§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."
§ Mr. HEWINS
(indistinctly heard): The circumstances in which we are at the present time make it extremely desirable that we should give rather wider consideration to the Finance Bill of the year than we have done to other War Budgets. The mere question of raising money, while, of course, itself of the utmost importance, is yet not the only important matter connected with the Finance Bill. Our financial and economic policy, as expressed in the Budget, is a matter of the greatest interest not only to ourselves and all our fellow citizens of the Empire, but also to our Allies, and in these circumstances, and considering also that we are to have the Paris Economic Conference, I do not think it would be right just to acquiesce in the proposals of the Government and to abstain from criticism. I therefore propose to offer a few critical remarks on the Budget of the year. In doing so, I wish to make the position absolutely clear. We have reached an exceedingly 1665 important point in the War. People in England are rather apt to underrate the economic power of Germany, because they are in the habit of judging the German economic system by criteria which they derive from that economic system of England and the British Empire with which they are more familiar. I am sure that ray right hon. Friend on the Front Bench does not feel at all certain that you can rightly estimate the stability and the efficiency of the German economic system in that way. You may judge of the British system by standards derived from your own experience and from the circumstances with which we are here familiar, but you cannot apply the same standards to Germany. It is just as though, in a sense, you were to try to judge of the economic system of England of the seventeenth or eighteenth century by the England of to-day, because Germany is not by any means in the same stage of economic development as we are, and I am inclined to think that it will be found on experience that the German economic system, from the German point of view, shows far more elements of stability than some of our more orthodox critics in this country may suppose; at any rate, I am quite sure that there is a tendency in England to underrate the economic strength of the country with which we are at war. Germany has made great progress during the War. She has started several new industries, and she has the advantage of occupying very important economic territories which she did not occupy before. It would be a mistake, therefore, to underrate the economic power of Germany. We ought to proceed on the assumption that we have a very powerful adversary to beat; it would be safer, at any rate. That being so, it is perfectly clear that we have to study our economic proposals at the present time not merely from the old historic Treasury point of view of whether they succeed in raising a large sum of money, but you have got to consider them from the wider point of view as to how far they assist you in the prosecution of the War. I regard them as part of our economic war policy; in fact, the very presence of the Chancellor of the Exchequer on the War Council indicates that. The point is fully realised in Germany, where the German General Staff has laid it down that the economic policy is inextricably bound up with the military policy. Therefore, you must regard this 1666 Finance Bill, not only as a means of raising the money which is necessary to carry out certain naval and military measures we decide upon, but also from the point of view as to how far your policy itself is intrumental in the prosecution of the War, and that is a very important point of view.
We have reached a critical period. Whatever the finance may be at the end of the War, I suppose my right hon. Friend will agree with me that from now till the next Budget is a critical period. Whatever you are going to do in the prosecution of the War, you are going to lay down the general lines of it in these three months. I do not think you can possibly escape from that conclusion, and if I am right—and I believe I am—in my conclusion that we have reached the stage in the operations of the War where a little weight one way 'or the other may have an important bearing on the military as well as on the economic solution, it makes it all the more important that we should scrutinise the Finance Bill very carefully, but in that scrutiny I wish my right hon. Friend thoroughly to understand my attitude. I feel that we have reached an extremely important period when we have all got to put the best brains we have got into the common stock and see whether we can get out the best policy. I am not actuated in the least by any hostility to the Government, and still less to my right hon. Friend. It is only that I feel that at this stage we ought to cast aside our pre-conceived ideas, and by argument ascertain the best policy we can for the prosecution of the War. When you look at the Finance Bill from that point of view, I am bound to say I am disappointed with it. I had profound disappointment when I heard the Chancellor of the Exchequer make his Budget speech, not, as some of my hon. Friends on the other side of the House seem to suppose, because he did not carry out the policy with which I was supposed to be identified. Really, one has forgotten all about that sort of thing. It does not matter two straws what policy we were identified with before the War. We cannot consider it at the present time. What I did feel about the Finance Bill was that you might suppose from the character of its provisions that there were no such thing as the British Empire, and that no consideration whatever was given in the observations of the Chancellor of 1667 the Exchequer to the exceedingly dangerous consequences to important interests which might result from it. I am sure the House does not appreciate what has really been taking place with regard to direct and indirect taxation. In the year 1907–8 we raised from Income Tax rather more than 32 million pounds. The estimate for 1916–17 is 195 million pounds. The estimated yield of Income Tax, including Super-tax, alone for 1916–17 exceeds the total of the Exchequer receipts in 1912–13. The total of direct taxation has grown, since the year 1907–8, from 62 million pounds to no less than 321 million pounds. I may remind the House that financial experts estimated before the War the annual savings of this country at rather more than 300 million pounds, and the sum that is taken in direct taxation alone is equivalent to that amount.
Indirect taxation has not grown to anything like the same extent. The total from taxation alone has grown in that period from 129 million pounds to 457 million pounds, of which 136 million pounds is indirect taxation. The increase in indirect taxation is only 70 million pounds in the period I have taken. The ratio between direct and indirect taxation, which old-fashioned financiers like Mr. Gladstone regarded as of such very great importance, has, I am afraid, been entirely broken. At the present time direct taxation produces 70 per cent, of our tax Revenue against 48 per cent, in the year 1907–8. But that is not the end of the story. I am now going to touch upon a rather controversial economic question. I have had those figures as to taxation taken out for a long period of time. They cover, roughly speaking, the whole of the nineteenth century. Up to quite recent years there was no relation at all between the growth in direct taxation and the level of prices. If you put these figures out on curves there is simply no relation between the two. But if you take the period since 1905, when direct taxation began to increase by leaps and bounds, the curve representing the increase in direct taxation and that representing the rise in prices fluctuate together. I do not undertake to say with absolute confidence what is the nature of the relation. It is certainly not that high prices determine the high level of taxation. It was argued by a great authority in this House years ago 1668 —when the then Chancellor of the Exchequer was responsible for a reduction in the Military and Navy Estimates—it was argued by my Noble Friend Lord Faringdon, who was then in this House, that direct taxation had risen to such a level that you could not make the same deductions as you formerly did in regard to the relation between direct taxation and prices. I know my hon. Friends below the Gangway still believe in the old argument with regard to direct and indirect taxation. But, as far as I can see, our long financial experience has absolutely smashed those old arguments. There is not that sharp distinction between the two classes of taxation, and we are being forced by experience to the conclusion—a conclusion which ought to have been obvious—that if you are going to pay taxes you must first produce them. If you increase your taxation, whether direct or indirect, they must be dependent on the production of the country. There is no mysterious fund of income unearned from which you can pay them. The higher your tax, the more you have to produce in order to pay it, and that ought to throw some light on the kind of policy we are to adopt.
That is not, in the present circumstances, the end of the question. We have now the Excess Profits Tax. I prefer to consider that tax in a category by itself. It is not like the Income Tax, it is not indirect taxation; it is something sui generis. The Excess Profits Tax raises an enormous number of exceedingly difficult questions. I am not going to argue, of course, against the principle of the tax. I think, as far as a priori arguments go, the argument is in favour of the Excess Profits Tax. As my right hon. Friend is aware, there is a very strong feeling amongst firms, both controlled and uncontrolled, as to the consequences of the Excess Profits Tax in the form in which it is now levied. I have not heard a single objection to the principle of the tax. I have had the good fortune to be associated with many representatives of the industrial classes. Some of them are strongly opposed to the Chancellor of the Exchequer and some are strongly in his favour, but I certainly have not met a single individual who objects to the Excess Profits Tax in itself. But there is a strong and most widespread objection to the course which has been taken in regard to it. It is certainly too high. After all, you cannot 1669 consider a thing like that just as though it were a side issue. What is going to be the effect of this particular tax upon the industrial position of the country when the War is over? There are a great many general considerations. We are giving are enormous stimulus to the trade in the United States by our war orders, an enormous stimulus, and it is with our money that that stimulus is given. You have got an enormous difference between the number of firms engaged in certain industries before the War and the number now so engaged. There is an enormous increase in the number of firms scrapping—if I may put it in this way, the one great factor on which English trade was before the War dependent—what we may call the goodwill.
The old markets are gone, ancient business connections are suffering, and much that went to the building up of British industry is not in the least likely to be capable of being got hold of again by the firms who are now devoting themselves heart and soul to helping the country. On these firms, who must look ahead—they have to look behind at what they have done, and have to look ahead at the future—you put this very heavy burden of the Excess Profis Tax. On the American firms you cannot put any burden. I am not quite sure, but I think that even in Germany the firms who are engaged in these operations are not subject to this sort of tax. Here you have had a vast increase in plant and machinery, and the firms I am considering have got to face the temporary loss—as I think the permanent loss—of the old markets, in the sense that they lave got to get hold of them again in times to come and cannot depend upon the old goodwill. You are doing all this in regard to our own firms, while you are not burdening firms abroad. Surely that is very hard. It is eminently a labour question. What is going to happen when the soldiers came back from the War? There will be a great cessation in the War demands. There will be these great firms who have gone in for great expansion who will be obliged to go ahead as well as they can without any Government assistance, and meanwhile you will have the labour market absolutely blocked with skilled artisans coming home in their millions from the War. Apparently you are not going to do anything to help to solve that problem. It is an exceedingly hard problem to solve. I do 1670 not sympathise in the least with what I think is the unfair criticism that has been levelled against one particular class of these firms, because I think that but for the patriotism and expansion of the great armament firms the country would long ago have gone to rack and ruin.
My hon. Friends know there are hundreds and hundreds of firms who have absolutely cut themselves adrift from all their old business. They have recreated and re-established their works on a new basis. They have acquired an entirely new kind of machinery and skill. They have to pay Excess Profits Tax. They cannot look, in present circumstances, to that with which they can hope to cope with what will be an exceedingly difficult position after the War. There is a certain class of firms who have built up entirely new industries. We seem disposed in this country to go on the basis at present of "Stop your industries." May I tell my right hon. Friends that quite a number of new industries have been and are being started both here and in Germany.
In these countries the new industries were possibly started because of the exceptional conditions of the War, and they are paying this heavy direct taxation. What is going to be done for those industries when the War is over? Are they going to be left to fight the battle without any kind of assistance from the Government? Take another class of firms, the controlled firms. Think of the situation there. I think I am right in saying that there was a statement in the House—the Solicitor-General will know—that there was something in the nature of a bargain between the Government and those firms when the Munitions Act was passed. The basis of assessment was determined. Now the Chancellor of the Exchequer comes along and in Clause 32 of this Bill he is going to make those firms conduct double negotiations with two authorities as to what allowances should be made. I know of firms where they have had to spend days and weeks of valuable time and ability in determining apparently such a simple question as what is the accounting period. Everybody knows how the Excess Profits Tax is working, and how, on the whole, people have tried to work it.
If you add these considerations to the general considerations I have put forward on the subject of direct taxation, I do not think there is any avoiding the 1671 conclusion that the Government have really tried to strain that kind of financial system too far—much too far. I feel sure that my right hon. Friend the Secretary of State for India cannot in his heart of hearts approve of putting this enormous emphasis on direct taxation. I cannot think he really accepts that as being the right thing, even during a time of war. If we go on like that and at the same time take no other measures at all to ward off the evils which will certainly follow this too great insistence upon this one particular form of taxation, many firms must face disaster when the War is over. It is the disposition in this country to induce one to recognise that there are certain governing facts in our financial position which either one must take as being facts or the facts will do a great deal to ruin him. There is too great a disposition in this country to think that this or that man's views or opinions represent the right policy and that that sort of thing really determines the financial policy. It does not. When Germany decided to go to war with this country, Germany decided by that very act that certain changes should take place in financial policy. You have only to look at the Debt Charge which is likely to result after the War. Some time ago I made a careful estimate that the revenue we should have to raise would be £300,000,000. I will confine it to £300,000,000 at the present time, although it is likely to be £450,000,000 or thereabouts after the War. You have only to look at that fact to see that a revision of your system will be insisted upon.
When we come to that part of the subject—I am most anxious not to raise any controversial issues—we find that in his speech introducing the Budget the Chancellor of the Exchequer said—I am quoting from memory, and therefore will not tie him to the exact words—the sense of what he said was that the Government had decided not to put on an extension of Import Duties because they could not provide the administrative staff which was necessary, but they had decided upon the policy of prohibition. That is a very important choice. What is the policy of prohibition? Is it successful? If it is not successful it seems to fall to the ground. I have asked the President of the Board of Trade about it, and he told me the other day in the House that, if the prohibition were fully effective, 1672 making allowance for the licences for the importation of goods, then, after twelve months, a saving would be made of between two and three millions of tonnage. He could not, however, tell me what saving had actually been effected. Has there been any result? I cannot see it. We have the official figures for a period during which the prohibition has been in force. It is perfectly true that here and there there are declines—I am speaking now of the official Customs figures—but there have also been increases, and it is perfectly evident that, speaking generally, this policy has broken down. It is not doing what the Government intended. This is a question of the utmost gravity, as I shall show presently. I should like to know precisely upon what grounds the Government selected this policy. Why did they do it? What sort of evidence had they? I say that this policy has broken down and has not provided what the Government intended to provide by it. Then the President of the Board of Trade informs me that no licences for importation are given except in respect of goods which have been paid for or are in course of transit. Of course, I accept what he says. It is quite obvious that to the extent to which you grant licences for importation you destroy your prohibition. I am bound to say that the impression I have derived from conversations with business men and in the business world is entirely different from what the President of the Board of Trade said. I am told, upon authority which I am bound to accept as being good business authority, that goods are coming in at the present time without licence, or permit, or anything.
§ Mr. HEWINS
Yes, they are prohibited goods. Why is that? Because the machinery has broken down. The Chancellor of the Exchequer said that they hit upon this policy because they could not provide the administrative staff for the other policy. Why has the prohibition policy broken down? Because you cannot administer it by simply setting up a department issuing licences. Everybody knows that the whole thing is in a perfect tangle. It is causing untold inconvenience and loss and it is not restricting imports—that is to say, it is not restricting imports in any important degree. That is not the most important side of it. Unfortunately, it is quite impossible 1673 for me to discuss in as great detail as I should like the really important side of this policy of prohibition. It is an exceedingly dangerous policy. Here, in the complicated conditions of modern times, with all our network of treaties, with the present attitude of many neutral States—the Government know what that means—with the position of our Allies, the Government adopt an expedient which belongs to the eighteenth century. Why did they do that? When we practised this policy in former times we had not the same treaty system in force. Our treaties were then for the most part reciprocal treaties, 'but now they are "most-favoured-nation" treaties, and you are running the risk, all the time you keep this policy in being, of most serious complications. I would not say a word about that side of the case—it is so difficult and complicated—I would imitate the Government, and keep it absolutely quiet, if I could. That policy, however, does not do, because it is a matter of common talk and notoriety all through the business world that licences are being given. That is what is said, that is the common impression in the business world, and it is the common impression outside this country. That is so much the case that some people think the Government really intend to abandon the policy. I am telling the right hon. Gentleman what is the impression I gain from the business world, and I ask him to reconsider the matter. If they do that, after all, will the consequences be so very great? I do not attach any importance to this question of the administrative staff. How many people do you require to work the Excess Profits Tax? How many people do all these new taxes require? How is the right hon. Gentleman getting on with the organisation of the Cider Tax? If it is going to be successful, it requires a good many inspectors. Later on I will ask him to give me a Return showing the precise number of officials who are employed in the administration of these respective taxes.
But I should like very much to know the ground upon which it is said that you could not provide a staff for administering a different system. As to what that different system might be, that is suggested lay the War itself. I have considered the case with a good many people, and they and I think, and always have thought, that a general tariff arrangement would be far more effective in securing the end he has 1674 in view than a policy of prohibition. I have not the slightest doubt about it. A tariff put on for that purpose must in the nature of things be absolutely different from anything we do in peace time, and could not exist after the War came to an end. Anyhow, if you put on a tariff for war conditions pure and simple you would have to include things, and do things, which would be entirely unsuitable for times of peace. I know they say that if you do it now during the War there is a risk that it will remain afterwards. I think it is absolutely certain that whether you do it now or not, you will have to do it after the War. That is my own personal view. But still various lion. Friends of mine do not take that view, and if it is not so they will have a full opportunity at the end of the War of fighting it out. But what you do during the War for war purposes does not necessarily, and will certainly not, in my opinion, be what you would do after the War is over I suggest to the Government that they adopt that expedient. If they would do it I am quite willing to go into details, but I do not want to do so in a speech like this. I think it is most important that in connection with this Finance Bill they should make absolutely clear to the world what is their attitude with regard to the Paris Conference. It is absolutely necessary. The Conference is, in my judgment, the most important economic consultation that has ever taken place in the modern world. We hope, simply because we hope to adopt every means possible to shorten the War, that one of the results of that Conference will be agreement upon the measures which will be aimed directly at the financial position of Germany. That is what the French hope, and it is what Italy and Russia hope. But really everything depends upon the attitude of the Government here, and the intitative they the going to take. Those countries cannot determine the line they will take in ignorance of what the attitude of the Government here is upon the destinies of the British Empire. I do not think you can go into details. The War is far too big a thing to permit of it at the present stage. But is not the right hon. Gentleman prepared to take such definite steps at the present moment in connection with the Finance Bill as will declare once for all to the world that we intend to organise the British Empire and to have preferential arrangements with our Colonies? I suggest to the Government that they 1675 ought to make a declaration somewhat to this effect at the present moment, that they intend to adopt whole-heartedly the Resolution of the Imperial Conference which demanded that in any duties now or hereafter imposed by this country a preference should be given to the products of the Dominions and Colonies, and as a preparation to that end I think they should give a similar intimation to the world at large that they intend to turn their back upon the most-favoured-nation treatment which we have extended to all countries, because I am sure the Government do not intend to put Germany in the same position as France. They should take those two steps. I do not want details mentioned at present. I want that spirit to be in the Budget and in the Finance Bill.
I do not look for important new departures in financial policy in this Budget, because I think the Chancellor of the Exchequer is raising too much money. It is not necessary to raise so much money at present. If he had left things absolutely unaltered, he had quite enough money. If you are going to raise a large sum, I cannot understand why you do not go in for compulsory loans, or something of that kind, because if you take money compulsorily out of people's pockets by taxes to this extent it seems to me even a milder form to take it out by compulsory loan, because you at least promise to pay it back. But I think the Chancellor of the Exchequer is really going too far, and I suggest to him that he should modify some of the provisions in the way I have sketched out. I suggest that in the particulars I have mentioned the Government should modify them in a favourable direction, and that these steps should be accompanied with a declaration on the part of the Government that they will take the other steps I have mentioned. Then the right hon. Gentleman (Mr. Bonar Law) would go to Paris next month with a perfectly clear mind. I am quite sure he would find the utmost degree of co-operation from the representatives of the Allies with whom he has to consult. These matters are of the utmost importance. Whether the Government agree with the suggestions I have made or not, we have rather reached the parting of the ways. After all said and done, your finance is only a reflex of your military and naval policy. I think, and many people agree with me, that we have reached a stage in 1676 the War at which the turn you give to your economic policy may be an important contributory cause in determining the fortunes of war. At any rate, these considerations I have tried to put before the House are of the utmost importance, and I urge the Government, and I urge my right hon. Friend, to come to a perfectly definite, deliberate, clear, and explicit decision that, let come what may, they will not tolerate the aggressive policy of Germany as it is at present being developed, and they will go forward in that policy for organising our Imperial resources in conjunction with our Allies on which I believe in my heart all of us are set.
§ The SECRETARY Of STATE for INDIA (Mr. Chamberlain)
It is so long since I had a Budget to defend, and my appearances in this House have been so frequent as a critic, that I feel myself in a somewhat strange position, not made the less strange when the fortunes of Debate call upon me to answer my hon. Friend, with whose ideas on fiscal questions, both in the past and at present, I have so large a measure of sympathy. There is a certain humour in the situation which will be apparent to the House and which I cannot conceal from myself. But I do not think any quarter of the House or any individual wishes to treat the Budget which we are discussing to-day as a controversial measure in the sense in which we have discussed many Budgets in the past. They would treat it rather in the admirable spirit in which my hon. Friend has treated it, as being an occasion on which all of us, without respect to party, without respect to past prejudices or opinions, should put into the common stock whatever we can to assist in framing the wisest and the soundest policy for our country at the moment. My hon. Friend said truly that the measure which we are discussing today is as much a war measure, and the policy which it seeks to carry out is as essential to success, as is any other measure, more directly military or naval in appearance, which we either have discussed or may still be called upon to discuss during the course of the War. I need not say that I entirely share the opinion of my hon. Friend, as to the importance of the financial and economic factors in this War. I agree with my hon. Friend that we should be foolish, indeed, to measure the German economic or financial system purely by the standards which were applicable to your own, or to suppose that any given set of conditions, acting upon 1677 their totally different economic life, would produce exactly the same effect in Germany as we might anticipate from them if they were applied here. It would be very unwise for anyone to count on the rapid economic exhaustion of Germany. It is very difficult to ascertain or to form an exact picture of the economic situation of Germany at present. I am not disposed myself to think the German Minister of Finance, or a German Minister, surveying the economic situation of his country, has as much cause to be grateful as a British Minister surveying the conditions of his own, but we should be quite wrong if, in this or any other matter relating to this War, we built our hopes of success on the weakness of the enemy instead of on our own strength.
My hon. Friend made some criticisms of the Bill, but at least he will agree with me in this, that the present condition of our finances, whether the actual measures we are taking are the best under the circumstances or not, after the unexampled strain which so many months of an unexampled war has put upon them, shows the strength of our nation and the capacity which it has acquired to bear extraordinary burdens, and gives us good hope and good assurance that we shall be able to continue this struggle for as long as may be necessary. Before I come to the detailed criticism of my hon. Friend, let me remind the House, very briefly, of what we have done. In the year before the War we raised a revenue of £200,000,000—a gigantic revenue, as it seemed to many of us, and an excessive expenditure as it seemed to some of us. We have increased that in the years of war to £500,000,000. To that extent, subject, of course, to the necessary ordinary civil expenditure, we are meeting the expenses of this great War as we go along. There is no other country which is attempting to do the same. There is no other country which could do the same—some because they have not the resources to do it, and others because the fortune of war has temporarily gone against them and they are deprived of a great part of their resources. Compare the strength, the elasticity, and the vigour shown by this effort, cheerfully borne by the nation, as my hon. Friend rightly said—cheerfully borne by every class of society in respect of that portion of the burden which falls upon them— compare it for a moment with the efforts of our German foe. It is only a few months 1678 ago that the German Minister of Finance was boasting that he had not added to the burden of his countrymen during the War. I think that is not perhaps an achievement to boast about. He does not now, because he has found it necessary to add to their burdens. What is the sum which he anticipates that he may perhaps get from his various taxes? A sum of £25,000,000 of additional taxation, compared with the £300,000,000 extra which, we are able to raise
My hon. Friend said that in his opinion we are raising too much money in current taxation. I will come back to an observation in respect of the wider considerations, to which my hon. Friend drew our attention. If we were overstraining our resources, I think you would see it in the reduction of the returns from the taxation. I think you would find that the estimates of the Chancellor of the Exchequer were falsified, and that the taxes did not produce the sums which he had anticipated he would get from them. Is that true? I do not want to worry the House with figures, but I will take the results in gross. I submit there is force in the argument which I am now addressing to the House, that, if you overstrain your resources, your taxes will fail to give you the results which you anticipate. Has that been the case? It has not been the case. The revenue for the years 1913…14 exceeded the estimate by £3,500,000. The revenue for the next year exceeded the estimate by £17,500,000, and the revenue for 1915…;x16, the year which has just ended, exceeded the estimate by no less than £32,000,000. So that as the struggle has proceeded, and as taxation has become heavier, the yield, instead of dropping below the estimate of the Chancellor of the Exchequer, has increased, not only positively, but relatively, in advance of the estimates which he made.
§ Mr. CHAMBERLAIN
There is the wider question which my hon. Friend raised, and which the right hon. Baronet the Member for the City (Sir P. Banbury) also raises. It was an old Liberal doctrine —it is oddly reversed when such a doctrine comes from the right hon. Baronet the Member for the City—that money always fructified to the better advantage in the pockets of the taxpayer than in the pockets or bags of the Chancellor of the Exchequer. I have not the least doubt that 1679 this money which we are taking from the hands of our countrymen could be used to greater advantage, if there were no war, than it is now being used in the interests of the War by the Chancellor of the Exchequer. I agree that the fact that we have raised so large a sum in taxation does lead directly to the considerations which the hon. Member for Hereford (Mr. Hewins) brought to our notice, and the effect of this heavy taxation, not so much at the moment, but when peace is restored, upon the manufacturing and productive capacity of our country. Undoubtedly there is much cause for thought in that respect. Manufacturers, under the pressure of war, and in compliance with the desire which is common to us all, to direct our activities into those channels which will best help our country at a time like this, have, as my hon. Friend said, given up trade which they had built up in peace, in order to serve the needs of war. They have parted with what he rightly said was the best asset that any manufacturer can have; they have parted with the goodwill of their business; they have allowed the business to slide while they endeavour to meet the demands of war. They have in many cases, for the demands of war, had to incur special expenditure in new machinery, new plant, new buildings, and no one can fail to recognise that in so doing they have created a claim upon their countrymen for later consideration, for consideration which is no more in the interests of these manufacturers than it is in the interests of the community as a whole and of the working class section of the community in particular. We are using up capital; we cannot help it. In one form or another we are bound to do it. We are using up capital for the purposes of the War. We are laying by less capital than in ordinary circumstances would be done for the development of business, for keeping business up-to-date, and for providing us with the means to meet our competitors. We are doing that at a time when it is true a great portion of the world is in much the same position as ourselves, but when other portions of the world, happily for themselves, are saved from this struggle and are making enormous profits at the expense of the belligerents, and are able out of those profits to reorganise, to extend, and to develop their business, so as to seize the business which the preocupations of war prevent us from carrying on, and to put 1680 themselves in the very best position to compete with us when we can turn our attention directly to business.
We do not need to go back to any old doctrines, we do not need to revive any old shibboleths, when the world about us is so profoundly changed and modified, as the world is being changed, by the necessary conditions of this War. I do not undertake to say what is the exact measure of agreement which may be evolved among the various parties and in different quarters of the House as we come to set ourselves to the work of reconstruction after the War. I think he would be a rash man who would say at this time what are the limits of possible agreement. I do not think anyone would attempt to say what are the limits of possible agreement. Any one of us might say what at the moment appears to us to be the best policy to adopt, but what I venture to say is that any man would be rash if he attempted now to say, from some searching in the past volumes of Hansard that on this, that, or the other thing there was no possibility of coming to an agreement amongst sections who in the old days were widely apart. One thing, at least, is quite certain. There is no section in this House who believes that you can leave the work of reconstruction to chance. There is no section in the House or outside the House who would maintain that we can pursue, after our experience of this War, and in this War, a policy of complete laissez-faire, of complete laissez-aller, of freedom from all Government intereference, Government assistance, or Government help in any form. It is common ground, I think, on the part of people who were widely separated of old, that the Government must come in to help to organise, to help to support, and to see that industries—if I may use a term which has been common in the discussions on the Military Service Act, the pivotal industries—are to continue to exist in this country, and that industries which we have not got and which were vital, as we found out when this War broke out, and which we have made in some cases through direct efforts by the Government, and in other cases great efforts through private individuals, to establish, shall not again be allowed to be crushed out, but shall be maintained, at least in so far as any one of them can be shown to be necessary to the full life and vital strength of the nation.
If my hon. Friend will ponder these observations, I think he will, perhaps, be 1681 inclined with me to be sanguine as to the future development of our policy. I think that we have made an immense advance towards agreement. Speaking for myself, and for myself alone—I undertake to speak for no one else—as one who was intimately associated with the Tariff movement, who is tied to it, if I may say so, by my heartstrings as well as by my head, I am not at a time like this, or in the future, going to consider myself bound to the exact measures which I advocated before the War, nor even to a rigid policy which in the circumstances after the War I might consider the best. I think it would be a much greater thing to get, if we can get it, a system which any one of us might regard -as somewhat imperfect, but which would really form the basis of a national and Imperial policy for our political development hereafter. I said I could speak only for myself, but I think that, speaking in this spirit, I represent the frame of mind of my hon. Friend the Member for Hereford and of those who worked with us in the old days. We do not invite anybody to say that we were right or they were wrong. It is the last thing that any of us wish to do, either on one side or the other. But we do invite them, as we profess ourselves willing to do, to bring fresh minds to bear on fresh problems and to consider them without prejudice and without reservation. My hon. Friend thought that this Bill ought to be utilised as an opportunity for, in some manner, declaring the policy of the Government or laying down principles which the Government representatives at the Paris Conference should follow.
§ Mr. CHAMBERLAIN
It is quite true that my hon. Friend said that he did not expect any revolutionary changes in the Bill, but at the same time he had expected something in the Bill, not being a revolutionary change, which would have formed the foundation of our policy at the Paris Economic Conference and of our general Imperial policy henceforth, and he invited me to make such a declaration now. I think that our declaration had better be made at the Paris Conference rather than that we should make a declaration here, before we had consulted with our Allies, or had their proposals before us. But I can safely assure my hon. Friend that the representatives of the Government at that conference will go there unbound by any rigid school of economic thought of the one kind or the 1682 other; will go there unbound by any specific fiscal policy which we have adopted in this country in the past or which some of us have advocated, in order to see in what way our common interests may be best pursued and strengthened, and the fortunes of those who in this great struggle are our friends and Allies may be together increased and prospered in the future.
My hon. Friend, turning to the details of the Budget, criticised the Excess Profits Tax. He used it to maintain one of his arguments that we were getting too much in taxation. I admit frankly that the Excess Profits Tax is open to some of the criticism which he administered to it. It is a very difficult thing to say, in regard to that tax or any other tax, exactly up to what point it is wise to raise it, and at what point it becomes deleterious and objectionable. Probably in the minds of all of us a somewhat different standard would be erected. I can only say to my hon. Friend that the criticism which he uttered finds an echo on some of the benches here, and is not universally shared on the benches on which he sits, and my right hon. Friend the Chancellor of the Exchequer was pressed from those benches as well as from the benches on this side to raise the Excess Profits Tax. The right hon. Gentleman the late Civil Lord says they will be raised again. I will say again that I hope they will not yield to further pressure. In my opinion the tax has gone as high as it ought to go. If you take it any higher you do two things: you cripple industry and you discourage enterprise. It is of the first consequence to us to do neither. Excess profits are, after all, very tempting. The basis of the tax is that in a time when many people are suffering reduction of income through the War, and when we are in great need of money, an increase of profits is a fair subject for taxation. So it is, but remember that increase of profits requires an increased reserve to be laid by. It requires the investment of capital, the fortunes of which, the moment peace is declared, are wholly uncertain. All the industries in which these works are occupied cease when peace returns, and they have to choose other occupations for them. And more than that. If you take any larger proportion than you do now you discourage people from showing that enterprise in business which we need in order to develop our resources to bear the 1683 burdens of war which this country has got to bear. It has got to bear them now or later. My right hon. Friend opposite thinks that we are taking too much at present.
§ Mr. CHAMBERLAIN
I differ from him. The greater your war the greater the demand, and proportionately the greater the demand that you must make on the present, because the greater in any case the legacy of obligation you have to leave to posterity. And for all the purposes of competition and of industrial life, of which ray hon. Friend has spoken, surely it is no less important that we should limit as far as we can the great debt which we have to bear in after years than that we should not take more than is needed from the community at the present moment. Then my hon. Friend challenged again—he challenged it on the introduction of the Budget—the policy of the Government with regard to the prohibition of imports.
My hon. Friend has twice referred to the statement of my right hon. Friend the Chancellor of the Exchequer in regard to that subject. He has not succeeded in representing quite correctly what my right hon. Friend said, and I think that much of my hon. Friend's criticism arises through this misapprehension of that statement by the Chancellor of the Exchequer. Just look at what that statement was. The Chancellor of the Exchequer said:I have made no fresh attempt to prevent the consumption of imported luxuries by means of Customs duties. We have come to the conclusion as the result of the experience which we have already gained, that the best method of dealing with this problem is by the growing scheme of prohibition which has been applied by the Board of Trade.The case for prohibition as put by my right hon. Friend the Chancellor of the Exchequer was not the general case which my hon. Friend the Member for Hereford attacked. It was a special case in regard to checking the importation of articles which we could and ought to do without at the present time. First of all, let us see how far I agree with my hon. Friend. I agree with him absolutely that a policy of prohibition is not a permanent policy, nor can it be permanently the basis of our policy. I agree with him that at best it is a rough and ready and rather a harsh method of dealing with the question. But how would my hon. Friend deal with it? He says by duties. If the 1684 duties are to be effective they must be prohibitive, and if they are prohibitive duties, what in the world is the difference, economically or administratively, between duties which prevent importation and an order which has the same result?
§ Mr. HEWINS
My case was that the prohibitions are not prohibitive, are not stopping them, whereas you could do it by means of a tariff.
§ Mr. CHAMBERLAIN
My hon. Friend' interrupts me to remind me of part of his argument to which I was just coming. My argument, so far as I venture to submit it, is that if you seek to prohibit certain articles of luxury for one reason or another, if you are to do it by duties, your duties must be prohibitive.
§ Mr. CHAMBERLAIN
Really my hon. Friend does himself an injustice. You must do so if your object be to keep them out. That was the object of the Government—to keep them out, in order partly to check expenditure on luxuries in this country, but much more in order to set free tonnage of which there was not sufficient for all the purposes of a more urgent character for which it was required. Then I come to the argument of my hon. Friend with which I was going to deal. He says, "your prohibitions are not effective." Is he not judging a little hastily? The first Order of prohibition came into force in March. Licences were granted for goods which were already contracted for, and throughout there has been a Colonial preference which cannot be ungrateful to my hon. Friend, and which counts for a great part of the produce of the arrival of which he has heard. I venture to say that if he would have a little more patience and distinguish between the goods which were contracted for before, and the goods which are of Colonial origin he will find that these prohibitions are not so ineffective as he thinks. I admit that they raise great questions of difficulty with neutrals and sometimes with our Allies perhaps. All that is true, but all that would be equally true if we chose to adopt the other method of dealing with this particular problem and put on such duties as would keep these goods out. My hon. Friend drew rather too alarming a picture of the result of having recourse to the eighteenth century policy of prohibition. I do not quite follow his argument. He says that if you resort to prohibition in war you must resort to prohibition in peace—
§ Mr. CHAMBERLAIN
I thought that my hon. Friend was not merely a historian in this case but also a prophet. I thought that he was not merely saying what happened in the past, but that he undertook to predict what would happen in the future.
§ 5.0 P.M.
§ Mr. CHAMBERLAIN
Then we are agreed. His argument is that if you adopt certain prohibitions as a war measure it would be found that past experience teaches that those prohibitions will be maintained after peace is established, not, as I understand, merely as a temporary measure to tide over an interval, which might very well be, but as part of your permanent system. A little later on my hon. Friend assured those who might be suspicious of any duties that were imposed at present, that whatever duties might be established in this war period could not remain when peace is declared. I do not follow his line of argument by which he reconciles those two conclusions It does not seem to me that prohibition is any more permanent than the duty, and I confess that, if the object be the exclusion of imports, in that case, in so far as that object can be attained, I greatly prefer to proceed by direct prohibition instead of by something which is called a duty but which is, in fact, a prohibition. I was rather surprised that my hon. Friend, after listening to the Budget Debate of last year on some taxes intended to be prohibitive, does not see that those who hold the view which he and I did before the War were likely to reap all the odium of taxes which were as foreign to our system as they were to the system of the critics of those taxes. I do not think it is in the interest of a sound tariff system that we should create preposterous duties which are duties in disguise, but which are intended to be in effect absolute prohibition. I have briefly, and I hope not unreasonably, dealt with the comments made by my hon. Friend. His speeches are always interesting, and they always deserve the respectful attention of Ministers who have to follow him, or deal with the subject on which he has spoken.
1686 I do not like to leave my participation in the Budget Debate on any note of controversy with anyone at the present time. After all, the most striking thing about the reception of my right hon. Friend's Budget is the acceptance which it has met with in all quarters of the House, and I think in all parts of the country. We have many tasks to discharge in this War. We have to make a gigantic naval effort, and we have to make gigantic military effort; but no less important than either of these, not merely to the success of our own operations, but to the success; of our Allies, is the financial strength, the financial stability, the financial resources of this country. No one who follows, or attempts to follow the German Press, can be without knowledge that in the financial, resources of this country the Germans see a measure of the capacity for resistance of the Allied nations. I think it is satisfactory that having this great burden to bear, the spirit of our people has enabled them to sustain it with such readiness and good will, and that after nearly two years of war we should find ourselves bearing comparatively willingly a burden of taxation which would have seemed incredible to any Chancellor of the Exchequer, a comparatively few years ago, and that our financial position, instead of growing weaker, as the War goes on, grows stronger with the experience we obtain, the confidence which we acquire, and the respect that we win by the efforts we are making.
§ Mr. LOUGH
I think those who listened to the hon. Member for Hereford will appreciate the spirit in which he opened the Debate. In this second part of the Budget there will be profound interest taken in every part of the country, and it is very desirable that the House should rise to the occasion in considering the weighty proposals put before it. The hon. Member for Hereford, in the greater part of his speech, adopted a quite uncontroversial tone, and I am glad to be able to agree with some of the conclusions at which he arrived. With certain parts of" his speech the right hon. Gentleman (Mr. Chamberlain) has successfully dealt, and he administered to the hon. Gentleman something in the nature of mild reproof for entering upon what may be deemed controversial; he deprecated that, and said that he approached the matter in a non-controversial spirit. I desire to do so.
§ Mr. CHAMBERLAIN
I would remind my right hon. Friend that I directly referred to the moderate tone and temper of my hon. Friend's speech, the admirable character of which could not be resented.
§ Mr. LOUGH
The main part of the speech of the Member for Hereford commended itself to me, where he spoke of the large amount raised by direct taxation, but he drew a conclusion with which I do not entirely agree. He referred to the proportion between indirect and direct taxation. I do not find fault with the Chancellor of the Exchequer's proportions; they are all right; but I agree with my hon. Friend in saying that the amount raised by taxation is rather heavy to be so suddenly placed on the country—£323,000,000 in one branch of taxation, and £136,000,000 in another. My. hon. Friend complained of that, and to a certain extent I agree with him. I disapproved of his speech where he wanted prohibition to be secured by introducing a subject which I do not want to discuss at this time. There was agreement between us in deprecating the heavy taxation, but my hon. Friend went on to suggest that we ought to take a new step in our finance, and I do not think that would be a prudent step. In one sentence the hon. Member said the Chancellor of the Exchequer must admit that the old weapons had failed him, or some words like that. I do not agree with that at all. The Chancellor of the Exchequer has won most extraordinary success in raising revenue by placing burdens on the country which have not been resented, and by sticking to our old principles of taxation.
But the situation is very critical with regard to finance. Tremendous changes are being made. The Chancellor of the Exchequer will admit that fact, and it is right that this House should look at it in a broad way, before we go further with the very great steps that we are taking. I, personally, am very glad to have heard the speech which we have had from the right hon. Gentleman who has just sat down. I agree with him that if we are to win the War the most powerful weapon that this country can use is the weapon of finance. It has been the most powerful weapon we have used. Next to the splendid achievement of our Navy, which everyone always puts first, what has astonished the world and ourselves, and puzzled the enemy, is the great financial strength which this country has displayed. They see our magnificent trade carried on and 1688 extended under very great difficulties; they see the high wages which are paid in this; they see the good social conditions maintained in the greatest crisis through which this country has ever passed; and then, above all, in the revenue which the Chancellor of the Exchequer has raised, everybody must see that we have developed a spirit which has proved that we are perfectly invulnerable. And it is because I want these conditions to be maintained, without bringing about any controversy in this Debate, that I venture to call attention to three matters on which I hope the House of Commons may be disposed generally to agree. Our great difficulty in understanding this subject is the rapidity with which the change has been made. This is May, 1916. A year ago, in what condition were we? A year ago the demands upon the country yielded a revenue of £226,000,000. We passed over one year. Up to May, 1915, the revenue yielded was, as I have said, £226,000,000, and after a lapse of a year, what is the amount expected to be yielded from the Budget? It is expected to yield more than double that amount—more than £450,000,000. That is a terrible load to ask the country to bear in one year. To increase the burden to that extent is a very great experiment.
The right hon. Gentleman (Mr. Chamberlain) used the expression that the evidence showed that the country is bearing this burden willingly, and he gave two reasons why revenue has been produced so well, and why there is no diminution. I will give two answers to his reasons, and I hope those answers will be considered. The first is that we have only had a short experience—Heaven forbid that I should indulge in any gloomy anticipations—for it is only six months since that the first heavy burden was imposed, and we cannot tell in six months what is the effect on the country. The second answer is, that while there has been a great surplus there has also been an underestimate of revenue. I called the Chancellor of the Exchequer's attention to that matter before, and I am not going to return to it now, but I think the revenue has been underestimated, and it is in these circumstances that the surplus has been created. I am sure the House generally will agree with me in this, that to raise the revenue from £226,000,000, as it was twelve months ago, to nearly £500,000,000 is a great experiment, and that we ought to go as carefully as possible into it, lest unhappily we do grave and 1689 unnecessary evil to interests of great importance throughout the country. I am an advocate of taxation, but I confess, as with all good things, we may be getting too much of this good thing. Having made this general observation, I ask for a moment's consideration of one or two points in connection with this grave matter.
I want to utter a protest against having a third Finance Bill this year. It is now certain that we will have a third Finance Bill in July. We have had one in April and another in May, and we had one last September which lasted only until December. These Bills create a great deal of alarm in the country and it would be a great improvement if we could have the matter settled in one Finance Bill. The Chancellor appeared to be irritated yesterday when I asked was there to be a third Finance Bill, but surely it was not an unreasonable question! Why not put the Tea Duty and other things for one short year into this Bill, so that the important business interests in the country, which are always agitated when there is a Finance Bill, will be able to arrange to take their medicine whatever it may be, and so that they will know that there will be no change for that period? The Chancellor has been very severe on branches of trade which tried to forestall, but does he not think he is creating that by bringing in so many Budgets. The taxes are stiff, and let him make them stiffer if he likes, but let him fix them and not be constantly changing them. I think the Chancellor has overestimated his expenditure and underestimated his income very grossly last year. The result is, I think, that we do not know exactly how much the country is paying. The revenue exceeded the Estimates by £32,000,000, and the expediture was £31,000,000 short of the estimate, and thus there was a difference of £63,000,000 in a Budget which lasted for only six months.
§ Mr. LOUGH
Those are only the first two items. I have got a bigger item. The Chancellor in his statement went on to say when he came to the loans this coun- 1690 try would have to provide there was a still greater difference. He said that the advances which had been made to the Allies and the Dominions had been overestimated to the extent of £107,000,000, so that thus the Chancellor has made a wrong estimate to the amount of £170,000,000. The Chancellor's words were:I return now to the account of last year's expenditure. I have already stated that the expenditure on our own services has been approximately near the Estimate, but that there has been a saving of £107,000,000 under the head of Advances to Allies and Dominions.
§ Mr. McKENNA
That represented the Exchequer issues. As I explained in another part of my statement, there have been loans which have not yet come through the Exchequer, and which diminish that total.
§ Mr. LOUGH
I will not trouble the House with the explanation which the right hon. Gentleman gave. I come now to another account in the indictment. Having told us of these differences, the Chancellor asked, "What has become of the balance?" He told us it had been, used to buy American securities. We are told that our national expenditure of last year has been used to buy American securities. Those are splendid securities, paying interest, and many of which have been sold, I believe, at a profit, and all of which are realisable; but that is not expenditure, and should not be mixed up with the expenditure of the nation. I protest against that, and I think the House ought to get a clean statement of expenditure without the mixing up of financial matters of this kind. The Chancellor said:The securities themselves, or the proceeds of their sale as far as they have not yet been expended, constitute a substantial asset in America with which to begin, the current year." — [OFFICIAL, REPORT, 4th April, 1916 cols. 1050 and 1051, Vol. LXXXL.]It is not last year's expenditure, and this is, I submit, the mixing up of two years' accounts in a reprehensible way. Those securities ought to have been put to a proper and separate loan account, and the finance of last year closed up on a proper and clean basis, and this year dealt with separately. The Chancellor of the Exchequer tells me I do not understand it. I suppose I do not. I am a simple business man and the Chancellor is a lawyer. He mixes up these charges and securities with the expenditure of the country during the year, and I protest against that. I think the House has been led into great difficulty by the mixing up of these loans with the 1691 national expenditure. I think it is done for the sake of showing a large figure and having talk of £5,000,000 or £6,000,000 a day. It has, I believe, confused the national mind, and the Chancellor by doing so has failed a little in his duty to the House of Commons. We are only humble people in the House and not all gifted lawyers who can wriggle figures about anyhow. If we bought £70,000,000 of American securities we would open up an account for them and would not mix them up with other matters. I was going to put down an Amendment to the Budget, but I did not want to strike a controversial note. I thought, however, that the House ought to have a clean statement of the expenditure. I hope I have not put this matter in any offensive way.
I come to the next point. I believe that the Chancellor has greatly under-estimated the revenue for next year. One very Curious statement he made was that there had been forestalments belonging to the current year amounting to £7,000,000. How on earth can he include revenue which was deep down in his pocket last year and which is not revenue for this year? You may call a thing forestalment, or anything you like, but when it is money paid you ought to be very thankful you have got it, and take it and not make any very striking remarks about it. The total revenue estimated by the right hon. Gentleman for this year on the basis of existing taxation, without any one of his new taxes, he estimates in his White Paper as £426,000,000. I think they will produce nearly £500,000,000, or at any rate a great deal more. I think, for instance, the new duties included in the Act just passed will produce a much larger amount. The Chancellor estimates that he will only receive £1,600,000 additional from Customs. What is the position after six months of the high Tea and high Cocoa and Coffee Duty and that on Sugar, and hat will be the result after a year? I certainly think it is going very far to estimate that there will only be an increase of £1,600,000 produced by those duties.
§ Mr. LOUGH
As long as the right hon. Gentleman keeps bringing in Budgets, and especially a quarter-dozen yearly, there will be plenty of forestalments, or there may be. But even allowing for forestalments, I think the Customs Duties will 1692 give him an increase of from £8,000,000 to £10,000,000. I believe the duty on tea, coffee, cocoa, and chicory will bring in £2,000,000 more than last year. Then there is the Tobacco Duty. At the old amount it totalled some £20,000,000, and the duty has been raised 50 per cent, by an addition of 1s. 10d. in the £. Surely it is a moderate thing to say that it will produce £5,000,000 or £6,000,000 more in a full year than in a half-year. The Chancellor estimates that he will lose £6,000,000 on spirits, but I do not know why. This country may always be trusted when things are prosperous to keep the drink bill up to a fairly level point. Therefore I do not think that £6,000,000 will be lost on spirits in the year. I put it down that on these items there has been an under-estimate of £18,000,000. I believe the Excess Profits Tax has been greatly under-estimated, and for two reasons. Remember that we are dealing with the year that will end in March, 1917, so that there will be two complete years of Excess Profits Tax. I know there is a great delay in the money coming in, but once they get started and see that they have to pay, I believe the Chancellor will get a great deal more than he has estimated. Then, last year, in the Excess Profits Tax we did not include what the Chancellor will get from controlled establishments, but that is included this year. I venture to say that from the two years, and including the controlled establishments, there will be a vastly larger amount than the £86,000,000 which the Chancellor has estimated. I think the returns from shipping are probably underestimated also, and that under these various heads the Estimates have been very seriously under-estimated.
The Chancellor made one very curious statement in his speech. He apologised for not imposing heavier taxes. That is one of the most delightful things I have ever heard from any Chancellor of the Exchequer during twenty years' experience of this House. He said that in ordinary circumstances no Chancellor of the Exchequer would apologise for not putting on heavier taxes, but he had to do so. I thought, when I heard that, "Now we are going to get off easily." But what happened? After this apology he immediately puts 1s. 6d. on the Income Tax. I think he might have spared us all that talk about the House desiring more taxes. As far as my experience goes, nobody desires more than is necessary. I think, if you correct the figures in the 1693 spirit of my suggestion and realise that there will be nearly £500,000,000 got without any additional burden from the country this year, the House will agree that the Chancellor of the Exchequer should have hesitated to impose such heavy burdens. Take, for instance, the Sugar Tax. It is a terrible thing to put 1½gd. per pound on sugar. The only reason given was that sugar is as dear in America as here. I do not understand that. Everything in New York costs about twice the price that we pay here. You have to pay twice as much there to get your boots blacked. When I was there I was always glad to escape paying twice as much for anything as we pay in this country.
§ Mr. LOUGH
That is a big question, and I would rather not answer it now. Sugar is now 5¼d. granulated and 6d. loaf, and I believe we owe about 2d. of that to the manipulation of the Chancellor of the Exchequer. At any rate, he might have spared us an additional halfpenny, which, I think, would make a great difference to our industries. There is a point about the Excess Profits Tax which, I think, must be a mistake. The right hon. Gentleman told us that he would not consider in his estimates the income from the Excess Profits Tax, because it was transitory. But what does he do in his Budget? He makes the tax permanent. After arguing the tax on the basis of its lasting only a year or two years, he puts it in "until Parliament otherwise decides." I suppose that that is a mistake made by the Secretary to the Treasury. I think that in the crisis in which we are involved, the Chancellor of the Exchequer ought to pay more attention to economy in expenditure instead of piling all these heavy burdens on the country, and I believe that in the two or three respects that I have mentioned he has greatly taxed the patience of the House.
§ Mr. HUME-WILLIAMS
I want to call the attention of the House to that part of the Bill which enables the Government to raise money. I think it is common ground that the time is approaching when the Government will have to make fresh issues. I am not here to criticise the way in which issues have been made up to the present, or to question the fact that the Government's finance has been wise and prudent. But I do not think I am betraying any secret when I emphasise the fact that the 1694 strain now imposed on the financial resources of this country is increasingly heavy, and must indeed become more so, because we are at the present time the financial storehouse of certain of the Allies, if not of the world. Consequently, in conection with this forthcoming issue, I want to press upon the attention of the Government the scheme which has become known under the term "premium Bonds."I want the House to believe—I am sure they will—that those of us who have directed our attention to this question have done our utmost to formulate or, at any rate, to outline a scheme which shall be financially sound and financially acceptable to the Treasury. Just because of the element of chance which underlies the drawing of these bonds we desire to be particularly careful to bring forward only a scheme which shall be wise, prudent, and financially sound. I am sure the House will believe that we have done our best in that direction, and the names of those who support the scheme in the House, and the support which it has received outside, should, I think, be a proof of that fact.
Let me explain what a premium Bond is. A premium Bond is a Government Bond issued at a rate of interest lower than the normal rate at the time, but carrying participation in half-yearly drawings, of which the object is to pay off the Bonds at a premium. This transaction cannot legitimately be called a gamble, for this reason. The essence of a gambling transaction is that the person entering into the gamble, whether it is a bet or an ordinary lottery, gives his stake in return for the expectation of a large profit. If he wins, he gains a large amount, in respect of which he has risked his stake. If he loses, he loses all. Win or lose is the essential of the gamble, and that element is here entirely absent. A premium bond is merely an investment at a low rate of interest, carrying with it a chance—by no means an unpopular one in foreign issues —that the bond may be drawn in a shorter or longer time and paid off with a premium. Every man who invests in house property is content to take a low rate of interest in the hope that some of the houses which he is buying may sell at a large profit. Very often the accidental advent of tramways or the growth of population gives the houses a considerable profit. The man sells at that profit, but when he makes the investment he is content with the smaller rate of interest, in the hope that he may realise part of his 1695 investment at a profit. Indeed, every investor on the Stock Exchange surely has in view that the securities which he is buying may go up. My own personal experience is that they generally go down. But the investor undoubtedly always hopes that they will go up. If they do, it is sometimes by fortuitous circumstances over which he has no possible control, and he sells at a profit. I am sure that any Members who have had that fortunate experience would have been indeed shocked if they had been told that they had taken part in a gamble.
If there is truth in that, let me outline the class of transaction which we suggest to the Government. There appear to me to be two distinct questions involved. First, is this scheme financially sound; secondly, if it is, would such a bond be sufficiently attractive to produce a sufficient return to make it worth while to try the experiment? I frankly admit that unless those two propositions were established one could scarcely expect the Government to make this comparatively new departure. Let me take, for the purposes of this explanation, the example given in the circular which we have taken the liberty of distributing to Members of this House—a circular prepared with great care, and with the best financial assistance to be obtained in the country. I take as the unit for the purpose of argument an issue of £10,000,000. The present rate of interest for Government issues is 5 per cent. It is proposed that these £1 Exchequer bonds should bear interest at the rate of 2½ per cent., free of Income Tax. That is an advantage which I strongly press upon the Chancellor of the Exchequer, because I cannot help thinking—in fact, I know, from the correspondence which reaches me in connection with this question from all parts of the country—that the uncertainty as to Income Tax in the future is largely responsible for the fact that some of the Government issues have not been, shall we say, quite as remunerative or quite as successful as the Chancellor of the Exchequer might legitimately have hoped they would be. Two and a half per cent., free of Income Tax, has also the advantage that it means 6d. in every pound, and the coupon attached to the bond is easily calculated. Therefore, it has the great advantage of being simple and easily understood. If you take 2½ per cent, interest and compare it with the present 1696 5 per cent., it leaves 2½ per cent as a margin. How do we deal with that? We take 1½ per cent, and devote it to a fund out of which these bonds can be drawn. That permits of a sum of £75,000 being provided every half-year during the period of ten years—which, I think, is the time within which the bonds would probably be redeemed—for redeeming the bonds, plus-premium. That would redeem 11,380 bonds every half-year. To sum up, you would during the period of the loan provide £1,500,000 for the payment of premiums, or prizes if you like so to call them, and by the end of the term you would automatically have redeemed 227,600 bonds. So that to that extent the bonds issued would be reduced, and the scheme, from the point of view of the Treasury, certainly should be financially attractive. It is not proposed that the premiums should be upon any spectacular or any theatrical scale. It is proposed that they should range from £500 to £5. We suggest £500 for this reason: It is for a class of people to whom we hope these bonds will appeal. The amount is sufficient to buy a house, or to establish a shop, or an endowment, and every half-year, when this drawing recurs every holder of his £1 bond will not only have his 2½ per cent.—his 6d. which he gets every year for every £1 bond—but the chance of obtaining a share of the £75,000, with the payment off of his bond, and with this incidental advantage, which I do not want to emphasise by overstatement, that the whole time this issue is going on you are redeeming your bonds, you are reducing the interest, and you are reducing the amount which the State has to pay at the expiration of the term.
That then leaves us with a margin of 1 per cent., which the Chancellor of the Exchequer can deal with as he pleases. There are several ways of dealing with it. If he thinks the bonds would not be sufficiently attractive at 2½ per cent, he could put them up to 3, to come out of that extra 1 per cent., and he could arrange that all bonds at the expiration of the term should be redeemed at a small premium. That leaves a substantial margin for expenses and for incidental costs. [An HON. MEMBER: "What about Income Tax?"] One per cent, certainly would deal with the Income Tax upon this particular class of security. First, however, let me complete my present point, then I will deal with that. The bonds should be to bearer and should be purchaseable over the counter. The existing machinery could easily be utilised. 1697 Among the other things you would possibly get as a result of this issue is a large accretion of gold. Experience shows, for instance, in the issue of a small bond of, say of the Underground Electric Railways, that these are subscribed, against the gold reserves, out of the pockets of small shopkeepers and humble people. The Post Office could keep the bonds as at the present time they keep the Post Office savings. The simplicity of the whole issue would, we think, be a very substantial attraction.
The next point we have to establish is this? Would these bonds prove attractive? We all admit it is no good attempting an issue of this kind unless it draw and attract an amount sufficient to warrant the experiment. I think the first thing which will occur to every man is this: That the class of people to whom these bonds are likely to appeal are those who up to now have not got the habit of investment. I mean some of those people of restricted means who, up till the time of the War, never had sufficient to invest, and have not got the habit. From £3,000,000 to £4,000,000 a day is being spent on the War. I should think it was not an undue assumption to say that about £500,000 is going to the working classes of the country. It is also, I think, a fair assumption that the majority of the working classes of this country are earning 50 per cent, more than they did before the War, or, at any rate, a very large amount. I am not saying that with the least disrespect for the working classes. I yield to no one in my admiration for the work they have done for the War. But I think it is common knowledge that the increased amounts they are earning are at the present time being largely frittered away in cinemas, cheap jewellery, and the purchase of pianos. These are the people who have not yet got the habit of saving. They have got not only to be taught to save, but to be attracted into some savings of this kind. It surely should be that a bond of this kind, with its recurring chances, would attract them—at any rate, so we think, and so we are advised—in a way no other investment could or would. Why, come to think of it, supposing a workman has saved, at the end of a week, a fortnight, or a month, £5 or £10—the time is immaterial, he has got the money to invest—and the Exchequer Bond is a very doubtful form for him. There are many of the working classes making £8 1698 to £10 a week now, as hon. Members below the Gangway know well. A working man has got it to invest somehow. All I can say is, if I were in his place, I should think an Exchequer Bond a very dull thing. You are going to get your few shillings a year, and at some future period you may get the capital back. You have got your walls and newspapers plastered with advertisements urging people to make investments of that kind. The investment itself is not attractive. That cannot be denied. It is because it is not attractive that we seek to find something which will be attractive, and which would get back into the coffers of the Exchequer these enormous amounts which are at present passing into the pockets of the working classes.
That is, to our mind, the main argument in favour of this scheme. It is because we believe it will appeal to that class that we have taken such trouble as we have, and that we are urging an issue of this type. It will occur at once, I am sure, to hon. Members of this House the advantage that will accrue after the War if you have induced the working classes to invest some part of their earnings. Nobody can shut his eyes to the fact that after the War there must be economic trouble, labour trouble, and depressioin of trade. I hope there will not be. I have every confidence in the power of the Government to deal with questions of that kind, but it would be idle to shut our eyes to the prospect. If you can persuade the working classes to invest you have a considerable argument in favour of an easy economic adjustment of the great questions ahead. There is another great advantage in this scheme. You avoid those—speaking with all respect of the Government, and I am only speaking my own personal opinion—you avoid those awful advertisements with which our walls are plastered at the present time—those advertisements like that one referring to bad form in dress. It is a grave question whether the want of taste is in the dress or in the framing of the advertisement. All those circulars which are issued by the Chancellor of the Exchequer with reference to his 5 per cent. Exchequer Bonds would be avoided, and for this reason: every drawing is your advertisement, every prize that is won is your advertisement, every six months, and every man who has been successful, every one of the thousand odd is a walking advertisement for your scheme in the future. You do 1699 not need to spend money or time, you do not need to spend your energies, in advertisement.
Lastly, there is this, I think, admirable factor, that you would attract money from foreign countries. If this issue is subscribed in considerable amounts it would, as those who advise us believe, attract from abroad money which at the present time is not coming into this country. Remember that this scheme which is new here, and the contemplation of which appears to have struck with horror the hearts of some, is a commonplace abroad. In fact, to them it seems a mild imitation of their means of raising capital.
§ 6.0 P.M.
§ Mr. HUME-WILLIAMS
The only form with which we are all familiar is the issue of the Suez Canal Bonds, one of the greatest institutions in the world, drawn half-yearly, payable with a prize, and also the Ville de Paris, made in the same way. Half the foreign issues made in this country and subscribed on the London Stock Exchange are the issues of foreign railways and foreign bonds which are bonds drawn payable at a premium, of course, a great deal smaller. Indeed, the scheme has once been in operation in this country. It has even been in operation in connection with Cape loans. There is nothing new in the system. An hon. Member inquired how about Income Tax? One of the great attractions of this scheme is that the bonds will be issued free of Income Tax. The 1 per cent. to which I have referred leaves to the Chancellor of the Exchequer an ample margin in which to pay. For this reason the whole gravamen and basis of this issue is that it will apeal to the class of people who at the present time do not pay Income Tax. What we want is that these bonds shall appeal to the working classes of this country, and do it in a form which will enable them, and enable the Treasury, to escape all the complicated machinery of application for the repayment of Income Tax which those concerned never ought to be asked to pay in the first instance. One paragraph in a letter of a general manager of one of our greatest joint stock banks in the country seems to me so admirable a summing up of this part of the scheme that I venture to read a few words to the House:Simplicity is the chief point. The working man and the small investor generally have been bewildered by floods of advertising matter couched 1700 in technical language, which those of us who have been brought up in the business have not always been able to understand. The whole scheme must be within the compass of the mind of the men to whom you are making the appeal. Two and a half per cent. interest—that is as much as I can get in the Post Office. No Income Tax—so I know where I am! And the chance of one of the large number of prizes which have got to be won by somebody. Everyone can understand that, and, what is more, carry it in his head.Those words are not mine, but they are those of one of the highest financial authorities in the country, and so I venture to read them to the House as putting shortly the arguments which I have ventured to produce on this point. Let me deal with the objections. The first objection is that it would deplete the Savings Bank. I do not agree. I think the class of people who have been putting their money into the Savings Bank will continue to do so; but, if the worst came to the worst, and the money was taken out of the Savings Bank and put into Premium Bonds, it remains with the Exchequer, and in larger quantities and in more satisfactory amounts. Then we are told that the co-operative societies would be hit. I do not believe that either. The co-operative societies, many of them, are firmly established among the working classes of the country, managed by them, supported by them, and the class of people who support them now, in my opinion, would support them in the future. Finally, we come to the last—and what I believe in the minds of some is the main—argument against this scheme, the element of chance—… that powerWhich erring men call chance.You cannot eliminate chance from human life. All life is made up of chance. From our childhood we take our chances every day. We not only take our chance, but we incorporate it in our daily habits. The schoolboy who tosses which side shall go into cricket first; the grown man who draws lots with other men as to who shall go into some position, coveted or feared—the element of chance is one to which we are all accustomed. "I moreover affirm," says Montaigne, "that our wisdom itself, and wisest consultations, for the most part commit themselves to the conduct of chance." It is a chance whether a man will be born; it is a chance whether he lives; it is a chance when each of us will die. Chance rules the sternest Puritan, as it rules the most irresponsible trifler. If, indeed, there be such a thing as chance at all—All Nature is but art, unknown to thee;All Chance, direction, which thou canst not see.1701 You can no more get rid of the element of chance in your daily life, and in your daily endeavours, than you can get rid of all the primeval passions with which nature has endowed everyone, and it is because chance is an essential factor that we think, instead of scouting it, instead of turning down a scheme which is otherwise sound—I admit I must establish that—it is surely a wise thing to realise its part, to recognise it, to harness it to the yoke of your necessities, to bring it in to the purpose of the War by utilising it in connection with this issue. It would be attractive. It would be, we believe, remunerative, and if it does appeal to the working classes of the country, as we sincerely believe it will, then it is thoroughly justified, and we hope the Chancellor of the Exchequer will take it into his serious and earnest consideration.
§ Sir F. BANBURY
I hope the House will allow me, as one who has spent many years in the City, and one of whose occupations has been chiefly concerned with investment, to say a few words upon this subject. I will not deal with the eloquent peroration of my hon. and learned Friend. Like him, I am a great believer in chance. Chance sometimes lands us on that bench, and sometimes it keeps us unrecognised behind. I have no objection to chance, and my objections to the scheme of my hon. and learned Friend are not founded upon any question of chance or gamble. My hon. and learned Friend began by stating that house property pays a low rate of interest. I am afraid I cannot agree with my hon. and learned Friend on that point. I have always thought that house property was rather a speculative kind of investment that paid a very high rate of interest. If you take a landed estate, that is another thing, but everyone, I think, will admit that if you take what is called house property—that is, a row of houses, or anything of that sort—you could buy them in the old days to pay something like 6 per cent. or 5 per cent. at a time when first class investments were only paying 2½ or 2¾ per cent. Therefore, compared with first-class investments—and we are now dealing with a Government investment— I think I am right in saying my hon. and learned Friend started with a false assumption. It is not a very important point, and it is only worth alluding to in order to show that many of my hon. and learned Friend's statements are not absolutely correct, but are founded on a misconception. Then he says that the rate on 1702 Government Bonded Stock is now 5 per cent. As a matter of fact, it is not. The only Government Stocks which pay 5 per cent. at the present are Exchequer Bonds and Exchequer Bills. All others pay less. What the rate will be for a new Loan I do not know, and I will not venture to say.
Having made that error, my hon. and learned Friend goes on to say that his new stock is to bear the rate of 2½ per cent., that there is to be 1½ per cent. to pay the premiums or prizes, and that there is a balance of 1 per cent., which the right hon. Gentleman the Chancellor of the Exchequer, or my right hon. Friend (Mr. Chamberlain), if he were to succeed to the office again, would have to pay. Unfortunately that calculation is entirely based on an error, because my hon. and learned Friend has forgotten that when he talks about 5 per cent., even supposing it is correct, he has got to deduct Income Tax, which is 1¼ per cent. at the present rate, and, therefore, Exchequer Bonds pay 3¾ per cent., so that the margin of my hon. and learned Friend disappears at once. He is using 2½ per cent. for interest and 1½ per cent. for premiums, and by a simple calculation l½ and 2½ make 4. Now, I have shown that the highest rate of interest at the present moment paid by any Government security is only 3¾ per cent., and, therefore, there is at once a deficiency of J per cent. before you get to the ¼ per cent. with which you are to regale ourselves. Therefore, I think, to begin with, the financial elements of the scheme have not been thought out.
Then my hon. and learned Friend puts a very great value upon the fact that these premium bonds are to return 2½ per cent. free of Income Tax. Later on in his speech he said that the people to whom these bonds were to appeal were to be the working classes. There was some little difference of opinion between my hon. and learned Friend and some hon. Members opposite as to what the earnings of the working classes are at the present moment. I will not go into that, but, at any rate, I do not think hon. Members opposite will disagree with me if I say that many are not within the Income Tax limit, and a good many are within the very small late of Income Tax which is payable upon an income of, say, £200 a year, and, therefore, they would not be attracted by a rate of interest free of Income Tax, for in no case would they pay Income Tax. It seems to me that there again the attraction, or the supposed 1703 attraction, of this scheme proposed by my hon. and learned Friend falls to the ground. My hon. and learned Friend says that this scheme is going to appeal to the working classes, and that in addition it is going to be a very great source of profit to the State in a time of war. Just let my hon. and learned Friend consider. This has got to come out of the savings of the working classes, not the past savings, but the future savings.
§ Sir F. BANBURY
Then the money is to come from the savings which they will be induced to make by my hon. and learned Friend's scheme in the years to come. How long is that going to take? I appeal again to hon. Members below the Gangway. I really do not know what the income of the ordinary working man at the present moment is. I believe it is very high, but say that it is £3 a week.
§ Sir F. BANBURY
I do not know at the moment, but I shall be pleased to find out. Take it at £2 a week, and I do not think, taken all round, that is too high. That is only £100 a year, and how much a year is going to be saved out of that? If you take the amount that is going to be saved out of that a year, and multiply it by the number of working men who are in that position, you will find at the end of the year it will come to a much smaller amount than might be supposed. But is the working man going to do this? Last week someone—I do not know who he was—sent me a Birmingham paper about something. I think I ventured to make a few remarks in this House, and somebody in the Birmingham paper criticised me. I was not very much interested in that, but I was extremely interested in the account of an interview which had taken place between Mr. Neville Chamberlain and some representative of the trade unions in Birmingham, and also some worthy Birmingham citizens. There was a proposal made there—a different proposal from that of my hon. and learned Friend—but a proposal to attract the savings of the working classes. At any rate, two gentlemen moved and seconded that this was a good scheme, and that it would have the support of the working classes in 1704 the town. What happened? The representatives of the trade unions at once said that they would have nothing whatever to do with it. They said the working classes cannot save because they have nothing to save with.
§ Mr. CHAMBERLAIN
My right hon. Friend is an old Parliamentary hand, and he ought not to believe everything he reads.
§ Sir F. BANBURY
I am not arguing whether the scheme was good or bad, but, at any rate, the representatives of the trade unions did not approve of it, the resolution was withdrawn, and the meeting ended in nothing. I was almost inclined to believe everything that came from Birmingham, but this was not an expression of opinion by a paper but simply a statement of fact. It was the report of what took place at a certain meeting at which a resolution was proposed, which was not supported by the representatives of the trade unions. I have the paper containing the report which I have saved, and I shall be very pleased to show it to the Secretary of State for India. [An HON. MEMBER: "What was the scheme?"] That is not the point. It was stated that the working classes cannot save because they have nothing to save with. Remember that this scheme would not appeal to anybody else. It would not appeal to trustees, because beneficiaries would not allow them to invest at a small rate of interest to receive a prize which would go to the State. My hon. and learned Friend (Mr. Hume-Williams) would know, if he had had any dealings in the City in this sort of investment, that trustees are the great supporters of Government securities,. and they would be cut out.
My hon. Friend says these securities have to be deposited as bonds in the Post Office. We are always very loath to take the custody of bonds because they carry a great deal of risk. The safe may be broken into or a bomb may be dropped from a Zeppelin, and we do not like to take the risk. Does my hon. Friend mean that these bonds are to be deposited at the Post Office in London and in our great towns? How can the Post Office undertake the custody of these bonds. At any rate, it would be very risky, and I do not think it is possible. I do not believe that a, scheme of that kind would attract money from abroad, and I think the Chancellor of the Exchequer will agree with me when I say that there is not much money abroad 1705 to attract. The right hon. Gentleman has already advanced £450,000,000 to foreign countries, and I do not think it is at all likely that they will be attracted here by a bond at 2½ per cent. with a small premium. The hon. and learned Member for the Bassetlaw Division said that after the War there will be depression, and it will be a good thing that these working men should have these investments. When the War is over and there is depression they will want to sell those bonds. Supposing they are out of work and have £50 invested in my hon. and learned Friend's premium bonds, and they have to sell them, because they are out of work and have to pay rent and other expenses. They may make a loss, and then where will be their prize? I think this scheme is unsound in all its essentials. If my hon. and learned Friend invests in one of these securities, he will find it is not equivalent to a premium, because he will have to hold his bond, and if he keeps it fifty years he will get par for it.
During the introduction of the Budget I asked the right hon. Gentleman if he would give me some information as to the manner in which the Income Tax on the working classes had been levied; and what success had attended it. The right hon. Gentleman told me that the proper time to do that was on the Second Reading of this Bill, but I hope he will not forget it now. I see that we are going to have three Finance Bills, and I rather agree with the right hon. Gentleman the Member for Islington (Mr. Lough), that three Finance Bills are rather a big dose, and I hope we are not going to have any more. With regard to present taxation, my right hon. Friend said that there was an old Liberal saying that "Money fructified in the pockets of the taxpayers more than it fructified in the pockets of the Chancellor of the Exchequer," and with that doctrine I thoroughly agree. When we are taking large sums out of the pockets of the taxpayers, and a very small class of taxpayers, I do think it would be better if that sum was left to fructify in the pockets of the taxpayers for financing businesses, because we cannot find all this expenditure and the money for our Allies unless our businesses continue prosperous, for businesses are the backbone of our national success and our capital should not be taken in the very heavy taxation which is being imposed at the present moment. That is really a question which deserves very serious consideration. We are doing all 1706 this for the benefit of posterity, and posterity ought to bear a share of the burden.
I have been asked to request the right hon. Gentleman to consider the position of the poor people with £200 or £300 a year who live abroad for the sake of their health. The Minister of Munitions, some three or four years ago, brought in a Clause which taxed these poor people, although their money does not come to England, and they do not have the protection of our laws and our society, and yet they are compelled to pay Income Tax. Now comes the 5s. tax on unearned incomes, and it is a very heavy burden on those people living abroad on a small income, in many cases for reasons of health. I promised that I would draw the attention of the right hon. Gentleman to that point, and I hope he will give it his consideration. Representations have also been made to me as to the hardship entailed upon people with small unearned incomes of £200 or £300, who will have 5s. deducted at the source. They have to wait for a year before they can get the money back again. It is quite true that in a year's time the matter rights itself, but to a person with £200 a year to have £50 stopped all at once, it is a very serious matter. I admit it is a difficult question to deal with, but I hope the right hon. Gentleman will give it his kind consideration. I quite agree with the right hon. Gentleman the Member for Islington that in all probability the revenue has been underestimated. I hope I have not touched upon anything controversial, but I cannot help asking the right hon. Gentleman to consider the question of the Land Valuation Department once more. I know I have brought this subject forward on many occasions, but we are all anxious on this matter, and finance plays a great part in this War.
§ Sir CHARLES HENRY
Hon. Members must have been extremely gratified to have heard the right hon. Baronet who has just spoken oppose this scheme in the interests of the working classes, for he is certainly establishing himself in a new rÔle when he takes the working classes under his special charge.
§ Sir F. BANBURY
I do not oppose this scheme in the interests of the working classes, and I should be glad to see them save money. I oppose it because I do not think the working classes would use it, and because I think it is unsound.
§ Sir C. HENRY
We heard a great deal from the right hon. Baronet about this scheme not being in the interests of the working classes, but we heard very little about it being unsound. The working classes are asked to invest their money in this scheme during the time they are receiving good wages, and the right hon. Baronet says that when the War is over there will be depression, and the working classes will be forced to sell their securities. In the interests of the working classes, I think it is desirable that there should be some sound investment in which they can place their savings, so that when the time of depression comes they may have something to sell. Then the right hon. Baronet objected because my hon. and learned Friend stated that one of the suggestions was that these bonds might be deposited at the Post Office. It would not be obligatory upon investors to deposit them at the Post Office, but small people who made small investments and had no means of custody would have the facilities of the Post Office, and for the life of me I cannot see any objection. The next point of the right hon. Baronet was that the 5 per cent. Exchequer Bonds with the present rate of Income Tax only gave 3¾ per cent. Is he of the opinion that the Income Tax will always remain at 5s., because unless he believes that his argument cannot be substantiated. Another point he took was that there would be no money coming from abroad, and he instanced the case that we were lending money to our Allies. That is quite true, but there are other countries. May I remind him of the United States of America, Scandinavia, and Holland, who have plenty of available money, and I am quite certain that the argument of my hon. and learned Friend was good that an issue of this kind would be attractive to those countries.
The scheme adumbrated by my hon. and learned Friend has been supported—I do not think I am exaggerating—by the greatest financial experts in the City of London, by bankers and those who are used to the handling of financial enterprises. It has been supported by the London Chamber of Commerce, and I only received this morning the report of a committee which was fully in accord with the issue of premium bonds. The opposition to this scheme comes, I will not say from the Government, but from some Members of the Government, and I am at a loss to 1708 understand why they are so antagonistic to this reasonable proposal. It must be a matter of common agreement that every effort should be made to induce the working classes to save under present conditions, and I do not think I am stating anything which is not correct when I say that up to the present the Government have singularly failed.
§ Sir C. HENRY
The scheme specially proposed for the working classes is that which is known as the "Pound for fifteen-and-sixpence" scheme. It has been advertised throughout the length and breadth of the land—I shall be very interested to know what it has cost the Government to advertise and bring the scheme before the public—and I asked the Chancellor of the Exchequer what was the amount which had been subscribed. It has been in operation for about three or four months, and he told me that the amount of cash so far subscribed was £2,100,000. I asked a supplementary question whether he was satisfied with the response, and I think I suggested that it should be withdrawn in favour of some other scheme. He told me the response was excellent. I would be no party, and I am certain those who have co-operated with my hon. and learned Friend and myself in bringing forward this proposal would be no party to any scheme which gave such barren results. During my hon. and learned Friend's speech the Chancellor of the Exchequer said, "What about the Income Tax?" That scheme is also free of Income Tax. It is a 5 per cent. scheme free of Income Tax. I wish to draw the attention of the right hon. Baronet to the fact that the Government have already been a party to an issue free of Income Tax which pays 5 per cent.
§ Sir C. HENRY
No, in this country. The right hon. Baronet when he walks about the streets of London certainly does not keep his eyes open. The Government is running it all they can, and for that reason I cannot see the strength of the objection of my right hon. Friend to a scheme that would be free of Income Tax.
§ Sir C. HENRY
What are the real objections of the Government to the scheme of my hon. and learned Friend? Hon. Members and myself have asked different questions. The first objection, the Chancellor of the Exchequer told us, was that it was against existing Statutes. That was a very lame excuse for not considering this proposal. If it is against existing Statutes, then the Government themselves have been responsible for sanctioning a premium issue scheme on a similar basis, in which the redemption has been dealt with by drawings within the space of ten years. I have brought to the attention of my right hon. Friend a prospectus which was issued under the sanction of the Treasury, and outside that the right hon. Baronet knows perfectly well that scheme upon scheme and prospectus upon prospectus were issued before the War in which drawings were made at a substantial price over the issue price. The right hon. Baronet said, "Yes, but they have the option of purchase below par or below the price at which they were to be drawn." That is true of some issues that have been made, but some issues have been made without that provision. The Chancellor of the Exchequer also said it was opposed on moral grounds. If he will forgive me for saying so, it is impossible to imagine a more fatuous objection. This is no lottery. Let me remind the House that similar schemes were resorted to in this country to finance previous wars, and to say because it has a speculative element about it or because there is a chance about it, that it should be condemned and not considered is, in my opinion, not meeting the situation in the manner in which it should be met. I do not want to go into small details, but when it comes to taking part or participating in schemes of a gambling character, the Government themselves, let me remind the House, are today interested in horse-racing. In this very Finance Bill they are getting revenue from race meetings. Therefore, because this issue has a certain speculative character, it should not be condemned. The Government must recognise the temperament of the English people. They do want not so much a gamble, but some potential element besides safe interest. This scheme offers safe interest, but it also offers some inducement that there may be some increment of capital. Surely there can be no objection to that. The 1710 well-to-do investor has a selection of investments from which he can make his choice, and I believe I am right in saying that the former clients of the right hon. Baronet the Member for the City of London used to make their investments, partly in securities where the interest was safe, and partly in schemes which were more or less of a speculative character.
§ Sir C. HENRY
And what is applicable to the ordinary investor should be applicable to the wage earner who only has his £o or £10 to invest. If the Government are really desirous of securing the savings of the working classes or of inducing the working classes to save they must adopt a scheme of the character adumbrated by my hon. and learned Friend. Let me refer to the origin, or one of the sources of the origin, of the scheme. I have here the Report of the War Savings Committee in which this question of bonus or premium bonds was dealt with. I have taken the trouble to find out, as far as I have been able, what was the opinion of the different members of the Committee who framed that Report, and I do not think I am wrong in stating that the majority were in favour of the issue of premium bonds. Why was it not pursued? Let me read this paragraph to the House:Bonus bonds would probably be a very attractive form of investment, and very considerable sums might be obtained by an issue of this character, but, on the other hand, objection would not improbably be taken by a section of the community to any proposal in which an element of chance is involved, and as opinion on the Committee was somewhat sharply divided we are not able to make recommendations on this subject.We all know that any proposal in which there is the element of chance will meet with some opposition, but the people who object to investing in a security in which there is any element of chance are not obliged to do so; they can resort to the 15s. 6d. issue or to the 5 per cent. Exchequer Bonds. There is, however, a large class of the working classes. I venture to say a majority, which desires an investment of a speculative character, and it is useless for the Government to brush 1711 this proposal aside if they are really anxious to attract the working classes to invest and to induce them to put aside a small fund in the shape of a nest-egg when the War is over and the demand for labour is not so great. I do ask the Government not to be obstinate in this matter. This is a practical proposal and can only be objected to for the reasons given by the War Savings Committee. My hon. and learned Friend said, and said rightly, that similar schemes had been adopted in other countries. [An HON. MEMBER: "By Governments?"] Yes, by Governments, by municipalities, as set forth in the report given by the London Chamber of Commerce—[Sir F. BANBURY: "By Greece"!]—including France. If the Government make up their mind not to have this issue, they will be shutting the door to a form of investment which a large number of people demand. There is a considerable mass of opinion that unless you do a thing like this you will not be successful in obtaining the savings of the working classes. Therefore, I do urge on the Government not to be obstinate merely because my right hon. Friend the Chancellor of the Exchequer has said that he will not have anything to do with this scheme. I urge them to look upon the proposal in the manner it has been brought forward by my hon. and learned Friend, and to bear in mind that it is not a wild-cat scheme, but to give it due consideration, and, if possible, bring it forward in a concrete manner.
§ Major Sir E. COATES
I desire to support the hon. and learned Gentleman who delivered the first speech on this subject this evening. I was also very much struck by a good many words which fell from the lips of the Secretary of State for India (Mr. Chamberlain), and especially with the wordsWe must bring fresh minds to fresh problems.We must bring fresh minds to fresh problems. It is true we have possibly no recent precedent for the issue of premium bonds which is now being suggested to the House of Commons. But we are creating, and have been creating during the past twenty-two months, precedents which none of us would have thought possible two years ago. We have had in the City of London, in the first place, the Government guaranteeing bankers' bills amounting in the aggregate to many hundreds of millions sterling. We had a moratorium for loans, and many other things. We 1712 have had in our Budget the Excess Profits Tax, and we have had many other things which none of us would have thought of two years ago. The right hon. Baronet the Member for the City of London (Sir F. Banbury), in his speech, to which I listened with a great deal of interest, hardly, I am afraid, brought a fresh mind to bear on this fresh problem. I agree with him that very possibly the policy of premium bonds may not be what he and others would call high finance. But if he will allow me to say so, I do consider it common-sense finance.
What we have to consider to-day are two great problems. We hear right and left, and we are told in the newspapers, of the large amount of money which is, at the present time, passing into the hands of the working classes. On the other hand, we hear there are many extravagancies being produced by the possession of that money. Surely it behoves us in the House of Commons, who are supposed to direct the affairs of the nation, to see whether we cannot by some action here induce thrift amongst the working classes, and in some way stop this terrible extravagance, and guide the expenditure in a channel which may be of real good to the nation in its present necessity.
Something has been said with regard to the element of chance, and speculation. I consider that one of the great traits in the British character is the sporting trait, the sporting element. Wherever you go all over the world you will find it has been the sporting trait in the British character which has really created the British Empire. What about our business men? You have only to look at the past history of this country, and you will be forced to confess that it has been by the adventure of money belonging to commercial and financial men that this great Empire has been built up. How have many of the railways and the industries in our Colonies been created? Simply by the adventure of money by our big commercial houses, members of which could never be pointed out as speculators. But there are speculators and speculators, and I maintain that commercial men in their everyday life are more or less speculators. We hon. Members here speculate when we go to the electors We do not know whether they will return us or not, and we speculate to the extent of our election expenses whether or not we may adorn this Assembly.
1713 There is one point to which I should like to draw the attention of the Financial Secretary, because I gather from a remark which I have heard fall that the Government are opposed to this question of premium bonds. I know that the Government have to a great extent been able to maintain exchange between this country and the United States of America by the fact that they have been in a position to purchase from owners in this country a large amount of American securities, which have been shipped to America and have thus steadied the exchange. I wonder whether the Financial Secretary realises how these securities first came over to this country. They came in this way. Go back to the year 1870. I am old enough to do that. That was a time when the United States were being permeated with railways. That huge country was being opened up by railways, and those railway undertakings were financed mostly by financial backers on this side of the Atlantic. America herself, although she had all that she required from a natural point of view, had not the wherewithal— the money—with which to build these railways, and they were built mostly by money from this country and from Europe. In doing that, of those who invested their money some lost and some gained. A man, as hon. Members know full well, may be a speculator in the best sense of the word, or he may be an adventurer, but as he grows older he realises that the money he has made as an adventurer should be utilised in some proper investments, and these investments he keeps until his hair grows white. That has been the case with regard to these railways in America. I know, personally, that enormous sums of money were sent over in those years to America. Bonuses were given to bankers, they were given bonds which were a first charge on the railways, and they were given shares as bonuses, and now the bonds and shares have proved to be useful to us in this terrible War, arid they have been utilised by the Government in order to maintain the exchange between ourselves and the United States.
Next I come to the question of the sporting instinct. Here are we in the House of Commons and in the country appealing to the sporting instincts of our soldiers in the trenches. You know what splendid sporting instincts they have shown in this terrible War. Why not defer to those sporting instincts by giving them an opportunity of having, if you like to call it so, 1714 a sporting investment? They are defending your gold and your territory. Why not give them an opportunity of having some of that geld which they are defending? We heard mentioned just now of the savings banks, and the possibility that these premium bonds might in some way or other interfere with them. The interest paid by these banks is 2½ per cent. Are you, because you have got the money of the investors in these banks at 2½ per cent., while you are giving rich people nearly 5 per cent. for their money, are you going to insist that those people to whom you are giving 2½ per cent., shall not get a larger rate of interest if it is possible to enable them to do so? Reference has been made to the 15s. 6d. Exchequer Bond. What a poor show it is after all the advertisements which have been issued. What about the dignity of those advertisements which are displayed all over the country? The return has been a paltry £2,100,000 in money. It is perfectly ridiculous to persist in this.
In my opinion we must, in the first place, realise that a lot of money is required by this country. We have been told in the papers only recently that we have got Treasury Bills out to the extent of £700,000,000. They are short-dated bills. They will have to be met, or they will have to be renewed. There is thus a debt of £700,000,000 already against this country. How are the bills to be treated? Will you bring out a loan? It is true that if you issue a new War Loan these 4½ per cent. Exchequer Bonds will have an opportunity of going into the new loan. But that will not give you fresh money. What we are out for is to liquidate our debts and to get fresh money. That is the problem before this House. First of all, you have to liquidate these £700,000,000 Will you get that £700,000,000 in your new-loan? Certainly not. There are many businesses in this country which, owing to the War, are unable to utilise their working capital. They have made losses in other directions, and the least these men can do, in order to save what little they have left, owing to the terrible War, is to put their liquid working capital into the very best security they can have where it will be always liquid. That liquid capital is now being used in the £700,000,000 Treasury Bills. Are the bankers going to give you the sum you want in the new loan? With all the desire and good will in the world, I question whether you will get one-third of the new loan from them.
1715 7.0 P.M.
But, even if you get your £700,000,000, you are only paying your liabilities, and you have still to look forward to raising a large sum of money. The Chancellor of the Exchequer has sunk his financial borehole right down to the strata of the commercial man. He has tapped that strata. He may not have dried it up, but he has tapped it very severely, and I say to the right hon. Gentleman that the proper thing now to do is for him to realise that he has to sink that financial bore-hole deeper into another strata, so as to touch the working classes, and give them an opportunity of having their stake in the country. These people do not appreciate what interest on money means. You can say to them, "It is true you have saved money. If you have an extra sovereign to spare, which in the ordinary way you would speculate in horse or dog racing, or in cinemas, here we are in this great national crisis. You can still keep your sporting instinct alive, and at the same time retain your capital." When the time comes, as we all know it will come, when the War is over, and there is industrial trouble, the men who have not saved money will look back with tears to the time when money was passing through their hands, and when they failed to take the opportunity to lay it aside. I say it is our duty to hold out the right hand of fellowship to the poorer members of the community, and give them an opportunity of an investment which they can understand. They do not understand these Exchequer Bonds, I say advisedly, and you ought to give them something which they do understand. My hon. and learned Friend has propounded a scheme which, I say advisedly, although it may have its faults, has the basis of something which will be of great benefit and interest to the working classes. I beg the Chancellor of the Exchequer not to turn it down, but to realise that although he may not yet have reached his last sheet anchor we have a long way ahead of us and he ought to prepare for i. Do not let us have a policy of "wait and see." Let us have a policy of "try," then we can wait and see what the result is. Let us try this scheme and see what the result will be.
There have been ample precedents in this matter in the financial history of this country. I have here something which I did not know until a short time ago and which some may not have heard 1716 of before. This country has had many State Lotteries in the past—real lotteries and gambles. This is not a gamble. A man puts his money down and it comes back to him whenever he wants it, while he has the opportunity of getting the various advantages which have been explained to the House by my hon. and learned Friend. One of the earliest instances of a British State Lottery occurred in 1751, when there was an issue of £2,100,000 Three per Cents., accompanied by a £700,000 lottery and 70,000 tickets of 10s. each. In 1857 there was another loan of £3,000,000, again in Three per Cents., supported by a tontine lottery. During the American Revolution, a British loan of £6,000,000 was brought out in London in 1778, and, in order to float it, several special inducements had to be offered. For every £100 paid the subscriber received, first, £100 in 3 per cent. stock, secondly, an annuity of £2 10s. for either thirty years or for life, and for every £500 paid he received four tickets of £10 each in a £1,180,000 lottery. In 1789 there was a great tontine loan in which the subscribers were divided into six classes, according to their ages, those up to twenty getting £4 3s. a year for every £100 subscribed, those up to thirty getting a little more, and so on up to the class over sixty years of age, who received £5 12s. a year. In this case the lapses in each class increased the individual shares of the survivors so rapidly that the last man might get so much as £1,000 a year for his £100.
There is just one other precedent I should like to bring to the notice of the House, that is the great Imperial building, the British Museum, which was built and started as a result of a lottery loan. In 1753, in order to purchase the Hans Sloane collection, the Harleian Manuscripts, and other things, the Government of the day issued a Loan with 100,000 shares, charging £3 each for hem No one was allowed to have more than twenty shares, making about £300,000 altogether that was received. What did the Government do? They gave prizes, one of £10,000, one of £5,000, two of £2,000, ten of £1,000, fifteen of £500, 130 of £100, 1,000 of £20 and 3,000 of £10. They gave the first bond that was drawn £200 and the last bond £300. What was the result to the Government? They took £300,000 out of the pockets of the investors, the men who trusted the Government. They also created as trustees the 1717 then Archbishop of Canterbury, the Chancellor of the Exchequer, and I think the other great man was the Lord Chancellor. They took £300,000 from the public and distributed £100,000, the result being that they got £200,000 with which to build the British Museum. The British Museum is a standing monument to a real, old-fashioned lottery of the finest description. I have not the pleasure of seeing the Chancellor of the Exchequer in his place, but I see the Financial Secretary to the Treasury, who is always so willing to listen to anything, and I know he is especially kind to me. This suggestion may be against his principles, because he may say that it is to be opposed on moral grounds. I have tried to show that there is no moral ground on which it should be opposed. I honestly believe that it will appeal to the working classes. So far as I am concerned, I have taken this matter up and spoken this afternoon, not only because I believe it will give him £100,000,000 or £200,000,000, which it will do, but because it will induce thrift, so that when we come to the end of this War people may have been induced to make an investment of this kind, if the Government will only give them an opportunity of doing so.
§ Mr. WARDLE
I am not going to follow all the ramifications of this Debate with regard to premium bonds, but there are one or two things about the Debate which have interested me, and upon which I ought to say a word or two. All the speakers have attempted to justify the issue of premium bonds as being in the interests of the working classes of this country, and I suppose, incidentally of course, in the interests of the State. I am not going to take exception to the interest that has been shown in the working classes by all the hon. Gentlemen who have spoken. I think that is to their credit, but I am not so sure that it is in the real interest of the working classes in the long run that this proposal is put forward. The hon. and learned Member who introduced this subject gave as a panrygric in his peroration on the element of chance. I will not attempt to pose as a Puritan, or to say that there is no reason at all why the working classes should not have a chance, but in my opinion the whole basis of civilisation rests upon reducing chance to the smallest possible dimensions. I do not say you can eliminate it from life. You cannot, but as a trade unionist I have always 1718 tried to persuade the working men of this country that they should try to eliminate chance from their life as much as possible, and that if they cannot eliminate it they should insure against it. That has been my principle. I am not going to say in these days, when fashions are changing and principles are toppling over each other, that we in this country may not have to come to the question of premium bonds. I am not going to pre-judge the question. I know there are large numbers of the working classes who would be delighted to have an opportunity of investing in premium bonds, but personally I would not, at this stage of the proceedings at any rate, advice them to do so, and I certainly could not take upon myself the responsibility of saying that I am in favour of premium bonds, or that I could advise the working classes of the country to take up so speculative an investment.
There are many aspects of this question. The right hon. Baronet (Sir F. Banbury), when he referred to the Birmingham incident, was partly right and partly wrong. Although some, not all, of the working classes are earning larger sums and the weekly income of the family is bigger than it was before, it must not be forgotten that side by side with that increased earning has come an increased expenditure which is very much higher, in many cases, than the increased earnings, so that the question of saving for these people is almost an impossible one. It is not true to say that all the representatives of trade unions in all quarters of the country, because they happened to be born in Birmingham, have taken up the attitude of which the right hon. Baronet spoke. In many cases the representatives of trade unions in various towns have advised the working classes to take part in saving, and to take up the War Savings Certificates, and a strong representation has been made by many of their leaders asking them to take up the bonds which have so often been referred to this evening. I dare say it is perfectly true that that issue has not met with the success which was hoped for it, and that even yet there is a shyness on the part of the working classes with regard to the question of saving, which we all deplore. I was struck by the desire of the last speaker that they should have something when the War is over upon which to fall back. We who more directly represent 1719 the working classes have not failed to tell them that they have to look forward to a future in which the pinch may come, and that if they have an opportunity to save now, and if the weekly income is of the character that has been described and there is a margin, they should put by that margin. But let me say quite frankly that I would rather see them put it in a safe investment, with a reasonable rate of interest, than I would ask them to put it in any speculative investment. [An HON. MEMBER: "This is a reasonable rate of interest!"] It is not a reasonable rate, as the present rate of interest goes. I do not see why they should not have the advantage of a higher and better rate as well as anyone else. There is one point which I am rather surprised the right hon. Baronet did not make. I want to ask the House seriously to consider—not that I am much interested in these matters myself—what the effect upon our credit in the world would be if we were reduced to the expedient of raising a Loan by this means. In my opinion, it would be very serious. That would make me have to consider this question exceedingly carefully in the interests of the nation as well as of the working classes before I consent to giving up long-cherished principles with regard to this matter.
There is another aspect of the case. It is perfectly true that there is a large number of workers who do riot save, have never formed the habit of saving, and know nothing about investing. But that is not universally true. I come from the North of England, where the habit of thrift and the habit of saving and even the habit of investing is very strongly marked. In the little Yorkshire town whore I used to live, out of about 40,000 inhabitants there were 7,000 members of the local co-operative stores, and if you reckon off the children and the old people it leaves more than the representative householders of the place number. That means that every one of these people was in the habit of saving and of attempting to invest. That is a fairly general characteristic of certain parts of the North of England, and, although they do not get large sums invested and never get very rich as the result of their investment, they always have an idea behind their minds that they shall have something put by for a rainy day, something which will assist them should evil times come. It is because so 1720 many of them have these investments already fixed—they are either buying their own houses or are attempting in some way or another to save—that they have not the money now to indulge in buying War Loan and stock which has been put upon the market. I am not going to close my eyes to the fact that the future may have all kinds of things in store for us. I am not going to say what we may be driven to do in this War yet. I only want to make my position perfectly clear that on principle, and looking at the thing as I see it at present, I do not think the time has come when we should consider this proposal as a practical one for the working classes of the country.
I have so far been very much in agreement with the right hon. Baronet (Sir F. Banbury). I am afraid I must part company with him with regard to the general proposals of this Finance Bill. I do not agree that the Government are raising or are attempting to raise too much by taxation. I am still a little old-fashioned. I do not believe in borrowing any more than you can possibly help. I was always brought up to it. In my private life at home my parents taught me that borrowing was a very bad thing, and I believe it. If you do not borrow you do not need to pay back. That is the first element of it, and it shows the soundness of the parental advice. The State is no better. If the State can do without borrowing, or in so far as it can do without borrowing, it ought to do without it. and if we lived on our income and paid for this War as much as is possible, I believe that after the War the recovery would be infinitely greater than it can possibly be by borrowing large sums of money, as represented by the present proposals of the Budget. After all, there was some truth in the old-fashioned way of living and the old adages which we learnt when we were young. I think there is too much borrowing. It would be a great deal better if the Government attempted by this Finance Bill to raise far more than they are doing at present. The right hon. Gentleman (Mr. Montagu) suggested some time ago that it was advisable in his opinion that at least half the income of private individuals ought at this time to go to the State. I think that is probably a very large demand, but I do not see why we should not attempt to raise a far larger sum. In my opinion it would be sounder finance, and although it makes 1721 a bigger demand upon the present generation, it is one which ought to be made. The right hon. Baronet said posterity ought to pay for a large part of the War. Posterity has had nothing to do with making the War.
§ Mr. WARDLE
Posterity will reap some of the benefit, as posterity always has reaped the benefit from all changes and wars of the. past, if you like, but the present generation is responsible for the War and it ought to do its share towards the War, and I think that share ought to be a very much bigger one than is attempted to be raised by this Bill. You have to consider these things in relation one to the other. We have passed through this House a Bill compulsorily making men go into the Army Lo fight for their country. I know that you also have compulsory taxation. You take a certain proportion of the wealth and the income of the people of the country for the financing of this War, but the relation between the two does not strike the imagination. The sacrifice which the soldier is called upon to make is far greater than that asked of the man who has to part with part of his income, even though it be 5s. in the £, and there is a growing feeling, intensified again and again by the passing of this compulsory measure, demanding that a bigger proportion of the wealth of the country should be mobilised for the service of the nation in order to win this War, and mobilised at once. I do not think there is anyone in the House who knows me who will deny that I am absolutely heart and soul and everything I possess in favour of winning this War, and so far as I have had influence I have tried to make others see how vital and how necessary, in the interests not only of posterity but of the present living generation, it is chat we should get this War finished satisfactorily and as soon as possible. If it be necesary to mobilise the men, the munitions, the factories and the businesses of the country in order to win it, it is equally necessary to mobilise the wealth of the country, and the Chancellor of the Exchequer, bold as he may think he has been and bold as some people certainly think he has been, might have gone even further than he has, and if he had gone further he would have done a great deal more to bring the end of the War nearer, to bring that sense of equality and sacrifice closer, and to have made a feeling 1722 in this country which would have enabled us all to be more united even than we are at present in securing a final victory.
The same thing applies on the question of excess profits. Some of the things which are read in the newspapers are most astounding, and they have a tremendous effect upon the working classes. They are becoming more educated, and although they cannot think in millions they do wonder what is happening when they see a return like that of the White Star Line the other day, where, after excess profits had all been paid and enormous sums put to reserve, a dividend of 65 per cent. was paid to the shareholders. Such premium bonds have certainly never come in the way of the working classes. I do not think anybody can wonder that, when they read about these wonderful profits and know at the same time that the effect of them and the reason for them is the increased cost of living which is imposed upon them, it should have a most deleterious effect, as it has had, upon the minds of the workers of the country. When they realise what this War is costing day by day in money, when we realise that we have somehow or another to get £1,825,000,000 to pay for the War, the proposals in this Bill are not sufficient, and we ought to have taken a bolder leap than we have, and we ought at least to have raised the Income Tax to 7s. 6d or 10s. in the £. I, for one, so far as I pay Income Tax, would cheerfully do that in order that we may make that equality of sacrifice of which so much has been said.
§ Mr. MACKINDER
I have listened with the very greatest interest to what has been said by the hon. Member, and if I differ from him in certain respects it is not in any matter of ultimate motive but simply because I doubt whether the means which he is advocating will attain his end. I agreed with him especially in two things. I agreed with him that any sacrifice which we here make, because we are over military age, or for any other reason, is as nothing compared with the sacrifice made by the men in the trenches. Therefore, so far as mercy for individuals is concerned, I do not feel in a very merciful mood, and any of the criticisms which I have to offer will be merely because I think that in the long run there are wiser measures perhaps than those which are advocated by my hon. Friend for the attainment of his own end. The other point on which I agreed with him very strongly was in connection with the dividends which 1723 are being paid by some successful concerns at the present time. One is almost tempted to use very strong language in connection with the wisdom, to say the least of it, of what has occurred in several instances lately. I am fully aware that in the case of some companies now they have made considerable profits, but before the War they had considerable losses, and it may be only a restoring of the balance as between losses before the War and profits now that they should to some extent reap a reward at the present time. But there is no need to divide it among their shareholders. It may be that in certain cases—in the case of shipping concerns I think it markedly is so—that it is so much in the national interest that they should be strong financially after the War that we should allow them the right to some reward from the present position, because they are in competition with neutral shipowners. Whatever the profits made by British owners, the profits made by neutral shipowners at the present time are far larger. They have not got to pay war taxes, their expenses for running are smaller, and they are able to obtain higher freights, for one reason because they are not liable to be commandeered. Therefore, we have to face the fact that our supremacy in merchant shipping on the ocean is threatened, and will be very seriously threatened after the War, and not least threatened by the enormous resources which are being piled up at the present time by the neutral shipping companies. We have to remember that the ocean is no territorial region. On the ocean you must and always will have free competition. You have to face the fact that our merchant shipping, which has been one of the very strongest weapons which this country has had in this great struggle, has been developed in that free competition, and it is necessary for us to stand behind that shipping at all costs in order to maintain the position in the future. But when a company divides its profits among its shareholders, it is throwing away any advantage of strength for the future which in the national interests it ought to preserve. Therefore, I have the strongest sympathy with the hon. Gentleman in his views in this respect, and I think it is tempting Providence, to say no more of it, to divide these enormous dividends at the present time. I could not agree with the hon. Gentleman, however, when he went further.
1724 I want to say something which goes back to the first speeches that were made in this Debate. The right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain), in replying to the observations of the hon. Member for Hereford (Mr. Hewins), referred to the difference between our position and that of Germany. He agreed with the hon. Member for Hereford that we must not measure the German financial and economic strength by the criteria that we are accustomed to apply to our own system. When he went on to discuss the fact that Germany is borrowing and is not paying for the War out of present revenue, whereas we are attempting to pay, at any rate, a portion of the War expenses out of present revenue, there was a little confusion of thought. What the hon. Member for Hereford meant was that the resources of Germany—not the fiscal or financial, but the economic resources of Germany—at the present time are far larger than many people in this country think. The economic resources of a country are something quite different from the financial resources of its Government, though in the long run, of course, you cannot have a weak economic position and a strong position of the Government. This is a question of bookkeeping. The War has to be paid for this year, entirely this year, and out of the produce of this year, in our several countries, and the question between us is one of settlement as to who shall bear the expense and how it shall be borne. The enormous sum of £2,000,000,000 has been raised by this country, either by taxation or by loan. That £2,000,000,000 is used in the purchase of munitions and food, and the other requirements of those who fight and those who support the fighting. Therefore, when we compare the resources of this country with those of Germany we are thinking of that £2,000,000,000, and not thinking of the revenues of the two countries or what they raise in taxation or in loans. We are thinking absolutely of their resources for the purpose of maintaining millions of troops and large numbers of ships and all the other paraphernalia of war. That is a totally different question from the question of the policy of raising taxation or raising loans.
The first point I would make in regard to this question of raising taxation or raising loans relates to borrowing. The hon. Gentleman (Mr. Wardle) said that he was brought up in an old-fashioned school and told not to borrow, 1725 and he would never have the trouble of repaying. But we are in a position in which we must borrow, and borrow largely, and in which a question of £50,000,000 more or less of borrowing is not a vital matter as compared with the dislocation of the machinery of the country for producing wealth. Therefore, I do express the hope that the Chancellor of the Exchequer will not levy one penny more in the shape of taxation in the country at the present time than is absolutely necessary. In the absolute necessity, of course, I include the necessity of maintaining our national credit. I include also the consideration that if you borrow you must provide a sufficient income both to pay the interest on your debt and to provide a sinking fund and also to provide a margin. What about the margin? I recognise that after the War there will be a fall in the yield of certain of our taxes, and that that fall will be exceedingly difficult to make good then, in a time possibly of distress. Therefore we ought to provide so much by taxation at the present time as will not only enable the country to pay its way according to the peace standard, but will enable it to pay the interest on its debt, to provide a reasonable sinking fund, and also provide for that fall in the yield of taxation, in order that we may be left with a balancing revenue after the immediate adjustment which follows on the War.
That bears on a minor point which was made by the right hon. Gentleman. He suggested that taxation had not gone too far at the present time in view of the fact that the yield of the taxes was not diminishing, but, on the other hand, increasing. Apparently the taxes were being borne with relative ease. But we must not forget that some of our taxes, and some of the most important—the Income Tax to wit, which finds nearly half our revenue—are raised by percentages, percentages of values, which values in trade ultimately depend upon prices. Therefore, a mere rise in values automatically tends to give to that percentage which is taken in the form of taxation a greater and, as things are, a steadily increasing amount. The actual quantity of goods made and consumed and imported is probably rather less than greater, certainly not very much greater, if we take everything into account, if we take necessaries and luxuries together, but the values have enormously increased, and automatically the yield by percentage of 1726 the taxation is also increased. Under these circumstances I am not very much impressed with the fact that our taxes are steadily yielding more. I am not very much impressed with that as evidence that the taxation is at the present time not excessive. When it is said that we in this generation, who are responsible for the War, ought to bear our share of the cost, let it not be forgotten that, quite independently of what the tax-gatherer does, the dislocation of trade at the present time is spreading ruin in many quarters, is piling expense upon all, even upon those who make profits in other ways, and that the waste in this country, due to what I have described as dislocation of the whole machinery of peace, must amount to a sum extending, in all probability, to scores of millions of pounds, and possibly even to larger sums than that. Therefore, as to the burden which those who are fighting this War should carry, there is an enormous burden for us to bear in war time, and I suggest that we must be very careful not to attempt to interfere with the economic machinery of the country more than is absolutely necessary in view of that fact.
After all, what we want to hand on to posterity is this country as a going concern. The wealth of this country rests mainly on the country as a going concern. It is the wealth-producing value of all your plant and of your men in the country which really constitutes the wealth of this country. The least possible damage that you can inflict upon this delicate, complicated, huge machinery, which constitutes the industrial and economic system of this country, the better you are doing your duty towards posterity, because you are handing on to them a great asset which is in your keeping and for which you are fighting, but which you can easily destroy, and which to them will be worth much more than a mere £50,000,000 or a £100,000,000 at the cost of damaging as going concerns many of the wealth producing companies and firms in this country. I have said this especially because of the Excess Profits Tax. I know it is easy to point to enormous profits that are made in certain cases, and you can easily persuade many people that you ought to extract 90 or even 100 per cent. of these excess profits. On that point I want to say this: At the end of this War what this country will need more than anything else is working capital. We shall have an enormous number of people seeking employment, because some of the 1727 women will not go out of employment at once, and there will be all those who come from the Army to find employment for, and there will be many also discharged from munitions works who will be thrown on the labour market. Further, this country will have an enormous plant. In certain respects the Minister of Munitions at the present moment is the greatest master of industry in this country. He has an enormous new plant in many respects. He is a great owner, for instance, of machine tools in the national factories, many of them imported from America. This country in many respects will be equipped with machinery as it has never been before. Therefore we shall have machinery and the men seeking employment. The one thing that will be necessary will be working capital—capital to modify the machinery to useful peaceful purposes, capital to set your works going before you can get in the payments for what you produce. Working capital will be wanted in thousands of ways. At that very time the temptation in the City of London to lend the money which it extracts from all parts of the country on the international market, in foreign international trade, will be very great. The pressure to do it will be very great. What we shall require is precisely that money.
What money usually goes into industries? Not, as a rule, any large quantity of money that is acquired by staid people in the South of England. A few shares, usually wild-cat shares, may be bought by them, but the money that keeps the industries in the North going is what I may call money that is already in the industrial fund. If you want some thousands of pounds to put into a new factory, where do you go for it? Not to the City of London. You go to a manufacturer in your own neighbourhood, probably, who understands manufacturing, can take your measure and can trust or not trust the man he sees at the head of that business. He will not put his money into 3 or 5 per cents. in London, but into that which will yield to him the return of a risky enterprise, trusting to his own judgment, because he has that enterprise in his neighbourhood and can watch it. There is in this country what I may call a fund of industrial capital. It is not an accurate term, but speaking roughly that is the case. At the present time what is happening to the working capital of our industrial concerns? Half of those industrial con- 1728 cerns are practically stopped or are working at very low pressure and losing money. When peace comes they will want money to set themselves going again in order to re-establish their trade. It may be perfectly true that the other half, having been adapted to munitions purposes, are making money. The money made by those people is likely money, not to be left in the banks to be lent in international trade, but the most likely money to be lent to those industries the restoration of which would be vital to us at the moment of peace. Therefore I feel that we must exercise great caution in extracting the profits we are making in war time from the men who have made them and know how to make them.
Of course, if we consider the profits spent by many of the people—I will not say on riotious living, but on living which ought not to be in war time—that is another question. But all the profits that can remain in the care and keeping of industrial magnates and great companies at the present time will be of inestimable value after the War, because these men, having the money, the power, the knowledge, the experience, the position and the opportunity, are the very men who will be able to step in, as no Government officials can possibly do, to restore with wisdom and enterprise those industries which have been so damaged by the necessities of the War. Therefore I look with great fear on the extraction of these profits unduly from those who can make the best use of them for the purposes of the State. I believe that at present, for the purpose of supporting the credit of the nation, we are raising probably a little more money than we need. Naturally the Chancellor of the Exchequer must be cautious. He must have a margin in case of the failure of some of his taxation at the end of the War. But is it not possible to earmark the money that comes from the Excess Profits Tax, and to say that that money, if the exigencies of the War do not force us to use it in the future, shall be treated as a fund in the hands of the State for the purpose of setting going industry after the war?
The whole financial system of the Chancellor of the Exchequer is constructed, so far as I can see, without taking into account the Excess Profits Tax. He realises that that tax will fail him after the War. Therefore he is bound to provide all the interest for his debts and the sinking fund, and so on, irrespective of the 1729 revenue from the Excess Profits Tax. But if we can follow the principle of providing a permanent revenue which would cover the interest on capital expenditure incurred during the War, but falling on the future, then it would be an immense service at the end of the War that there should be available a large fund taken from industries, a fund running to a £100,000,000, not in the hands of bankers in the City of London, who, following the rules of their trade, must necessarily use that money, not in the way that we as a nation require, but in the hands of the State, and the State, acting through trusts on the Canadian principle, for instance, would be able to lend the money again which was taken from industry to industry, though not necessarily, of course, to the same firm. It would be possible to utilise those very brains which have made that money for the purpose of helping the State in re-equipping with working capital the industries whose working capital would have been depleted.
I would suggest that the proceeds of the Excess Profits Tax should not be treated as ordinary revenue, but should be regarded as taken exceptionally and with the agreement of the vast mass of people from our industries, taut also as being earmarked to go back into industries, since the fact is that the profit has been made by the one-half of our industries owing to this War, while the other half of our industries have been half ruined by this War. Let us restore the equilibrium by using in that way that money. That is the chief thing that I wanted to say, because at the present time all of us are bound to throw our thought into the common store, though the sole effect may foe only to excite criticism, but that criticism itself may probably suggest something else. The only other point is a rather kindred one. I think it is deeply to be regretted that the method of levying money from the controlled establishments is not similar in principle to the method by which you raise Excess Profits Tax. At the present moment enormous sums are being wasted in this country owing to the fact that masters in controlled establishments, which are making larger profits than before the War, have no motive whatever to exercise that close economy upon which the success of every industrial concern depends. All the industrial concerns controlled are being run at the present time steadily more and more, month by month, as men 1730 feel the relaxation of the pressure of possible bankruptcy, on the same sort of principle as a Government Department. You are asked to produce certain things, and you produce them. You have no motive whatever in producing them at the least possible cost. You are allowed to have an income, which income is based on a prewar income, whereas if you even got a small percentage as a reward for exercising ordinary business care you would save the country a great deal of money. I know it will be answered that you can have your Government auditors and so on working, but the thing is far more insidious than that. At the present time great firms are continually requiring coal, for instance, and are ready to pay the collieries practically any price they ask without bargaining closely. They are making friends with the colliery proprietors. They feel that later on a certain colliery can do them a very good turn in sending them coal, remembering what they did during the War. Coal is being bought at extravagant prices because these people know that they have made all the money they are allowed to take under the Munitions Act, and they may as well spend a little more on their expenses and make friends as exercise control over the last shilling in prices. I do feel that, while the Minister of Munitions must retain financial control of controlled establishments, the principle upon which the money levied from those controlled establishments is levied ought to be identical with the Excess Profits Tax. It ought to depend on a system of percentage on what is made now and not a percentage on what was made before the War.
I do not quite agree with the right hon. Gentleman the Member for West Birmingham in this, that we can consider simply the financial conditions imposed upon us now by the War and shut out the arrangements of the future. Confidence is of the essence of business enterprise. Enterprise is necessary in order to stem the torrent that is turned against us at the present time. Enterprise is being damaged among your commercial men, and especially among your masters of industry at the present time by the fact that as the War lingers on more and more uncertainties are coming into the financial position. You are asking them to spend money. They do not know where they will be after the War in respect of competition with other countries. You cannot wait to see indefinitely, as the War goes on, what is 1731 going to be your policy after the War. You cannot follow your policy after the War in all its details. But you have to face the fact that in certain respects you must begin to build your financial system in order that those who have to carry on during the War may be able to frame their policy, to think ahead and so be able to meet the tremendous difficulties and crises which will be upon them, at the end of the War. Let us never forget that the things that we have done well in this War have been the things that we thought out carefully before the War. The insurance of our shipping, the transport of our Army to France, and certain other things were thought out carefully before the War. You must think out now, and you must let your great business men think out now what is to be their position after the War. If the Government tell them always, "We will make no decisions now with regard to what is to happen afterwards," they will throw them back into a helpless position, into a position that will become increasingly more helpless, and bring about greater and greater confusion in the whole method of carrying on their business. I do most earnestly ask the Chancellor of the Exchequer that he will not follow the advice given to him in certain quarters to increase his Excess Profits Tax. I do ask him, if possible, to provide funds which will give confidence to manufacturers, who will see that the Government have available for their industries money of which they had robbed them during war time. I do ask further, that, if possible, the right hon. Gentleman will come to some arrangement with the Ministry of Munitions, whereby controlled establishments may have some motive for not being wasteful of what are now, far more than at any other time, the national assets of this country.
Mr. T. WILSON
I was hoping that the hon. Member who has just sat down would give some expression of opinion with regard to the suggestion of the hon. and learned Member for Bassetlaw (Mr. Hume-Williams) on the question of premium bonds. I think I am absolutely correct in stating that the Committee which was appointed to deal with the question of war savings has given us to understand that it is absolutely necessary that some of the big wages earned by the working classes of the country must be got hold of by the Government; and the reason why we are 1732 discussing this scheme for getting money arises from a division of opinion in regard to premium bonds. When the Committee sat and considered the question of premium bonds, I was surprised to find that some Members of the House, and a large number outside the House, thought that if they bought premium bonds their capital, would be lost if they were not successful. A large number of people to whom I spoke held that opinion. The capital would not. be lost. It would be invested; and, therefore, it should be made quite clear that while there is an element of chance in connection with the prizes on premium bonds, the money invested is returnable with the interest due upon it. I think it should be made quite clear that, so far from the money invested being lost, it is not lost at all, and is returned to those who invested it. In regard to the question of making a deduction from wages, mentioned as an alternative to premium bonds, I venture to say that neither the Chancellor of the Exchequer nor anyone else dare suggest compulsory deduction from wages unless they go further and make compulsory deduction from the highest salaries. The working men would not stand it, and I would not blame them for not standing it.
In connection with the Report of the Montague Committee, we are told that their recommendations were of some value, but I am not quite certain whether they were of any great value or not. They recommended that two Committees should be set up with the object of devising schemes whereby the people, and particularly the working classes of the country, might be induced to invest their money in War Certificates or in Exchequer Bonds. That was put forth as an inducement to the working classes to save. I agree with, what my hon. Friend the Member for Stockport said with regard to the working men and women in the North of England. In Lancashire and in Yorkshire a very large number of working men and women, of those two counties save considerable sums of money yearly; they save it week by week, and the greater part of their savings are put into co-operative stores, and those stores, in turn, invest the money in War Loans. To that extent working men and women are investing their money with the Government. I am very doubtful whether any scheme devised by the two Committees set up on the recommendation of the Montague Committee really grasped the best way of dealing with the question. The two 1733 Committees have been merged into one, and I repeat that I am very doubtful that they have really grasped the best method of getting at the means of the working classes. I am very much afraid that the National War Savings Committee is itself setting an extremely bad example in regard to economy.
I am very much inclined to think that there has been a very poor return for the money spent on large posters inviting the people to save—posters which are seen particularly in London. I would rather myself see the Chancellor of the Exchequer put heavy taxation on pleasure motor cars rather than that these appeals should be made by posters. In many instances these pleasure motor cars can be seen going through all the large towns of the United Kingdom. Instead of appealing to the people by means of these posters, it should be made an offence, with punishment, that anyone should dress extravagantly or live extravagantly, or use costly pleasure motor cars, and in that way you would get at the root of the matter. Meetings have been held under the auspices of the War Savings Committee, and the result of the meetings held ten and twelve months ago has been such that I should have thought it would have prevented the National War Savings Committee from entering into another campaign with regard to war savings. The game is not worth the candle. With regard to premium bonds, I will just mention, speaking of the working classes, that those who saved before the War from the wages they were earning will continue to save from the wages they earn during the War in larger amounts now than before the War.
People who did not save before the War will not to any large extent save now, because of the issue of these War Certificates, 20s. for 15s. 6d., or in Exchequer Bonds. These inducements will not affect them. There is not that element of chance —the chance of winning large or small prizes—arising from the investment of money in War Certificates or in Exchequer Bonds. We are told that the Montague Committee's object was to get money. I do not suppose that they were advised to get it honestly but that they must get it; I do not for a moment suppose the advice went that far, but I imagine that they were told the money must be got somehow. I would point out, in regard to taxing the earnings of men and women who are making high wages, that I know to be absolutely the fact what the hon. Mem- 1734 ber for Stockport said with regard to a large number of men and women, that though they are making higher wages in consequence of the War they are not able to save because the high cost of living absorbs their extra earnings. I believe that if the scheme of issuing premium bonds were adopted it would create, a spirit of thrift in the minds of the people who are not saving at the present time. We are told it is a gamble. It is not a gamble.
Attention called to the fact that forty Members were not present; House counted, and forty Members being found present—
(continuing): I was saying that by the issue of premium bonds we should induce the men and women in the country to save money by investing in those bonds. The fact that prizes of large and small value were attached to the bonds would, I believe, appeal to a large number of these people in a way that no other schemes could appeal to them. I do hope the Government will give a favourable consideration to the proposal that has been made by one of the hon. Members for Nottingham. If that were done, a large amount of money would be obtained. The answer given yesterday with regard to the number of tickets sold was not very satisfactory—only some £2,100,000. I venture to say that if a scheme of issuing premium bonds were adopted, it would bring in a very large amount of money, probably £150,000,000.
I am not speaking of the working classes alone, for I believe the people of the Colonies and of the States would also buy these bonds. If the scheme were adopted on the lines which are in operation in France, these bonds would be negotiable; there would be no loss practically on the sale of bonds of this kind—at least, I believe that is the experience in France. While speaking about France, let me say this, that the issue of these bonds has inculcated a strong spirit of thrift among French working men and women. When a child is born very often the father buys one of these bonds, and it is of great use when the child reaches age, and forms the dot in the case of the girl for her marriage. It has been said that these bonds would inculcate a spirit of gambling, but I think that any such possibility would be far more than counteracted by the spirit of thrift which would 1735 be created. I am satisfied that this is the only possible way of getting any large percentage of the extra earnings of the working classes. I do not think the Government need hesitate in the matter at all. We are not living in normal times. What has taken place in connection with newspaper competitions and football coupons and other kinds of competitions shows that large sums of money can be obtained. The money in those competitions is absolutely lost to those who do not win prizes, but in the case of premium bonds the money would be returned in a certain period with quarterly drawings, or in some cases every six weeks. There is no immorality in bonds of this kind, and you would get a fairly large amount of the money you are asking for. There is a very poor chance from the efforts of the War Savings Committee of getting in any large amounts. So far as I know, there is no great objection by any section of the community to premium bonds.
I have spoken to a large number of working men, and they have expressed themselves in favour of these bonds. Some of the leaders of the trade union movement believe it is the only possible way of getting in a large amount of money and of inducing people to save who can do so. In Lancashire and Yorkshire people are getting 4£ and sometimes 5 per cent. at the present time by putting their money in co-operative societies. There is no inducement to put their money in War Loans. In the society they can get it out in a week or a fortnight, or sometimes in a day. I am satisfied that the premium bonds would be the means of inducing people to invest permanently. I think the right hon. Gentleman might do something more also with regard to getting more money by direct taxation. I suggest that he should take all the profits over and above the Excess Profits Tax and invest the money for the people who made the profits. I am not saying that he should take all the money in taxes, but he should obtain more from those making money out of the necessities of the nation. We read of coal in Newcastle being £3 per ton, and the working man who gets 3s. per ton for getting it wonders sometimes whether the Government is doing all that it might to secure from the profits that are being made out of the necessities of the nation the amount they ought to receive. I hope the right hon. Gentleman will give further consideration to the advisability 1736 of taking a larger amount, either by way of loan, or by way of taxes from the very large profits now being made by steamship companies, munition works, and by other industries which are making what is necessary for the carrying on of the War. I join with everybody in the hope that we shall bring the War to an early and successful conclusion. I do not quite agree with my hon. Friend the Member for Stock-port (Mr. Wardle) that this generation is responsible for the War. The present generation in Germany may be, but in this country it is not responsible for it. Therefore he is not quite accurate in asking that the present generation should pay more than its share of the cost of the War. I know that the right hon. Gentleman will see to it that the present generation pays its share. I want to see him getting as much money as possible without having to resort to harsher means. I do not want to see a compulsory loan, particularly on wage earnings. I believe the working classes would resent that, and that it would give rise to sullenness and discontent, which would be a national calamity.
§ Sir CLIFFORD CORY
The hon. and learned Gentleman who introduced the subject of premium bonds said he thought most Members were in sympathy with their issue. I for my part am opposed to premium bonds for several reasons. In the first place, I very much doubt whether they would bring in a very large amount of money, and, secondly, although I do not want on puritanical grounds to oppose them, on the ground of the immorality of gambling, yet I think it is an undesirable state of things to set up in this country. I remember when I was in Spain and Portugal years ago there were weekly lotteries, and sometimes they were held two or three times a week. Tickets, or portions of tickets, could be bought for 2½d., and what was the effect? One saw peasants coming in from the country districts buying these bits of paper and lists with numbers of the lotteries, and they were always in a state of excitement and ferment when they saw that some person, say, in Barcelona had drawn a prize of £20,000, or someone in some other place had drawn a large prize of some kind. That always induced them to buy those wretched little lottery tickets, and instead of settling down to their work, they were always living in a state of excitement and leaving it. It is said that premium bonds are not gambling. That may be true in the sense 1737 that you do not risk your capital, but you are certainly gambling with part of the interest. Instead of the 5 per cent. which the Government are offering, in some cases free of Income Tax, those who invest in premium bonds would only get 2½ per cent. or 2¾ per cent. Therefore, if it is not gambling with capital it is gambling with interest. They are called premium bonds, but I fail to see where the premium conies in, since instead of premium the interest is at a discount. The hon. and learned Gentleman who introduced the proposal said that the prizes would range from £500 to £5, and that very likely the man who won the £500 would invest it in a house or shop, or something of that kind. My experience in life is that money that is come by easily generally goes very easily. We all know how men who perhaps have a bit of a flutter and are lucky feel when they receive a lot of money in that way. It goes very easily, and I think we should find that the prize drawers in these bonds would act very much in the same way.
The hon. and learned Member said that the scheme would appeal to those who have not the habit of investment. Possibly it would appeal to the gambling section of the community, but those who have the gambling instinct are relatively a very small number. The number of people who habitually bet or gamble is relatively very small. Even of those who go to races, a large number do not bet at all, and some of those who bet only put on a small sum. If these bonds" were introduced, instead of creating a spirit of thrift, it would create a spirit of gambling. The hon. and learned Member also said that the speculative element of these bonds would attract money from abroad. But you have lotteries of every kind abroad, and those who want to speculate are much more likely to put their money in them. The hon. Baronet the Member for Mid-Shropshire (Sir C. Henry) said that the scheme was supported by bankers and all sorts of men in the City, who thought that the working classes would take up these bonds to a large extent. I have had conversations with gentlemen representing Labour in this House, and that does not seem to be their view. I have been in contact with Labour all my life, and from my knowledge of working men I do not think they would take up these bonds. The working man is not such a fool as to invest his money in something that will bring him in only 2½ per cent. when he 1738 can get 5 per cent. in something else. I am sure that those who did not draw prizes when they found they got only 2½ per cent. would be very discontented indeed. The hon. Baronet said that the Government were already promoting gambling because they were going in for horse-racing. Surely the ownership of racehorses does not necessarily mean gambling. Horse-racing does not necessarily involve gambling. Gambling is one of the drawbacks which often come in the train of horse-racing.
The hon. Member behind me (Mr. Tyson Wilson) did not think it desirable to introduce any scheme of compulsion in regard to the wage-earners, and he thought that if such a scheme were introduced it should include also those who earn salaries. I have all along been opposed to the Excess Profits Tax, not because I do not acknowledge that the money must be got somehow, but because I think it is not the best way of getting it. I should much prefer direct taxation, such as Income Tax and Super-tax. I consider that the excess profits should be reserved in order to develop businesses and to get back trade after the War is over. We have the Admiralty now bringing forward a scheme by which it is proposed to release every month 60,000 tons of requisitioned shipping in order that it may go to the States and load coal for the River Plate, because it is not thought that it will be possible to release the same amount of coal in this country as in the past. That may be necessary, but it means that you are going to drive to the American producer of coal markets which are now held by the English producer. After the War is over, in order to recover those markets, you will certainly have to undercut the American coal producer. You will probably have to sell your coal at a considerable loss. If all the excess profits are taken from the concerns in this country during the War, I do not see how they can hope to recover their markets after the War. The same thing applies with regard to steamers. I deprecate the large dividends which have been paid. I think it would be much wiser to nurse the profits and keep them until after the War. In all the companies with which I am associated I discourage any large dividends, and persuade them as far as I can to put the money to reserve until it is required.
But if you have an Excess Profits Tax you have a good excuse for asking wage- 1739 earners to do something towards raising the money required to carry on the War. While not necessarily taking the excess wages of the wage-earners, you might introduce into the Finance Bill a Clause providing that of the excess wages earned by the labouring classes 60 per cent. should be invested in War Loan or some other Government issue, which they should not be at liberty to sell until after the War. They would still have in their hands 40 per cent. of their excess wages with which to meet the extra cost of living during the War. I do not pledge myself to 60 per cent.; it is open to discussion whether it should be 60, 50, or 40 per cent.; but in the interests of the country some percentage of the excess wages as compared with the pre-war standard should be invested in that way. It would be a benefit not only to the country—although the benefit in that respect would be enormous—but also to the working classes themselves, because they will no doubt find after the War that wages will be greatly reduced, they may even have difficulty in getting employment at all, and if they have something of this kind to fall back on it will be the greatest possible boon to them. I trust the Chancellor of the Exchequer will take his courage in his hands and deal with the question in this way. Even hon. Members representing labour are not opposed to it. The only thing they fear is that there may be a certain amount of opposition to it. They do not all think that. I believe that if the Government did something of this sort the wage earners themselves would in the long run be most grateful to them. I should be quite prepared to recommend that increased salaries should be dealt with in the same way. I hope the Chancellor of the Exchequer will give his attention to this proposal.
§ Mr. COOTE
In all parts of the House there is the greatest sympathy and support for the financial proposals before us. We are all agreed that we must be prepared to give our last man and our last pound before we allow our flag to be torn down. There are, however, some matters in the Finance Bill to which I should like to draw the attention of the Chancellor of the Exchequer with a view to their adjustment. Some of them are in his favour, and some are small grievances which, I think, might be remedied. The first has reference to the Motor Tax, 1740 especially as it applies to Ireland. I understand that the motors are registered in each county, and the county council is responsible for collecting the tax. But in many counties in Ireland the tax is not collected. Motors are registered, but year after year they work away and no tax is paid for them, until it has become a standing joke that if you wish to evade the tax you must register your motor in some county far distant from where you live, pay the tax for the first year, and after that you can work away and there is no one to look after you. The county in which you are registered does not bother about collecting the tax. It is apparent on the face of it that the reason why this leakage takes place is that the secretary of the county council is the secretary of the local authority that collects the tax, and there are many varying interests which make it rather difficult for him to press for the payment of the tax in certain quarters. We find, however, in councils where we have a fearless and conscientious secretary, backed up by a business council, the taxes are collected and honestly collected, while in other counties in Ireland the reverse is the case. The tax is not collected, and hundreds of pounds are lost. That is not as it ought to be. We are all anxious to raise, legitimately and properly, as much money as we can, and this source of raising money ought to be applied equally and fairly. If I might suggest it to the Chancellor, to obviate this difficulty, it would be much better if this tax, instead of being collected by the secretary of the county council, was collected by the local revenue officer, like the gun licences, assisted by the local constabulary, who, if a motor car was registered in one county and operated in another, could trace it and see that it paid the tax.
There is another question which the Chancellor might consider: there is no tax on motor vans that are used by the retail or wholesale traders. These vans come from the large towns and some cities, and they distribute their merchandise over three or four counties. They compete with the smaller traders, and they pay no tax for the roads over which they travel. They are terribly destructive of these roads, and the local authority have no redress. They compete with the railway and canal traffic, and with the traders who have the upkeep of these roads in the various counties. It is unfair that they should pay 1741 no tax, and I desire to call attention to this potential source of revenue. These are sources by which the right hon. Gentleman may a little improve the revenue. I want to appeal to him on behalf of a section of the community which will be hit very hard by this extra tax, and that is the clergyman, who, as is known, in many parts of Ireland and some parts of the North of Scotland have not very large incomes. They have to travel over a wide area, and I plead that they should have the same consideration with reference to this tax as is now given to medical men. I also would ask for the same consideration as the medical men get for the veterinary surgeons, but I plead very strongly for the clergymen. Some of these have only incomes of £150, and their incomes generally range from £150 to £300. Some have small motor cars the better to enable them to cover their parishes, so as to be able to do their work more effectively. Their incomes do not increase. There is no chance in their lives. They are simply tied down to a certain income, very little indeed, and hardly able to keep their homes together, and it will be a great hardship if they do not at least get the same consideration that is accorded to medical men.
There is another little trouble that I wish to bring before the Chancellor of the Exchequer, and that is the years of selection which the Finance Act gives to the manufacturers in Ireland for which to select the two years average on which is to be the fixed profit. I understand that in Ireland, with the exception of the area of Dublin, three years is the retrospective time. I plead that the Chancellor will give us six years. The three trade years laid down in the Act have been most trying and most troublesome to Irish manufacturers. For reasons which are known to the House trade has been terribly depressed in those years, not through any act of the manufacturers who have been trying to pioneer trade in the country, to help on trade generally in trying circumstances, and to provide capital in a country which has money in its banks, but which calls upon Heaven to save it, and will not take that money out of the banks! Those manufacturers have acted as pioneers and endeavoured to create industries where there was no employment before. They have considered the interests of the poor people, and the needs of the country. I hold that they deserve the sympathy of this House and of their 1742 country. I think you should allow the manufacturers to select from the six years so to get over this very trying period. That was a period when there was an awful pall hanging over the country. Men did not know what was going to happen next. The purchasing community, especially the Irish community, did not purchase and lived, so to speak, from hand to mouth until they saw what was to become of things. It was under conditions like this that the woollen trade had to exist. These men were terribly hit during these three years. The Woollen Association of Ireland have made representations to their Members with a view to their trying to get the six years instead of the three, and they will feel satisfied if the Chancellor of the Exchequer can grant this privilege. I think I have shown to the right hon. Gentleman sources from which the revenue can be legitimately increased. I have tried to show him some of the difficulties under which the manufacturing community labour. I have tried to plead for the clergyman, and for the veterinary surgeon. These are matters which are very important to those affected. They are not very big nor grave, and will not affect things very much one way or the other. But the concessions will satisfy those concerned, and make the Finance Act more popular than if what I have asked is not conceded.
§ Sir NORVAL HELME
In the past century the commercial interests of this country have been applied through successive generations to building up the great position which we occupy throughout the world. It is satisfactory to know that at the present time, when such great demands are made upon the Exchequer for the purposes of supporting the War, to which the nation has given its ready assent, and which is one in defence of liberty and freedom, that the commercial classes of this country are endeavouring to the utmost of their power to support the Government in raising the funds by which to pay this terrific expenditure. About a fortnight ago a number of hon. Members of this House went across to Paris and there met in an informal conference members of the commercial committees of the Allied Powers, representatives from those Parliaments, and we had the opportunity of discussing various interests affecting the present and the future. We desired, as far as possible, to endeavour if we could to understand how best to 1743 secure the development of business after the victory is won which will end this un fortunate War. We discussed with the members of those Parliaments the conditions at the present time in regard to their ability to pay their share in prosecuting the War. In the conversations we had with those representative men—many of them ex-Ministers of the different Powers—they expressed the same opinion which had been come to by those of us who are associated in the informal commercial Committee of this House when as a Sub-Committee we had gone into the question of the industrial and commercial interests of this country. That opinion we had ventured to put before the Prime Minister when about three or four weeks ago he had given us the opportunity of calling his attention to what we believed to be the very serious position in which we should find ourselves if the plans of the Chancellor of the Exchequer for the in gathering were interfered with by the destruction of the commerce of the country, which is so necessary to maintain our financial position. Two Members representing the other side of the House and two from this side had the pleasure of discussing this important question with the Prime Minister, and we ventured to say that, in the opinion of us, not as individuals but as reported to us from the great centres of production throughout the country, we were approaching the danger point when, if large numbers of men were called from the occupations in which they had been engaged in the coal mining, in the great iron and other Industries, in shipbuilding, and in the textile manufactories, we felt that it was necessary that we should ask for the careful consideration of the different Departments of the Government so that they together might work with one aim and object to win this War. The various Departments in the Government understand each for themselves the immediate subjects that come within their Department. The Army, the Navy, the Board of Trade, and the Exchequer, each of them had for the moment to look at these questions from their own standpoint, and then in the Cabinet the opinion of the whole is concentrated and the policy of the country is developed. In the official document that was issued in December last the notes issued by the Director-General of Recruiting and signed by Lord Derby—
§ Sir N. HELME
I, of course, obey your ruling. But the point we have before us now is how to sustain the revenue of the country, and therefore, as the Chancellor of the Exchequer requires taxation, and it is necessary that the manufactories of the country shall be maintained, I venture to submit that it is in order to ask that these considerations shall apply. We have, in the document to which I was venturing to allude, the importance of finance mentioned, and in it I read that success in war depends upon money as well as upon men and munitions. In this connection our trade is of the utmost value. There is a primâ facie case made that men in various trades shall be continued in their industries in order to support the financial interests of the country, and it is for this purpose that I venture to rise, because this House is practically unanimous, and represents the great and prevailing opinion in the country, that the Government shall have, and is worthy of, the confidence of this House, and we are called upon to provide the money. Therefore I think it may be perhaps regarded as in order if I venture to urge that the Government must have regard to the future as well as the present in respect to this great question of sustaining manufactories—
§ Mr. DEPUTY-SPEAKER
I am afraid if I permitted it that it would wholly divert the Debate into a wrong channel. The hon. Member presumably was not here during the last five or six days in which the House has been sitting, because we have had frequent Debates on that very question as between the interests of trade and the interests of the Army, and I could not allow that to develop on the present occasion.
§ Sir N. HELME
I had the pleasure of attending in the days that are past, but, at the same time, one is not always fortunate in catching the Speaker's eye or being able to join in the Debate. But for the moment we are engaged in the consideration of the question of the great financial means by which this War may be continued, and I venture, on behalf of the commercial classes who have communicated with us, to urge that the demands of the Chancellor of the Exchequer can 1745 only be met if we continue the business which will provide the money—first, to support the workers through the wages that they earn, and, secondly, to provide profits so that not only shall there be capital available but that there shall be income with which to find the means that are required. But I have no wish whatever to contest the point with the Chair. I simply rise for the purpose of urging that, in the interests of the country, the Government should have regard to the possibility of a long-continued war, and that each Ally might be requested and required to render its best service to the joint cause we have in doing our utmost to carry the War to a successful issue. I desire in these few words to urge that there shall be such an arrangement between the Departments of the State that the equilibrium shall not be destroyed and thus render derelict many of the concerns that have been for years built up with care and industry, and are now necessary to support the export trade of the country. We must maintain—that is admitted on all sides, and the Government never fail to recognise that there must be—a supply of exports in order to finance this War, and I venture to urge that the Government in its various Departments should so see to it that in pushing one interest of the State others are not damaged, but that the country may be able to continue its great commercial history, and in the future develop still further the success which has attended its efforts.
§ Colonel GRETTON
No one will dispute the contention of the hon. Member who has just sat down, that the industries of the country should be maintained in order to pay for the War. I will not follow his arguments, because it is not necessary to do so on the Bill before us to-night. Earlier in the evening larger considerations were put forward, and the Debate, unfortunately, developed into the channel of premium bonds. The Government are, I think, in this dilemma—they desire obviously to attract contributions to finance the War from those in receipt of weekly wages, and they were obliged to confess that the figures they have produced show that their efforts have not been adequate to the needs or to what they desired. The reason is quite clear. Anyone who has any acquaintance with the question of investing the savings of the wage earners knows perfectly well that the first thing required is to be able to realise your capital at short notice. The question of interest in 1746 these cases is not of the same consideration as being able to realise your capital. The premium bonds are of this character. I know you must get the subscriptions, to a certain extent, but the popularity of these bonds will soon wear off directly it is discovered that the rate of interest is low and that a portion of the capital is liable to disappear on realisation. The Government will have to try again to bring forward some scheme to enable small investors in their loans to realise their capital more quickly without depreciation.
I believe that the hon. Member for Hereford (Mr. Hewins) was perfectly right in his main contention, that the Government have not yet adequately considered what provision they are going to make for the finance necessary to end the War, and for financing this country and building up its prosperity and industry when the War is over. War conditions are artificial, and you have a kind of artificial prosperity now which, at the end of the War, ends in a very deep depression. There is no indication that the Government have the slightest realisation of these facts in the Budget that they have produced. They base their finance on the principle of getting as much of the national income as they can collect, and at the same time they require huge loans to raise the national capital. Consequently they are tapping both sources equally heavily and to an enormous degree. That process cannot last. We are providing the manufacturers under war conditions who are earning profits the means of putting by savings which will enable them to face the depression which must result in many industries at the end of the War. I would like to give an illustration of what I mean. Take the glass bottle industry. It so happens that that industry has been for a considerable number of years prior to the War very largely in German hands, and this country has never produced a sufficient quantity of glass bottles to meet the various requirements of industries. The consequence has been that a huge combine was set up in Germany, huge works were erected, fortified by certain machinery of which they gained control, and they were able to resort to measures which brought pressure to bear upon the bottle manufacturers of this country and forced them into the combine. There is now a great shortage of glass bottles, and at the end of the War you must relapse into the same condition as before the War and submit to the domination of Germany or America 1747 or Holland, or perhaps a combination of all three, who will again come down to your bottle manufacturers and in the same way force up the price of bottles in this country to any level which the Trust chooses to dictate. What is the remedy? You can put down furnaces now slowly, but at a great cost, and you could in this way make provision for the day when peace will come. The same thing applies to many other trades. If you make this provision you have to pay for the cost of construction under war conditions, and consequently the cost would be very much higher for the work than five years ago, before the War. What are you going to do? If you begin to erect your works, instead of taking six months it will take nine months, at a high price, and at the end of that time you will have works erected at an extravagant cost with the certainty that you will have plenty of bottles from Germany waiting for the time when the English markets will be open again. What are the Government going to do in a position like that, which applies to many other industries in which German competition used to be the controlling factor, and in regard to which the provision of supplies in this country is not adequate to our needs. Are you going to open your markets, or are you going to supply the wants and needs of this country by your own industries? Are you going to go to the foreign countries for articles which you can produce yourselves, if the Government will take measures to ensure that the production may be done under commercial conditions which will enable the industries to continue after peace? You will want all these industries, because trade is going to be greatly disturbed after the War, and it will not relapse at once into the old conditions.
There is no indication that the Government have any idea of facts such as those. Our Allies realise these matters, and they know that at the end of the War all these questions will be raised, and you will again have German competition, because there are large accumulations in Germany waiting to be exported at any price to enable money to be obtained for them and sent to Germany. You will also have competition with those countries which are now absorbing the wealth of the world from the belligerents, owing to the fact that they have been able to keep out of the War up 1748 to now. Those cases have to be met. The only indication of the Government policy has been their policy of prohibition. I am sorry to have to refer to the expression "Free Trade policy," which has been the subject of controversy in the past; but, if this is Free Trade, then it comes to this that the highest expression of Free Trade during war time is either total prohibition or limited prohibition. The Government have adopted a policy of prohibition, and I regret that the Secretary of State for India in the speech which he delivered did not meet that question quite frankly and fully. He talked of the total prohibition of luxuries. There may be something in that, but that is not the main question. The Government have gone very much beyond the total prohibition of luxuries in prohibiting the importation of certain articles except upon the issue of licences. What is the result? Every one of those licences which is issued by the Government for the importation of a prohibited article in that Proclamation breaks some fifty-four commercial treaties, and of course there is the greatest danger of difficulty and friction arising with foreign countries who are now our Allies owing to this fact. The whole policy of commercial treaties was embodied in the Most-Favoured-Nation Clause, and whenever you issue a licence to anybody to import something, you violate that Clause.
Is that the policy the Government intend to pursue after the War, or are they going to revert to their so-called policy of Free Trade all round, including Free Trade with Germany as before the War? We ought to have some indication of their policy, because commercial men and traders of all descriptions want to know what they have got to do. There is at present the greatest doubt and apprehension in many quarters, and the Government have not given us a glimmer of light except this policy of prohibition, which every sane man knows must break down after the War, and which in war time cannot work altogether. It is the most unsatisfactory, unscientific, and ineffective policy that could possibly be adopted for limiting the imports into this country. I do not want to enter upon matters of controversy, but I have been obliged to mention that one point about Free Trade, because hon. Gentlemen who do not agree with any change in our policy pin themselves on the doctrine which has been described as Free Trade. We ought to have some definite indication whether that 1749 policy is still to be adhered to, or whether the Government is prepared to meet the occasion as it arises, and face conditions, new and entirely different, to which the old principles, so-called, are no longer applicable.
I do know from communications I have received from many sources that our position in this matter is of the most vital importance to our Allies. We all know what it means to our own Colonies, and we know what is their line of policy. They want this question reopened with the most open mind, and they want it considered on lines very different from those on which it has been considered of late years. They will be delighted to go into it. What are they told? They are told to-day by the Secretary of State for India, as we have heard before, though it has never been publicly announced, that the Government are not going into the Paris Conference to discuss matters with our Allies with any policy or definite views but they are going on a fishing expedition, or an expedition of investigation. According to the Secretary of State for India, they have no proposals to make, but are going to hear what the others have to propose to them. Have they not investigated these things? Do they not know the facts already? They ought to know them, or, at any rate, most of them. If they go there without a policy, it means that they are going to inform themselves, that there is going to be great delay, and that this state of doubt is going to be continued. These matters want clearing up, and unless they are cleared up, so far as one can learn from recent indications, the effect in future years on those who are now struggling together and fighting together, and who will undoubtedly if they stay together save the civilisation of the world from the most serious assault ever made upon it in modern times, may lie very disastrous. There is great danger that the bonds may be broken down by want of sympathetic consideration of these vital matters, in regard to which we expected to find some indication or guidance, but in regard to which darkness, uncertainty, and indecision, so far as this Budget is concerned, still continue. I look with the greatest apprehension on our present position in this matter, a matter most vital to ourselves and to our Allies. There is no indication that the Government is yet alive to the urgency of the question.
§ Mr. NEEDHAM
The hon. Gentleman opposite (Mr. Gretton) seems to me to be against the policy of the total prohibition 1750 of articles which are not essential to vital industries for the carrying on of this War. I understand that he would allow articles to come in on certain terms. We are prohibited from going into controversial matters, and I will not develop it further, but I am in hearty sympathy with the Government in insisting upon the prohibition of articles unless they are absolutely essential for winning this War. One of the main reasons is that it saves us having to find money to buy articles which we do not need in order to win the War, and therefore lessens the burden of maintaining the exchange between this and other countries. Another reason bound up with that of maintaining the exchange is that there is a shortage of shipping space, and the more articles you bring into this country that are not necessary the more you add to the cost of foodstuffs and the articles the people must have, and undoubtedly also very considerably to the cost of the War. After all, who is the chief buyer at the present time? The Government, of course, and the Government, in piling up the bill, has to turn to the taxpayers, and the taxpayers have to pay the extra costs which are swollen by any importation of goods which are not absolutely essential.
The hon. Gentleman spoke about the artificiality of our greatest prosperity. In that I am entirely in agreement with him. I think it is one of the gravest misfortunes of this country that it has not more widely understood that the prosperity is only apparent and not real. What we are doing to-day is to spend the whole of our capital. We are in the position of a man who is having a good time, only to find himself at the end of two or three years without any capital and a whole string of debts around his neck. That is the condition in which we shall find ourselves after the termination of this War. Individuals who have credits at the bank will be better off, but nationally we are going to be poorer to the extent of that debt which is accumulating with such rapidity at the present moment.
That brings me to the Finance Bill. I am entirely in agreement with the determination of the Chancellor of the Exchequer to raise a considerable amount of money by direct taxation. It is difficult to know exactly where the danger point is, but he would be almost wise to run to that point in increasing his calls on the purses of the people in the matter of direct taxation, because it has the advantage of 1751 diminishing unnecessary expenditure on the part of the individual, and the immense advantage of paying off a distinct and definite portion of the cost of the War as the War proceeds. That brings me to the subject of premium bonds. I am totally opposed to those bonds. I have only risen because one of my colleagues on the Committee spoke in their favour. The hon. Baronet the Member for the Wellington Division (Sir C. Henry), speaking in favour of premium bonds, said, to my astonishment, that Governments in Europe had issued such bonds. I asked him which Governments, and he handed over a certain paper to me. But I have been unable to find any recent example of any European Government issuing lottery bonds. Incidentally may I remark that the Members who have supported this project have not seemed to like the word "lottery"? They have carefully used the phrase "premium bonds," or "bonus bonds," but I think they ought not to object to the word "lottery." They have also attempted to keep out the word "gambling." I am going to point out that the hon. Baronet the Member for Wellington had no authority to support his claim regarding European Governments. What he might have done was to have said that the City of Paris Municipality, in 1871, issued a 3 per cent. loan, and he might have finished up by saying that, in 1870, Turkey issued a loan, and those are the last examples I can find. I cannot conceive that these hon. Members who are supporting lottery bonds are willing to rely upon examples of that kind.
It seems to me extraordinary that hon. Members should think it necessary to appeal to the gambling instinct—or to the sporting instinct—rather than to the instinct of patriotism of our people to find money for this War. They are not doing their countrymen justice when they say that the only way in which we can obtain money from them is by appealing to their sporting instinct. That seems to me a very unfair suggestion to make. My main reason for objecting to lottery bonds is that I cannot conceive it would help the credit of this Government if it were known to the world at large that we were prospectively so hard up that we had to offer lottery bonds in order to attract money for the prosecution of this War. Supporters of this scheme, many of whom I know and respect very highly, have not attempted to meet that point. They have 1752 made other points. The hon. Baronet who spoke last on the subject, the Member for St. Ives (Sir C. Cory), referred to his experiences in Spain and Portugal. But the information given to me by men who have lived in the Argentine and other countries where lottery bonds have been issued, and who have had experience of the effect of such bonds on the people among whom they have lived, are not to be found supporting this project.
May I pass to another part of the discussion as to in what other manner we can find money for the War. I would like to see the Exchequer Bonds reduced to a smaller denomination than at present. The smallest is now £5, and a great number of these have been issued. But I cannot see why bonds should not be issued at a unit of £1. The system is now in full working order. The Treasury have a splendid organisation through the Post Office, and I believe bonds at units of £1, bearing interest of 5 per cent. per annum, payable half-yearly, the bonds to be deposited with the Post Office, would be taken up quite readily and would materially help us in finding money. May I, with regard to the Exchequer Bonds generally, urged what I have previously put before the Chancellor of the Exchequer in the shape of questions, that, instead of having these bonds issued and payable on the 1st December, 1920, he might offer them for varying lengths of time which would be attractive to various people of various temperaments? I do not see why he should not more fully develop this system and offer bonds payable in three years, four years, five years, six years, seven years, eight years, or even ten years—certain seven or eight years—and let them fall due in the anniversary year of their issue. This would give an opportunity to all persons of choosing dates most convenient to themselves. They would appeal to a wider class of people than they do at the moment when you have only one fixed date.
The right hon. Gentleman, in answer to one question, said that, as far as he knew, the public had not indicated that they were dissatisfied with the present bond issue. I was not surprised at the answer. But I should have been very much surprised indeed if the Chancellor of the Exchequer had told me that any member of the public had taken the trouble to write to him and say that he was dissatisfied. It is for the right hon. Gentleman to offer his wares in such a form as will attract a much larger number of customers 1753 than they do at present. The other point is that the Chancellor of the Exchequer should make much greater use of the branches of the joint stock banks. I have suggested to him, in the form of a question, that he should make it clear that the head offices of the banks were acting as agents for the Bank of England, and then the 9,000 branch managers of the various banks in the United Kingdom would become, instead of mere passive receivers or channels for the passage of money, active distributors of War Loan Stock, and people would know that when they applied to any branch office, instead of having to wait for several weeks as at present, they could at once get the stock. The right hon. Gentleman should also bear in mind what would be the psychological effect of this on the minds of branch managers throughout the country. They would feel that their head offices were much more keenly interested than they are at the present time, and they would act as distributing agents much more effectually than is the case now. A great deal more money could be raised in that way.
I hope the Chancellor of the Exchequer will not have to deal with any such subject as a "next loan." The phrase "next loan" has been used frequently during this Debate. I do not like the idea of a next loan. My belief is that if the Chancellor of the Exchequer would develop the system of day-to-day borrowing and renewing in the same way as the municipalities carry it out, the whole of the money that is required for the prosecution of this War could be obtained. It is not in the interests of the bankers that there should be a next loan. It is notorious that in connection with the last loan a considerable sum had to be taken up by the banks. The hon. Member for Hereford (Mr. Hewins) made the point that the banks were going to be put in such a position that they would not be able to finance trade. It would be an added misfortune if a next loan came off and the banks had to take up a considerable sum, because that would again be to the prejudice of trade, which we all desire to subsidise to the utmost extent. I would ask the Chancellor of the Exchequer to be good enough to make some slight alterations in the method of issuing Exchequer Bonds. If he does he will find there will toe such an inflow of money that no next loan of a. spectacular character will be 1754 needed, and that he will be able to carry on the War not merely for ourselves, but find money for the Allies also.
§ Sir J. HARMOOD-BANNER
The last speaker is among the few Members of the House who are opposed to premium bonds. So far we have only had the hon. Baronet the Member for the City of London (Sir F. Banbury) and one of the Labour Members against the proposal. Those of us who are on the Committee dealing with this scheme have every reason to be gratified with the success of our suggestion. The suggestions made by the hon. Member who has just spoken are very much like bringing down a 100-ton hammer on a tenpenny nail. They do not provide the money that is wanted for the Exchequer. Look, for instance, at the £1 for 15s. 6d.! What has it produced? Not a half day's expenditure, despite all the advertisements and labour and the nuisance we have seen on the walls for so long. We should find his other suggestions would give exactly the same result. The reason why I and others have come to the conclusion that premium bonds are necessary is that we are absolutely satisfied that before the end of the War we must do our best to see that there are plenty of savings in the hands of the working classes. That was clearly shown by the hon. Member for Westhoughton (Mr. Tyson Wilson). He put it so clearly that I do not intend to pursue the matter further. It is quite clear that Labour accepted that position, and that, so far as they are concerned, they will give us all the assistance in their power. There are three reasons urged why we should not adopt this scheme. The first is that of conscience. I am rather inclined to think from the reception the Chancellor of the Exchequer gave to the speech of the hon. Baronet the Member for St. Ives (Sir C. Cory) that it is conscience which stands between him and his agreeing to issuing premium bonds.
§ Sir J. HARMOOD-BANNER
Of course, the question of conscience is accompanied by the question whether it is good for the people that they should have these bonds, and whether it would interfere with their habits and character. The experience of the past has shown that it would not have that effect at all. What about the building societies, where you 1755 put in your money and wait for a draw until you are able to get anything out? What about the numerous bonds which are drawn yearly? I happen to be a trustee for debenture holders, and every year I take a handle and whizz round a tin box, take out some numbers and settle the question whether a man holding a 4 per cent bond is to be paid off at 105, or is to retain that bond with interest at 4 per cent. Probably that 4 per cent. bond is worth only £75 or £80.
I do, certainly. You buy a bond for so much money, and you have a draw to see who is to have a handsome return and who is to have nothing at all. It is quite as good a parallel as that given by the hon. Baronet the Member for St. Ives, who said there was no gambling in watching a horse race and seeing whether your horse came in and you won £5, or whether it came in last and you won nothing. There is a good deal of gambling about that. The question really is, is it necessary that the people of this country should have savings at the end of the War t We have tried every possible way up to the present time and we are left with only two alternatives, that of making the bonds productive, or of raising the money forcibly. To make the bonds productive you must have something of this kind. There can be nothing against them except conscience or the question of morals. I have seen many of the principal bankers, merchants, and principal business men in the City of London, and none of them, except a few extreme men, took the view that it was a matter of conscience. We could arrange the premium bonds in such a way that a man could not lose his money. He holds his bond until he get his money back. The last speaker said that there was no such thing as a premium bond at a premium. I happened to meet a distinguished Belgian banker last night, who told me that in Belgium they have a 4 per cent. bond with premiums drawn every year. This bond is a little different from the usual premium bond because there is no interest paid on it. It gets 100 francs for the first year, 104 for the second year, and 108 for the third year, which is the equivalent of interest. There is a pre- 1756 mium drawn on that Belgian bond every year. There is direct evidence of a case of a premium bond of this nature which is being used, but no one thinks it wrong as a matter of conscience, except a few people in this country. The question arises, shall we get money out of these bonds? We shall get the advantage of getting the working classes to save, which we have found impossible under all the schemes of the Government up to the present time. Money boxes and all these attractions, what have they done? They have produced pennies not pounds, and are just as destitute of use as they were on the day they were suggested. We want the working classes to put in good sums. That they are getting good money we all know. A colliery manager told me that an adjoining colliery offered some of his men £1 a day if they would go away and work for them. I have seen wages. lists in other works where the men are getting £8 and £12 a week. Could not those men save something? A head gardener who gets 35s. a week challenged me to come and look at his house and at that of his brother-in-law, who was getting £12 a week, and I should find greater comfort in every way in the 35s. house. That shows there is a margin for saving, and we must get hold of these savings. Surely conscience is not going to stop us. Conscience is a good thing, but even the Treasury Bench knows a little about gambling in certain ways. Inquiries show that the whole House is not quite devoid of peccadilloes in this respect. At any rate, there we are. None of us can say it is a wrong thing to go in for bonds of this description. I can answer for this, that workmen, clerks, and merchants have come to me and said, "When are you going to get those premium bonds? We are going to have some of them at once." They were not men whose conscience would have allowed them to stray from doing what was right.
I will say no more about it, as it has been so well put by previous speakers, including the hon. Member (Mr. Tyson Wilson), who has put in the clearest way that Labour will support it, but I should like to go on to another subject and to ask the Chancellor of the Exchequer whether he is on speaking terms with the Minister of Munitions. It is a very important question. On 2nd April, when he brought in his Budget, he mentioned 1757 certain proposals in reference to controlled establishments. They were very alarming. There are something like 3,000 establishments doing duty for the country. I wrote to the Minister of Munitions asking him to let me see him, but he said the point was still under consideration. I read to-day that we have not got further than this, that the Inland Revenue and the Ministry of Munitions have consulted as to how far they can treat the assessments under the two Acts, the Munitions Act and the Finance Act, on a common basis. We have heard of Cabinet disagreements, and we know that Ministers do not always see eye to eye, but here are two Ministers in the Cabinet who have had this subject under discussion all this time, and they cannot settle how they are to treat fairly and honestly the controlled establishments with which they are dealing. That is a great discredit to the Cabinet. They ought not, at any rate, to let the Treasury try to get the better of the Minister of Munitions or the Minister of Munitions to get the better of the Treasury. They ought to look honestly and squarely towards the interest of the nation and the interest of the firms with which they are concerned, and come to some joint agreement without trying to drive and to push firms into a position in which it is difficult for them to carry on their trade. Before the Munitions of War Act was passed all these firms agreed to come in and do their best so as to meet the requirements of the working classes. They submitted to giving up twenty per cent. of their profits on the pre-war standard. They submitted to be put at a distinct disadvantage compared with any foreign firms which were getting orders pari passu with them, they submitted to everything for the good of the nation, and now the Chancellor of the Exchequer says, "We are going to give you double taxation," and he foreshadows it most clearly in his Budget. "We are going to get you with Excess Profits Tax, and we are going to get you with munitions." I know negotiations are going on and are not yet finished. Differences have so far arisen that I have seen a document, which has come to me in a business way, stating that if the Chancellor of the Exchequer makes some of these controlled establishments pay money which the Minister of Munitions does not think they ought to pay, the Minister of Munitions will repay them the money. We ought not to be 1758 dealt with under two Acts. Let us be taxed as one. Let the agreements—that is a sine qua non—under which the Minister of Munitions has induced controlled works to spend huge sums of money be honestly respected. If you are going to take 60 per cent. of excess profits, after all the other duties, and also break all the contracts you have made in regard to expenditure on plant, the first thing the Minister of Munitions ought to do is to say, "I have made these contracts with firms which are ready to help the country, and if they are pressed further I shall resign the high office which I occupy."
There is just one other thing, because I want to help the Chancellor of the Exchequer to get some money. It is a very great pity that in the last Act he did not include everyone in the Excess Profits Tax. There are men earning enormous sums of money in commissions, from £40,000 to £100,000, of which under this Bill the Chancellor of the Exchequer will get no part at all, or, if he gets it, will only get it by making the controlled firms pay, and will leave them to bear the double burden of having to pay these enormous commissions to people employed by them and also to pay the Exchequer. If they have omitted to include them they are omitting a very large sum of money. They ought undoubtedly to bring all firms under the Excess Profits Tax. Everyone ought to come in. It is the only way to do it. Reverting to the question of premium bonds, I cannot for the life of me see how I am immoral in conscience or in intent, or that those who support me are immoral, when we advocate such bonds. I think that they are the sole way in which we shall ever get the labouring classes, out of their excessive wages, to find money towards the War. The hon. Member for St. Ives mentions another alternative, in regard to which I agree with him. There is the alternative of taking a portion of the excess wages and giving Exchequer Bonds for them. This method and the premium bonds are the two alternatives. We must have either a forced loan such as that, or a premium bond which is attractive. I prefer the attractive form, but, if the Chancellor of the Exchequer cannot agree to adopt premium bonds, I do not say that I will not support the hon. Member for St. Ives in his suggestion.
§ Mr. McKENNA
The Debate has ranged over a very wide field, and to me, at any 1759 rate, it has been of the very greatest interest. We have devoted, perhaps, a great deal of time to the discussion of the premium bond question, but, quite apart from that, subjects of the very greatest importance have been raised and ventilated. My hon. Friend (Sir J. Harmood-Banner) dealt with the question of the relations between the munitions levy and the Excess Profits Tax. He considered the relations between the levy and the tax were so dubious that he doubted whether the Minister of Munitions and myself could be on speaking terms. I am happy to be able to assure him that not only are we on speaking terms, but that we have talked together, either directly or vicariously, so frequently upon this subject that I hope we have come to arrangements which may prove administratively satisfactory. I quite recognise that there is an apparent divergence of principle between the levy and the tax, but, looking to the history of the dates, I do not see how that divergence could possibly have been avoided. The House will remember that the Munitions Act was introduced as a necessary and urgent measure, in order to deal, not primarily with the question of employers profits, but with the conditions of labour. The nation was determined to increase and to accelerate the output of munitions, and the House of Commons gave great powers to the Minister to help him in his work. The provisions of the Munitions Act gave to the employers of labour certain advantages not enjoyed by other employers, and imposed upon labour certain restrictions to which other outside classes of labour were not subject. It was then stated, as one of the grounds for the munitions levy, that where the workmen were to be placed under these special restrictions which inured to the benefit of the employer, the employer's profits must be subject to a special levy or charge.
§ Mr. McKENNA
Not a tax. A special levy or charge, or otherwise the workmen could not be expected to enter into a bargain under which they alone were to pay and the employer alone was to receive. I really think that that, so far as I can recollect, is a fair statement of the history of the case. The point was raised in this House whether it was a tax, by an hon. and ingenious Member, who addressed a question either to Mr. 1760 Speaker or to the Chairman of Ways and Means, whether this levy was not a tax and ought therefore to have been introduced under a Resolution of the House. The decision was against that view. The decision was that this was not a tax at all, but that it was a bargain. A Bill, I think, was introduced early in July, and very quickly became law. That was a Bill embodying the special bargain. How did that restrict the power or authority of the State to levy a tax of general application? What is the history of the Excess Profits Tax? If my memory is right, I was appointed to my present office on 27th May of last year. Immediately afterwards, in the first week of June. I had to go to Nice to conclude financial arrangements with the Italian Minister of Finance. On the way back from Nice my right hon. Friend and I, in. the train, drafted the outlines of the Excess Profits Tax, and on 16th or 17th June the announcement was made in this House that it was our intention to introduce a tax of that nature. Therefore, before this bargain was entered into, it was notorious, and public notice was given of our intention to introduce an Excess Profits Tax, which must obviously be of general application. We could not introduce it earlier than we did, in the month of September, because in the months of May, June, and July, I had still to carry through the May Budget of my predecessor, which was not a taxing Budget. At the earliest moment after we had concluded my predecessor's Budget, the non-taxing Budget, I introduced the taxing Budget of September, and incorporated in it the Excess Profits Tax. Can it be suggested that it would be proper for controlled firms to come off better under the munitions levy than they do under the Excess Profits Tax? Can it be suggested that they should? I understand it is not suggested that a controlled firm should come off better under the munitions levy than under the Excess Profits Tax. It could not be right, because in the case of the munitions levy the controlled firm gets an advantage out of the Act, for which he pays with the levy, whereas all other firms get no advantage in return for the Excess Profits Tax. It is quite clear, therefore, that no controlled firm can expect to be better off under the munitions levy than under the Excess Profits Tax. What is it that we do under the Bill? What we do under the Bill is this, that 1761 where a controlled firm is better off under the munitions levy than under the Excess Profits Tax, it shall make up the difference.
§ Mr. McKENNA
My hon. Friend says that in no case is a firm worse off under the Excess Profits Tax than under the munitions levy. If that is the case no firm would be affected by the Excess Profits Tax.
§ Mr. McKENNA
I am dealing now with the question of payment. I will come to the question of accounts. If any controlled firm pays more under the munitions levy than it would have to pay under the Excess Profits Tax, it will have to pay nothing under the Excess Profits Tax.
§ Mr. HENDERSON
Of course I would like to have the opportunity of answering the right hon. Gentleman.
§ Mr. McKENNA
If my right hon. Friend wishes, he can answer afterwards, but if he desires to do so why answer me now? If he wishes to answer me now, I will sit down. I am quite willing if he wishes that he should address the House now. As regards payment, it is common ground that where a controlled firm would get off with less payment under the munitions levy than under the Excess Profits Tax, the difference ought to be paid by the controlled firm. A controlled firm which gets an advantage under the Munitions Act ought not to pay less than a firm which is not controlled. That is the first point. The second point is this: The Excess Profits Tax dates back to the year 1914, and every single controlled firm in the country will have settled its datum line and will have made up all its accounts on the basis of the Excess Profits Tax for the first year of taxation before it became a controlled firm. Therefore the whole accounting was a known fact to the controlled firm before 1762 the time when this bargain with the Ministry of Munitions was entered into. How can you escape—I put the question in this firm to the controlled firm—from the necessity of making up your books on the basis of the Excess Profits Tax? The Excess Profits Tax basis is the same basis as the Income Tax basis. It is the same period of accounting. It is the same method of accounting, though it is quite true that different allowances are made under the Excess Profits Tax and under the Income Tax, but so far as their datum line is concerned, and so far as keeping accounts are concerned, the controlled firms are bound, for Income Tax purposes, to make up their books in a way in which it is necessary for them to make them up for the purposes of the Excess Profits Tax, and all that was true before the Munitions Act was introduced, and continued true ever since. That is my second point. If a firm fulfils the bargain entered into with the Ministry of Munitions, at the time of the Act, and in return for which it got certain advantages, the controlled firm must make up its books at two different periods and for two different purposes. The Income Tax basis is essential, and cannot be avoided. Consequently, if it keeps its bargain under the Munitions Act, it must make up its books in the two-ways. That is my second point, that the difficulty of the double accounting is inherent in the Munitions Act and cannot be got over.
The third point is this: The hon. Baronet who spoke last suggested that the munitions levy should be absorbed in the Excess Profits Duty, and that there should be only a single tax. I think that I understood him correctly in that respect. So far as I am concerned I have nothing to do with the munitions levy, except to receive the money. My hon. Friend behind me (Mr. Henderson) says that the munitions levy is far more severe that the Excess Profits Tax. I have received representations to the contrary. I have received a great many deputations on the subject, and I have been told that the Excess Profits Tax will prove, in the working out, more heavy than the munitions levy. I cannot say until I have seen the figures of the two. I can only deal with the law as it now stands, but assuming that my hon. Friend behind me is right, and that the munitions levy is the heavier of the two, I do not know whether controlled firms will expect to get out of the bargain which 1763 they have made with the Ministry of Munitions in return for which they receive certain advantages. I quite agree, and my right hon. Friend the Minister of Munitions quite agrees, that it is a great hardship on those firms to have to make up their accounts twice over. In these times, when there is such pressure of work and such shortage of labour, the hardship is peculiarly severe. For my part, I will go a very long way to assist firms in getting out of the difficulty, but I am sure that every hon. Member in this House will agree that I ought not to ask the House to go the length of discharging controlled firms from the liability they are under in respect of the Excess Profits Tax when every other firm in the country is liable to pay.
As regards the conversation between my right hon. Friend and myself, I have been able, after consultation with my advisers, to meet one very strong case that has been put forward. The case arose out of the question of the allowance for depreciation. Very large numbers of controlled firms have been called upon by the Ministry of Munitions to put new capital into their business for the purpose of erecting machinery for the special purpose of making munitions of war. The firms in that case very naturally expect that the allowance for depreciation of that machinery during the War will cover their own capital loss on the machinery, which will have to be written down to a comparatively small figure after the War. I have agreed that in the case of controlled firms we will take the depreciation allowance which is either agreed between the Ministry and the controlled firm or which is awarded by the Board of Referees set up by the Ministry of Munitions, and I think that that arrangement meets the whole case on that part of the subject put forward by my hon. Friend the Member for Liverpool.
§ Mr. McKENNA
I think that that covers all the special arrangements made and all those cases where there are no special arrangments, but where there has been an expectation that an arrangement of that kind will be made. It is only right to say that in making this arrangement with my right hon. Friend we are not doing more for controlled firms than we think it right to do for other firms also, and we shall 1764 certainly give in our Excess Profits Duty an allowance for special rates of depreciation of machinery for the special purpose of the War or for other reasons which will not have the usual value after the War which it would otherwise be expected to have. I think I have said all I have to say on the subject of the munitions levy, and the divergent principle of the Excess Profits Tax. Let me turn to the question of premium bonds. I hope there may be common ground between the advocates and opponents of premium bonds on certain points, so as to clear the field for discussion. I think it is common ground on what is called premium bonds that there is no gamble in the capital; I think there is equally common ground that there is a gamble in the interest. There is no question about those two propositions. I think it must also be common ground that if we drop the name of premium bonds and call them by the name known to the law, we would call them lottery bonds, and why not call them by that name?
§ Mr. BUTCHER
May I ask my right hon. Friend what he means by a gamble in the interest? The interest is fixed, and so long as the bond is undrawn the holder gets the interest on his capital.
§ Mr. McKENNA
My hon. Friend the Member for St. Ives, in his excellent speech, quite understood what is meant by a gamble in interest, or, if he heard the explanation given on the point, he will see that there is a gamble in interest. The owner of the bond is assumed to receive 5 per cent. He does not get 5 per cent. paid to him; he gets 2½ per cent. paid down, and he gambles with the other 2½ per cent. If he is lucky on the £1 bond he will draw £500. That is a gamble. I do not want to mince matters, but personally I do not like these bonds. It may not be a gamble in capital, but I do say it is a gamble in interest, and I think it is a lottery bond. I have noticed that everyone who has spoken in support of this bond has described it as a war measure. My hon. Friend the Member for West-houghton (Mr. Tyson Wilson) said of course no one would suggest this in normal times. Why not? If it is a proper proceeding, why not suggest it in normal times?
§ Mr. McKENNA
Conscription is, I think, inexpedient in normal times, and I think not beneficial to the State. But if this is a good way of raising money and is not immoral, why should it be restricted to the time of War? The real reason is that it is so much immoral that it is thought the end justifies the means, if the hon. Member will forgive me for saying so.
§ Mr. McKENNA
Let us get to the plain facts. My hon. Friend thinks it is not a good thing in itself, but in time of war he thinks the amount of harm is so very little that the end justifies the means. He sets up the balance of the scale, and we have a little grain of immorality on the one side and a heavy weight of profit on the other, and the weight of profit is so much greater than the immorality that it weighs it down, and he is willing to do that. The hon. and learned Member who introduced the subject gave us a very forcible peroration, beautifully expressed, from which I gathered that chance was so universal and so normal a condition of our lives that we should all be thoroughly justified in investing our savings in gambling saloons. But I do not think so. Although it is quite true that chance enters into nearly every condition of our lives, although it is perfectly true that an immense amount of our business cannot be carried out without a gamble—although that is the condition of a large part of our lives, yet I do not think that gambling is a good thing, and I do not think it is wise of the State to encourage people to look 'for making a living without working for it. It is quite true that a great many people succeed in making a living without working for it. It is quite true that a large number of other people would like to be in the same position. Is it the duty of the Government to encourage people in that line of thought? My hon. Friend says that if you can get what is so absolutely necessary for the purposes of the War, someone said £150,000,000, it is 1766 worth while. I must look to what I am likely to get. Is it worth while for what I am likely to get? What are we getting now? What do you think we would get under this scheme, and what are we likely to lose under it? Since last July we have obtained from small investments through the Post Office £62,000,000. There have been small withdrawals from the Post Office, particularly at the time of the investment in War Loans, amounting to £4,000,000, so that we have a net investment of between £67,000,000 and £58,000,000 since last July—in ten months very nearly £6,000,000 a month.
§ Mr. McKENNA
Yes, the withdrawals are about £4,000,000. Of course that financially does not anything like represent the whole of the investments of the working classes in War Stock. Their chief medium of investment is through the building society, or the co-operative store, or other societies, and these societies of all kinds have invested a very large amount in Treasury Bills, Exchequer Bonds, and War Loan, so that it is quite fair to say that the investment of these classes, who do not invest through the stockbroker or banker, and who invest sums of £5, are today very large. We have had estimates of what we should get by the issue of premium bonds—one Member suggested £150,000,000 and another £200,000,000, but neither told us in what period it was expected to get those sums. I should very much doubt myself whether they would get anything more than what they are getting now. I do not dogmatise on this subject. It is possible that the lottery bond would be attractive to a certain number of people, and you might get a few more millions in the course of the year; you might get £10,000,000 or an additional £15,000,000 in the course of the year; I do not think you would get more, because I do not think the money is there. Is it worth while paying the price and taking the risk? Is it worth my while taking the risk of a new class of investors—persons only attracted by a gamble, and who say they will go in for these premium bonds as there are high prizes to win? I am bound to say that if I were going to have a lottery I should not have such a jejune affair as that suggested by my hon. and 1767 learned Friend where the maximum prize would be £500. If I were going in for a gamble I would have a prize of £50,000.
§ Mr. McKENNA
I would induce a large number of people to come and take, perhaps, a million of those bonds. I am already getting more than £1,000,000 per week directly in small sums. A speculator of this kind in a gamble of this kind is not a person who is a real investor. If a more attractive gamble comes along which he wants to take, he will immediately sell. These people are holders, they are not investors, and I should have a constant dribble of these premium bonds on the market, which would affect my whole credit. Now we are maintaining our credit, and I very much doubt whether the House would be well advised m insisting upon a new venture of this kind. I do not believe there is money in it, and I am quite sure it is not a good example for the State to set. It would be very unwise for the House of Commons to deprive itself now of the power hereafter of preaching not merely to the working classes, but to the wealthier classes, that they ought not to look to the profits of gambling. I would very much prefer to continue upon the lines upon which we have acted hitherto. I would like to say this also upon the subject. A good deal has been said, both now and at other times, upon the lines that the working classes throughout the country are wasting their money and are living with a degree of luxury which is particularly unbecoming in the middle of a great war, but, so far as I can judge by any of the ordinary tests, that charge, as a general charge, is not true. It is perfectly true that individuals earning very high wages are spending larger sums than they ought to spend, and it is perfectly true that those individuals are more numerous than any one of us likes to see, but it is not true of the working classes as a whole. Take this one simple test of extravagance—the consumption of meat. In spite of the high wages that are being generally earned now, so far from there being an increase in the consumption of meat by the civil population of the country, there has been a decrease. [An HON. MEMBER: "What about the price?"] The price has gone up, it is quite true, but we are told wages have gone up also very considerably, and 1768 I am not sure, taking the population all through, that the margin of wages has not gone up quite as much as the margin of price.
§ Mr. McKENNA
I hope my hon. Friend will not think that such an obvious idea did not occur to me also. In estimating the consumption I should certainly have taken the consumption per head. All that being allowed for, the evidence goes to show that the actual consumption of meat is not increasing, but rather diminishing.
§ Mr. McKENNA
I got them from the Board of Trade, and if my hon. and learned Friend applies to the same source he will get the same figures. It is naturally a subject of daily interest to us, and I have been extremely interested to discover that, as regards meat, notwithstanding diminished supplies, there is no indication of shortage, because there is a diminishing consumption.
§ Mr. McKENNA
There has been a very decided effort, and, notwithstanding what has been said by persons of great weight in the country, it has been very considerably effected by advertisements.
§ Mr. McKENNA
Perhaps my hon. Friend will excuse my arguing that point. I do not think it is fair to make a general charge of extravagance against the working classes as a whole. According to my observation, if you take the working classes through, they are behaving very much in the same way as every other class in the country. The wealthier classes, as a whole, are showing great patriotism, great self-denial, and great willingness to pay taxes. The same is true of the working classes as a whole. You get individuals amongst the wealthier classes—quite enough often to make a very disagreeable display—but those who denounce the extravagance of the upper classes on motor 1769 cars and luxuries in restaurants are not doing them justice. If you take them through, there has Been an enormous reduction in personal expenditure, and a very great and successful effort to cut down the luxurious enjoyments of the individual family. That is true of the upper classes as a whole, and it is also true of the working classes as a whole. It would be absolutely impossible for this nation to make this financial effort if it were untrue. You cannot raise in taxation £500,000,000 in a single year and £1,300,000,000 in loans except from the economy of the people, and that economy must be general, running through the whole nation. We must not be misled by the painful examples that we see here and there into thinking that those examples represent the general practice of the people.
I would return, for a moment, to the speech of the hon. Member for Hereford (Mr. Hewins). He was answered by my right hon. Friend opposite (Mr. Lough), who claimed that the present power of the nation to raise revenue is a triumph for tour fiscal policy. Although I share my right hon. Friend's views on the fiscal policy of this country, I think he went too far in that statement. It is not just, and would not be just, to claim for ourselves, as a proof of the advantages of the system which we advocate, all the results which may be due to other causes. I regard this, the power to raise this gigantic revenue, primarily not as a fiscal, but as a moral triumph. It is only by the willingness of the people to pay that it is possible to raise these great sums. If other nations were as willing as this nation to pay they, too, could raise great sums for the cost of the War. It depends upon the moral power of the people. Whatever else may be said of this nation, in our power to submit to bear taxation, I think we have shown a moral strength of that which none of the other belligerents have yet proved themselves capable. I am entitled, I think, to speak with some feeling upon this subject, because the raising of this revenue undoubtedly causes great hardship to very large classes of people. I hope my hon. Friends will not think that because I am unable to meet them on every case they raise that I do not, therefore, recognise the truth and justice of many of the arguments they use. We cannot raise these sums without hardship. I only hope that while we cannot avoid afflicting individual hardship we do not at the same time do 1770 permanent injury to the productive power of the country.
There is very great force in the argument used by those who are opposed to an increase in the Excess Profits Tax. I can assure the House that I have been very reluctant to increase the rate of charge from 50 per cent. to 60 per cent. The force of the argument lies in this great fact, which we cannot ignore: that a very large part of the income of the successful employer and the successful firm in one year becomes the capital of the next, and that, when you take from the successful employer the excess profits you are taking it from the man who has proved himself the most capable of using it in the development of national industry. I am always oppressed in my own mind with that argument, and I hope my hon. Friends below the Gangway, who do not see in 60 per cent. excess profits a sufficient charge, will remember if they destroy capital in the hands of those who can best use it, that in the long run they will prove the worst friends of labour. I believe we are now taking the maximum amount that the trade and industry of the country can be called upon to bear. I, can only be grateful that this House and the country have been willing to accept the taxes. Those who speak lightly of these burdens really do not know what they mean in industry. They are truly heavy. Personally I feel very strongly that in going the lengths I have felt bound to go in the present emergency I have gone to the extreme point of safety. I shall have, of course, during the Committee stage of the Bill, the opportunity of dealing with some of the other points which have been raised more properly belonging to the Committee stage. Income Tax has been touched upon, and the heaviness of the charge of 5s. in the £ deducted at the source. We shall do our best to meet the grievance, for I admit it is a grievance. It may not have been a grievance which was felt when the duty was 1s. in the £, but it becomes a severe grievance when the duty is 5s. in the £. I think on the Committee stage I shall be able to explain that we have met the grievance. As I understand, the objection now is that, whereas 5s. in the £ is deducted quarterly from the dividends received, the repayment only takes place at the end of the year, and consequently the taxpayer may be left out of 2s. in the £ for the whole of that year.
§ Mr. McKENNA
Yes, for nine months. We propose to meet that which, I think, is one of the strongest cases we have to meet in the Bill. We propose to meet that by making the. repayment half-yearly. Will the House remember what that will mean? The taxpayer will begin the year from now on with the repayment from the last year, and he will get the next repayment at the end of six months, so that the taxpayer will be really better off as regards repayment during the first year, and in the second year will get repayment at six months instead of at the close of that year. There is also a modification of the rates which I shall have to propose to the House bringing the earned and unearned income more into proportion, so that unearned small incomes will get an advantage. I hope the House will believe me when I say that, since we last discussed the Bill, my right hon. Friend and I have devoted most of our time in going through the arguments and endeavouring to see, in consultation with the officials, how far we can meet every case raised, and I hope in the Committee stage we shall be able to give a satisfactory account of our work.
§ Mr. PETO
I think the right hon. Gentleman has shown the House at any rate one thing, and that is in the short time we have had to discuss the Second Beading of this almost unique Finance Bill the House has really devoted itself, except in the opening speeches, to a very small section indeed of the many problems this Bill presents. The Chancellor of the Exchequer's speech was almost entirely confined to two questions—to replying to that part of the Debate which has occupied so large a part of the time of the House on the premium bond question, and on one important question, which was dealt with only, as it were, as a side issue of this Finance Bill, the relation of the Excess Profits Tax payer and the taxpayer who pays as a controlled establishment to the Ministry of Munitions. I do not propose to deal at all with the question of premium bonds, but I should like to say something with regard to that part of the Chancellor of the Exchequer's speech in which he dealt with the question of excess profits and the controlled establishments. He gave three reasons why it was necessary to apply this double process of taxation and double process of accountancy, which will undoubtedly work a very great hardship and a great loss of time, which can be ill-afforded at the present time. He said, in the first instance, 1772 that he was bound to apply this double method because the levy which was paid by a controlled establishment was not a tax. It was part of a bargain that was made for advantages received. I could not help being reminded, when the Chancellor of the Exchequer brought forward that argument, of the fact that he is a member of the legal profession. I do not think anyone else, certainly no member of the business community, would see any very great difference in principle in paying 80 per cent. of their excess profits from one point of view and paying 60 per cent. from another point of view, and it would be poor consolation to be told that it was a levy in one case and a tax in the other. That may appeal to some hon Members, but not to business people as a whole. The right hon. Gentleman said it was necessary to have Clause 32 in the Finance Bill, which I regard as one of the greatest blots in the Bill. It means a great waste of energy that might be better employed. It is said that there was a bargain made whereby the employer gained some advantages from Labour, and, in consideration of that, made a certain return to the State. Does the Chancellor of the Exchequer maintain that employers who were engaged in munition works feel that they have such an advantage in the control of labour that it was worth their while to pay 80 per cent. of their excess profits above a cerain datum level because of the control of labour which the Munitions Act gave them? I do not think that can be seriously contended. I would remind the Chancellor of the Exchequer of another bargain that in every case when an establishment came under the control of the Ministry of Munitions every question with regard to new machinery, plant, and extensions necessary to increase the output, turnover, and so forth was to be taken into consideration by the only Department that can go into it and make a bargain. Now the Chancellor of the Exchequer proposes to put that bargain on one side in every case where it happens—
§ Attention called to the fact that forty Members were not present; House counted, and forty Members being found present—
§ Mr. PETO
(continuing): The Chancellor of the Exchequer said that there was no hardship in this matter of accountancy, because the Excess Profits Tax was known to employers and the business community before the controlled establishments were 1773 introduced. That argument applies only to the first year. In the case of the right hon. Gentleman's proposal he contended that every year, however long this tax may last, firms will be liable to an investigation whether they will be liable to be taxed under one Department or under another Department. It seems to me that the object of the Chancellor of the Exchequer would be absolutely met if either to one Department of the State or the other the appropriate tax, as I prefer to call it, is paid. Surely the Chancellor of the Exchequer can trust the late Chancellor of the Exchequer not to make any immoral bargain with any particular controlled firm and to extract from them whatever in the interests of the State is the maximum that ought to be paid. It certainly seems to me a very curious state of affairs if the Chancellor of the Exchequer should now come along and say, although a certain number of firms, now, I believe, nearly 3,000, are really in respect of their whole business arrangements under the control of the Minister of Munitions, a Minister who was only lately a successful money extracting Chancellor of the Exchequer, yet he must have his own control and the accounts of the firms must pass a double scrutiny. Really, it might well be left to the Minister of Munitions to make his bargain with the controlled firm and not have any other Minister to dispute and upset that bargain.
I want to question altogether whether this Budget is really a clever and effective instrument designed for the special purpose of meeting the needs of the country best at the present moment. I listened to the speech of the Secretary of State for India (Mr. Chamberlain) with a great deal of interest to see how he would defend the Budget from that point of view. I heard a very able speech—it really was not needed—in praise of the taxpayer and of the country generally, but I cannot say that I heard any praise or even any defence of the Budget proposals as a whole. The right hon. Gentleman said that the proof that the Budget was successful was the fact that the taxable capacity of the country had kept up to such a wonderful extent, and he showed that the Chancellor of the Exchequer had derived in three successful years an increasingly larger margin of revenue than that which he had estimated. The right hon. Gentleman the Member for Islington, following him, questioned very much these estimates; and he showed in a few items, 1774 Although I could not agree with every one, that there had been an underestimate, and he calculated on the whole that there had been something like an underestimate of £80,000,000. It is very easy to have a surplus if you only estimate low enough. But it is a, very weak argument for an ex-Chancellor of the Exchequer to bring forward that the revenue-yielding capacity of the country has proved to have been more than maintained under the stress of war because we have had increasing surpluses.
I regretted very much the defence the right hon. Gentleman made of the entire absence from this Budget of any attempt to lay the foundation of an Imperial system or any system such as would tend to help our Allies in recovering after the War. He told us the reasons why he thought it not desirable that this Finance Bill should have any particular fiscal complexion, and he said that as far as he was concerned he thought everyone would have to go a long way towards the opposite camp in meeting views which were different to those held before the War with regard to the question of tariff as being part of the regular means of collecting revenue. I think it is quite unnecessary for anyone who has strongly held the tariff view in the past to make any approach to the other view, because I believe the country as a whole have entirely come to the conclusion that it will be essential from the point of view of revenue, quite apart from any other reason, to adopt tariff as one of the principal revenue-collecting means in the future. That being so, why should we hear from an ex-Chancellor of the Exchequer—from the right hon. Gentleman the Secretary of State for India, considering his close personal the to the founder of the whole of this Imperial system, which has now proved to be so absolutely essential, and demanded by every part of the Empire—that he intends to go a long way to meet the opposite view as soon as this War has terminated?
The only argument which has been put forward for not including tariff as part of the system of this Budget is that there would not be the start necessary for its collection. If that holds good as regards a general tariff, surely where there is a will there is a way, and if it had been the intention of the Government to go as far as it could in satisfying the legitimate demands of the Dominions and in satisfying the aspirations of our Allies and trying 1775 as far as possible to make that alliance paramount and put it on an economic basis, surely they could have done something to show in this Finance Bill that they intended to protect those vital industries of the country of which we have found ourselves practically bereft and which are so badly needed in this War. I refer to such things as the glass industry, and particularly optical glass, dyes and soaps, which yield glycerine as a byproduct, which is so much required. It would have required no great addition to the Customs staff to meet such an extension of tariffs as that. Of course, there are other things which from the point of view of economy ought not to have been left out—cocoa, hops, and so on. It is really very difficult to understand what argument could be put forward for leaving them out and having no tax upon them. I do not want to go into figures at this time of night, but I must say, having mentioned cocoa, it is an extraordinary thing, considering it is only three or four years since we abolished the difference in duty between the manufactured article and the raw material, and that the only effect was to put £50,000 a year into the pockets of a foreign chocolate combine, that the Chancellor of the Exchequer, knowing well the figures regarding the importation of these luxuries, should have had a flat-rate duty in his Finance Bill raised upon the raw material only, with no additional duty on the manufactured article. I will only give the House the figures of the imports from one country. From Switzerland in 1913 we imported only 96,000 cwts,. in 1914 it was slightly less, 92,000 cwts., and in 1915 it was 205,000 cwts. With all that amount of money going out for an article, every pound of which we could produce in this country, employing mainly female labour, we find the Chancellor of the Exchequer adhering to the full Free Trade theory that it is only proper to put a tax upon the raw material and that there is something wrong in dealing with this question, with which, from another point of view, he wants to deal, by the imposition of a tariff.
There does not appear to be any attempt in this Finance Bill to give effect to what should be the mainsprings of the policy of statesmanship at the present time—firstly, the strengthening of the alliance by which we hope and intend to beat down the opposition of the enemy, and, secondly, the 1776 consolidation of the Empire. If hon. Members say that measures which should tend directly towards the progress of the War are still more necessary, I say there is nothing in this Bill, so far as I can see, which tends even indirectly to defeat the enemy. This vast amount of money is being raised really in the clumsiest way. It is very easy, if you only put large new taxes upon the profits made by industry in this country, taxing them directly, to say that you can raise a certain sum of money, even this £500,000,000. But there is no attempt to raise that money in such a way as to benefit any single industry in this country, or to place any industry in this country, or the countries of our Allies, or in any of the Dominions of the Empire, in a position superior to that same industry if it were carried on in the country of the enemy.
I want to give one example of what I mean as to the extension of direct taxation and the Income Tax. What does the Chancellor of the Exchequer do with regard to the income from investments in the Dominions? All he does in Clause 28 is to say that he will not raise it to more than what is approximately the maximum tax, 3s. 6d. in the £, upon the proceeds of investments in the Dominions, and that if there is any Income Tax in the Dominions which brings the total Income Tax on a particular investment above 3s. 6d. in the £, he will adjust the difference. That is not meeting the question at all. The Dominions have a right to regard, and I am given to understand that they do so regard, profits made in their territory as a source from which fresh capital will flow into other investments, because they are saved and reinvested in that particular Dominion. Beyond that, it is a proper subject for taxation within the Dominion itself. Far from giving any preference in that matter to investments in the Dominions, the Chancellor of the Exchequer only says that he will not make it a positive premium against such an investment if the total Income Tax would be more than the maximum that would be charged in this country.
I do not believe the attempt to grade the Income Tax down to the smaller incomes is really working. I cannot believe that it is the intention of the Chancellor of the Exchequer really to distribute the Income Tax over all classes in the country who earn more than £2 10s. a week, when we find the gigantic profits of co-operative societies left untaxed and the advantages 1777 given to them as against the small trader. I should like very much to hear—and I hope we shall hear when we come to that part of the Bill in Committee—what is the practical result of this attempt to tax down to £130 a year and to collect Income Tax on the higher wages of the wage earners. I am very sceptical as to how the Treasury are able to follow and to tax the wages which are paid on piece work in such trades as where you get a gang of platers or riggers working at one of our ports and earning an altogether fluctuating but very large rate of pay for individual contracts. I should also like to hear how the profits of such people as cattle dealers and the like—quite small people—are going to be brought in to pay Income Tax. The whole justification of bringing the Income Tax level down is that there is no longer the same distinction between direct and indirect taxation.
There is one question which the Chancellor of the Exchequer did not touch on, because it had not been mentioned in Debate before, and that is the question of collecting Super-tax upon the gross income instead of upon the net. Now Income Tax is up to 5s. in the £ on incomes which are liable to Super-tax it is really an absurdity to say that you are going to collect Super-tax upon gross income instead of upon the only income that ever reaches the taxpayer's pocket. If you take an income of £6,000 a year gross all that remains after paying 5s. Income Tax—all that ever reaches the taxpayer at all—is £4,500 a year, and on that particular income—I have had it worked out —the Super-tax on the basis on which it is at present collected would be £244 3s. 8d. a year, whereas all that is really due on the income actually received by the taxpayer is £115 0s. 4d. I think there is absolutely no justification for that, and I hope that we shall be able to get that part, at any rate, of the Income Tax amended in Committee. I know the argument put forward at the time Super-tax was first adopted in the 1909–10 Budget of the immense amount of trouble involved to the taxpayer were met by the Minister of Munitions, who was then Chancellor of the Exchequer, in this way. He said:Surely all men in that category can afford to keep a private secretary or agent. If they do not keep a private secretary or agent they are men of leisure and a little sum of that sort will not do them any harm in the world as a mental exercise. It is not a mental exercise that they will have to indulge in every year, because they understand this sum will last them a lifetime.1778 At that time the Income Tax was 1s. 2d. in the £, and it is evident that the Minister of Munitions did not anticipate frequent variations in the amount of Income Tax which would involve a very frequent alteration in the calculation that has to be made. But now the Income Tax has reached the level of 5s. in the £ it is really not a question of the trouble of making a calculation, but that you are pretending to collect Income Tax and Super-tax at a rate which is not really the rate that you are taking from the taxpayer and not anything near it. I do not think that is either fair or honest, and I hope that part of the Bill will be altered in the future.
§ Mr. J. M. HENDERSON
The Chancellor of the Exchequer has made a very clever, astute argument for Clause 32 of his Bill. I raised a point of Order on 1st July, 1915, when the Minister of Munitions brought in his Bill for munitions of war. I said that this was a tax. The decision is well worth reading, and I desire to recall it to the attention of my right hon. Friend, because the Chairman of Ways and Means was very careful in what he said. He said:I think it may be looked at in this way: That the State proposes to give to certain establishments orders for war materials, and the limitation of the profit to be obtained by means of these orders is what in Committee of Supply we call an Appropriation-in-Aid—that "is to say, that any amount beyond a certain produce shall come back to His Majesty's Government. That, I think, is the correct way of looking at the procedure of this Clause."—[OFFICAL REPORT, 1st July. 1915, col. 2005, Vol. LXXII.]Then he went on to say:It is in the nature of a bargain or contract.Are you going to keep to the bargain? Are you going to suggest that the Government is done in watertight compartments, and that one branch of the Government can make a levy and another branch can levy a tax? The thing is monstrous. Is there any other branch of the Government that can make a levy? Only you, the Treasury, can make a levy. You, the Chancellor of the Exchequer, are the only one entitled to make a levy. What is the use of splitting hairs? I hope to convince my right hon. Friend. It will not be the first time I have convinced him. He says he is not breaking a bargain. Then it is the Minister of Munitions' bargain, and he must support it. The right hon. Gentleman says lie is not in conflict with the Minister of Munitions. Let me show him exactly where the unfairness of the bargain lies. 1779 You say to one man who has been successful, "You have made a lot of money. You shall only have 20 per cent. I am going to take the rest: if it is 80, 100, or up to 150 per cent." To the man who has not been so fortunate you say, "Under no circumstances shall you get more than 20 per cent., but if you are an uncontrolled establishment you will get 40 per cent." Then you go on to say to the man who has not been so fortunate through one cause or another—and I shall be glad to show my right hon. Friend that there are a great many causes which have militated against making profits in controlled establishments—"I will hold to the bargain with the successful man, but you will not get your 20 per cent. I am going to get 60 per cent. of your 20 per cent." Is that right?
§ Mr. HENDERSON
I am surprised that a Minister of the State suggests that such a disgraceful transaction as that is right. It is the most unjust proposal that has ever been made, because you are departing from the bargain made by another Cabinet Minister.
§ Mr. McKENNA
A bargain was made with the Minister of Munitions that, in respect of controlled firms, all profits in excess of 20 per cent. over the standard line should be paid as a munitions levy. That bargain does not in any way deprive the Exchequer or deprive this House of its power of taxation of controlled firms. The bargain did not at all limit the power of taxation.
§ Mr. HENDERSON
You are going to suggest that the Treasury has one pocket for a levy and another pocket for a tax. [HON. MEMBERS: "Divide!"] I do not want to keep the House, but this is a very important matter—much more important than hon. Members realise.
§ Mr. HENDERSON
I am quite willing to treat it as a Committee point, but I do not want it to be prejudiced by no answer having been made to your statement. What I say shortly is that it was a bargain made by one of the Cabinet Ministers, and the Treasury must stand by that bargain, or, in the alternative, this is what I recommend to the Minister of 1780 Munitions—that he should make an exact same levy upon all traders in the same way. If you can come to that I am quite sure that the controlled firms will agree, but to make one tax of that kind so grossly unfair is a thing which I am quite sure the House, when it understands it, will not sanction.
§ Sir JOSEPH WALTON
I had intended drawing attention to various inequalities in the levying of the Incomer Tax, but in view of the late hour I will defer raising those questions until the Committee stage of the Bill. There are one or two points on which I should have liked to hear some statement from the Chancellor of the Exchequer to-night. The total deficit for the two years ending 31st March next is £2,545,000,000, though we have raised and are raising this year the gigantic sum of £502,000,000 taxation towards this £2,545,000,000. We were told that there was a £600,000,000 Loan, and a £50,000,000 American Loan, and we also know that £202,000,000 has been raised by Exchequer Bonds. That is a total of £852,000,000, leaving in respect of the deficits of the two years, including the present year, £1,693,000,000 to be raised. Towards that by temporary borrowings we have got £648,500,000, but those are to be repaid in three, six, nine, or twelve months; and what I urge upon the special attention of the Chancellor of the Exchequer is that the time has more than come when this huge deficit, which we are quite able to meet and deal with, should be dealt with in a permanent fashion. I hope that at no very distant time a War Loan may be again issued, say, at 4 per cent. free of Income Tax, which would, I believe, be subscribed by the people of the nation as a whole. We know that in France 5 per cent. is being paid free of Income Tax. We know that for the greater part of the £648,000,000 Treasury Bills 5¼ per cent. is being paid, and that to the small investor in the shape of war savings certificates 5 per cent. free of Income Tax is already being paid. Looking at the whole financial situation of the country and to the enormous expenditure this year of £1,825,000,000 and the possible prolongation of the War, my fear is that if the Chancellor of the Exchequer defers issuing a loan he may have to pay a higher rate of interest than he would obtain the money for to-day. A loan should have been issued undoubtedly before the increase of the Income Tax to 5s. in the £ was announced.
1781 Another point I would press upon the Chancellor of the Exchequer is that I regret that, in the course of his speech today, we heard nothing of retrenchment in expenditure. Certain Committees were appointed. The Chancellor of the Exchequer is the custodian of the public purse. He it is who ought to supervise and control expenditure in every Government Department. He told us that he cannot possibly in the present abnormal conditions do that as regards the Army, the Navy, and the Ministry of Munitions expenditure; but at any rate I should have hoped that he would have reported to the House what retrenchment had been effected by the Committees specially appointed as Retrenchment Committees in connection both with the Army and the Navy and the Ministry of Munitions. It would have been of the greatest interest if the Chancellor of the Exchequer could have reported to the House to-night that those Committees had done most effective work, and that he had the strongest possible ground for saying that in future we should get better value for our money. We also consider that the Chancellor of the Exchequer has not done as much as he might have done to reduce the abnormal amount of imports as compared with exports. They are going on at the rate of £700,000,000 a year, and that is one of the most serious financial aspects that we have to consider. Though I am a Free Trader, I could wish that the importation of everything not required for our national life and the prosecution of the War had been stopped either by prohibition or by putting on a severe import duty as a War tax for the period of the War only. I think more might have been done in the taxation of expensive clothing. We know the extravagance of many women in this country at a time when economy ought 1782 to be practised. They wear furs feathers of a most expensive description. What I do say is that if sheepskins keep our Tommies warm at the front they ought to be good enough for the women of England and to save this huge waste of money for furs on which we see a, greater expenditure in our streets than ever. I rejoice to know that the Chancellor of the Exchequer had so encouraging a statement to make to us to-night and that he gave in his speech every indication that he is prepared to consider in Committee every question we desire to raise, and that he will do all in his power not only to secure more equal incidence of taxation, but also to redress every injustice involved in his Budget proposals. On the whole I support those proposals warmly, and I trust that in Committee we may obtain adjustments and concessions which will make it an all-round fair and equitable Budget.
§ Question put, and agreed to.
§ Bill read a second time, and committed to a Committee of the Whole House for Monday next (22nd May).
§ The remaining Orders were read, and postponed.
§ Whereupon Mr. SPEAKER, pursuant to the Order of the House of 22nd February, proposed the Question, "That this House do now adjourn."
§ Question put, and agreed to.
§ Adjourned accordingly at Fifteen minutes after Eleven o'clock, till Monday next, 22ud May, pursuant to the Order of the House of the 22ndt. February last.