§
Order read for resuming adjourned Debate on Question [20th May].
That the Bill be now read a second time.
§ Question again proposed.
Mr. HOGGELast night the House of Commons had a Division on an Amendment moved from these benches dealing with the question of a capital levy, Preference, etc., in which a majority of Members voted for the Motion. The voting rather surprised some of us who for a long time have been associated with certain, hon. Members, both inside and outside this House, on the question of the trade of the country. We saw many of our Free Trade colleagues going into the Lobby in favour of Preference, and finding very readily and easily arguments why they found themselves in that particular Lobby. Be that as it may, there are one or two other points in connection with this matter which, I think, we must have cleared up before we agree to the Second Reading of this Bill. The Chancellor of the Exchequer, in dealing with arguments which were adduced from this side, criticising the policy that he has incorporated in this Bill, made a statement in which he said that this is not in itself a very large affair, but part of a larger policy. Those were the words used by the Chancellor of the Exchequer yesterday in defending the attack that was made upon Preference from this side of the House. If that be so, I think we are entitled to ask my right hon. Friend what is the larger policy upon which he proposes to embark. [AN HON. MEMBER: "He told you yesterday !"] I think we are entitled to go further, and get some specific information upon his proposals, because there are colleagues of my right hon. Friend who sit on the bench opposite who have described in rather caustic sentences the kind of Preference which my right hon. Friend proposes in this particular Finance Bill, and I have two of them in front of me now. I remember the very same proposals being described by the Secretary of State for War (Mr. Churchill), who at that time was an ardent Free Trader, and this right hon. Gentleman told us at Dundee the other day that he stood precisely where he stood before, and he described the same proposals as are now being made as "Prefer- 420 ence by hypodermic syringe." That was the criticism made by the Secretary for War. The Prime Minister, dealing with the same point, used this phrase:
It was like reduciug the duty on Tintarn and floating the Empire on pippins.''That was what the Prime Minister said. The right hon. Gentleman says that what is in the Budget now on this question is simply a fingerpost to a larger policy, and I think he will agree that those who profoundly disagree with Preference of any kind are entitled to know what the policy is, and whether that policy takes us any further than what is laid down in the letter written by the Lord Privy Seal to the Prime Minister on the eve of the General Election, on the basis of which he collected into his fold a large number of Coalition Liberals, who were not wide enough awake on that particular occasion. I think we are also entitled to know whether that letter represents all the arrangement that has been made with regard to Preference. We are entitled to know whether there are any secret treaties between the Prime Minister and the Leader of the House with regard to Preference. After all, the Chancellor of the Exchequer is an honest man, and if he says deliberately at that box that this is part of a larger policy, he is committing not only himself, but, presumably, the Cabinet to which he belongs.
The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)The hon. Member has really discovered a mare's nest. If he will read the next two sentences of my speech, he will see that I went on to explain the larger policy. I said, for instance, that we intended to inform our whole policy by this principle of Preference, and that where we had a control of capital issues we had directed that is preference should be given, caeteris paribus, to issues intended for the development of the Dominions and the overseas territories of His Majesty, and that similarly we had directed in contracts for purchases made outside the United Kingdom that a Preference should be given to the products of His Majesty's Dominions. That is the explanation of the sentence which the hon. Gentleman has quoted, and, if I may add a further word of reassurance, there are no secret treaties with the Prime Minister. His letter to the Leader of the House was public and open, and was a statement of the policy of the Government.
§ 4.0 p.m.
Mr. HOGGEI do not want to do my right hon. Friend an injustice, but I remember him standing at the box opposite on the day he introduced the Budget, thumping the box with all the energy of which he was capable, and declaring that now the day had arrived for putting into operation the policy of his distinguished father. My right hon. Friend seemed to suggest that he had his foot on the ladder of Preference, which the Prime Minister was then holding, and he was ready to scale that ladder to the extreme heights of the policy dictated by his illustrious father. If the right hon. Gentleman does not mean that, and if he means it simply as rhetoric and confines himself to the interpretation of the sentence in his speech which he has now corrected, then we know where we are. But I think we are entitled to ask what limits are going to be placed on the policy. as applicable to the trade conditions of this country. If it means nothing more than that we are to go the length of the sentence, he has just given us, we know a little better where we are. Whether that be true or not, we have a right to say what it means by implication, And I would like to remind the House of a particular reference to this subject made by the Secretary of State for War in which he points out the real road that this policy is going to lead us on to. It is a fairly long quotation, but it will not take. long to read. I think, however, that it is worth reading, because it will save a long speech. The Secretary of State for War said:
The second objection is that it introduces into our fiscal system an entirely new, and, as the Government think, the wholly vicious feature of discriminating between one class of producer and another. The whole basis of our financial and fiscal policy—a policy which has been pursued for so many years by this country, and which has been supported by the practice and precepts of so many great and distinguished men—is that it draws no distinction whatever between different classes of producers, whether they reside here or abroad, whether they live in foreign countries or in our own Colonies. I am quite prepared to state that proposition in its simplest form. That is the fundamental principle of our fiscal principle, and there is no discrimination. We have but one measure to give to those who trade with us, the just measure of equality, and there can be no better measure than that. That is the fundamental principle of the Free Trade position, and if it is challenged by the party opposite the whole of the great controversy is again raised between Free Trade and Tariff Reform. I do not believe that the Opposition will be acting with candour if they say, We have abandoned the proposals which the right hon. Member for West Birmingham has made.' 422 I believe his proposals are still their policy, and any lesser proposal put forward is only designed to lead up to them."4.0 p.m. I venture to suggest that is the position in which we still find ourselves by the introduction of these reference duties into this Budget. So much for the Secretary of State for War who, I may remind the House again, told us that when he supports the Government in these proposals he stands precisely where he did. The Chancellor of the Exchequer made an extraordinary capture yesterday afternoon in my right hon. Friend the Member for Swansea (Sir A. Mond), who protested that the introduction of these Preference Clauses meant a wider and better Free Trade. With his hand upon his heart, he declared that he had never had this put up to him before. As a matter of fact, proposals identical with those contained in this Budget were voted upon in this House in 1909, and my right hon. Friend then was in the Lobby against my right hon. Friend the present Chancellor of the Exchequer. Just as my right hon. Friend's illustrious father saw the promised land, and did not enter it, but chose a younger man to lead the children of Israel into it, so my right hon. Friend has made an extraordinary capture in my right hon. Friend the Member for Swansea. I wish therefore to put it on record that as far as we are concerned we regard these duties as the thin edge of the wedge. We do not believe in them. We believe in the dictum of my right hon. Friend's illustrious father, that if they are persisted in there is going to be both blood and trouble. It is the blood and trouble that accompany restriction of trade throughout the world. that create war, and the finest peace maker in the world is freedom of trade. The more free that trade can be the less difficulties there are between the nations of the world in the interchange of trade, and the less likelihood anywhere is there to be war. I look forward personally with disappointment to entering upon a long struggle again on questions which in the immediate future will promote wars and woes.I want to refer to the capital levy. A great deal has been said about the fact that those who sit here are not prepared to act up to the principle which we tried to establish yesterday in our Resolution. No greater mistake can be made by any body in any part of the House than to imagine that we did not mean business 423 by that particular suggestion in that Amendment. It is quite true that we were beaten last night by a large majority, but it does not matter now what this House does in the Lobbies. This House doe3 not represent the people outside, and we do not care—and there have been other minorities who have said so quite as frankly—about the decisions of this House, although we respect those in which we take part. We go beyond the Division Lobby of this House, and, if the Chancellor of the Exchequer imagines for one moment that he has disposed of the principle of a capital levy by the jejune argument which he advanced yesterday afternoon, he is making a colossal mistake. There is one argument and one only that I will pursue on this subject, and it must be taken into account by this House and by my right hon. Friend. There are more men being demobilised from the Army to-day than have been discharged at any period of the War. I do not know how familiar hon. Members are with the feelings of those men, but I would like to remind the Committee that men, when entering the Army, whether voluntarily or compulsorily, were compelled to surrender not only capital but frequently life. The average man who went into the Army was a working man. and he took into the Army his hands and his brains and his ability to earn his lining outside the Army by the combination of those things. If he were killed, it was a tragedy, and if ho were wounded it destroyed his capacity to work. Apart from that, many of those men had to surrender their homes, and to-day there are thousands of demobilised men in London who not only surrendered their homes when they went into the Army, and many of whom lost little businesses and gave up capital, but who to-day cannot get houses in which to live. At the same time, one highly placed Minister in connection with this Government found an opportunity to build a house with many bath rooms, though restrictions were placed upon materials for building. You may take it from me that those men's attitude on the question of a capital levy is governed by one fact, and it is one that must be taken into consideration. It is what you call the "equality of sacrifice." W have talked ever so much about the equality of sacrifice in this War, but what really happened was this: We—all of us are responsible—have carved from four 424 to five years of the most potential period out of the lives of men, particularly the young men. We have prevented those men getting access to the success which might have been theirs had there been no war. While we have done that, those men have had to run the risk of death and wounds during the War. If they comeback and interest themselves in politics and read my right hon. Friend's Budget, they find it a Budget which gives advantage to the rich, and which penalizes the poor, a Budget which divides the excess profits made out of the War by two while they are tramping the streets of London and the provincial towns trying to get house room for their wives and children.
Mr. HOGGEThat is true; but, as an alternative, why not continue them? I suggest to my right hon. Friend that there is that danger among large bodies of opinion in the country. He will agree that those men have made considerable capital sacrifices. Therefore, there is not so very much in the argument that people who have made large profits out of the War—and there are many of them in this country—should not be called upon to surrender part of those profits in order to relieve the country from taxation. If my right hon. Friend had even in his Budget a suggestion that those who have made profits out of the War should have those profits taken from them, it would help to allay public opinion, because I believe a. large body of opinion in this House and in. the country would certainly support the theory that profits made as a direct result of the War and through association with war work does not belong to those who have made them, and ought to be sacrificed similarly to the lives of men who joined our Forces. That is why my right hon. Friend found himself in the difficulty in which he was placed yesterday afternoon. His colleague, the Leader of the House, speaking only a few months ago on the question of a capital levy, said that his mind was perfectly open, and that he thought it was a matter of expedience. After all, he is an ex-Chancellor of the Exchequer, for whom, I suppose, the present Chancellor of the Exchequer had some economic respect. Who closed his mind, or is his mind shut, on this particular topic of a capital levy? It would 425 be rather interesting to discover why one Chancellor of the Exchequer only a few months ago thought that it was a possibility and expedient enough to consider it, and why now, apparently, his mind is closed. So far ho has not told the House why that is so. It would be an interesting contribution to the Debate if the Lord Privy Seal would tell us if ho has changed his mind, or if he does not sec some reason for maintaining the attitude that he took up before.
There is one other question which has not been touched upon, and it is the present inflated currency. I remember in the days of the last Parliament, when some of us who sat on the benches opposite, used to make little speeches to Under secretaries trying to prove that inflated currency would eventually ruin the country, and we quoted all kinds of economists whom we had been taught by our universities were in favour of this proposition. Still currency went on being inflated. Speaking from memory I think my right hon. friend said that at the moment he was introducing his Budget there was something like £940,000,000 of legal tender in paper. I am perfectly certain my right hon. Friend wants to look at the question of inflated currency from the point of view that it is an underlying cause of high prices, and the more we can get rid of the inflation the more quickly we can reduce prices and secure greater economic cheap-ness.
The right hon. Gentleman the Member for Swansea (Sir A. Mond) laid down the doctrine last night that it was not a bad thing to have a large debt—a most extra ordinary doctrine. He said there was less extravagance with a large debt than other wise, and he put that forward as a reason for supporting the Budget. I do not suppose the Chancellor of the Exchequer adheres to that proposition, for if it were true that the larger the debt the less extravagant should be, he would only have to encourage the many extravagances which this House is investigating in Committee upstairs in order to ensure an increase of the debt, and thus get rid of extravagance. On the question of Preference I want to tell my right hon. Friend that he will meet with the most deter mined opposition on our part. No doubt we may be snowed under before the Committee stage is over, but we shall fight the matter both in the House and at every opportunity outside. On the question of 426 the capital levy, we may be twitted from all corners of the House with regard to the position we have taken up, but apparently our chief fault is that we have taken up a new position for ourselves, a position not thought of by anyone else as a practical means of solving existing problems. We believe in a capital levy. We believe in reducing our liabilities now that conditions in the country are settled, and we are prepared to address ourselves to the problems as we find them. We want to see the country getting back to its proper place in the great race between the peoples of the world that will come after the declaration of peace, and we want to see this country maintain its commercial supremacy. That is our faith, our programme, and our belief, and on those grounds we intend to fight my right hon. Friend and the Coalition Government.
§ Sir E. CARSONI think the speech to which the House has just listened was a very regrettable one. My. hon. Friend started with the statement that it does not matter what this House docs. To say that a few months after this country has declared its view as to the Government which ought to be in power, to say such a thing when everything both in foreign and in home affairs is in a critical condition, is to lay down an extremely dangerous doc trine. I believe the hon. Gentleman is really trying to do a little bit of cheap electioneering, and anything of that kind at the present moment is very regrettable. The hon. Gentleman went on—and I am sure he was quite sincere about it—to speak of the sacrifices that many men have made in the War—one-man business men, men owning small businesses, who have gone into the trenches, and who now find themselves without a home. Does the hon. Gentleman think we are forgetful of that fact? Does lie think the Government is forgetful of it? It is a cheap sort of thing to say in relation to a Budget which, is to afford the means of providing the finance, because if there is any reality in the statement it means there are opportunities of doing something more for these men, and that it can be done merely by a wave of the wand, call it, if you like, a capital levy, and that you will be studding the whole country with buildings which these men can inhabit. It means, too, that the only people in the world who do not care about these men are His Majesty's Government, while the only people who do care are my hon. Friend 427 and his Friends. I could make that kind of speech as well an my hon. Friend—per haps not quite so well.
For my own part I can assure him, whether he believes it or not, that as regards these men who have sacrificed everything, there is no length I would not go if I thought it Bound. I would not think of my own pocket in this matter. You can take anything you like if it is sound. I can live on very little if I am put to it. But I do say this, if there is one thing the country wants more than any other, it is that you should restore confidence in the country, financially, economically and commercially. Then you will be able to get money to build houses, and to give greater compensation to these men—a compensation which they ought to have. But to put forward an unsound proposition for the purpose merely of making an electioneering speech of this kind is to threaten the very foundations of the stability and future of these men who, we all agree, have done so much, and to whom we owe everything. I have said over and over again, and I repeat it now, there is nothing that you can do for these men that is too good for them, and for this simple reason, that if it were not for these men, there would be nothing for anyone of us. We should have had every thing taken away from us had Germany been in a position to dictate peace terms in London. We ought, therefore, to approach this subject, realising that the country owes everything to these men, and that within reason anything we can do ought to be done, not merely in providing them with homes, but in also providing them with what I think they would far more prefer, namely, employment at good wages and under good conditions. To utter in this House such statements as have been given expression to by my hon. Friend can only tend to deter these men, who are already anxious and nervous whether they ought to strike out on new lines of trade and commerce; from entering upon this work of reconstruction. Whatever your intentions may be, and I do not impute anything dishonourable to my hon. Friend, I say you are doing the worst thing for them, even although the object you have in view is to improve their position.
My hon. Friend has said that his party is in favour of a capital levy. If I thought that a capital levy was possible or practicable, or that it could be made 428 with any equality of sacrifice, if I thought it could be done without shaking the confidence of this country to its very foundations, I would not be opposed to it. Personally I have no objection to bearing my share of taxation. The question when you want to raise money is what is the soundest way to do it. What is the best way to keep up confidence, which after all is your greatest asset? Why has England been greater than any other country in its finance? I say the greatest asset that England ever had was its credit—its credit in America and all over the world. It was because of that, that by a mere bit of paper, as it were, vast transactions could be carried through without bullion and without the transfer of money at all. We have, in consequence, been able to carry through our finance on a scale which has been the admiration of the world. I am a very old Member of this House. I have listened to many of these Debates, and I do beseech hon. Members in all things to avoid claptrap. Do not put your selves in the position of the man who tells his friends he is going to cut a dash for a year or two and who knows that at the end of that time he is going to become bankrupt because he has been spending his capital. We do not want to do that. I listened with very great attention to the very able speech of the hon. Gentleman opposite who put the question of a levy on capital in about as plausible a way as it could be put, but who when he came to-the practical application of it, utterly broke down. It would be all very well if everybody had the same amount of ready money, for then you could say, "We will take a quarter from each of you," and business could accordingly be regulated for the future. But there are many men who are apparently well off whose wealth is merely upon paper, and they cannot give you the money which you require. Let me take two instances. Take first the case of a business established at a cost of £200,000. It has paid no dividend, and is only just paying its way. Are you going to value that business with all its machinery at £200,000 and to take £50,000 out of it when, it is not even able to pay its way? What would be its chances for the future? You would literally destroy it. This principle of a levy on capital, no matter how you try to carry it out, must end in the destruction of a certain amount of the business of this country.
Mr. ARNOLDWill the right hon. Gentleman permit me to say, in the first place, 429 that no levy would be paid by a limited company. He referred to dividends, therefore, I suppose he has limited companies in mind. In the second place, in the case of a private concern, where the partners have all their money locked up in the business and no securities outside it with which to pay the levy, they would be allowed to pay the levy over an extended period of years out of income. Therefore, there is nothing in the proposal which would take out of any business the capital which it needs to carry it on.
§ Sir E. CARSONI understand the argument is that if you have not got the money you are to go on paying the tax. Then one man is to pay out of his capital and the other is to pay out of income. That is a levy on capital! That is a reductio ad absurdum.
§ Sir E. CARSONI heard my hon. Friend make that statement, and that is one of things I meant when I said that when he come down to practical application he entirely failed. Take the case of a man who has land with a large mortgage on it. You go to him and say, "Your land, after the payment of that mortgage, is worth £100,000; give me £25,000." He says, "Where am I to get it?" Will you take it in lumps of clay or in fields, and if so, what are you going to do with it? Will the State become the landlord of it?
§ Sir E. CARSONIt is the Death Duties that have reminded me of this, because I have known the difficulties that many people have been in who were quite willing to sell their land to pay their Death Duties but who have not been able to find a soul to buy it. Will you take some of the hind? Is that the proposal? No. That is; not the proposal of the hon. Member. He would say there again, "We will take it in instalments out of the rents as they come in." What are you doing now? I had the pleasure of practising my profession this morning for a very considerable fee, say it was £5. At what amount do I enter it in my fee book? £2 10s. Why? Does not the Government get half of it? Is not that a levy? I put this to my hon. Friend (Mr. Hogge): Is it right with the affairs of the country in their present condition, with all the trials the people are going through and with all they have suffered 430 to preach as he preached here to-day, and as I. have no doubt he preaches in the country when he goes among the people, to tell them, "There are the wealthy classes making a great deal. You are in this condition, without houses and every thing else, and they are not paying Is. to help you." The people who pay Super tax are paying 10s. in the £, and it is your duty to tell the people so. Let us not be mealy-mouthed about this thing. There is great reality at the back of it. There may be revolution at the back of it and we know it. If I were not paying my fair share now I should be ashamed to meet these men whom I see limbless and arm less coming along the streets as I go to my work. If it had not been for this War I should have been very glad to retire from my profession and devote myself to other things, but I gladly go to my work day by day, because I know that one-half of what I am earning is going to help these people. I work to help these people and I am glad to help them. I decline to say it is fair play, or playing the game in this crisis of our country's history, which may lead to the most terrible con sequences, to go out and tell these people that I am doing nothing, but that I am accepting myself the fruits of the sacrifices which they have made up to the hilt in the War, which they have won to their great glory.
§ Sir E. CARSONI heard the speech, and it was very like it.
Mr. HOGGEI do not want to be unfair to my right hon. Friend, because during the War we have worked together to help these people. I never suggested in the course of my speech that men like him self, pursuing their ordinary profession, gained any particular advantage out of the War. What I did say was that there were hundreds of people in this country who have made profits ad hoc from the War, who are not contributing in a pro per way to the resources of this country as against the men who gave their lives and whose lives were taken.
§ Sir E. CARSONI was coming to that point. I have it on my notes. Before I do that, let me make one other observation about this levy on capital—I do not know whether it has been made before. Let hon. Members consider what the War has done to the capital savings of men like myself. I only take myself as an 431 example. All my life I have tried to save enough, so that when I became old, or if I became infirm, which I am glad to say I have not yet become, I should be able to live long in peace and in a certain amount of comfort. What has the War done, when you talk of taking away capital? A prudent man in a profession ought never to look at a Stock Exchange list; he ought to put what he has earned by the sweat of his brow into a Government Loan or something of the kind which will give him no more bother. That is what I have done. I have tried to get 2 ½or 3 per cent. What has become of my capital? The War has taken away half of it, in addition to charging me an Income Tax of something like 10s. in. the ½ of course, I go to work. Is that my fault? No. People seem to forget. They seem to think that the men who have made money or tried to make money by prudence have it all still. They want to take another quarter of it away by the levy on capital in addition to the half I have lost already. I do not believe that, if that was understood, any man would say it is fair or right, or that it could tend to the encouragement of a man trying to lead a decent life with a view to not being a burden on the State afterwards. There fore, when you arc considering the question of a capital levy, do not forget that the War has already taken away from many of us one-half of our capital, and that the Income Tax is taking away half of our income
The hon. Gentleman did not deal quite fairly with the Excess Profits Duty. He said that in the middle of this great crisis, when we want money, you should not re duce the Excess Profits Duty. Does the hon. Gentleman think for a moment that the Chancellor of the Exchequer did that out of any favour towards the men who pay Excess Profits Duty? Does not the hon. Member know very well that the right hon. Gentleman did that with a view to the expansion of business? Does he not know perfectly well that there are hundreds of businesses in the country which, in consequence of the Excess Profits Duty, have been unable to renew their machinery, to keep up their equipment, and to have the usual expansion which is necessary? Unless you are going to lay down that the standard of profit to be made by a business is what it made in 1914 or 1913, what is the justification for keeping it on after the War is over? There 432 is none whatever. I do not believe for one moment—if I did I should take an entirely different view of the matter—that my right hon. Friend had any other idea in view in reducing the Excess Profits Duty than that of increasing, keeping up, and reconstructing the trade and business of this country and, so far as possible, restoring that confidence and credit of which I have already spoken. My hon. Friend wont on to say that there are men in this country who have amassed great profits directly out of the War. So far as I am concerned, I should like to see them dealt with drastically. For any man—I am talking now of profits made directly out of the War—to take advantage of the War to enrich himself at the price of the blood and of the treasure this country was shed ding, is one of the most abominable things that could be contemplated by any decent citizen. For my own part, I should be sorry to make Is. out of it. All I can say is, that if there are these people, and if you require different, legislation to get at their profits, the hon. Gentleman and my self might very well renew some of our efforts to do things for those men to whom we have promised so much, and for whom we have not done nearly enough.
1 pass from that question and come to the. hon. Gentleman's dealings with the question of Preference. I found it very difficult to follow him. Apart from the quotations which he has dug out of the dustbins—I think that was Mr. Asquith's phrase—of what arc now antiquities and speeches that were made under entirely different conditions, what I understood him to say was that it is really a miserable thing, there is nothing in it, it is not worth doing, and it is hardly worth counting, this little concession made here and that little concession made there. He quoted a speech made by the Secretary of State for War ridiculing the smallness of the concession that would be made. I desire to make two observations upon that. The first is, that at all events the Colonies are grateful for it. Sentiment in these things cannot be weighed by mere pounds, shillings and pence. The sentiment and the feeling in Canada, in Australia, in South Africa, and elsewhere, after a long struggle against a Preference, which, remember, they had all given us. and which we had refused to give to them—the sentiment that the Mother Country is taking the only way she has at the present moment of showing her great gratitude for the rush 433 to the Colours at the moment the country was in danger and her appreciation of what she owes to them, is worth millions of money, but it cannot be weighed, and that, at all events, my right hon. Friend has effected by his Budget.
When my hon. Friend is making these quotations docs he really not see that the conditions now are entirely different from what they were in 1909 and 1910?Has he learned nothing from the War? Does he really think we stand towards our Colonies now in the same position that we were in 1910? Does lie think there is no greater cohesion now in looking upon the Empire as one great whole than there was then? The hon. Member went on to quote Mr. Chamberlain as saying that if these duties were persisted in there would be blood and trouble. That is not what was ever said. What was said was that they would not come till after blood and trouble. We i have had the blood and trouble, and our Colonies have helped us. That is what he j said, and that is what I heard my right hon. Friend quota in a pathetic passage in his speech. The hon. Member gave the go-by to the whole of that which has happened, and he would say calmly to the Colonies, who in Imperial Conferences i under two Governments have passed this with the assent of the Governments here as a proper and necessary step to bind closer to us those who have fought for us, "I am sorry. We are deeply grateful for the sacrifices you have made, but we can do nothing even to satisfy the sentiment of your country in relation to these matters." At all events, I am glad my right hon. Friend has made up his mind to make a beginning in this matter. The hon. Member is very anxious to see where that will extend. Time and experience will show—time and experience, the two great things which must regulate all the policy of the future. But to represent to the country that in some way or other you are breaking through the principles of. Free Trade, or that you are doing some thing uneconomic to their disadvantage be cause you have made a reduction in their favour on existing duties, and thereby are really lowering the duties, is a perversion of the real facts which ought not to take place when an effort is being made to show the gratitude which every man in this House is prepared to show in some way or /mother to those men who have come across the seas to help their kith and kin.
I should very much like if the Chan- 434 cellor of the Exchequer—I am afraid I shall not tempt him to do it—would let us a little more into the secrets of the Government as to the future policy of the country. I agree with the hon. Member opposite I that that is an essential matter. I believe the sooner that is done the more it will make for the stability of the country and the promotion of greater confidence and security. I believe there are many things kept back because we do not know. All we know is that in the announced policy on which this Government was returned there was a promise to protect key industries and to save us from dumping. I have not yet seen any sign of the fulfilment of that policy. Time is going on, and September will come when the restrictions, we hope, will all be off. The sooner we get back to normal conditions the better, and whatever is the policy of the Government it ought to be openly declared and well understood, without reference to War conditions and based on peace conditions. As regards dumping, I am not very much encouraged -when the Parliamentary Secretary to the Board of Trade told us to-day that he was not even able to say whether goods were at present being dumped into this country which were made by the Japanese at a wage of 10d. a day. I think the Government has a difficult and anxious duty in this matter, and that is at the earliest moment to take the country into their confidence. The matter has to be discussed openly and frankly with all the conditions surrounding it brought home as far as possible to the people. What ever may be our differences and discussions in the future upon this subject, I lay down this one proposition with all the earnestness I can for the consideration of the House, that we ought to try, in the circumstances of the country, to be perfectly frank one with the other as far as it is humanly possible and take care that we do not leave realities in what we put forward
§ Lord HUGH CECILI listened with great interest to the speech of the hon. Member (Mr. Hogge), and I felt, like my right hon. Friend, that on the two points which he selected for criticism his treatment of them was not wholly satisfactory. I have always been deeply interested in the question of how far you can modify the fiscal system of this country in the interest of the Dominions without departing from the general principle of free exchange, and I heard with great interest and satis- 435 faction the speech of the Chancellor of the Exchequer, because it brought home to me that he defended this innovation mainly on the ground that it was part of a policy of Imperial co-operation; that is as one may say, political policy, and only subordinately because of its economic value. Speaking of it purely as a question of economics, I still believe that the less you interfere with the natural course of commerce and industry the richer you grow, but no one can pretend that this is more than a most trivial interference with the natural course, and I think the Chancellor of the Exchequer made out a strong case for believing that there were considerable political advantages in adopting it at present. It is said it is so trivial that it does not advantage the Dominions, and therefore its political importance, like its economic importance, is only slight. I think a good deal depends on the circum stances of the time. If I were going to be married, which I hope will not happen to me, I should, in accordance with custom, make a gift of a suitable ring to the young lady of my affections. No doubt the ring would cost some money, perhaps less than I should have paid for such a present before the War.
§ Lord H. CECILMy economic motives are much more operative now than they were before the War. I should not expect the young lady to value it entirely because of its pecuniary value. It would rather be as a testimony of my affection. These reductions in duties, small as they are, and comparatively insignificant as they must be in their economic effect, are, I believe, acceptable to the Dominions as homage to the services they have rendered to the Empire during the War, and as a sign that we are in all possible ways going to promote co-operation between the Dominions and ourselves. An economic policy so conceived as part of a larger political policy is not, I think, susceptible to serious attack from the point of view of Free Trade. Perhaps it would have been otherwise before the War, and before we had, with the common consent of Liberals and Conservatives alike, trodden under foot every possible principle of freedom of ex change during the War. The hon. Gentle man speaks as if we were still in the year 1903, or even 1895. I first got into Parliament when the principles of free 436 exchange were generally respected in ordinary legislation. During the War we have paid not the slightest attention to them. We have regulated industry, commerce, prices, and production in every possible way, nor is it apparently the common policy of the House to abandon that system altogether now in time of peace. How in significant is this small departure from the principle of allowing commerce to follow its natural path compared with the Corn Production Act, which is a most gigantic system of Protection, if by Protection you mean changing the national course of industry and commerce, that has ever been carried out, certainly since 1846.
§ Lord H. CECILIt was carried, and a great many Liberals voted for it. That was a far more considerable method, and I hope we may say in that respect the fiscal controversy, if it be still a controversy, has changed, its character. The future of Protection in this country really depends on whether such interference as the Corn Production Act turns out to be successful or unsuccessful. I mention it because it is the most considerable, and not the only one, amongst recent measures. If it is a success and it turns out that that policy fulfils the intentions of those who put it forward, let us be sure that in one way or another you will spread that system bit by bit over the whole range of industry and commerce. It is by that path that we shall enter upon Protection, a path which will, of course, involve our amply safe guarding and securing the position of the labourer as well as of the capitalist. If, on the other hand, the Corn Production Act breaks down, and there is a reaction of opinion against it, it will certainly take something a great deal more considerable than these small preferential duties to induce us to depart from the general system of freedom of exchange. I therefore attach no importance now to the suggestion that this is opening the way to something much more important. I think we must judge preferential duties on their own merits, and on their own merits it seems to me that the political advantage would far outweigh whatever economic disadvantages can theoretically be attributed to them.
5.0 p.m.
I pass to the question of the levy on capital. I do not think anyone has said this, obvious though it appears. If a levy on capital on a great scale is possible at all, we need not make it in this country. 437 It will be quite easy to make it in Germany. If it is really possible to make on a great commercial and industrial country a great levy on capital amounting to thousands of millions of pounds, we shall get the cost of the War by indemnity out of Germany. Therefore we shall not have any need to do it in this country. If, on the other hand, we cannot get it out of Germany, by a levy on capital, if it is too onerous, too difficult, or too complicated to be imposed upon our enemies, then it is too onerous, too difficult, and too complicated to be imposed upon this country. I believe that what upsets the minds of those who recommend a levy on capital is on of the most common and dangerous errors of our economic discussions. I mean a misconception as to the nature of values. When we speak of bringing certain re sources into the Exchequer we contemplate something in the shape of or calculable in terms of currency—that is to say, we contemplate making a levy on the value of the utilities that exist in our country. Value does not reside in commodities at all. It does not inhere in commodities at all. Value inheres in the human mind. For example, take a well-known story of the seventeenth century, when travellers in the Highlands found that people there would not take gold, but preferred white money. They had no value for gold. Accordingly, it was only the white money that had any value or use. That instance illustrates the general truth that value depends on what people think, on their desire, their demand for the commodities in question. It follows, therefore, that you cannot at any given moment realise or make available for the Exchequer a vast quantity of values of the utilities in a community, because the minds of human beings do not operate in that way. They do not want great quantities of land at the same moment, or great quantities of shares in various commercial enterprises, or any other utility or symbol of utility you can name. The moment you come to try to realise these utilities their value disappears, because you flood the market, as the phrase goes.
What alternative have you in a levy on capital. Only this, that you take away the value of the utilities themselves. You take part of a certain company or part of a certain landed estate, or certain shares, and the State would be in the position, on a quite colossal scale, of having to deal with an estate which has to be wound up. 438 Take, for example, that great financial enterprise which was successfully under taken when Messrs. Baring fell into financial difficulties, and in order to prevent a collapse of their business their affairs were taken over by a syndicate and slowly realised over a period of time. If I recollect aright, the figure was about £21,000,000. That was a very difficult commercial enterprise, but it was success fully carried out. That enterprise was to-realise £21,000,000. The State, under the present proposals, would have to realise £6,000,000,000 sterling in the same way. They would have a vast accumulation of shares in land, and shares in various commercial enterprises, and they would have-to slowly put them on the market over a-great period of time. I do not believe it could be done. I believe it would be wholly unworkable, and it is for that reason that I am not sanguine that we shall get anything like an amount to pay for the War out of the German people. I do not believe you can realise the values-of the utilities of a country at any given moment. The moment you attempt it you-upset the whole standard of values, which, resides in the human mind and not in the things themselves.
I do not think this proposal for a levy on capital is recommended by calling it the conscription of wealth. Conscription is a most odious resource which the country-was driven to because of urgent necessity. Assuredly, we could never have carried, conscription and we could never have imposed it, and all that it means, on the population except that it was the only alernative to national destruction. If you. can show that a levy on capital is the only alternative to our country being totally destroyed there would be some analogy but to suggest that because under conscription a vast number of people of all. classes have suffered terribly, therefore,, in the name of equality of sacrifice you are to impose something as unpleasant as you can on those who have not suffered is. surely grotesque.
§ Lord H. CECILYes. A great many-people have suffered very severely in the War by terrible bereavements and terrible disablements, and they would come under the operation of the conscription of wealth. But surely it will not be con tended that having gone through a great 439 war in which many people have suffered severely we are to take measures to make all the people who have not suffered Buffer as much as possible, and to call it equality of sacrifice. Equality of sacrifice is not to be pursued as a sort of ascetic communism, by which for everybody suffering is to be. an object in itself and by which everybody is to be a sharer in a common inheritance of anguish. My feeling is not so much in regard to the larger capital levy as recommended, but it is that the levy on capital which has been actually in operation under the Death Duties is open to serious criticism. I accept the proposition that a graduated tax on inheritance, if you are to have an inheritance tax at all, is the justest way of imposing it; but if you have the principle of graduation, and if you make the graduation as severe as it is now proposed to make it, you ought to ensure that the graduation corresponds to the capacity of the taxpayer to pay the tax. The person who pays the tax in the case of Death Duties is undoubtedly the person who receives the inheritance. In former discussions we have fallen into a lamentable and, in my view, muddle-headed attempt to pretend that the person who pays the tax is the testator. The testator has gone to another world beyond the reach of the Chancellor of the Exchequer and it is to him personally a matter of indifference what the Chancellor of the Exchequer may do in the matter of taxation. It is the heir who pays the tax both in fact, and in theory. Therefore, I say that if you are to have graduation, however heavy the graduation, the tax should be paid according to the amount that the heir receives. If a man inherits from a millionaire £100,000, he should not pay on the graduated scale appointed for £1,000,000, but he should pay on the graduated scale appointed for £100,000. Whatever the man receives, that he should pay on. The contrary theory of supposing that the inheritance pays the tax is a fallacy in the first place, because it is people and not things who pay taxes; and in the second place it makes nonsense of graduation. Commercial stocks and shares suffer no hardship. An inheritance is an inanimate thing, and there can be no equality of sacrifice between inanimate things.
Quite plainly, if you are to carry out the principle of graduation you must make it operate on what the person receives. 440 Therefore, the first thing my right hon. Friend should do should be to make his graduation so as to abolish the principle which has always been attacked in the Death Duties, the principle of aggregation and of levying the tax on the whole estate. I think he ought to have regard to the consideration that the principle of graduation should be confined to the varied capacity of the taxpayer to pay. Nobody has ever sugested that taxes on amenities or luxuries should be graduated. No one suggests that the very rich man should pay more on his cigar or his champagne than a man of comparatively moderate income. No one suggests that the cigars of the First Commissioner of Works should cost him more than the Chancellor of the Exchequer pays for his cigars. That is a principle of taxation that has never been introduced. Accordingly it does seem to me unreasonable and, in fact, a hardship if the graduated tax is levied, not on the income-bearing part of an inheritance, which is quite reasonable, button those parts which are non-income bearing amenities. It is reasonable that there should be a tax on the amenities of an inheritance, but it should be a flat-rate tax. and there is no more reason for saying that the amenities belonging to a very rich man ought to be more heavily taxed than the amenities belonging to a moderately rich man. If the right hon. Gentleman accepted the principle, that would in itself remove a good deal of grievance which is felt in regard to these taxes. I heard the right hon. Member for Manchester (Mr. Clynes) make a statement, which was a just and true one, that a tax should as little as possible vex those on whom it is imposed. You ought to make your taxes as little vexatious as possible. It. is notable that though the Death Duties bring in a vastly smaller revenue than the In come Tax, and though the higher rates of Death Duties seem to be, on paper, less onerous than the higher rates of Super tax, they have always been felt as a grievance and have occasioned much more complaint than the heavy Income Tax. That seems to me a very remarkable fact, well deserving of the attention of my right hon. Friend.
Why is it that the Death Duties are, as a matter of fact, much more disliked by those who have to pay them than, apparently, the greater and more burden some Income Tax which is vastly more remunerative to the Exchequer? One of the reasons is that the Death Duties press 441 very hardly at the time of accession. The theory of the tax is that the time of accession is an exceptionally unfavourable time for paying the tax. I believe it is an exceptionally unfavourable time. These Death Duties ignore the plain truth that the widow and the children of a testator have already in the lifetime of the testator enjoyed the full benefit, or almost the full benefit, of the estate that passes. There fore it very often happens that, except in the case of the main heir, the death of the testator means, not enrichment to these people, but impoverishment. It is particularly hard in the case of a widow, because in almost every case the widow is left poorer by the death of her husband, who may have been a wealthy man; but according to our theory she receives a bequest, and accordingly has to pay Death Duties. You constantly find very hard cases. The widow, on the death of her husband, has to make all sorts of retrenchments that are vexatious, and particularly vexatious to those persons advanced in years who have got accustomed to certain ways of life. She has to make reductions and abatements in her style and cost of living, and, at the same time, she has to pay very heavy Death Duties.
That is one of the reasons why these taxes are felt to 'be so onerous. Undoubtedly they operate harshly on landed property. At any rate, they occasion a sense of hardship to owners of landed property. I think the reason for that is that landed property sells at a higher value than its income-bearing value. Certain amenities are still supposed to attach to the owners of land. People still prefer to buy land at a rather higher value than would be reasonable if it were considered merely as an article of commercial production. That increases the selling price of land, and, accordingly, a duty levied according to the selling price of the land, which is the theory followed, is excessive when compared with the income derived out of the land, out of which the tax must be paid- The landowner, on succeeding to a landed estate, has to pay Death Duties out of the income derived from the landed estate; but those are levied not according to the income received, but in proportion to the selling price of the land. I am not at all sure whether the Exchequer might not get all the money which it gets now from that source, and get it with much less friction, by having a separate independent Income 442 Tax levied on the profits of landed estates instead of Death Duties. The Treasury could see how far that could be made operative, but I believe that if there could be a special Income Tax levied on landed estates, in virtue, of which they would be-exempted from the payment of Death Duties or Estate Duties, it would bring in more money with much less dissatisfaction to owners of landed estates than results from the present system, and would, be equally remunerative to the Exchequer. That is a point which it would pay my right Hon. Friend to inquire into.
I have heard it suggested that the-Death Duties, as now proposed to be graduated, will consume capital, and that in the higher rates of graduation the-Government will actually lose, because the capital will be consumed so quickly that they will lose out of the reduced receipts from Income Tax more than they will gain. I do not know whether that is so or not. Perhaps my right hon. Friend will look into it, but I certainly say that when you get to the rate of 40 per cent. capital tax you consume capital so-quickly that Income Tax, with the rate of Income Tax now levied on large incomes, would give you more. All those are points for inquiry. My right hon. Friend might-very well appoint, not a Select Committee of the House of Commons or a very elaborate Royal Commission, but have a small Treasury Inquiry by persons in whose judgment he has confidence, who are expert in these matters, to discover why the Death Duties excite so much discontent, whether there is any modification of them which would remove discontent without undue sacrifice of revenue, how far they really are remunerative a compared with Income Tax, and how far they are comparable with the productivity of the Income Tax, and whether it is not possible to distinguish between income-bearing property and property which does not produce an income. It might also report what loss of revenue would result from the abolition of the principle of aggregation, which does seem to me in face of the high graduation now adopted to be indefensible and unjust. My right hon. Friend's original Budget speech referred to these taxes as an illustration of taxes intended to be levied on those who are not actively engaged in the production of wealth. I forget what his exact phrase was, but he spoke of them as being-illustrations of the very heavy burdens now thrown on those who enjoy posses- 443 sions without making any exertion in respect of them. And of course it is the most common thing in the world, and it is made a sort of criticism on all sorts of people who live on their own means, and are not engaged in any form of business exertion. It is, therefore, worth while to traverse the proposition that an acquirer of wealth is a more valuable person to the community than a possessor of wealth.
It appears to be a fashionable opinion now that one ought always to be engaged if you area citizen of the world, in acquiring wealth as otherwise you belong to what are called the idle rich. Of course it is very undesirable that anyone should be idle, and the attribute of idleness be longs to a person because he is human, and not because he has property, and in any rank of life idleness is equally mischievous to the community and equally discreditable to the individual. But if the idle rich is a bad citizen there is a class of acquirers of wealth who are at least as bad citizens. There are what may be called the predatory class—per sons who are making money by taking it out of the pockets of other people, such as certain classes of speculators and certain classes of usurers. Then there are persons who are acquiring wealth by exertions which the community would be very much better without. For example, the whole of the periodical literature. Beginning with the highly respectable "Edinburgh" and "Quarterly" Reviews, and coming down to the least respectable newspaper published, you will find a vast difference in merit in those engaged in these enterprises. Some newspapres are subject to criticism on these benches, and sometimes one might be inclined to think that Ministers themselves thought that those newspapers were not very valuable. But there are lower classes of papers -which make large profits and which nobody disputes are mischievous. That is only one illustration by which it can be shown that the acquisition of wealth is not in itself morally superior to the possession of wealth, and therefore I earnestly deprecate, whether on the part of the Chancellor of the Exchequer or any other Member of this House, any suggestion that the State ought to favour one class of owners of wealth as against the other. Any such theory would be mistaken.
Mr. CHAMBERLAINMy Noble Friend will forgive me if I remind him that I ex pressed no moral judgment whatever. I 444 made a distinction in the Income Tax between what is called "earned" and what is called "unearned" income. I said that I always disliked these differences, be cause they suggested a moral judgment, and that they were an accurate statement of fact.
§ Lord H. CECILI would suggest that the proper distinction is sure income and precarious income.
§ Lord H. CECILWhere a man earns a professional income which dies with him it is obviously not a matter of complaint because he saves something from that in come in order to leave it to those whom he leaves behind him. I am not sure that the legal distinction in the Income Tax Acts does really correspond with the true distinction of equality of sacrifice which ought to be made. It will be a thousand pities if, whether it is advocated by my right hon. Friends who are moderate men or by a future Labour Government, who will perhaps not be so moderate, it be comes the doctrine that the State ought to eradicate leisured people from the community. There are a great many things which I do not think will work at all if you have no leisured classes. One of those things is the House of Commons. I do not believe that you could really work the House of Commons merely in the spare time of business and professional men, and what applies to the House of Commons applies generally to representative government throughout the country. You must have classes of people who have time to devote themselves to public work. If you are going to have all your public business done in the time which a lawyer or a business man can spare when they retire from business, and they no longer enjoy the highest vigour, or at the end of the day, when they have spent all their best energy, then assuredly you will not have public business very well conducted. They may add a very useful clement by their experience and knowledge of affairs, but they will not be able to do the work of public government in this country which must necessarily always fall into the hands of those who have leisure to attend to it, and therefore have their own means of living.
It would be well if we had the advantage of hearing those who are able to speak on the drawbacks on the inflation of currency 445 and the consequent depreciation of its value. That is in itself a most heavy tax on those who are possessors or acquirers. But acquirers get paid on the higher scale, while the mere possessor living on his own means, quite apart from taxation, is almost half as poor exactly as he was before the War began. The depreciation of the currency practically means that he is only receiving the same nominal income, and he has to buy everything at double or very nearly double its former price. That is a peculiarly inappropriate moment to put an additional burden on his shoulder. We ought to recognise now, at any rate, that the mere possessor of wealth is already suffering under the economic pressure of the War a very heavy loss indeed. I know of no remedy for all these difficulties except the remedy which my right hon. Friend preaches—the remedy of economy. Obviously, if you do not have economy the awkward question always arises. Who will pay? Can you sugest a more appropriate class of victims than a particular class of tax payer? That is not indeed unanswerable. One can often make an answer, but it does not stand in the way of obtaining particular additions of taxation. May I repeat what is indeed a platitude which seems to be commonly forgotten in these matters—you will make very little progress an economy if you are satisfied merely with putting down waste. It is not waste that keeps the situation as it is. It is useful and wise expenditure, expenditure which, considered in itself, is wise and useful. Therefore, when we say we are in. favour of economy, we must be honest with ourselves and say that that means that we are going to give up some particular branch or branches of expenditure of which we should approve.
I often wonder where we are to begin to economise. If we were to propose economy in education, I suppose that even in this comparatively tranquil House we should "be met with a great burst of indignation from all benches. Everybody will agree that we should not spend less money on education. There are other things necessary, like housing, as to which the suggestion of economy would produce even greater indignation. I believe that if we went through the national expenditure point by point, if we had a sort of litany in which the Chancellor of the Exchequer read out point by point the different headings of the expenditure, there would be a chorus of anathema from all benches 446 when he proposed a reduction in any branch of expenditure. If that is so, we shall not economise, however many times we speak in praise of it. Let me say, then, that while economy is in the interest of the great body of the British wage-earning class not at all less than in that of any other, there is, I am afraid, a view that as long as taxation mainly presses on the rich it docs not matter to the poor. That is a delusion. The difference from the poor man's point of view between taxing the rich and taxing the poor directly is very much like the difference between being beaten with your clothes on and being beaten without them. If you are without clothes the blow falls on the bare pelt. If beaten in clothes, the blow first falls upon your clothes, and gradually wears and tears them to pieces, but it bruises the flesh underneath all the time. I believe that you cannot really impose taxation on any part of the community without making all parts of the community suffer. National possessions and national wealth are in that sense one. The resources of all the different citizens are constantly operative on one another, to the benefit of each, by commercial interchange, by growth of business and wages and the like, so that if you are extravagant in the national finance everyone feels it, and it is the poor who feel it the worst, not because the blow falls the heaviest on them, but because they can least afford to bear any blow at all. Therefore, do let us believe that economy is the interest of the poor man.
I am very much opposed to the raising of the level of the exemption from Income Tax which is now so much complained of, because I think it is so important that the great body of the electors of this country should really understand that truth—which whether you put the exemption on one level or another remains true—that poor people suffer from national extravagance. Unless they feel in some way or other the burden of taxation we shall not have the necessary pressure of public opinion excited to make economy effective. I should like it to be a rule of this House that whenever any Bill comes to Second Reading, if in the opinion of Mr. Speaker it involves or will ultimately involve any national expenditure, it should not be in order to read it a second time until the Treasury have laid on the Table a note showing how much the Bill is likely to cost, and what taxation—taking typical taxes like the Income Tax and the Tea Tax—it will eventually involve in their 447 judgment. I think that would be an ad vantage. Then I think there ought to be an effort to compare the national expenditure with some remotely standard year, a year quite far back. My right hon. Friend said yesterday that there had been no effective Treasury control since the days of Sir William Harcourt. Let us take a standard year of the time when Sir William Harcourt was Chancellor of the Exchequer, for the purposes of comparison, and then let us show exactly how the expenditure, detail by detail, exceeds what it then stood at. That may enable us to see in what particular items you can effect a reduction. Then, thirdly, I am now convinced that we must have a Second Chamber that has financial control. I endeavoured—my right hon. Friend was not so sanguine as I was—to find means by which we could maintain some fragment of the Second Chamber in getting over that difficulty, but I believe that now you must have a completely fresh Second Chamber, and I believe you should set it up side by side with the existing House of Lords and leave it to this House to determine whether it will send Bills up to one Chamber or the other, but Financial Bills must go to the new Second Chamber. Unless you have a Second Chamber more independent of the extraneous influences of this Chamber, you will not get a really effective economic policy. I make these suggestions to my right hon. Friend, but the principle which I most want to insist upon is that we must not have in this matter what in the region of ecclesiastical controversy is called sectarianism. You cannot divide the community, you cannot say that expenditure is in the interest of this class but not of that, that economy will be advantageous to this class and not to that. The interests of all classes are dominantly the same. You cannot really make a distinction between nation and nation. That is my great objection to all the Protectionist theories in international trade. The interests of the whole world are the same. Human prosperity is indivisible through out the world, in the community as well as throughout the world. What we must pursue, therefore, is plenty and abundance here, throughout Europe, in Germany, as well as amongst our Allies. We must pursue plenty and abundance as an economic ideal. If we do that, I am earnestly hopeful that we may effect reductions in the taxation which now presses so heavily 448 upon all, that we may eradicate poverty in this Island without confiscating wealth, and may do far more lo inaugurate that general prosperity and that general tranquillity which social reformers of all opinions and all shades of political thought alike sincerely desire.
Mr. LUNNI desire to offer a few general observations upon this Bill. I do not claim to be a financial expert, but I do understand the views of working men and women who will be so heavily taxed by this Bill. I realise the difficulty of following two of the most highly educated men we have in this House—two hon. or right hon. Members whose eloquence always impresses, but whose views rarely penetrate me at all. What I may have to say will be at the uttermost extreme to the views that they have given, so I suppose I shall be subject to the taunt that what I am saying is balderdash. That does not concern me at all. I simply desire to say that any observations I make will be made with all sincerity in my capacity as a workman, and as one who is desirous of raising the standard of life of the class to which I belong. It is something of a mystery that, six months after the fighting is over, the Chancellor of the Exchequer should be budgeting for an expenditure of nearly £1,500,000,000, and that we should be continuing to borrow money. I find that the average daily expenditure during the last month has been £4,330,035, which is two-thirds the average for the twelve weeks immediately before the Armistice. I submit that the Chancellor of the Exchequer has no right to keep us to war taxation unless he can assure us that everything is being done that is possible to reduce unnecessary expenditure. That is not the case. Let me give one or two instances. We are spending £1,000,000 a week on unemployment doles—that is, we are paying people not to produce wealth when it is urgently needed, and when the Government and others are telling us that the way out of our financial difficulties is to increase production. In my opinion the Government are to blame in this matter in not having organised an employment scheme. My second objection is to the enormous expenditure upon the Army, the Navy, and the Air Services. I suppose this is because the Government's peace policy is at variance with their aims during the War. Or is it because we must have another war to destroy the Republics and the objects of revolutions in other countries? 449 We have to raise this enormous revenue because the policy of the Government is not one of peace, but is absolutely militarist and imperialistic. By this Bill we are to raise taxation to find money to help dictators like Koltchak to defeat the Russian Revolution. There is also no serious attempt to economise in home ad ministration. Wartime staffs are largely maintained in Government Departments. I agree with suggestions that have been made from various parts of the House that these ought to be considerably reduced at a very early date. I oppose this Bill also because it proposes to tax the country for purposes of which we, of the class to which I belong, disapprove, and for expenditure which is wasteful and unnecessary. It further proposes to continue the vicious system of borrowing money. We have a National Debt of something like £8,000,000,000, which will require £400,000,000 a year for a generation or two to pay interest and sinking fund. I submit that if the war profits had been fully taken from the beginning the debt to-day would have been very small. The Government have been too cowardly to make the country meet its obligations.
The really honest thing to do now is to find out where the war profits are and to take them for the reduction of this debt. The other night I had pointed out to me a man who had made £900,000 during the War. I suppose he is not alone; it is possible there are many more. This war debt largely represents war profits; it is monstrous that the Government should have to pay interest on what should be its own money. I heartily support the proposal for a capital levy, which was so admirably explained to this House by my hon. Friend the Member for Penistone, and which I think has never yet been really attacked from any part of the House. I support it because I believe it will get back the war profits, because it will relieve the taxpayer, because it will release money for industry, and because it will make those pay who have stayed at home and done well out of the War, as against the proposals of this Bill to make those pay who have already suffered and bled and fought during the War. I oppose this Bill because it gives no relief of taxation to the poorer classes. I would not ask for that if fairness had been shown to all classes by the Bill. This Bill gives over a period of years hundreds of millions to the rich by reducing the Excess Profits Duty, and by the promise to abolish it 450 altogether. The Chancellor of the Exchequer, in his own words, is giving them £50,000,000 this year. Well might they leave the House exultant, as they did when he had explained his proposal with regard to the Excess Profits Duty and the removal of the Petrol Duty and that the Income Tax should remain where it is. There is no relief for the worker in this matter of Income Tax. He has to pay Income Tax to-day on a wage of 24s. per week pre-war value. Is that a reasonable position after a war such as we have gone through, and after what has been done for the rich is it unreasonable to ask that some consideration should have been given to the poor. How is it possible to raise the standard of life of the people whilst taxes like that remain on the workers? The workers at present are taxed out of all proportion. Take the Tea Tax. The Tea Duty of Is. in the £ is heavier on the working man's family than Is. on the £ Income Tax to a very rich man. [AN HON. MEMBER: "There is 2d. off tea!"] On very little of the tea will there be 2d. taken off to the worker. The tax of Is. a lb. on tea is, I submit, indefensible in peace time, and this tax alone means Is. per week tax on a working class family. Then the Sugar Tax is not to be touched by this Bill, and that is a tax upon a prime necessary of life. Both the Tea Duty and the Sugar Duty should have been reduced or abolished before the Excess Profits Duty was reduced. The reduction of the Excess Profits Duty, in my opinion, is a gift to the profiteers, and companies appealing for new capital may now take the opportunity of stating that this reduction will enable them to pay a higher dividend. It is monstrous to me that the Chancellor should have given first consideration to those who are making more profits out of the poor.
I submit to this House that our hopes lie more at the other end of this building in the Royal Commission which is exposing the hollowness of our industrial system, and not only the mining system, but the whole of our industrial system, and which is exposing the rottenness of our land owning system, and which is laying the basis of future legislation. Robert Smillie and his colleagues have won the undying gratification of the workers of these countries in what they are doing in that Com mission. I submit that the Government might have given some consideration to the workers in this Budget when they had to submit to heavier taxation in every 451 way. There is a tax on everything they buy through higher prices. I further oppose this Bill, because it proposes the beginning of Protection under the camouflage of Imperial Preference. To bribe the people, the Chancellor of the Exchequer is giving the country £3,000,000 of revenue, and is borrowing money to do so. He frankly admits this is only a beginning. His father did tell the country what Imperial Preference would demand from them, namely, taxes on food, and logically on all raw materials from foreign countries in competition with the Empire. When we admit the beginning, the rest, I am sure, will follow, if it is left in the hands of this Government. But I hope that we are not prepared to raise a memorial for the late father of the Chancellor of the Exchequer on the poverty, starvation, and unemployment of our people. I am a constitutionalist when it suits me, like most Members of this House, but I am sure, after the imposition of Conscription by this Government on the people, with the threat to use the military in trade disputes, and then now a Budget like this, which is absolutely in the interests of the rich man, the cup has gone full, and I' hope, i! our position in this House is not sufficiently strong to break down the policy of the Government in this matter, and I speak as a loyal member of the Labour party in these things, desirous to be loyal to my party, that we will withdraw from the House, which I know has been scoffed at and laughed at by hon. Members opposite, and join hands with that organised industrial body in the country, to take whatever means are considered necessary to destroy the imposition of taxation and restrictions such as this Government is trying to force upon us. For those reasons I oppose this Bill—first, for what it does not do, and, secondly, for what it does. It does not face the financial situation in a courageous way. It puts off the evil day. It does not face the question of reducing duties, but continues borrowing, while abolishing taxation on profits. It does not relieve the intolerable taxation on the masses, or do any thing to reduce the cost of living. Further, I oppose tins Bill because the Chancellor has evidently done nothing to compel the spending Departments to reduce extravagance, and because it abolishes the Excess Profits Taxes without imposing new taxes on profits, and because it introduces Protection into our fiscal system. 452 I am, as I have said previously, prepared to take any means to destroy its possibility of becoming law, because I am satisfied it is a menace to the future happiness, comfort and well-being of our people. At the same time, I do wish, and I would rather these matters could be done in a constitutional way. I would rather it could be brought about through the Government understanding not only what are the feelings of Members on these benches, but what are the feelings of the masses of the people outside, and, instead of introducing a rich man's Budget like this, at this moment when the position is so critical as it is, that they might have given consideration to the things which I have mentioned. But if it is passed, I am convinced that the sacrifices of the last five years will have been in vain.
§ Mr. MACKINDERThe hon. Member who has just spoken will, I hope, forgive me if I do not follow all his arguments and give them that reply which I feel was given to them, or at any rate to the latter portion of them, in the very powerful speech that was made a short time ago by the right hon. Gentleman the Member for the Duncairn Division of Belfast (Sir E. Carson). There was a veiled ox hardly veiled threat in what the hon. Member said. If that threat had been uttered by the right hon. Gentleman (Mr. Clynes),who spoke yesterday afternoon, it would have been a serious matter. I cannot help feeling that the vast masses of the citizens of this country repudiate any such course as fatal and suicidal to the very interests of the country, for which they fought with such noble valour. I would only say one thing on one point, with regard to which the hon. Member spoke, and that is in regard to war profits. I think he very greatly exaggerates the amount of war profits that have been made. We must not forget that as regards reputable companies you have still to get to the end of this year to see whether a great deal of those temporary profits are not wiped out by depreciation of stocks. Trade is by no means good at the present moment, and you cannot make certain what the profits are that have been made in the course of the War by reputable companies, who keep good accounts, until a considerable period has elapsed after the War. But, apart from that, the worst cases of war profiteering would be very difficult to follow and detect. Let me give a single illustration in a small way of the difficulty 453 I foresee. Last night I was in the Under ground Railway, and sitting opposite to me there was a man who wore upon his fingers a series of diamond rings of immense value. That man was quite obviously in clothing, appearance and speech not a Member of the idle-rich class. [AN HON. MEMBER: "A diamond merchant?"] He may have been a diamond merchant, but ho. did not look it, and there were many circumstances against. such a conclusion. I venture to think that it is quite probable those were war profits very deftly put into a form in which they could be carried into other countries where they could evade the tax gatherer, and where you would find it extraordinarily difficult, with probably no books kept, to bring home to the man the fact that he had made profits out of the War. We are all agreed if you could only get a practical scheme for extracting war profits, they should be extracted. I do not believe they would be so great as some hon. Gentle men think. But when you have got to meet practical difficulties I notice that hon. Gentlemen who bring forward these suggestions are very rarely very helpful in the way of construction.
6.0 p.m.
I desire to make one remark in regard to certain speeches that have been made in this Debate yesterday and to-day. To some of us who remember the old fiscal controversies in previous Parliaments, it has been a matter of extraordinary interest to watch the very different roads by which different minds have arrived into the position in which they now stand, a position which will enable them to help forward the great policy which the Government have in view. The right hon. Gentleman the Member for Swansea (Sir A. Mond) spoke last night. I should not myself take the same line of argument as chat which he took, but he arrived at the same conclusion that I arrived at long before, and whom men join the ranks and are ready to fight in the same line with me I am not going to inquire too closely whether they have come as volunteers or as conscripts. But I was still more interested in the. speech that was made by the Noble. Lord opposite (Lord H. Cecil). He has arrived by a very characteristic road—intellectual honesty—and he is willing to see the question tested by experience. If long ago we could have had the same intellectual frankness and friendliness over this issue I believe we 454 might have been a long way further to wards unanimity to-day than we are at this moment. There is only one remark I would venture to make, in this moment of agreement, on the economic portion of the Noble Lord's speech. He said that he still believed that by a policy of Free Trade we should be the richer.
§ Lord H. CECILBy a policy of free exchange.
§ Mr. MACKINDER:I do not want to discuss the subtleties of the question, but he said that by a policy of free exchange we should be the richer. Even in time of peace I should be prepared to deal with that argument and to show that I was not completely ready to agree with the Noble Lord, but I know that the argument would soon take us into subtleties suitable for another arena rather than this. I have ventured to express some of that argument in book form, not in periodical literature, and the Noble Lord will recognise that it is the result of a certain amount of thought therefore. But let me, for the sake of argument, sweep away these subtleties and for the moment agree with the Noble Lord that you might be the richer by a policy of free exchange. I could only agree on one condition, and that is that you are arguing economically on the assumption that you leave out of your economics war. That was the great difference between us, and I believe that is one of the great reasons why we now are coming together. You argued that you were the richer because you allowed, for instance, tungsten to be manufactured, to all intents and purposes, wholly out side of this country. What was the result? The result was that in the early months and even years of this War this country suffered untold loss in lives, and if you leave them out in the matter of economics, then in wealth also. This War in all probability was prolonged because we had allowed trade to take its own course, the course which, in accordance with the classical scheme of economics, would make us the richer nation. Are we the richer to-day? We have had war, and. my contention is that the big difference between us and those who differ from us was that they insisted in thinking all the time, in their process of economic thought, as though war were not, whereas we insisted that war was a danger, and it was to avoid war, to equip ourselves for war, that we wanted the larger thought, the thought that took all human contingencies 455 into account and refused to think there was such a being as an economic and not a fighting man.
The Debate has been interesting from another point of view. Usually, I think, it has been a sound dictum in politics that an Opposition should oppose. Usually, old hands in the leading of Oppositions have refused to table an alternative policy. I have listened since I have been in Parliament to a certain number of these Debates on Second Readings of Finance Bills, and I have seen some Amendments tabled, but, as a rule, they were destructive Amendments. On the present occasion the Opposition, perhaps because some old heads are away in Newcastle and elsewhere, has adopted a different course, and it has put forward a policy, in negative form, I agree, but I assume it is a responsible Opposition, and, if it is a responsible Opposition, even though it puts its policy in negative form, we must assume that it means the statements that it makes. It tells us that this Budget makes inadequate provision out of revenue; then I assume that if those Gentlemen had been on the opposite bench they would have made adequate provision. It tells us that it fails to deal with the War Debt by means of a capital levy; I assume, then, that if they had been in power they would have made their adequate provision by means of a capital levy. We are told that the Government have taken 40 per cent. off the Excess Profits Tax, and I assume that, as a responsible Opposition criticising the Government, if they were put on the Government Bench they would propose to maintain the Excess Profits Tax at 80 per cent. Finally, they condemn the introduction of Preferential tariffs, and, there fore, I assume they would not have introduced them. They have among them an astute electioneer, the hon. Member for East Edinburgh (Mr. Hogge). The hon. Member knows perfectly well that a policy, to have much electoral value, must have some lifting power in it, and therefore we have to look, not so much at these pro positions, as at what it is he is driving at. He has got two methods in view. On the one hand you are going to tell the poorer portion of the community that this is an inequitable Budget, and on the other hand you are going to try and alarm the richer portion of the community.
I want to deal for one moment with that matter of alarming the community. There was an interesting speech made last night 456 by the right hon. Gentleman the Member for the Platting Division (Mr. Clynes). What he says always commands attention, and it is always interesting. One can often agree with it, but last night he was in a pessimistic mood. He spoke of the immense burden left upon this country as the result of the War. He said that it was a burden which could not be carried, and by that phrase he left us to infer that he would wish to write off the burden by some taxation of capital or otherwise. If it were not that he is a man of such commanding position now in this country, I should not have taken hold of a phrase such as that, but what he says will be quoted. That burden must be borne, can not but be borne, and to the very last half penny. We have spent in this War goods, things. It is not a mere question of bookkeeping and of writing debts down. We have destroyed wealth, and unless their country is to face decay, this country must restore that wealth, and that means that we must bear to the very last penny the burden which the War has thrown on us. The real issue is not whether we can bear the burden, because it is inevitable that we must bear the burden, even though it crush us. The real issue is how you will adjust the bearing of the burden, on whose shoulders it shall fall. Shall it be equitably divided? There will be differences of opinions as to what is equity in that connection. Shall it be divided with posterity? These are all book keeping questions immensely important within the State, but do not let us mix them up with the real essence of the position, which is that we have got a burden that we cannot throw off unless we commit suicide as a nation. If we are to bear that burden and bear it easily, we must go forward with courage, and one part of courage is hope. It is incumbent on every public man at this moment, if he sees reasons for hope that we can reconstruct and reconstruct without too-much difficulty in the future, to express the faith that is in him, because in ex pressing that he is lifting the souls of others and breeding courage in the community, and it is courage and confidence-which at the present moment can make all the difference between a" few years of work and a century of suffering.
The complaint made in regard to this Budget last night, and the complaint made by Mr. Asquith at Newcastle, is that it has given a false impression, an impression that things are not quite so bad as- 457 we thought they were likely to be, and, it is insinuated, as they really are. That is how you raise the alarm. It is essential not to regard the position as less serious that it is, but not to regard it as more serious than it is. We want to take the compass of the difficulty in front of us. I suggest that Mr. Asquith himself was painting a false picture, an alarmist picture, and therefore a harmful picture, an unhelpful picture at this moment, when he arrived at the conclusion that we were spending at the present time eight times a day as much as before the War. His words will be repeated, his words will be printed in pamphlets, his words will be circulated as election literature. That is one of those statements which is all the more false because it is a half-truth. Mr. Asquith never went on to say that the purchasing power of that money was one half what it was before, and that, measured in goods and services and not merely in counters and account-keeping, the position was only half as bad as the position that he represented. There is a very interesting and a very valuable book which has lately been published by Professor Bowley, Professor of Statistics in the University of London, on the question of the division of the proceeds of industry, and in that book I think it is generally admitted, as far as I have been able to hear among economists, that you have got the most careful and probably the most nearly accurate estimate of what was. immediately before the War, the total of the national income. Professor Bowley put it at £2,250,000,000 a year. In these things one cannot in the very nature of the thing, be accurate to a few millions, and I will say £2,300,000,000. Basing ourselves on those figures, I have, in consultation with others, tried to form some sort of idea of what the national revenue is at the present moment. On the assumption—and I ask the House to notice that—that the output of goods and services remains unaltered, that is to say, that when we go back to the normal year we shall not increase our power of output, on the assumption that it is for the same quantity of goods and services, what now is the book value, as measured in these Treasury Notes, at the present time? I find a general consensus of opinion that it is probably somewhere between £3.500,000,000 and £4,000,000,000. Let me put it for the moment at very nearly the bottom—£3,600,000,000. The value put 458 upon the same quantity of goods and ser vices which were produced immediately before the War, and after the most careful investigation by a skilled statistician, is £2,300,000,000 a year, and as far as we can see at the present moment, it is certainly not less than £3,600,000,000. Take £400,000,000 as the charge for the National Debt which the Chancellor of the Exchequer is going to put before us for a normal year. That is, 17 per cent. of the £2,300,000,000 before the War, but it is only 11 per cent. of the £3,600,000,000 to-day. In other words, a large part of the alarmist statements made are merely due to a change in the counters in which you keep your accounts, and have no relation whatever to what is the really important thing—the supply of wealth, food, raw materials, work within the country.
That is the first point, and as the House has been good enough to listen to me, I specially wanted to make it in that form, because there are many who suspect the statement that prices have gone up 70, 80, or 100 per cent., and that we must write down values by 50 per cent. I want to put it in the form of total national in come, and I want to measure the total vast sum of the debt charge against those two methods—the prewar method and the post-war method—of measuring identically the same real values of goods and services. But there is something to be added to that. By common consent of all the great captains of industry with whom I have been able to talk, once we have been able to repair our productive machinery, then the productive machinery in the pos session of the country at this moment is capable of far greater output than before, and—I make this further statement—of a far greater output for the same amount of labour. If only the labour is kept as it was before the War, owing to your repetition methods, owing to the reorganisation, during the War, of all your methods, all your machinery, you are capable of a far greater real output, and not merely output in inflated values as measured by the money of to-day. If you add that to the output; if you consider, first, the in creased nominal value owing to our present depreciated currency; and if you further consider the vastly improved machinery of production we have now in this country, then I venture to say that when Mr. Asquith tries to raise alarm by speaking in terms of so many pounds a day, when he tries to make us thank in 459 pre-war terms of post-war facts, he is playing the part which the hon. Member for Edinburgh would like him to play.
Before you can get this increased production, it is essential that you should make the necessary repairs. And, in order that you may make the repairs, you must not at this moment tax up to the hilt. I believe that the Chancellor of the Exchequer has done the very wisest possible thing in the interest of the working-classes of this country in setting free 40 per cent. of the Excess Profits Duty, be cause at this moment what every firm producing wants is fluid capital, in order that it may re-adapt to peaceful methods the machinery which has been diverted to war purposes, and in order that it may do more than that—in order that it may adapt its whole productive machinery to the changed conditions of to-day. Everyone who has ever had to deal with the reconstruction, of a derelict company knows that the first thing you have to do when you take over is to spend with both hands. What usually brings a company down is the fact that it requires alterations and it cannot get the credit in order to spend the money to make those alterations. You can buy it for an old song and proceed to pour money out in order to make it efficient, and you trust to its efficiency to give you a return for the money you have spent. That is our position to-day, and I only mention one single point in regard to it. At the present moment we owe money abroad. That is the most onerous portion of our debt. That is the one thing that is not simply a matter of book-keeping within the State. That is a real debt in things due to other countries. That means that we must in crease our export trade. But if you are going to have an export trade with the countries of the world in their present condition, you must be prepared to finance that trade.
What has been the Liberal contention in the past? That when you invested capital in foreign countries—Argentina, for instance—you were causing a demand for manufactures in this country. That was quite true. How was it you got the making of locomotive engines, and of rails for the construction of the whole railway system of Argentina, to all intents and purposes? It was because, not merely were you ready to make and sell the goods, but actually to advance the money 460 to Argentina to whom those goods were-sent. How was it Germany drove us out of the trade of Roumania? Because she established a bank in Roumania which financed the Roumanians with money borrowed from us. The position is that you want fluid money at this moment, and if I had a criticism to make against the Chancellor of the Exchequer it would be that, instead of remitting 40 per cent. of the Excess Profits Duty, it should have been 80 per cent. and I believe the result to the wage earners of this country would have been pound for pound in wages. What is their alternative? It is a capital tax. I do not want to follow all that argument, but merely to make one observation in regard to it. They come in an insinuating way to the property owner. They say, "This means no more than an Income Tax. You pay now and lose interest in future. If you defer payment, you will have to pay a heavy Income Tax in the meantime." I have seen indications, not merely on one side, but on both sides in this Debate, of a tendency to say that, after all, the distinction between capital and revenue is an artificial distinction. Yes, if you are talking in economic fundamentals, it is a conventional distinction. At any given moment there is a certain amount of wealth in the country. Some of it—wheat, for instance—you will eat in the next few months, and machinery, if not kept in repair, will wear out in the course of two or three years.
If you choose to reason in that way, there is no fundamental difference between capital and income, but the economic experience of all civilisation shows-that the very basis of probity, of honesty, of successful economic policy, lies in maintaining that continual distinction—the distinction between capital and in come. Look at the difference. In the first place, you bring in a fresh moral quality, that of saving instead of consuming at once—a vastly important quality to emphasise, unfashionable it may be, but therefore more important. Secondly, your capital is always being consumed, and every accountant knows that he has to struggle with owners of businesses from time to time to insist on adequate depreciation and adequate repairs. The whole basis of the vast commercial success of this country in the past has lain in honesty, and no small portion of that honesty lay in insisting on the accounting difference between, capital and income. Consider the position of a board of 461 directors who are paying dividends out of capital and not out of profits made. That distinction is fundamentally concerned with the maintenance of any secure system of trading with joint stock companies. Mr. Asquith sees that. That is why Mr. Asquith—not some of these Gentlemen here; he is a purist in these matters—says that the National Debt must be paid off. It is a charge on your capital, and you must hot finance the country by borrowing longer than is possible, because in borrowing you are merely living upon capital. He, like Mr. Gladstone, both a financier and an expert politician and statesman, thinking, not as a partisan, but as a national leader, knows that it is essential in a great democracy to maintain these purisms of finance, this distinction between borrowing and paying your way out of your income, this distinction between capital and income.
These Gentlemen go on to tell us, the moment we speak of Preference, that trade is very complicated. They then tell us, the moment we say it would be a complicated thing to levy a capital tax, "Oh, you can get out of that." Have they ever reflected on the difference of possessing wealth, even though you pay something a year for it, and paying away that wealth? If I have a block of National Debt securities, I can borrow on that; I can finance business on that. That, ultimately, is the very basis of our vast system of credit. If you begin to tell practical business men that it is the same thing to have parted with your securities as to have retained your securities, even although there is a charge on them, you will find they will give you a very different answer. If you have got debentures on your company, at any rate you have got the use of that money; but if you pay off those debentures you may not be able to raise fresh debentures. You may have adequate capital for your business with the debentures on your business. I do not say there are not times to pay off debentures, but foolishly pay them off, and you will find yourself short of capital to manage your business.
You treat trade as a complicated thing where it is a question of Preference, but where capital is in question you touch it lightly. When it is a question of a capital tax you will find that, after all, trade is, in fact, most complicated. There is one. great reason—and I put it to the Labour party that it is a matter which, honestly, they ought to put to their own people in the 462 country—why we ought to be scrupulously honest in the matter of the accumulated capital of the past. This War has been won. by the sacrifice of young lives—true; but it could never have been won unless the ancestors of those young men had saved money in the years before the War and had invested it. How was this country saved during the early stage of the War? By borrowing, and by financing on a basis of the investments which had been made in foreign countries—in North America, in South America, by credit instruments taken up from this country which were utilised in New York in order to borrow the necessary money so that we could give advances to our Allies and hold them up that they might be able to fight alongside of us. You cannot exaggerate the debt we owe to the men who in the past laid money by. These men rendered it possible for us to come through this War with success. The savings of the past—in many, many a penurious way it must have been saved up by people who saved it! Those people should be reckoned as worthy of credit alongside the spilt blood of the people who fought during the War. Therefore we should treat this capital saving as something, after all, that is sacred.
I have only one other point. I believe this is a sound Budget, rightly conceived because it contains a constructive scheme; on. the one hand, by refusing to adopt these policies of despair in relation to a capital tax, and the rest of it; and on the other 'hand, by a constructive scheme for the future. I put on one side the discussion in regard to India. Mr. Asquith's discussion on the tea from India is, after all, not a very large matter. Does any body believe that the people of this country would consent to adopt a policy and not extend that policy to India and give our fellow subjects in India what we believe to be the right thing? If incidentally we lose a certain amount of revenue, if incidentally our citizens gain a certain amount, that only makes the matter all the better. We must treat India as we have treated India during the peace negotiations. Take the case of Canada. "Oh," says Mr. Asquith, "I remember the sabre of Mr. Chamberlain's father. We live in degenerate days." Yes, Mr. Chamberlain's father had a sabre in his hands, and my belief is that if you had allowed him to wield it it might have gone a long way to avoid this War. It was not much to the advantage of Mr. Asquith's case to 463 cross swords with that weapon. I am, however, not going on arguments of sentiment. Will hon. Members recognise this: That Preference is important just in proportion as it does not now bring in a large revenue? Preference is the seed of the mustard tree. If you have faith sufficient from that seed you will get the tree. That is the difference between our faith and those who hold the opposite. Take the Preference in regard to Canada. Canada, sooner than we perhaps think, is going to be one of the biggest manufacturers of the world. To-day you can do a great thing for Canada, more than is suspected by those who rely merely on the statistics of the moment. Canada has contributed her 600,000 men to this War. Canada to-day has her unemployment problem involved by demobilisation just as we have. If you give a Preference to the Canadian motor car and you induce American capital to cross the frontier and establish itself in Canada, you give employment in Canada. You are helping Canada to meet that unemployment problem due to her demobilisation. I say that when Canada has become one of the great industrial portions of this Empire it will be a thing remembered to the credit of this country that we did that something that was within our power to promote that movement in her country in this present time of difficulty.
This Preference, however, regards tropical countries mainly; it relates to sugar, coffee, and tobacco. The hon. Member for Central Edinburgh, who made a very interesting speech yesterday, spoke of this country as a little island. If hon. Members will think in terms of this little Island, then there is very little future for the working classes of this country. If, however, they will think of this Island as part of a vast estate containing hundreds of thousands of fertile square miles, in Africa say, capable of raising sugar, coffee, tobacco, then you are thinking in quantities which will put the working men of this country on a par with the working men of the United States. You tell me that sugar, coffee, and tobacco are not raw materials. They are not. But do you realise that once you get a community going, no matter on what, it will be active for other purposes? In Australia they discovered gold. What was the chief value of that gold? That you got immigration. Australia was going in a way it had never been going before. Once Australia was a going 464 concern, then you got the population on the spot; and then you had the live leadership and intelligence on the spot which could be applied to producing food and all other matters.
I believe that this little Preference to day, limited to the articles it is, may do things that some of us little dream of in the course of the next ten or twenty years. If as a result of it you start our Protectorates going you may get amongst the incidental results those which are not directly calculated as results of the Preference. The right hon. Gentleman has told us that within the policy of Preference you are to have, besides matters of tariff, also issues and contracts. Will the House allow me to remind it, in a very few words, of something many hon. Members read in their school days. It is from ancient history, but it is so closely similar to the situation in which we stand to-day that the experience of mankind then may be helpful to mankind now. I am referring to that period of reconstruction in the Athenian democracy after the great sea battle of Salamis had been won. Athens was triumphantly victorious over the Persian despot. She had won battles on land and sea. There never was a nation with greater triumphs than she in the ten years which included Marathon and Salamis. But the Athenian city was burnt to the ground at the moment when she had paid, relatively to her size, even a greater penalty than we have paid for victory. There came forward a leader with a constructive economic policy. He dared to put it before the democracy. That policy was a policy suited to that time. There were, said this great leader, the silver mines of Laurium. "Take," he said, "that silver which you formerly distributed amongst yourselves and with it bought the good things of life from other places; take that silver, treat it as capital, build ships, launch out with a great commercial policy." The Athenian democracy took their leader's advice. They took their leader's imagination as a guide and followed him. They created within one generation that flowering of civilisation which has been a school for civilisation ever since. To-day we have won a great victory. We have won it at a terrible cost. Our city is not burnt down around us. But we have a vast debt to-day. In the presence of that it is for us to see whether the British democracy will be content with less imagination than 465 was the Athenian democracy. If so, history will judge us. We also have our mines of Laurium. We have vast tropical areas, in which hundreds of thousands of square miles of fertile soil are to be found. Will this great people now by an imaginative arid constructive policy help development? Or shall we construct for the future some old house into which to retire? Or will this great democracy of active workers base themselves on a sound economic and daringly constructive policy and so, out of the death penalty—though a. glorious penalty—enable us to bring forth a Britain such as even our fore fathers never dreamt of?
§ Sir R. ADKINSIn the opening sentences of that profoundly interesting speech to which the House has just listened the hon. Gentleman opposite referred to the fact that many hon. Gentle men in their speeches and by their votes have shown that they have come to the name conclusion by different paths and from various starting points. In the few remarks which I shall venture to make to the House I shall make them from a, starting point different to that of the hon. Gentleman, and although he and I will probably meet in the same Lobby in a few moments, we do so as people who may come from one place, and, it may be, go to another. When the country is governed not by one party but by a Coalition party, it is obvious that the strength of that Coalition party is not to be measured by she decrees, or even by the ideals common to one party in the State. In the very important discussion that took place yester day, and has been continued to-day, the House is asked to express: an opinion on the Budget, the great importance of which necessarily raises issues of the deepest controversy. These deserve, and I am sure will receive, the most careful and most thorough consideration from all parts of the House. I speak as one of those Coalition Liberals whose position is obviously open to attack from more than one point of view. The House will not hear from me any of those dithyrambics in favour of Tariff Reform, such as we have heard from the hon. Member fox Brighton, nor will the House expect from a sincere supporter of the Coalition the use of those miscellaneous missiles, or any of them, which my right hon. Friends on the opposite side of the House take hold of on any or every opportunity they can in Parliamentary Debate.
466 I support this Budget on political rather than on economic grounds. Much of it I support on both. We have heard from Members of the Labour party sincere and forcible statements as to the importance of not having in peace time Budgets appropriate to a time of war. Are we in peace? The whole difficulty of the situation lies in the fact that though hostilities are over peace is not here, and the conditions which in peace time should be supreme are conditions which are not with us now. There may be one way of walking in the night and another in the day in those climates where the twilight is long and misty, and who is to be blamed because they then adopt methods which are inappropriate to the days to which we look forward? In the manifesto issued by the Prime Minister and the Lord Privy Seal there is a sentence of great significance which I ask the House to bear in mind in voting on this Budget. After a reference to fiscal policy, which is substantially the same as the reference which was read yesterday with regard to Colonial Preference, the manifesto proceeds:
Until the country has returned to normal industrial conditions it would be premature to prescribe a fiscal policy intended for permanence.I noted that the Chancellor of the Exchequer stated that none of the preferences given in this Budget are to be taken as proof of the permanence of the taxes to which they apply, and therefore into whatever Lobby we go, or from what ever point of view we approach these problems, we are not dealing with permanent fiscal policy of one kind or another, and our speeches and votes would be misinterpreted and perverted if they were taken as an adhesion to one or other kind of fiscal policy, which the country must decide when we return to times of peace. With regard to the economic aspect of these proposals, one is not altogether sorry to see their minute character on one side attacked by those who are so detached from responsibility. Pictures of the romantic possibilities of these proposals have been painted in this Debate by persons who naturally think they are the beginning of a system which has passed through very chequered times during the last fifteen years. I would submit to the House that it may well be the duty of any of us, at critical and exceptional times in the history of our country, to put political considerations before economic theories.467 Last November, when the Coalition Government was formed and an appeal to the country was made, those of us who were candidates had to decide whether we would support the Government whose policy was contained in the letter of the Prime Minister and the joint manifesto issued by the Government, or whether we would not. It seemed to me that it was supremely necessary for the country to have a Government wider than any party if it was to speak with due weight in the councils of Europe at a time of extra ordinary difficulty and consequence. In order to do that we had, to use a well-known phrase, to pay a certain price. We had to agree to support that Government, as I have supported other Governments, upon their manifesto and programme, and I say deliberately that under these circumstances those of us who chose to support that Government are not to be judged by our likes or dislikes of any particular items which we then accepted. The question is whether we were acting as men of honour in the discharge of our duty in the position we then took up for the sake of our country. Having looked at these proposals, I confess the preference ones I do not like, because they appear to me to be economically unsound, but nevertheless they are well within the manifesto that was then issued. So far from this being the turning point of one's action in economic controversy, whatever turning point there was arose when for political reasons we chose to support the Government and their manifesto six months ago.
We have the highest authority for putting political considerations during a crisis before economic considerations. Reference -has been made to the Paris Resolutions. Those Resolutions are, in deed, a most striking example of recent years of the supremacy of political over economic considerations. My right hon. Friend the Member for Peebles (Sir D. Maclean) said we have to look at the Preamble. What was it? It was that such action was being threatened by the Central Powers that it justified the Allies and the Entente in altering their fiscal policy, and doing all kind? of things which were economically bad because of the exceptional international situation which arose. We have the authority of those great Liberal statesmen who have been specially identified with that school of 468 economic thought to which I belong, that you have to put political considerations before economic at particular times. The application of that principle, or rather of that view of political perspective, leads me and many others to support from the point of view of lifelong Free Traders the Budget on this occasion.
Sir D. MACLEANThe Preamble, as I read it, laid down that the conditions should not only be anticipated, but fulfilled in Middle Europe, entirely, and if that happened, then the subsequent propositions of the Paris Resolutions would come into operation, but not until that was an accomplished fact.
§ Sir R. ADKINSI am much obliged for the right hon. Gentleman's interesting intervention, but it is quite irrelevant to my argument. My point is that the Paris Resolutions stated as part of the Preamble:
They declare that after forcing upon them the military contest in spite of all their efforts to avoid the conflict, the Empires of Central Europe are to-day preparing, in concert with their Allies, for a contest on the economic plane, which will not only survive the re-establishment of peace, but will, at that moment, attain its full scope and intensity.I agree with what the right hon. Gentle man said on this question, but my point is not that the Paris Resolutions ought to be carried out to-day under conditions quite different to those contemplated, but that it was sound and right, in a moment or great international danger, to enter into undertakings which from our point of view were economically bad, because of the special crisis which was threatened. In other words, the political considerations overrode economic considerations. The defence I am putting up for Coalition Liberals is that we support this Budget not on economic grounds but on political grounds, just as our great leaders were parties to the Paris Resolutions.May I deal with one other point which has arisen in the Debate. We are told, and very naturally, by those who are not supporters of the Government, that this is the thin end of the wedge, and that you cannot have the proposals of this Budget without leading on to a full-blown system of Protection, and that is anticipated with pleasure in some parts of the House, while it is viewed with horror by other hon. Members. Those who are filled with horror, and those who are entranced with hope on this question are going beyond the facts of the case. There is a good 469 deal of difference between a Coalition Government and a homogeneous party Government. Whenever a homogeneous party Government propose any item in their programme, friends and opponents know that the desire of the Government is to carry that programme as far as they possibly can, but when you are dealing with a Coalition Government it is stronger than the party Government within the limits of the alliance, but it does not carry within it a promise of the special development of the ideas of one school of thought which would be the case in ordinary government by party.
7.0. P.M.
Within the limits of those famous letters the Coalition is solid for a Budget like this, and if future Budgets develop either in one way or the other beyond the limits of that concordat, there would be no such guarantee for the solidarity of a Coalition, and I sincerely represent to the House that it is neither right nor wise to build upon the proposals of this Budget brought forward at this time on the basis of a Coalition, support either for the hopes or fears which have formed so large a part of the Debate to-day and yesterday. It is from that point of view that I have no. hesitation in supporting these proposals, but if I had any hesitation I should be more confirmed in doing it by the alternatives which have been suggested to the House. Yesterday we had for the first time a proposal for a capital levy arriving at the dignity of filling an interstice in an Amendment of the official Opposition. I congratulate the hon. Member for Penistone (Mr. Arnold) on his personal success, because even the right hon. Gentleman the Member for Peebles, who in his public as in his private life is such a charming blend of caution and attractive ness, after coming here and pouring a shower bath of tepid water upon these proposals, actually oscillated into the Lobby in favour of the proposal of the Member for Penistone at the close of the evening. Is that the alternative presented to this House and the country at a time of great crisis like this? Who are the statesmen in this country who have taken the most leading part in the great fiscal controversies of the last fifteen years, those I mean who maintain the principle and practice of Free Trade? Surely they are the present Prime Minister, the pre sent Secretary for War, Mr. Asquith, Mr. McKenna, and Mr. Runciman. Two of those five statesmen are in the Govern- 470 ment—one of whom is at the head—and; they have nothing to do with this capital, levy. Why was there no mention of this capital levy in the great speech at New castle? Why is there no support for it from those who rightly carry most weight in the country among Free Trade states men? The significance of these real leaders on this point is of more con sequence than the more or less melodious-echo on those benches of other utterances which have been made by those leaders outside. Those of us who are called upon, to-day as Liberals, as Free Traders, and as supporters of the Coalition, have, of course, first to satisfy ourselves that our support of this Budget is within the terms of our honour and in the interest of our Empire, but we have next to look, and we do look, to see what alternative is suggested which can have weight or assistance in a time like this. The fact that the only alternative suggestion has already had a chequered and variegated career in the thirty-six hours that it has been present to the House would confirm us, if we needed confirmation in the attitude. that we are now-taking up. I, and I believe not a few Members of this House whose political traditions and principles I share, support this Budget, because, on the whole, in the time of transition and crisis, we think it is sound; because we believe those parts of it which we personally dislike and to which we do not. adhere on economic grounds to be within the concordat and alliance to which we are parties; because this is no matter of committee detail which can be decided one way or the other by the House without any effect upon the fortunes of the Government, and because that at this moment, when peace is delayed, when Europe is disturbed, when, international problems are more and not less acute than they have been for years past, we would not lift a finger to weaken the authority or power of that Government and that Prime Minister who at this time we believe to be indispensable to the-welfare of the Empire.
§ Mr. SEDDONI had intended making a suggestion to the Chancellor of the Ex chequer how he could increase his revenue, but, owing to the narrowness of the discussion in Committee, under your ruling, and to the seriousness which the position has assumed in the country, I shall have to postpone any remarks on that particular question to the adjournment of the House 471 to-night. I have risen, therefore, more particularly to take part in the general discussion, and I am exceedingly sorry that the hon. Member for Rothwell (Mr. Lunn) should have delivered himself in "the language that he used. If he thinks that I am wrong, I can assure him that I am just as honestly wrong as I think he is honestly wrong. What was the burden of his speech? He said that he was a constitutionalist when it suited him. I under stood that the Labour party and all other people in this country supported the War, to make the world safe for democracy. According to the hon. Member, the Labour party are prepared to thrust it into revolution if they cannot get their way by constitutional method's. There was recently a by-election in Aberdeen. The Labour nominee—a personal friend of my own, and one of the ablest men in the Labour party, was rejected, proving that the people of that part of the country were not prepared to return a Labour Member on the programme which hon. Members opposite represent at the pre sent time. Are the members of the Minority party in this House, who sup ported the War to make the world safe. for democracy, because they cannot get their way, going to plunge this country into revolution? I would warn the hon. Member that those who project revolutions are very often the first to suffer by them. If he wants a concrete example, I would refer him to our great leader, Kerensky, who is in hiding at the present time. I am convinced that the great mass of the people of this country are sound democrats, and, although they may suffer by and object to what is done in this House, they are not prepared to bring the whole system down in ruin and chaos simply because a minority in the country -cannot get their own way.
I have been amazed at the arguments presented to-day. The Noble Lord's interesting speech was appreciated by every body, although many may disagree with its conclusions. He pointed out a very significant fact. He said that the Corn Production Act was Protection in excelsis. I happened to be a member of that Committee, and whether hon. Members believe or disbelieve me, I can assure them that I went through many anxious moments, and that my support was given on an honest conviction that it was the only way to meet the difficulties that confronted us 472 at that time. The Corn Production Bill cut right across all my pre-war political ideas and theories. I supported it because I felt it was the only way to save us from starvation and defeat. The Bill came to the Cabinet. It was then a blend of various fiscal ideas, and nothing was done. I am not blaming Mr. Asquith; probably he had to take the course that he did, on behalf of his friends in the Cabinet. Be that as it may, the Bill was hung up. It was pigeon-holed. Then the German submarines became more menacing, and almost hurriedly the Bill was produced from the pigeon-hole and placed upon the Statute Book. Is there a single Member who raised his voice against the Corn Production Bill as a war emergency measure? It was carried with the good will or at least with the support or acquiescence of all sections and parties in the country. That Bill. having been passed, has created responsibilities. The agricultural labourer has been lifted in a year or two higher than he could have been in a quarter of a century by any other means. I may say that when I gave my support, on the Milner Committee, to a guaranteed price for corn, I laid it down that as a sine qua non that there should be a minimum wage for the agricultural labourer. He wants to keep that minimum wage. Is he going to keep it if we go back to pre war conditions in agriculture? I can understand some of my hon. Friends saying: "Oh, but the great incubus preventing the agricultural labourer getting a living wage is the landlord." As a matter of fact, the agricultural rent of this country is £50,000,000 per annum, and at this moment we are paying more than £50,000,000 per annum to secure the agricultural labourer his minimum wage and the farmer a, fair return on his corn. Therefore, if you nationalised the land and you wished to keep the farm labourers wages at their present standard, you would have to give a subsidy. I do not suppose any country can live by taking in each others' washing. We already know that the railways are costing more than their revenue, and that the Post Office is exceeding its income. If you go on, and each industry is going to be subsidised by the State, I want to know from where the subsidy is coming?
The agricultural labourer cannot be saved unless something is done to make agriculture prosperous in this country. You may say that it means a charge upon 473 the food of the people. Let us argue it out. The miners—and my hon. Friend belongs to that section of the community—ara privileged by a natural monopoly, and I venture to say that if the same thing happened in other industries as has happened in the coal industry, there would be an outcry within a very short time.. If Japan with its cheap labour and its subsidised mercantile fleet could import coal into this country at 30 per cent. less than the cost of production in this country, there would be a revolt on the part of the miners. I appeal to the position. There are other workers who are not in a privileged position. I take the major industry of the district that I represent at the present time. Pottery ware is the chief industry of Stafford. When the War broke out the United States were carrying out a very exhaustive inquiry in this industry in every country in the world. The inquiry had taken place in America, France, Germany, Austria, and England. Up to the out break of the War the average wage in the Potteries was less than £ per week. To-day, because the home market has been secured for the pottery workers, it is double that amount. It was not the wicked employer who was responsible for the low wages in the Potteries, because the average return upon the money in vested in the pottery trade was only 5.2 per cent., and I am sure that there would be a hue and cry among the great co-operators—and many of my hon. Friends are members of co-operative stores—if only 5 per cent. were paid by that great institution of the country. Why were they unable, with those low wages, to compete against Germany and Austria? Compared with America, wages were 50 per cent. higher in this country, and there was no American competition. Wages in Germany, however, were 30 per cent. less than in this country, and it was that which impoverished the pottery worker and rendered the return on the capital invested in the pottery trade so meagre.
We hear a good 'deal about the dead hand upon land. Let us remove the dead hand upon our economic system if it is out o? harmony with the experience of the last four and a half years. What is the position to-day? If we return to pre-war practices—and apparently it is the intention of many people in this country that we should take the Germans to our breast? again, and renew the old commercial relationships—you will have wages tumbling 474 down in the pottery districts, and you will have them in a worse state than they were under the miserable conditions I have described. After all, no body of workers can live to themselves; if general industry suffers in this country by unfair conditions, then the miners as well, who are in a privileged position, will suffer also. There is, further, a moral side to this. It is mean for one section of tbe-workers to merely look after themselves. and not give a hang as to what happens to their fellow workers in other industries. I am not tied to any "ism," I am trying honestly to apply the lessons of the War to the reconstruction of this country. Would hon. Gentlemen who profess to be Free Traders, hide-bound and immovable, would they, as a protection to the pottery works of this country, accept a 30 per cent. tariff against pots coining into this country? That represents only the difference-in wages. I am saying nothing about transit. It is the duty of the Government to give facilities for transit equal to those-which the German Government give. I say nothing about the methods of manufacture; those are matters for the manufacturers themselves. I am narrowing my point down to wages. Here is an un fair competition. One country is paying 30 per cent. less wages, and thereby destroying an industry in this country. I therefore ask Free Traders if they are pre pared to levy in this particular instance a 30 per cent. duty on the commodities coming into this country?
I make that request as an ardent Free-Trader. My right hon. Friend the Member for Gorton (Mr. Hodge) has certainly had no easy passage in his relationships during the last few months. I think I am right in saying that one of the questions-on which he at least disagreed with his colleagues, was the question of our future fiscal policy in this country. He was approached by a late Member of this House, Mr. Arthur Henderson, and, in answer to his objection, Mr. Henderson said, "It is universal Free Trade that the Labour party is after." So am I, and that is. the-reason I am making the suggestion of a 30 per cent. tariff to meet the difference in wages between Germany and this country. My proposal is made in order to protect the workers of this country from unfair competition, and I would place the 30 per cent. tariff immediately upon these goods coming into the country. If the Germans increased their wages by 10 per cent. I would reduce the tariff by 10 per 475 cent. If they increased their wages by r20 per cent. I would reduce the tariff by 20 per cent.; and if they gave the same rate of wages as in this country, I would allow their goods to come in free. That would be real Free Trade between one country and another, instead of the one sided Free Trade which obtains today.
I am very anxious that we should examine this question in the interests of the country. It has been said time and time again, and it cannot be too often repeated, that our very national existence has been the price of the richest blood of our race. Not only our Colonists, but the sons of the Homeland, have made it possible that we should gather here in stead of being under the iron heel of Prussian militarism, which I hope has been forever destroyed. But this price throws upon us obligations and responsibilities. We have heard something about repudiating the National Debt. That would be dishonest in the extreme. You would not only be robbing the rich, but you would be also robbing 13,000,000 of the working classes who have invested their money in war savings. To repudiate obligations thus entered into would not only be unjust, but it would also be non-moral, and a system or nation which has a non-moral basis is bound to fail. Trade is necessary. There is no love in trade. Each country is out for its own, and I find that President Wilson has got his eye on the main chance. The almighty dollar has not lost its potency, notwithstanding the high and noble sentiments which he has expressed during the Peace negotiations. In sending his message to Congress, President Wilson said:
There is, fortunately, no occasion for under taking in the immediate future "——I ask hon. Members to carefully note these words "immediate future"—a general revision of our system of Import Duties. No serious danger of foreign competition now threatens American industries. Our country has emerged from the War less disturbed and less weakened than any of the European countries which are our competitors in manufacture. Their industrial establishments have been subjected to greater strain than ours, their labour force to a more serious disorganisation, and this is clearly not the time to seek an organised advantage. The work of mere re construction will, I am afraid, tax the capacity and the resources of their people for years to come. So far from their being any danger of new or accentuated foreign competition, it is 476 likely that the conditions of the next few years will greatly facilitate the marketing of American manufacturers abroad.America is alive to the position, not only of this country, but of every belligerent country on the continent of Europe. What is our position? Industry is disorganised; we are trying to get back at this moment to pre-war conditions. I have the pro-profoundest sympathy with the hon. and fight hon. Gentlemen who are charged with the tremendous task and responsibility of converting us from a war state into a peace period. Instead of gibing at them, and thus making their task more difficult, it would be really patriotic to give them all the support possible, so that we may pass by a peaceful process from war to the industrial conditions which existed before the War. How are you going to do it? Here you have Japan, husbanding her resources for the markets of the world. You have the United States, who too, during the last four years, has been adding to her store of wealth, and whose factories and various undertakings have been flourishing alongside with the munitions of war which she had been providing for the Allies on this side of Europe and in other parts of the world. She is ready. She is not only prepared, but she has already taken advantage, if rumour is not a lying jade, for she has obtained an order for 1,000,000 tons of steel rails for Europe. I would just like, in passing, to call the attention of the Chancellor of the Exchequer to this point. I am told on good authority—perhaps the right hon. Gentleman will inquire into the matter—that steel rails coming from the United States are being carried at 20s. per ton freight. The freightage for general merchandise is 60s. per ton, and I fail to see why the shipowners of this country, even for their own gain, should give a difference of 40s. To American steel maufacturers in competition with the steel manufacturers of this country. Here you have the United States stripped ready for the industrial race. Not only is she ready with her factories, but she has got the German ships. She has already taken control of 660,000 tons of German shipping—the best shipping that crosses the Atlantic. That shipping, consisting of big Atlantic liners, is ready at once to pounce upon the South American and the European markets. Let us at "east examine the proposal in front of us, and instead of the dead hand of Cobden paralysing us, and sinking us 477 more deeply into the mire, let us see how far we can get over the changed conditions.Much has been said about the help of the Colonies. I do not think the most rabid Free Trader will take any exception to the loyalty and devotion the Colonists have displayed to the Mother Country. They have asked us to join hands in a closer and more intimate bond than has ever existed before. We were told in days gone by that the door had been slammed, banged, and barred. Now that door has been opened, not for mere gain, but to give the Colonies what they asked for. Are we not prepared to meet them half way, and to enter into a closer bond than ever existed in pre-war days? I, like many other Members, have had to sever friend ships because I have been trying to follow the lessons of this Armageddon. I have been, I w ill not say privileged, because it was a sad experience, but I have had the opportunity of visiting Northern France, and have seen the nameless graves that do appeal to me, if they do not appeal to some hon. Members. [HON. MEMBERS: "Oh, oh!" I say "if," and when I see a man sneering at that I have my doubts as to whether he is sincere. After all, we. may have our differences, but we have all got our responsibilities to these men, and the only thing I ask is this, that instead of being concerned with mere party war fare we should realise that we are the trustees and guardians of the most critical period in our Empire's history, and if we take a false step now we shall be undone as a great people. Let us be honest with ourselves and to our convictions, even if they be contrary to our party programmes. If every man acts conscientiously and with honest intentions, I am quite sure that much of the criticism directed against this Budget will be withdrawn, and that there will be greater unanimity in believing that if the British Empire is to be what it can be it must be brought about by a change, and that change must come as quickly as possible.
§ Mr. CHARLES EDWARDSI have listened with much interest to the various speeches delivered yesterday and to-day, and have been surprised at the burden of some of them. I listened also to the very interesting argument put forward by the Noble Lord (Lord H. Cecil) this afternoon. He told us that the Death Duties were collected at the wrong time and at an in convenient time. I have yet to learn that 478 the collection of taxes from anyone is ever done at the right time. He told us another thing. He said that the only difference between taxing the poor and the rich was that in the one case the man was being beaten with his clothes on, while in the other case he was being beaten with his clothes off. But I would like to suggest the difference is something greater than that, because the taxation of the worker means that something has to be taken out of his supply of necessaries of life. In the other case possibly some luxuries might be restricted, but more often than not it is simply the banking account that shows any difference at all. The difference between the two is that the one is getting the actual beating, while in the other case it is an imaginary thing. Imaginary things are sometimes pretty hard, and it may be so in this case, but it is not more than imaginary. The right hon. Gentleman the Member for the Duncairn Division of Belfast (Sir E. Carson) spoke of going to any lengths to support the men who have fought in defence of this country. We agree with him on that point. But the Government he is supporting have not gone very far to help these men, who have often come back many of them to no work, many of them to no homes, while many of them who are permanently injured are expected to live on one-half of what the lowest paid man who is able to work gets. The widows of the brave men who have died are expected by this Government to live on 13s. 9d. a week, which is an impossibility, while for the children who are born to the men permanently injured they refuse to make any provision whatever. The Government the light hon. Gentle man is supporting on the ground that it is generous and acting honourably to the men who have fought in defence of the country is not playing a very creditable part.
The question of a levy on wealth is a very serious matter. I suppose it is very sinful for anybody to have raised it. One hon. Member who spoke yesterday had four points against it, one of which, that it was dishonest—I forget the others, but they are not of much importance. He re minded me of an inveterate smoker whom another tried to argue out of that habit, and he said, "If you can prove to me that I do not like it I will give it up." And the people who argue against a levy on wealth are in that position. If we can prove to them that they do not want to keep what they already have, they would agree. I 479 do not believe this proposal is impossible or impracticable. We have done a lot of impossible things during the War, and have got over them all right, and this difficulty could be got over if there were a disposition to attempt it. The result would be that taxation in the future would be greatly relieved because of it. When the Chancellor of the Exchequer spoke the other day I listened to him with great disappointment. He has relieved the profiteers of this conutry of £50,000,000 or more taxation, but he refuses to relieve the workers of the country who are taxed on an income of £120. One hon. Member said to-day that this was done out of consideration for the workers. I should like him to go before a working-class audience and prove that it was to their interest to relieve them of £20,000,000 and that they should have to pay Income Tax on an income of £120. The Chancellor of the Exchequer spoke of £3 10s. a week as if it were a fortune. How far does that amount carry one in these days? He meant to prove how little a man had to pay out of his £3 10s. a week. The right hon. Gentleman knows nothing at all about it. His position is such that he has never been called upon to understand how the workers live on £3 10s. a week. I do not suppose he would know how to start out for a single day on that sum. Yet when the point was put from this side by speaker after speaker that the basis of the Income Tax ought to be raised from its present amount, he said in effect, "I know what they can do and what I am going to make them pay." He did not use the same language other hon. Gentlemen have used in this House and say, "We must show a firm hand and take all the means at our disposal to get it." The £120 limit is an unfair basis. No hon. Member could argue that that is a proper standard of living. If it is not, why not raise it?
There is a movement outside to refuse to pay Income Tax under a limit of £250. Without a doubt that is going to succeed. One hon. Member has spoken to-day about constitutionalism. You are killing constitutionalism by these methods. If hon. Members do not know the position of the workers—they do not, because they have never been among them—that is a reason why they should listen to those who have lived among them from day to day, but who, as a matter of fact, are totally ignored. From the time the Budget was 480 brought in we have been facing the opposition of the workers at every meeting that has been held. We have been telling them that it is the law of the land and that we must take constitutional methods to get it off. Constitutional methods have been tried over and over again. The Leader of the House has on more than one occasion received deputations and possibly the Chancellor of the Exchequer has also done so. We have stood up against the agitation and kept things going until the pre sent moment, but when every man who speaks from these benches is ignored, I have come to the conclusion that so far as I am concerned I would not stand in the way of any movement to enforce that opposition. That movement will go like wild-fire throughout this country, and every low wage earner will jump to the conclusion that it is only fair and reason able, as I believe it to be. I do not object to the Income Tax at all. I do not object to a higher Income Tax, once the basis is properly fixed. The basis is now too low. £250 a year represents between £4 and £5 a week, not a large sum by any means. I am not particular what the Income Tax is. None of us like to pay it, and I am the same as other people. But once the basis-is fixed at a proper standard of living, then I shall not complain if you raise the Income Tax. It ought to be graduated more steeply from that point upwards, be cause the higher it goes we are the better able to pay it. That is a point to which the Chancellor of the Exchequer ought to pay more attention. How he is going to save the Government in this matter I do not know, because I am certain of the success of this movement. The only thing I would advise him to do is. to tell the Commission at present considering this matter to make the £250 the standard. That might get the Government out of the difficulty. You are forcing us to adopt these methods all the time. We have had the same thing from employers. We have met them with a reasonable, commonsense proposal, but the reply has been, "No." The men have asked what is the good of negotiation, and have said that direct trade union action is the only thing that counts in these days. It is the only thing that is understood. There has been bred from this treatment Syndicalism and all the other outside movements, because they are looked upon by the working class as the only things that have any effect whatever. We are forced to them by the action of the employers and of the Gov- 481 ernment. In regard to this Budget we axe forced into the same position. That movement must succeed. Therefore I suggest that more attention should be paid to what is said from this side of the House. We know the workers. I worked for twenty years in the same pit—it is no disgrace to say so. We have lived among the men and know them and how far £3 10s. a week can go. Many hon. Members opposite do not know and have not been called upon to know. If more attention were paid to what is said from these benches, there would be less trouble and fewer unconstitutional things in the world than there is at present.
§ Mr. BALDWIN (Joint Financial Secretary to the Treasury)I should like to say a few words about the subject which was dealt with at some length by the right hon. Gentleman the Member for Peebles (Sir D. Maclean) in his opening speech yesterday. I do so because it is the subject of Treasury control, on which a great. deal has been said to-day and which excites a grout deal of interest in a new House of Commons. It is rather important for the House to realise what Treasury control means and what it does not mean. I want to remind the House that there is undoubtedly an opinion widely held that the Treasury has power to investigate, to criticise, and to control the expenditure of all the Departments. It has been blamed very much in the Press and on the platform for either letting this control go altogether or exercising it in an inadequate manner. There is no better evidence of what the powers of the Treasury are and of what they are not than the evidence which was given before a Select Committee many years ago by the greatest and most powerful statesman of the last two generations who presided at that office, namely, Mr. Gladstone, who combined the offices of Prime Minister and Chancellor of the Exchequer. I am not going to weary the House with the evidence he gave, although it would be well worth the study of every Member of the House. I would only call their attention to two replies given by Mr. Gladstone. He was asked by Mr. Childers:
Is there no statutory power in the Treasury to compel reduction if they think it necessary in any public Department?Mr. Gladstone said:I have not that power. I can refuge an increase and I can make myself generally disagreeable, but I have no power to enforce reduction.482 He was asked later on:Then it is a popular delusion to believe that the Treasury does exercise control, and effective control, over the expenditure of the different Departments?Mr. Gladstone replied:I do not know that it is popular, but it is a delusion.The reason I venture to call the attention of the House to these statements is that I want hon. Members to realise what control the Treasury does have. It has control over staffs to a certain extent. It has a control over new expenditure. It has the power of putting all the Departments on their defence, and that power it exercises. I would remind the House that in the many cases where the Treasury objects to expenditure and succeeds in upholding its objection, the House never hears of them. But there is a great difference between the condition of things to-day and in Mr. Gladstone's time. It is true to-day, as it was in his time, that when expenditure in a new Department is proposed there comes ultimately to be a fight between the Chancellor of the Exchequer and the Minister in charge of the Department, and in the event of the Minister not being satisfied with the Chancellor of the Exchequer's decision he can appeal to the Cabinet. In Mr. Gladstone's day the subjects of expenditure of public money were few and limited, and if a Minister was turned down by Mr. Gladstone and appealed to the Cabinet he knew that he would have, a hostile Cabinet against him, which in nine cases out of ten would back the Treasury.The whole outlook to-day is changed, and every man in public life believes that an amelioration of the condition of the people can be obtained by the expenditure of money, and all large items of expenditure are controlled, not by the Treasury but by the policy of the Government of the day—such questions as the money to be found for the fighting forces, money for education, national health insurance, housing, and a hundred and one things of that kind—and in almost any one of those subjects if the Chancellor of the Exchequer raises" objection and the Minister whom he opposes takes the matter to the Cabinet, it does not matter what Government is in power the natural bias of every member of the Cabinet will not be against the expenditure but in favour of it. That feeling is in the mind of every Minister and of every Member of Parliament, and it is in the mind of the electorate, that the 483 House of Commons will have the ultimate control of expenditure. So far as that expenditure is controlled by policy the House of Commons itself would in nearly every case support the Government which was spending the money on purposes of social amelioration. The Treasury then has to sanction these large amounts, and when once sanction is given to a Department for expenditure the responsibility for the expenditure in "detail" really rests on the Minister in charge of that Department. It is his responsibility to see that the policy is carried out, and he is in an impregnable position if he takes up the line that without being permitted to spend his money in such and such a way he cannot give effect to the policy which has been sanctioned by the Government and the House of Commons. There is the essential difference between the position of the Treasury a generation ago and its position to-day, and the office to which I belong is often criticised for not exercising a power which it has no right to exercise, and its faults are not faults of will but faults arising entirely from lack of power. I think we shall best attack this problem of control ling expenditure in the innumerable Departments that now exist by strengthening the power in the Departments them selves, by strengthening the position of the accounting officer and giving him more support than he has to-day in exercising financial control inside the Department, and with the sympathy and support of the Minister in charge.
We have had a protracted and interesting discussion, and the House has given my right hon. Friend a number of very interesting suggestions, and possibly if they had been given in time he might have modified his Budget, but at this date I am afraid it is too late for him to incorporate in it the main suggestions which have been put before him. He has been recommended to impose a capital levy for the first time in the history of the modern civilised world. It would have been a large task to take that in hand in time for this year's Budget. Apart from the capital levy, he has been asked to raise £450,000,000 additional taxation; he has been asked to abolish all indirect taxation except on alcohol, and I am quite surf-had he seen his way to do that a school of thought would have arisen which would have desired the exemption of alcohol; he has been asked to abolish all Income 484 Tax on incomes below £250, and apart from this, to recast the whole existing basis of Income Tax assessment, and to revolutionise the basis of the Death Duties. Moreover, he has been expected to find a substitute for the Excess Profits Duty, which will produce as much money as the Excess Profits Tax produced with out any of the disadvantages of that tax. I am sure the House will not expect me to criticise every one of those measures which have been urged upon us, but rather to direct myself towards one or two of the most salient features of the criticism which has been launched against the Budget itself. It has been called a rich man's Budget. I do not think that is at all an unfair description of it, because it is charging higher rates of taxation on the rich man than any Budget which has ever been introduced in this or any other country. The gravamen of the charge against the Budget, as comprehended in the Motion which was before the House yesterday and as has been repeated on the Labour Benches, is that my right hon. Friend is taking off a considerable amount of taxation from the wealthy and that he is not giving any relief to the poorest classes of the present income Tax payers. The first point we have to remember is that the Excess Profits Tax and the Income Tax are not comparable. They are two taxes on a different plane. When working men pay Income Tax, whatever the basis may be, they are paying a tax which is common, at varying rates, to every class in the community. it was recognised by Mr. McKenna that it is no light tax on the lowest class of income, but he took the view, when he reduced the limit, that to-pay off the expenses of a war on such a gigantic scale, that every class, except the very poorest, should be asked to make a contribution to the Income Tax, and the hardship has been so far to this extent recognised that in each Budget, notably in the Budgets of the Leader of the House in the last two years, fresh exemptions have been given to lighten the burden falling on those with the smallest incomes. To that extent the hardship has been met—I do not say all the way, but some of the way.
But when you come to the Excess-Profits Tax you come to one of an entirely different nature. You came to one which was put on for a specific purpose and under a distinct pledge of limitation as to time. The Chancellor of the Exchequer 485 could do no other than he has done, in view of the pledges which were given to Parliament on the introduction of this tax, and it may be pleaded with some justification that to fulfil those pledges in their entirety ho should have removed the whole of the tax at one time. He has not done that. He has recognised that we are only passing out of a state of war, and I think he has met the case very fairly by reducing the tax by one-half. But, after all, hon. Members who are opposed to this reduction speak as though there had been no taxes on profits during the War. They forget that the Income Tax and the Super tax have been going on the whole time, just as well as the Excess Profits Tax and that the Excess Profits Tax would only apply in those cases where profits exceeded a certain datum line as it stood in 1913-14. That in itself constitutes one of the bad features of this tax continued year after year. It tended to stabilise the position of businesses, and it tended to penalise new businesses. It helped the old-established businesses, and there is one more point which has struck me, and I think must have struck anyone familiar with the working of the taxes. We have heard a great deal about the way in which men's incomes are reduced because the Purchasing power of money is so much less. Logically we can apply that all the way up and it will be quite possible to argue that there are no excess profits to-day, because 20 per cent. dividend to-day is no more than 10 per cent. was before the War. But I do not want to make any point on that.
Income Tax on businesses—and I say businesses because the Excess Profits Tax applies to businesses—is not a tax on income. It is a tax on profits computed in accordance with statute, which is a very different thing. In other words, the amount of money paid out by any business for Income Tax represents a tax on a great deal larger amount than is ever paid away. It means that a considerable amount of the liquid assets in the shape of cash are taken out of the business and transferred to the Exchequer every year. The Excess Profits Tax continues that process, and when you had an 80 per cent. Excess Profits Tax it was found in practice that the 20 per cent. which was left of the excess profits was not enough to meet the extra cost of running the business and in meeting the higher prices that had to be paid for 486 labour, for goods and for all commodities. Eight per cent. of these excess profits had to be paid out of the business.
§ 8.0 P.M.
§ Mr. BALDWINI am afraid I have not made my point clear. I am speaking of the amount of cash a man has in business which is quite a different thing. A man may have good profits but may not have much cash in his business. He may have to borrow to pay his dividends. What I am trying to explain is that both by paying the Income Tax, and by paying the excess profits, all of which have to be paid out in cash, many businesses in this country, although making large profits on paper, have been so completely denuded of liquid assets that they have not enough cash left to pay the taxes demanded by the Inland Revenue. That accounts very largely for the amount that is still out-standing, and in many cases the only way in which this extra cash can be provided is for these businesses to raise extra working capital to enable them to meet the higher cost of working to-day and to find, the actual cash necessary to pay their taxes. My hon. Friend opposite who has first-hand knowledge of these matters, and whoso speech I listened to last night with interest, knows as well as I do, and I am not inexperienced in business, that a great deal of the profits that have been made during the War are profits that have arisen in many cases almost entirely on the enormous increase in the values of stocks. That puts no more money into the coffers of the business. It leaves the coffers where they were. I think the bon. Member now sees the point I am trying to make. Given that position, you find it is a matter of vital importance to industry that there should be enough working capital to carry them on through the time of transition upon which we have now entered. I think we ought to bear this in mind.
The Chancellor of the Exchequer has to look at the industry and the life of the country as a whole, and he has, to the utmost of his ability, to diffuse its taxation as equitably as he can among all classes as they can bear it, and it is to help him to do that that he has set up this Commis 487 sion on the Income Tax. At the same time, it is essential that in this country industry shall be in a position to carry on profitable business. We have to look at the environment in which we live and work. This country has one of the most highly developed industrial systems in the world, and it lives on industry—industry which has been built up on the credit and hard work of three or four generations. It is industry alone that enables the population of the size that inhabits these islands to live in them. It is a population that can not feed itself. It has to draw the bulk of its food from overseas, and it can only pay for that food by industry and its export trade. If ever the trade of this country fails the country will starve; its industry cannot be maintained, and our lifeblood will be drained away. It, there fore, follows that the first essential for the sound financial position which the Chancellor of the Exchequer and this House desires is, that at the earliest moment the industry of this country should get on its legs and should proceed in its normal way to produce. Every day that we spend in this country in quarrel ling among ourselves and in debating how this and that is to be done, and every delay that takes place before we set to work, delays the task of production and makes the difficulties of our financial position greater and greater. There is no better service which Members of this House of all parties can render to the country to-day than to explain these facts which I have tried to explain to the House to the people in the country.
The Government has the heaviest task to face to-day that any Government has ever had. It knew quite well when it took office that in endeavouring to carry through legislation which normally would take years to pass within the limits of a single Session, or two Sessions, it would be brought up against many interests, it would tread on many people's toes, and it would be bound to come in for criticism from all classes of the community. I have no doubt that many elections for many months to come must and will go against the Government, because it is impossible, for many months after the close of war, for the industry of the country to resume its normal course or for the lives and habits of the people to resume their normal 488 course, and in the excitement that always and necessarily follows such times of trial as we have been through nothing is easier, by harping on the failures of those who are trying to do their best, than to increase the feeling of dissatisfaction and discontent and to stir up a feeling that men are being treated unjustly. That is the last thing which the Chancellor of the Exchequer in his Budget desires to do. He has made a genuine and a fair attempt to meet this transition year by a transition Budget which shall deal out even handed justice, consistent with Parliamentary pledges that have been given by previous Governments, and I think the general sense of the House is that he has succeeded very well.
With regard to the particular point that has been raised from the benches opposite, I would remind them that that matter comes up for discussion naturally on the Committee stage of this Bill, and arguments can be used on both sides and met in detail. Then will be the time, if the Chancellor of the Exchequer thinks fit, to make such concessions as at that time may seem advisable to him. But I do hope most earnestly that we have so far escaped from the militarism of war-time that hon. Members who have taken up a position strongly opposed to the right hon. Gentleman, as did the hon. Member for the Rothwell Division (Mr. Lunn), may not see fit to convey their objection to matters in the Budget by veiled threats of what they will do outside this House. A very great responsibility rests upon this House. There is no alternative in this country between this House and anarchy, and with that sense of responsibility before all Members, collectively and individually, I feel quite certain that when the Budget goes into Committee it will not be impossible that we may reconcile our differences there and that hon. Members who have been but a short time in this House may possibly regret having used such language as was used this afternoon. I hope the House will be willing now to take the Second Reading of the Bill, in view of what the Chancellor of the Exchequer said last night.
§ Question put, and agreed to.
§ Bill accordingly read a second time, and committed to a Committee of the Whole House for Monday next.