has taken a new course, and I feel entitled to call attention to what has happened. We have been accustomed to deal with the standard barrel, and we know what that means. The Chancellor of the Exchequer and his advisers have set up a new device, the "average barrel." He calculated that the increased taxation on the average barrel of beer would be 1d. per pint. That means nothing at all in practice, and therefore he is making it as difficult as he can for the brewing trade to adjust itself to this taxation. No doubt hon. Members will have noticed another fact, that beer is the only exciseable liquor selected for taxation.

Mr. R. RICHARDSON

It is the poor man's drink.

Colonel GRETTON

There is no fresh taxation upon spirits or upon imported foreign wines—upon the red wine which comes from the north of Spain and which the Portuguese Government protest masquerades as port. It is charged duty at a very cheap rate, it has a strong alcoholic value, and is a serious competitor with other alcoholic liquors, beer included, in many parts of the country.

That is all I propose to say on that subject to-night, and I turn to make one or two observations on the general question. It is admitted that the proposals of the Government are going to be grievous to everybody affected by them, that is, every soul in the community; but they are only a stop gap, they are not a solution of the crisis. The reason for that, as other speakers have said, is that we are not paying our way as a nation. [HON. MEMBERS: "We are!"] I think I can show that we are not. It has been a long and gradual process, but our balance of trade has been steadily going against us. I have a statement showing how British trade has declined in spite of the fact that up to the end of 1929 the general trade of the world has increased.

The general export trade of the world increased from £6,490,000,000 in 1925 to £6,815,000,000 in 1929. It was not until 1930 that the general decline took place. Notwithstanding that general increase the British share of the trade of the world declined. Our total export trade fell from £773,000,000 in 1925 to £729,000,000 in 1929—a very serious decrease. The decline was chiefly in manufactured goods, which fell from £616,000,000 to £573,000,000. The process has been accelerated during the past two years, and what has occurred during the two months of June and July gives a picture which is truly appalling. Imports into the United Kingdom during those two months totaled £138.7 millions, while our exports—not including re-exports—were £63.6 millions. Therefore, during those two months the trading of the United Kingdom overseas has resulted in an excess of imports over exports to the extent of £75.1 millions.

The right hon. Member for St. Ives (Mr. Runciman) suggested a special tax upon luxuries and estimated that it would produce £20,000,000. But for dealing with an adverse balance of trade amounting to £75,000,000 in two months such a proposal is like applying a postage stamp to stop a, leak in a ship. I do not want unduly to alarm hon. and right hon. Members opposite, and I am not trying to be pessimistic, but these are facts, and these facts have to be dealt with, or they will bankrupt the country. We cannot fight against these economic impediments unless measures are taken to grapple with them. What prescription have hon. and right hon. Gentlemen to offer? If this adverse balance of trade continues it will mean ruin for the country, and we shall be placed in a position from which no device of hon. Members opposite can save us. The steps which the Government are now taking are absolutely necessary, and if things are not placed in a better position we shall go on increasing our number of unemployed which will necessitate overwhelming taxation tending to the ruin of the country.

Mr. CAMPBELL

The hon. and gallant Member for Central Hull (Lieut.-Commaader Kenworthy) informed the House that the Labour party were agreed that the Budget must be balanced. The acid test of the sincerity of that declaration will be shown by the party now in opposition voting fur the cuts which are proposed by the Government. If hon. Members opposite run away from the declarations which they made when in office, we shall know that they are no longer sincere in their desire to make the Budget balance. An hon. Member opposite said that for years he had been sitting patiently as a member of the Labour party to see something done. It is true that something was done—the country was done. The Labour Government continued to run up expenses, and to-day we are suffering severely from the extravagance of the last two years. We all realise that everybody will have to suffer great hardship in consequence of the very severe taxation which is now being proposed [An HON. MEMBER:" You will not."]

On this side of the House we are extremely sympathetic to the teachers, the police, and others who are being subject to cuts in their salaries. As regards Members of Parliament, I think it is right that their salaries should be cut by 10 per cent., and many hon. Members sitting on the Government Benches would have been prepared to support heavier taxation on Members of Parliament, and they would have supported such a proposal but for the fact that there are a number of members of this House who are almost entirely dependent on their salaries as Members of Parliament.

Whatever the cuts are, and however much we all deplore the necessity for more taxation, we must all come to the conclusion that it is an absolute necessity. This is a, temporary Measure, and, if we do not balance our Budget in another year or two, things will be very much worse than they are now. I sincerely hope that we shall get through this stage of the present Parliament as quickly as possible. Although we on this side belong to all parties, we are all determined to put through the Budget which has been presented to us to-day. However unfortunate it may be, however disadvantageous, perhaps, for ourselves, we are patriotic, and, instead of considering our parties, we are considering the country. But, while we are united in our determination to put through this Budget, on other matters; we are entirely divided, and, therefore, if it should he necessary for us, after the Budget has been balanced, to consider the question of the future prosperity of this country and the question of a tariff, ibis Government which is in power to-day is, to my mind, totally inadequate to bring in such a tariff. When a patient is ill, a doctor may he called in to see him and to prescribe. The medicine he prescribes may he good or bad. But when three doctors prescribe—[Interruption]. In our policy of tariffs there must be no whittling down, there must be no compromise, which would necessarily he the ease were a tariff to be brought in by this Government, and, therefore, it is absolutely necessary in the interests of the country that this Parliament should do its business as quickly as possible, so that we may get on with the other business which is absolutely necessary if this country is to become prosperous.

I congratulate our Chancellor of the Exchequer on his skill, on his pluck, and on the very fine Budget that he has brought in. Looking at it as impartially as one can, it will affect, as he intended it to affect, every section of the community. I cannot think of any individual person who will not be affected by it; even my hon. and gallant Friend the Financial Secretary will, I am perfectly sure, be hit somewhere or other. Therefore, however much we may deplore the necessity for it, however much we realise that for many people it will be a great hardship, I sincerely hope that everyone in the House will remember that, in the interests of the future of this great country of ours, we should unite and pass this Budget as quickly as possible. It is useless for Members on either side of the House to try to crab one or other of the propositions contained in the Budget. We all dislike it. The Chancellor himself said he deplored the necessity for such a Budget. But I am sure that hon. and right hon. Gentlemen opposite, who have for many months been considering the position, will realise that what is proposed is proposed in all sincerity and in the hope that not one section shall suffer more than others.

Mr. PETHICK-LAWRENCE

I must really congratulate the hon. Member on being the only speaker on that side of the House who has been thoroughly satisfied with the Budget and who thinks it is going to solve the crisis for the sake of which it is alleged to be introduced. Some of the speakers have stated quite frankly that they think it will not do so. Others have seen fit to lecture us for what they believe is our attitude. They have told us we do not understand the danger of going off the gold standard. If I may use a colloquialism, they are barking up the wrong tree. That is not our case. Our case is that the Government, in meeting this crisis, have adopted a remedy which is unsuitable, which does not cover the exigencies of the situation, and which will still leave the problem to be faced in another and better way. Our case is also that, apart from that, the Budget itself is a bad Budget and does not fulfil the promise that it would be an equal sacrifice.

Let me take the second point first. The slogan of this so-called National Government is equality of sacrifice. What is equality of sacrifice? If you have two men, one rich and the other poor, is it equality of sacrifice if you take an equal percentage from the income of each? If you take 5s. from a man who has an income of 50s. a week, will any hon. Member opposite say that the sacrifice that he has to make is the same as the sacrifice made by a very rich man who has to part with 10 per cent. of his income?

What are the facts in this case? The Chancellor of the Exchequer told us what was the burden that he was going to put upon the most wealthy section of the community, and I notice that he has chosen to express it in terms of a percentage. He told us he is making an increase to the Surtax of 10 per cent. and I daresay there are a great number of people up and down the country who will be led by the newspapers, which are nearly all supporting this Government, to believe that this 10 per cent. compares equally with the 10 per cent. cut that is being imposed upon the unemployed. The fact is that this 10 per cent. increase in the Surtax is not a 10 per cent. cut in the incomes of the Surtax payers. It is merely a 10 per cent. increase in that particular tax.

I have taken the trouble to work out roughly the position of a man in receipt of £5,000 a year. What will be the effect of this Budget upon him, what will be the effect upon, let us say, a civil servant, a single person, with an income of £3 a week, and what will be the effect upon the unemployed? The amount of increase on the Surtax payer is 6d. in the pound on the Income Tax and 10 per cent. additional burden on the Surtax. I have not by me the precise figures of what the man with £5,000 a year pays, but I am satisfied that the effect of those two taxes—[Interruption.] Hon. Members can get the figures and work them out for themselves. [Interruption.] If the hon. Gentleman who is now interrupting me and the hon. Gentleman who interrupted me before will allow me to finish my sentence they will understand the point. I have not before me the precise figures of what these people pay, but I can tell the Committee that the approximate result is that the Surtax payer who has an income of £5,000 a year will be called upon, as a result of these two taxes combined, to suffer a cut in his income of between 3 and 4 per cent. Take the civil servants. On the top of all the cuts in the salaries of civil servants which have been made during late years to keep pace with the fail in the cost-of-living index figure, a single person with £3 a week will suffer, owing to the fall in the bonus, a reduction of £5 a year. That is not the only cut he will be called upon to face. Owing to the change in the allowances with regard to Income Tax that same person will have to bear a further loss of income which, I think, is in the neighbourhood of £3. Even if he is a nonsmoker and a non-drinker he will have to pay about £8 on a total income of £156 a year, that is, between 5 and 6 per cent. Finally, we come to the unemployed man, with his wife and family. He is to get a cut of 10 per cent., and sometimes, if the table is worked out, it is over 10 per cent. in relation to the lowest income of all. So that not only would the equality of sacrifice not have been carried out if there had actually been an equal proportion of cut on all classes of the community, but these new burdens which are being imposed are regressive in their effect. That is to say, the larger the income, the smaller the proportion of the cut. To the man with £5,000 a year it is between 3 and 4 per cent. of sacrifice—[HON. MEMBERS: "No, the figures are all wrong!"]—I have not made a mistake.

Major NATHAN

rose—

Mr. PETHICK-LAWRENCE

If I were quoting some speech incorrectly, I would willingly give way, but I am stating the position. [An HON. MEMBER:" The figures are wrong!"] I stated that the Surtax payer, with an income of £5,000 a year, is being called upon, as a result of these proposals, to suffer a reduction in his income of between 3 and 4 per cent, on account both of the increased Income Tax and increased Surtax. As far as civil servants with £3 a week are concerned, they are suffering a cut of between 5 and 6 per cent., and as far as the unemployed are concerned, they are suffering a cut of 10 per cent. That is not in accordance with the slogan of equality of sacrifice which is the alleged principle on which this Budget is framed and on which this Government has claimed the support of the country.

Again, under these proposals the civic servant is called upon to bear the burden of the sacrifice three times over, first, on the cut, with a reduction of his salary, secondly, in the increase in the Income Tax and, thirdly, the increased cost owing to the indirect taxes which are put upon him by the Chancellor. During the earlier part of this Session there was what I might call almost a Liberal ramp against the principle of double taxation. The right hon. Gentleman opposite told us that he was quite prepared to see a single tax put on but he was not prepared to see double taxation. Under this Budget we have not merely double taxation but triple taxation placed upon the people who are certainly not most capable of bearing it. [Interruption.] Everybody bears some taxation but the question is, is the proposed taxation in accordance with the principle of equality of sacrifice? It is not. I think I have shown that it is not, and we are not going to get a wholehearted nation standing together in regard to this matter, as this alleged National Government professes to expect to find. [HON. MEMBERS: "Wait and see."] We will wait and see, and we shall see how far the nation supports these proposals.

Another of the aspects of the scheme involved in this Budget, is how far will these alterations it: the purchasing power of the people affect unemployment? I had occasion last night to note a gesture by the Government to the local authorities to cut down their capital expenditure. That is carried further in this Budget. It will be carried out in the cuts in the money which the people of this country have to spend. Do hon. Members mean to say that they do not think that that will affect the total volume of unemployment in this country? Of course it will. All this deflation, all this cutting down, will affect unemployment, and the Government will find in many cases that they have lost quite as much and perhaps more through having to meet the needs of the unemployed than they have gained by the economies that they are making.

I want to turn to a larger aspect of the question, which formed the subject of many of the speeches to-day, as well as on Tuesday. It has been represented to us to-day by the Chancellor of the Exchequer and by the right hon. Member for St. Ives (Mr. Runciman) who gave one of his thoughtful speeches, that the crisis through which the nation has been and is still passing owes its existence to an unbalanced Budget. I entirely dissent from that view. If it were true that an unbalanced Budget brought about this crisis why is it that other countries whose deficits have been going on for a far longer time and to a far greater amount are not in the same position? Let the Committee face the facts in this matter.

So far as this country is concerned we have had so far no deficit at all. The finances for the last completed year showed not a deficit but a surplus, if you include, as you are entitled to include, the amount set aside for repayment of Debt. That surplus was of an amount of no less than £43,000,000, and I would remind the Committee that included in the expenditure in that year was the Road Fund, of which a large part was used for capital expenditure on roads, which in other countries, and particularly in the United States, is debited to capital and not taken out of income. If hon. Members opposite object that it took no account of the amount that was borrowed for the Unemployment Fund I would remind them that even if the whole of that had been thrown on to the expenditure side of the Budget there was nevertheless a considerable margin still on the right side, so that so far as the last completed year is concerned it is not true to say that the country had an adverse Budget. [Interruption.] Hon. Members laugh because, I suppose, they do not know the facts. That is a literal statement of fact. Compare that with the position of the United States, which in the last completed year had a deficit round about £180,000,000: and I notice that in the "Times" of 5th September their correspondent estimated that the deficit of the United States next year ending June, 1932, would he no less than £300,000,000.

An HON. MEMBER

They have not to borrow in the open market!

Mr. PETHICK-LAWRENCE

I will come to that. Another country intimately connected with this question, France, also has a deficit in the current year. The Prime Minister in his speech on Tuesday referred to the collapse which took place some few years back in Central Europe and actually told us that signs were not lacking of a similar thing taking place in this country. That statement is definitely untrue. I strongly resent the Prime Minister coming down to this House, with all the authority which lies behind his position, and venturing to suggest that the financial position of this country is comparable with the position of countries in Central Europe. The reason for the collapse of the States of Central Europe in years gone by was not, of course, their unbalanced budgets. It was that their external liabilities far exceeded their external assets—[Interruption.] Of course, that is true. That is something that is really comparable with the idea of bankruptcy. It is a travesty of the facts to suggest that the financial condition of this country at all approaches that position. Everyone who knows anything about it knows that the foreign assets held by the nationals of Great Britain are far in excess of any liabilities that we may have.

This crisis has not been brought about by the Budget deficit, but by an entirely different question. It has been brought about by the policy pursued during the last month by the City of London and the Bank of England—[lnterruption.] That is perfectly true. The City of London and the Bank of England during the last month have been pursuing a policy which was generous in some of its motives, but it was a policy pursued by an imprudent banker. If hon. Members say that that is too strong an adjective to use I will say by a banker who had not the foresight to anticipate the abnormal events which have taken place in latter months in Europe. [Laughter.] Hon. Members who laugh might not be aware of the facts. The facts are that the drain of gold—this statement is borne out by the Prime Minister's own figures and the dates concerned—from this country began with the recent collapse of Germany. Every one knows that who knows anything about it. If hon. Members will read again the speeches of the Prime Minister and see when the drain of gold began, they will realise that those are the facts.

The position is this: The City of London and the Bank of England are perfectly solvent, but they are in the position of the banker who, though he has plenty of assets, cannot get together immediately enough cash to meet a sudden drain upon his resources. That is the situation. The real answer to it is this: We have, owned by our nationals, ample holdings and investments outside this country to meet the situation. If you exclude the property of Britons held in the Dominions, India and the Colonies, if you take the market value and not the nominal face value, you will still find that the total wealth held abroad is over £1,000,000,000 sterling. It is true, as the right hon. Member for St. Ives said, that not the whole of that is negotiable, not the whole of it is held in the form of currencies which would be valuable for the purpose of meeting this emergency. But the right hon. Gentleman does not pretend to suggest, I am sure, that there is not in foreign countries enough to meet the situation. This is not my view alone. I read only the other day in the "Manchester Guardian" a letter from a man who, the editor of the "Manchester Guardian" stated, was a leading international banker. I know privately that that is the case. He definitely says that it is by the mobilisation of our foreign securities and by that alone that this crisis will be overcome. [Interruption.] I really cannot give way. I have only 10 minutes more to speak. [Interruption.] I have read both these letters. I have read all the correspondence in the "Manchester Guardian." It has not shaken me, or shaken the evidence of the international banker whose opinion I am quoting at the present time.

It works out that mobilisation of these securities will enable us to do two things. It will enable us, in the first place, to hold the securities as a cover for trading. It will also enable us, if necessary—and this is the point that both the Home Secretary and the night hon. Gentleman the Member for St. Ives overlooked—to put those securities on the market, and thereby to end the drain of gold. I am not suggesting for a moment that we should confiscate those securities. [Interruption.] I am suggesting simply what was done during the War, as the eminent financial authority that I quote also recommends. I say that it is perfectly possible to take that course, but, of course, if those securities were actually sold, we should have to pay the persons who held them with British Debt in its place. The Home Secretary says: "What difference does it make if you give one debt for another?" It makes all the difference for the purpose of protecting the pound, because it substitutes an internal Debt for an external Debt.

Let me come now to the question of balancing the Budget. I hold very strict views on this question, stricter than most of those of the hon. Members and right hon. Members of the Conservative party on the other side, who for years, supported the right hon. Gentleman the Member for Epping (Mr. Churchill), when he played ducks and drakes with the sound finance of this country. I hold that it is useless for a country to proceed for a period of years without balancing its Budget. Such a course of action defeats itself, and can only bring any Government that adopts it down in its train. The essential point is that it is balanced over a period of years. I. hold this view, that even in a year of exceptional adversity, attempts should be made to get that year's Budget balanced as nearly as possible. I think the method of the Labour Cabinet was perfectly right, in going a very long way in the direction of saying that this Budget and next year's Budget should be balanced. It is a matter that has to be carefully considered, just as in the case of an individual, who must balance his account in the good years, although, when the rainy day comes, he may stray slightly from that. If we do balance our Budget this year, we shall be practically the only country in the world that has done so. Our Budget may be balanced at too high a cost.

I want to say something further: Whether we balance our Budget or not, and whether we balance it meticulously in every year of exceptional difficulty, that is a matter for ourselves, for the people of this nation and for this nation alone. So long as we have ample foreign securities, ample foreign assets, in excess of any foreign liabilities, that is no concern of the foreigner at all. Why has this Government been formed? This Government has been formed, it is alleged, in order to meet this crisis. I maintain that there was a right way to meet it and that they have not taken that course. I maintain that whatever they do in regard to the Budget they will still have to take the right way of facing the issue—the way in the direct line of putting right the exchange through our foreign assets—even if they do succeed in carrying this Budget through this Parliament.

What is the reason why this Government has been formed? It has been formed in order to balance our Budget, not for our own sake, not in the way in which we believe in this country but in order to balance it in the way that some persons in foreign countries think we ought to do it. I do not speak in terms of exaggeration. I choose my words with the utmost care. I am not speaking the language of hyperbole. I am speaking with deliberate intention and a careful use of words and I say that this Government has been formed for the express purpose of placing the neck of this country underneath the foot of foreign finance. I believe this to be wholly unnecessary and infinitely degrading. This Government calls itself a, national Government but to me as an Englishman the positron seems pitiably unpatriotic, and it is my firm conviction that when the annals of this time come to be written, this Government will be known as one that failed the country in its hour of need.

Question put, and agreed to.

It being after Eleven of the Clock, the CHAIRMAN proceeded, pursuant to the Order of the House of the 9th September, successively to put forthwith the Question in respect of each subsequent Resolution, except the last Resolution.

cc407-8
1. BEER (CUSTOMS DUTY AND DRAWBACK). 232 words
cc408-9
2. TOBACCO (CUSTOMS DUTY). 279 words
c409
3. TOBACCO (EXCISE DUTY). 160 words
cc409-10
4. TOBACCO (DRAWBACK). 222 words
c410
5. HYDROCARBON OILS (CUSTOMS DUTY). 99 words
c410
6. HYDROCARBON OILS (PROHIBITION OF MIXING). 72 words
c410
7. ENTERTAINMENTS DUTY. 197 words
8. INCOME TAX.
c411
1. HIGHER RATES OF TAX FOR 1930–31. 67 words
c411
2. RELIEFS 95 words
c411
3. PROFITS ON CONVERSION OF GOVERNMENT SECURITIES. 40 words
c412
4. STANDARD RATE OF TAX FOR 1931–32 AND CONSEQUENTIAL AMENDMENTS OF LAW. 154 words