HC Deb 29 October 1919 vol 120 cc757-846

I have omitted some things that I intended to say, but I have already made. a long speech. Let me summarise my conclusions. At the basis of all Revenue Returns and all Estimates of taxation is the condition of industry and trade. We of the Government, as- I have endeavoured to show, have been doing, and are continuing to do, our share towards financial reconstruction. But in order that our efforts may be fruitful, much more is needed than any Government can do. There must be an increase of production throughout the country. That is a vital necessity for national prosperity and national credit. Subject to that, I summarise my conclusions. On the position as now shown, no additional taxation would be required to balance future Budgets. No fresh borrowing would be required on Revenue Account after this year. On the contrary, next year a substantial surplus should be available for the reduction of debt. Parliament may desire a quicker reduction of the debt than we have provided for, and it is certainly most desirable. With that view we invite the House of Commons to explore with us, and in anticipation of any decision by us, the subject of a levy on war profits. Our burdens are heavy, but our shoulders are broad. I end as I began. There is every occasion for caution. There is no excuse for panic. Our position is sound. We have borne throughout the years of war a financial burden unequalled by any other country. [An HON. MEMBER: "Thanks to Free Trade."] Our resources and the spirit of our people have responded to our necessities. The same resources and the same spirit are as equal to carrying us successfully through the first difficult and troubled years of peace as they were to carry us through the fierce fighting of the War to victory.


May I ask my right hon. Friend one question, whether he will be able to give to the House any idea as to, what amount we may expect within the next year or two years as an indemnity from Germany, and whether that has been taken into consideration?


I explained to, the House on Monday, in answer to a question, what were the conditions governing payments by Germany under the Peace Treaty. I can give no figure, be,: cause the figure has to be assessed and decided by an Inter-Allied body sitting in Paris, a body to which I cannot give directions, and that body has not even yet been constituted.


Sitting in this House on the 7th August last, I remember, the Prime Minister and the Chancellor of the Exchequer addressed us, and these words were uttered by my right hon. Friend the Chancellor of the Exchequer: If we were to continue to spend at the rate we are spending now, it would lead us straight to national bankruptcy, and there is DO doubt whatever about it if we cannot increase production beyond what we are producing now we shall go to national bankruptcy. Later on, he said: Let me say, and I had intended if it were possible to take this opportunity to say it, that the Budget position, the balance between expenditure and revenue for the year is less favourable this year than it was when I made my Budget statement. It is distinctly and seriously less favourable, and both sides of the account are failing to realise my expectations. If you like to say I shall prove s false prophet you may put it that way, but the important thing for the House and the country to understand is that the forecast I made to the country in my Budget statement is not being realised."—[OFFICIAL REPORT, 7th August, 1919, cols. 634 and 635, Vol. 119.] What a transformation scene‡ And it is supported by facts which must have come to light within ten weeks of that statement. No one, of course, is mace delighted than I am, because the matter is far too grave for any chaff or ridicule, or attempts to make small points. What has, happened in the last ten weeks to justify this new position which the Chancellor of the Exchequer has taken? It really seems that all is for the best in the best of all possible financial worlds, and I think it is my duty, as well as I can, to call back the House to a sense of what the undoubted facts are. We are expropriating £1,500,000 per day out of private property to keep going the financial machine. That has been added to the National Debt. The wealth of the nation when the War began was £16,000,000,000: To-day we have, by these cheery documents, so far as I can see, £8,000,000,000 of National Debt. The deficit for the current financial year, instead of being £250,000,000, as estimated in the Budget, is now estimated to be £473,645,000—an addition of £223,645,000. There is an additional point in regard to that. They are taking into the calculation in arriving at that the realisation of capital assets. They are treating such assets as they can realise from what remains after the War as if they were revenue. I do not wish to press that point more than to indicate the kind of finance on which my right hon. Friend the Chancellor of the Exchequer bases his cheery optimism of the present and of the future.

Let us look for a moment or two at these White Papers which are placed before us. The increases, as he tells us on the first page of the Revised Financial Statement (1919–20), are in respect of War Pensions, War Bonus, extra Police Grants, and expenses due to the strike, which account for £44,000,000, loans to Allies for £32,000,000, and increased pay to Army, Navy, and Air Force for £21,500,000, making together £97,500,000. As regards every one of those items, I suggest to my right hon. Friend that it should have been reasonably foreseen when he made his Budget estimate. He knew perfectly well that this House was going to insist upon additional pay for the soldiers and sailors, that we were going to have additions to war bonuses, and, even with regard to the strike, the Prime Minister himself said, with a touch of pride, as far back as February last, they were anticipating it, and even with regard to this they could easily have covered that under the head of Miscellaneous Items which they might have to meet in the course of the current year. So far as one can see from the facts, in the whole history of Budgets, there has not been shown more—I do not like to say neglect —but, at any rate, less prescience of what was fairly obvious was going to happen, than in the provision which he then laid before the House, and on which he then levied his taxes. What I suggest is, that if the Chancellor of the Exchequer knew, as he must have known, that these heavy additional charges were going to come in course of payment during the financial year, it was his duty to face the facts and to impose heavier taxation to meet them. That was the position, I suggest, he ought to have taken at that time. Look at another of these items. What justification can there be for so gross a miscalculation as happened in the case of the War Estimates?

We know now that there is no less an increase than £188,000,000 due, of course, partly to not getting certain Appropriations-in-Aid which were expected. But very few men who looked at the thing calmly and coolly in those days expected that they would get them. At the very time these Estimates were being submitted to this House, the Expert Committee in France had been dealing with this question, and the Government were solemnly warned by that Committee that it was no use expecting to get any money out of Germany for a very long time, except a very small sum. They were solemnly warned, yet with that warning staring them in the face they deliberately laid before this House estimates which now, owing to the obvious development of the facts of the situation, have landed them in a deficit of £118,000,000 over their anticipations. The same thing applies to the question of coal, which has gone up in a most alarming manner. Some sort of assumption was made that everything was going to work out admirably. I think it was the Secretary of State for War who said that war is a gamble. The Government seem to have been gambling on peace chances. These Estimates show that the facts have gone against them. In the view of some of us it was the duty of the Government to place the facts of the situation manfully before us in the last Budget, so that it might be considered what action could reasonably be taken—and the Government had inside information which we did not possess—and the proper taxation imposed so far as the Government thought the nation could stand it. There was another opportunity for allowing the House to know what was the position. A Supplemental Estimate was made which. I venture to say, did not give the faintest idea that the present was the position in which the House was likely to find itself to wards the close of October.

Let me just look for a moment or two at the question of a normal year, to which reference has been made by my right hon. Friend. It is of great importance that we should remind ourselves of what a normal year is by reading up exactly what the Government themselves say: When all war services will have ceased, and that trading department (e.g., food shipping, etc.) will have been wound up. When all subsidies (bread, railways, unemployment donations, etc.) will have been withdrawn. When no further loans will be made to Allies and Dominions. When the training schemes for ex-soldiers, etc., have been completed, and nothing new arisen in their place. Though the cost of labour and materials will not have differed materially from that now obtaining. I quite agree with my right hon. Friend in his endeavour to guard himself fairly and well as to what the position under this normal balance sheet is likely to be. But we -will have no normal year for years to come. I am pretty certain this Government will never see a normal year. The suggestion is not business at all. What is the use of waving a vision of this sort before our eyes I It. is the present position with which we have to deal, not an abnormal, mythical dream of what may happen years hence. The practical view is to get down to the facts as we know them and deal with them. I repeat that the position in which we are placed ought to have been thoroughly realised and probable contingencies provided for accordingly.

Let me pass on to again ask what in the last three or four months have been the actual reductions made by the Government. We welcome in the most hearty manner what my right hon. Friend said, particularly in regard to the Treasury. The scheme must ere long be of real fruitfulness and benefit to the country. I also welcome the other schemes which he has indicated. But these are all things for the future. We are dealing now with the current financial year, and if the thing is going to be dealt with efficiently it must be grappled with here and now. What is the remedy after all, but retrenchment More taxation, perhaps, but retrenchment first. Taxation is better than borrowing, and retrenchment is better than taxation. Taxation is always an evil. Retrenchment is always a thing we can deal with here and now. We need not wait for other schemes. We ought to begin at once. The best form of taxation is adequate and proper retrenchment. I would make a suggestion to my right hon. Friend in connection with this matter of the Treasury, and in connection with the new and revised Estimates for the Army and the Navy—because the Navy Estimates have not yet been laid before the House. We have only had Token Votes. Then there is the Civil Service. These have to be laid before the House before we rise for the Christmas vacation. Let the Government—this is my suggestion‡—put on one side any but the most vital measures of a legislative character, and give the House a chance to reassert its ancient right and privileges of control of the expenditure of the country. I want to say this to my right hon. Friend. I know lie has had a very rough passage indeed during this year. In many of these things be could not help himself. In regard, however, to the present position lie will have the House and the country solidly at his back if an opportunity is given the House to deal with this thing on the floor of the House. It is no good sending the matter to Committee upstairs. We know how almost hopelessly that system has broken down. I am certain of this—if the House of Commons is worth anything at all—we ought to ensure in the next six or seven weeks-that trivialities should be set aside in. Debate, and that in Committee of the Whole House we should consider, on two days in each of the remaining weeks of this Session, before the Christmas vacation, the new Estimates for each of these-great spending areas—the Army, the-Navy, and the Civil Service. Hon. Members would back the Government, and it would give an opportunity to the House to reassert itself.

It would make for great public confidence, and also for publicity—which what we want—for, with great respect to my right hon. Friend, the speeches delivered here to-day will not allay public anxiety very much. Because the public has got to know the facts‡ The public can appreciate at their worth these dreams of what is going to be done in the future with its talk-of no extra taxes next year. For this does not alter the fact that we have got a debt of £8,000,000,000. Our Army Estimates haw swollen to a pitch which the public know is absolutely unnecessary. The same applies to the Navy, the Air Force, etc. People know it. No amount of cheeriness or optimism here will alter the facts from what they are. We have got to face the facts‡

The opportunity I have suggested is one which the House can take. The Government will be well advised to use that opportunity. I am certain it would not be used in any factious way. If any of the groups on this side of the House attempted such a proceeding, well, what some Of us could do we should to prevent it. It is perhaps little that some of us can do, but I would assure my right hon. Friend—I have no authority to speak for my Friends of the Labour party—so far, however, as I have authority to speak for anybody, I say that there would not be any factious use of the time of the House, there would be no futilities so far as we are concerned. We regard it as a great public duty to assist on the floor of this House in a serious and reasonable examination of these Estimates, and to back the Government in every possible way in such reductions as they can suggest, and carefully to consider any reasons or arguments put forward by them to see whether or not such reductions can be made. I press the suggestion on the Government with all the force I can. It is a new thing to do. But we are faced with an unexampled position, and we must take fresh steps. It may be said that it cannot be done. It can be done‡ I have sufficient confidence in the public spirit of this House, in all parts, to say that it can be done.

A word or two now on the question of a Capital Levy and a tax on what I prefer to call war accretion. So far as my opinion goes, and is worth anything, it is hopelessly bad to attempt to single out from the accretions which have fallen to individuals that part of them solely due to the War. It is hopeless. You will have to take war accretions. With regard to the Capital Levy, the right hon. Gentleman—the House knows—has spoken quite frankly, honestly, and equitably—as lie always does. The position I have steadily taken up is that it is not a matter to be lightly dismissed. It is a serious proposal, which is open to very grave objections—of which I am very conscious—hut it is not a matter that can be put to one side. As the Leader of the House has said—and I think he has never gone back on that position—it is not a matter so much of principle as it is a matter of expediency in the time of a great national crisis. The question is: Is it likely to do more harm than good, or to do sufficient good on a big, broad scale to far outweigh any harm which must accrue from it? There is only one way to convince the public of that. It is not by argument on the floor of the House. It is by inquiry into it. I do suggest to my right hon. Friend that the scope of an inquiry in regard to war-time accretions—and not capital—might be very wisely and equitably extended to the larger question. However, so far as I am con- cerned, my position in regard to a general Capital Levy is exactly where it was. But I do welcome the fact that my right hon. Friend has a more favourable view of the taxation of war accretions of capital than he had last summer. In July I humbly made that suggestion across the floor of the House, and my right hon. Friend came down upon me with all his power and force and almost castigated me.


I have a very clear recollection of pointing out some of the primâ facie objections, and I have a very clear recollection that I instructed the Inland Revenue to go very carefully into it and produce the best scheme they could.


I congratulate my right hon. Friend upon so admirably concealing what his real feelings were, but there it is. With regard to that it is a basis which has an inestimable value in any tax, whether on capital or income, and it unquestionably has a moral basis. We all agree that nobody ought to have made any money out of the War, and I am quite sure the Government are well advised in taking into very serious and immediate consideration the question as to whether they shall not, in the coming Budget, deal with those accretions by way of getting the largest possible share of them for the lowering and reducing of the great National Debt. In another place Lord Milner spoke with almost equal cheerfulness to that of my right hon. Friend, and he compared the position with what happened after the Napoleonic wars, and the reduction of debt which took place, and how we emerged from that. There is, however, one fact which we must bear in mind and never forget, and it is that there is a very great deal of difference between the way the mass of people view their status within the nation to-day and 100 years ago, and whatever sacrifices have to be made—and very serious sacrifices will have to be made before we emerge from the financial morass in which we are—those sacrifices will have to be generally shared. Very largely the nation emerged from its financial difficulties a hundred years ago by grinding the face of the poor, but that cannot happen again.

We have now a very different outlook with regard to that. As far as the masses of the people are concerned the position is very different, and the sacrifices will have to be based upon the new outlook. I should not like to wind up my much more gloomy, but much more accurate view of the situation, than that given by the Chancellor of the Exchequer without joining with him in one thing he said. I do not believe the country is bankrupt. There is an immense amount of material wealth, of great power of resilience, and all the factors which go for the recovery of a sound financial position in the country to-day, but even greater than that is the great asset of national character, and the situation should be seriously faced, and the people told the facts through this House, for that is the best way to let the people know, and not by speeches on platforms and communications to the Press, because this House is the great sounding-board of the nation, and this House still stands prominent in its authority and the respect and regard of the people of this country.

This is the place to settle all these things, and to let the people know the facts. Once the people realise that the Government, working with the House of Commons on the floor of the House, has 'got to grips with this very dangerous financial position in which we find ourselves then we shall restore public confidence, not only here but abroad. I can quite understand what the right hon. Gentleman says about running ourselves down too much. It is a British habit, and sometimes people take it much more seriously than we do ourselves, but I do urge upon the right hon. Gentleman and on the Government to take the suggestion I have made with all seriousness. Let the next six weeks before us be financial weeks. Let the House of Commons get on with this matter, and reassert its authority over the Executive, and I am sure that all the Departments will be thankful for the support which the House will give them. If we do this, then, dangerous and difficult as the road before us is, we shall some day successfully accomplish our object.


I would like to express the appreciation which many of us feel for much of what the Chancellor of the Exchequer has said, and also for the very friendly manner in which he has again treated the House, as he did when he spoke before the Recess. There is one thing which everyone feels when the present Chancellor of the Exchequer makes a speech, and that is if a figure he gives proves to be incorrect, we know that he believes in it absolutely at the time he gives it. When the Chancellor of the Exchequer said it had been suggested that some Estimates he had put in the White Paper were faked, I think he may rest assured that not a single Member of this House ever thought for a moment that the right hon. Gentleman would fake any Estimate, or try to deceive any hon. Member in the least degree. May I express my cordial concurrence with the proposal to set up a Select Committee to go into the question of the possibility of rendering more profits liable to taxation? The more I think upon this question the more I find it really difficult of carrying out without inflicting injustice which more than equalises any advantage that may be gained. At the same time, when one ceases going into all the objections and you come back to the main principle, then there is no question that as a general principle there is justice in it if it can be applied fairly, and I am confident that the proposal to examine it by a Select Committee, with a view to carrying it out, is one that is likely to commend itself. to all fair-thinking Members of the House.

When I have said that, may I make one or two remarks which I trust will not be misrepresented as being in any sense animated by hostility to the Government? The Lord Privy Seal, in a speech which he made before the Recess dealing with the mining situation, said that on serious occasion frankness does not mean hostility but is, at the same time, necessary, and, therefore, on this occasion, which is of equal importance, I trust if I am perfectly frank it will not be thought that I have any desire to hamper the Government, because I wish to strengthen the hands of the Chancellor of the Exchequer in the course he has taken. There is an Amendment which may come on to-morrow, and which has been put down by certain Members on this side of the House, and some of us are of opinion that while we gladly support the whole of the Motion that has been moved by the Chancellor of the Exchequer, that in itself is not enough for us, and we wish to have some further safeguards which we think will help the Chancellor of the Exchequer in his work.

We wish to have a further safeguard for this perfectly definite reason, and here my frankness begins. The Chancellor of the Exchequer has narrated the various steps which the Government have taken, mostly, be it marked, within the last month or two, in order to effect economies. May I impress upon the House in this, critical situation the history of this movement for economy at the present moment? The real fact has been that the whole effective movement for economy has originated not with the Government but outside the Government, and that while we are grateful for the steps taken in the direction for economy, yet the driving influence has not come from inside but from outside the Government, and it is only in response to that impulse from outside that we have had so many steps taken during the last few months, as the Chancellor of the Exchequer has explained to us. I have not the least doubt that during the earlier months of the year the Chancellor of the Exchequer and the Financial Secretary have been doing their best in this matter, and they have been good men striving, not so much with adversity as with spendthrift friends in other Departments. Not only has there been laxity in other Departments, but we have had also the phenomena of individual Ministers putting us, so to speak, in the depths of despair at one time, as the President of the Board of Trade did by a speech he made in this House, and then in subsequent speeches which he made afterwards apparently he tells us that the future is bright. You may have a medical practitioner who might have the best possible bedside manner, but if he says to his patient, in the first place, "If not in extremis you are in a most serious condition," and later on he says, without any obvious change in the condition of his patient, "Your future outlook is bright," one's confidence in him as a practitioner is not increased.

6.0 P.M.

As we all know—there were many reasons in explanation of it—during the earlier months of this year there really was not that regular co-ordination of the work of the different Departments under one central authority that one looks for in a Government when it is properly organised. Now we have a reversion to ordinary peace time Government. As one cynical friend of mine has said, "the Soviet in Downing Street has been replaced by a Duma." At the same time it is a distinct step in the right direction. Let me emphasise this point. It is only just recently that we have got a step again towards the real organisation and co-ordination of effort and expenditure inside the Government Departments. Yet the whole time, I would ask the House to notice, the Government have been in possession of the knowledge as to the real financial state of the country, though A has not been so freely in the possession of Members outside. When we read the Budget speech of the Chancellor of the Exchequer, it threw a certain amount of light upon the situation. More light was thrown upon it by his speech in August, and much more by the White Papers that have now been published. I think that everyone, not only in the House but also in the country, will say that it has been up to now exceedingly difficult for anyone outside the ranks of the Government to know precisely what has been the position of the country with regard to its finances. Yet even so, the movement for economy has come from outside the Government and has found a response there, and has not come from inside the Government. Under those circumstances, I for one would be perfectly ready to subscribe to the words "that the House promises its hearty support to the Government in all reasonable proposals for the reduction of expenditure and the diminution of debt," but, when the course of history during this year has been as I have stated, then I say to myself: "It may be quite true that the burglar has turned night watchman—it may be quite true that the spendthrift has turned miser —but at the same time I would like some proof of permanent conversion before again we hand over to him the unfettered control of the spoons." Therefore, some of us feel that we would like to bring back to this House again, it may be in the old form or it may be a new form, a real control over expenditure, so that as the effort towards economy first originated in this House so the House may be able to keep its control over it.

I believe that the proper way to treat the question is to say to the Government: "Ask for the amount of cloth that you need. If we think that it is a reasonable request, we will give it to you, but then you must cut your coat according to your cloth, and, if you find that you cannot, then come back to us again." It is not really fair always to come back—The right hon. Gentleman has talked to us quite frankly and quite rightly as we all appreciate, so perhaps he will not mind frankness in return—and say, "You know quite well that private Members have come forward first with this proposal for expenditure and then with that." It is perfectly true that it is the Chancellor of the Exchequer who resists their demands, but private Members are not so fully to blame as his mere charge would indicate. The private Member for the most part does not know the whole story; that is in the possession of the Government alone. He sees only one side of it and it may be a very deserving side. He cannot be expected to realise how much there is upon the other side without the information being given to him. Therefore, no Government must throw upon this House the responsibility of saying, "Aye" or "No" to some request for further expenditure, knowing full well that private Members of the House cannot have the same information upon each individual point as the Government themselves possess.

I hope that I shall not be thought hysterical in saying that the situation is serious. We have had administered to us this afternoon in the most pleasant way a dose of soothing syrup compared with the much more nauseous medicine from the Chancellor of the Exchequer which we swallowed in August. There are some points with which he has not dealt, but no doubt he had so much ground to cover that it was difficult to do so. In order to get this country into a right financial position, let us by all means have a Select Committee on the possibility of taxing war profits, but let us also have some serious study of what is the real cause of the high prices and the inflation, and see what can be done to remedy it. There has been no real inquiry as far as I know. We see opinions by quite eminent authorities in the daily papers. We see an opinion expressed one day by Lord Cunliffe and we see it controverted the next day or the day following by other authorities equally eminent. Clearly, if we wish to get back to a proper normal level of peace expenditure, private and public, we really want to know what is the cause of the inflation. One may have one's own ideas, but we want to get at some real general agreement so as to try and reduce it to a normal level.

Take again our very serious position with regard to raw materials. This is not a case for hysteria. But it is a case for not believing that the present is quite so pleasant a situation as compared with last August as one would have imagined from the speech of the President of the Board of Trade, or even the speech of the Chancellor of the Exchequer this afternoon. We more than any other country are dependent for our whole national existence on our supply of raw materials from abroad. We are dependent fur our wheat and our big supplies of feeding-stuffs from the United States and the Argentine, and we are dependent on other countries for our iron ore, and so on. Yet when one really carefully studies the situation with regard to raw materials one realises that the present financial condition of the country warrants very grave anxiety. The whole supply of many of these materials to the world at large is short. It is short in the countries of production. The means of bringing it to the continent of Europe are also short. I do not want to overdo that subject, but everyone knows that though there may be enough tonnage, yet it is not used to the best purpose, and congestion at the ports here, and so on, make the availability of the supply difficult. Here we are, therefore, with a comparatively short supply of the great materials that we need, and, as all the world is short, competition is likely to force up prices. And just at the time when even in the countries of production prices are likely to be forced up, here is our exchange depreciated in America. I cannot say the exact percentage. I looked at it yesterday, and I should think that it has depreciated about 13 per cent. It is also depreciated 15 per cent. or thereabouts in the Argentine, another of our great sources of supply, from which we get meat, wheat, and cotton. It is depreciated in Spain 13 or 14 per cent. We have to pay this burden of exchange in addition to the high competitive prices that rule in the country of production. The Chancellor of the Exchequer has not dealt with this side of the situation, but it enters into the whole question of our national prosperity and the position of employment in the near future.

There is only one other point that I would like to mention. The Motion promises hearty support to the Government in all reasonable proposals, however drastic, for the reduction of expenditure and the diminution of debt. I should have thought, seeing that these words are in The Motion, that the House was entitled to know whether the Government have in their minds any further proposals, however drastic, for the reduction of expenditure and the diminution of debt. We have heard that the staff of the whole of the new Government Departments only mean an extra expenditure of £22,000,000 above the pre-war level. Therefore, we are told, there is not likely to be a very great reduction of expenditure or diminution of debt in that direction. We would like to have some indication of what the proposals really are which the Government have in mind, and in what direction we may hope to reduce our Budget from its present swollen dimensions even in a normal year. I wish the Government would consent to some addition to their own proposal by which they would themselves put a fixed limit to their expenditure. If they do not like the particular form in which it is proposed in our Amendment, let them propose some other form. It would certainly help the Chancellor of the Exchequer and the Financial Secretary to the Treasury in a very difficult task—and I wish the Government would realise that we think that we should be helping them—if they could have a regular fixed limit put to their expenditure; if they could have a certain amount of cloth given to them within the limits of which to cut their coat, so that they would have to come back to the House and justify the whole of their proceedings if they wanted to go beyond the limit which had once been laid before the House and approved.


We have had a very interesting and very able statement from the Chancellor of the Exchequer as to the national position of the country, and a very urgent appeal to support the Government in proposals for meeting our financial obligations. I am bound to say, as the last speaker said in other words, that the statement which he has submitted to the House this afternoon is of a very disappointing character, and the proposals which he outlined for enabling us successfully to meet our financial obligations and difficulties fall short of my idea of what is required. I have no doubt that the House and the country will be quite prepared to support the Government in their efforts to deal adequately with the financial position, provided that the House and the country see more indication that the Government themselves are in earnest about the matter. Frankly, the House and the country are getting tired of the ceaseless talk that we have had within recent months about our grave financial position, and the great need for economy being exercised by all sections of our people, when no practical steps are being taken by the Government themselves to secure the advantages that must follow from real economy.

During the past few months the Chancellor of the Exchequer has been uttering grave warnings as to the country being in a position of getting rapidly towards financial and economic disaster. While he modified that statement to a certain extent this afternoon and told us that our position was not as grave or as desperate as some sections of our people make out, I would remind him of the fact that his own statements to a considerable extent have created that feeling in the minds of the people of the country. During the course of his Budget speech in April the Chancellor said that nothing but an united effort of all classes, comparable to that we had seen in the years of the War, would enable us to face the years of difficulties which must follow on the conclusion of so great a struggle, with Government economy first and foremost. What practical steps has the Government taken to give effect to that appeal? Any practical suggestions that have been made by the Chancellor of the Exchequer in the course of the afternoon are to be realised in the future. The steps that the Government, from the Chancellor's statement, are prepared to take have not up to the present given us any relief from the heavy burden of taxation.

What are the broad general facts? The Chancellor in his last Budget Speech estimated that our expenditure would be something like £1,451,000,000. I would submit that if the Government had really intended to keep faith with the spirit of the Chancellor's appeal on that occasion they would surely have made a more serious effort to keep within the Estimates, and yet, though hardly six months have elapsed since then and according to the statement which was issued by the Chancellor the other day, that figure has been increased to £1,642,000,000 or an increase on the previous Estimate of no less a sum than £195,000,000. Following upon the Chancellor's statement, we had a very urgent letter sent by the Prime Minister himself to the heads of the various Government Departments, literally instructing them that drastic economies must be effected, and that in the event of them being unable to effect the economies in the terms of the instruction that had been issued they were to make room for others who would be able to effect these economies. What has been the effect of the instruction issued by the Prime Minister on the occasion to which I have referred? I have here an analysis of White Papers on staffs employed in Government Departments on 22nd July, and showing the staff numbers on 11th November, 1918, 31st March, 1919, and two subsequent Pipers showing the numbers employed in the various Government Departments on 1st July, 1919, and 1st August, 1919. On 11th November, 1918, the date on which the Armistice was signed, there was in the employment of the Government in the various Departments 420,510 persons. On 31st March, 1919, that number had been reduced to 397,825, a reduction of about 23,009, or a little more than 4 per cent. On 1st July, 1919, the March figure was exceeded by nearly 10,000, the precise figures being 407,294. On 1st August a further increase had taken place on the total staffs to 409,561 persons. As some of the Departments showed a reduction and others an increase, it seems obvious that the reductions were effected by transfer. The whole staffs on 1st August were only 10,959 less than oil the date of the Armistice. Assuming that the average salary of these employâs amounted to no higher figure than £200 per year, the salary list alone would amount to over £100,000,000, and if one were to include expenditure on buildings and upkeep that would show something approaching £150,000,000 absorbed in administrative charges in the Civil Service.

Referring again to the Chancellor's revised estimate of expenditure, I should like to draw attention to the extraordinary increase which has taken place on Army and Navy expenditure, the increase being, roughly, £120,000,000. The Chancellor, in the course of his speech this afternoon, made a point of the fact that up till the signature of Peace we had no guarantee that the Army might not have had to advance further instead of being demobilised. He tried to show in that way that there was a real reason for continuing this excessive expenditure so far as the Army was concerned. I should like to draw his attention to one part of the expenditure on the Army which he did not mention in the course of his speech. He did not mention the fact that we had spent at least £70,000,000 in Russia. I have the figure, and it was something like £70,000,000 in July, and more will have been spent since, and the possibility is that it will be, as some of my hon. Friends have said, a great deal, more than the £70,000,000 which I have mentioned. Now that twelve months almost have elapsed since the signing of the Armistice, and after the many assurances that we have had from the Secretary of State for War that we were rapidly approaching the time when the Army would be on something like a normal peace footing, surely we should not have had such an abnormal increase as the one to which I have just drawn attention As a matter of fact, the experience of the Members of this House and of the people of the country of the manner in which the Government deal with the financial situation does not inspire confidence in the present Government being able to extricate our people from their present critical position and to pilot them safely through the present financial position.

The Government cannot complain that they have not been warned of what was likely to take place. The Labour party can take some little credit for having foreseen the financial difficulties which would confront the people of this country. As long ago as January, 1918, the Labour party wrote to the Prime Minister, putting forward a request for the appointment of a Royal Commission for the purpose of securing reliable information of a detailed character as to the national wealth, and also as to the liabilities of the nation. The following is the letter that was sent: The party is strongly of opinion that such an inquiry is very necessary at the present time and that a Royal Commision would be the best body to conduct it. At the same time, however, in suggesting a Royal Commission the party does not wish to imply that the inquiry would be very protracted. Indeed it feels that the inquiry should be carried out as expeditiously as possible and the Report presented without delay, in order that the Government may, if it is considered desirable, take prompt action upon it. The receipt of that letter was acknowledged, but nothing further was heard of it until July, when a further letter was sent to the Prime Minister as a result of inquiries made through a Labour member of the Cabinet. I refer to July, 1918. The terms of the first letter were referred to, and, in order to give more definite form to the proposal, it was suggested that the following should be the terms of reference: To inquire into the present financial position of the country and the international financial position created by the War debts of the belligerent nations; to consider and report upon the methods adopted for financing the War; the methods to be adopted for dealing with the liquidation of the National Debt; the system and incidence of taxation in liquidating the debt, and for meeting the annual charge thereon; the national wealth available for such purposes, and to consider the banking system of the country in connection with the promotion of State loans. The receipt of that letter was also duly acknowledged, but it was not until some considerable time thereafter that the party learned that the Cabinet would not entertain the proposal put forward. In my judgment there are three broad general policies that we might pursue in attempting to overcome the present financial difficulties with which we are faced. The first of these is that we could repudiate the National Debt, which in the opinion of certain people would supply us with a short road to getting out of our financial difficulties. Personally I think that that method is an impossible one, and consequently I do not take up much time in dealing with it. The second is the policy pursued by the present Government, of raising the necessary money by ordinary and extraordinary taxation. I believe that many Members of the House were much relieved this afternoon to hear the Chancellor saying, among many other things, that he did not think he would require to apply any new taxation. In my judgment, to continue the present excessive taxation would be almost as fatal a policy, so far as the people of this country are concerned, as the one that I have just disposed of in a very few words. The Chancellor said something this afternoon about normal expenditure, and I am not unmindful of the fact that he said he would talk about normal expenditure in inverted commas. The normal expenditure which he had in mind is set forth in one of the White Papers that have been issued in the course of the last few days. It would amount to no less a sum than £808,000,000 per year. If anyone thinks that the people of this country are going to continue bearing a normal expenditure of that amount, year in and year out, for something like fifty years, as the Chancellor indicated in the course of his remarks, I think they are deceiving themselves. I do not believe that at any rate the working-class section of the people of this country will continue to bear that excessive burden, with all the consequences it carries in increased cost of living and so forth, and to do it calmly, and I believe that, if not this Government, some future Government will have to face a different method of meeting our financial obligations from the one which they have followed up to the present time, and which the Chancellor of the Exchequer indicated this afternoon that they were going to continue to follow.

The third of these broad general policies which I think could be followed in order to enable us to overcome our difficulties, is one which I personally favour, and which I believe carries the consent of the whole of the members of the party with which I am associated. It is that of a combination of taxation—taxation which would begin after a reasonable standard of life had been reached, and would be of a graduated character, falling more heavily upon the incomes of the very rich, when they reach £20,000, £50,000, or £100,000—of rigid economy, and of taxation of war profits. I was very much interested in the suggested inquiry which was promised by the Chancellor of the Exchequer into a tax upon war profits. So far a I am personally concerned I think that it should not take the form of a tax upon war profit, but that every farthing that was made over pre-war profits by any of our people in supplying our necessities during that trying time should be taken. In addition to the suggestions which I have already made, I believe that, whether we like it or not, the people of this country will be forced to face the question of a levy on capital. I do not believe the suggestions I have already made will entirely relieve us of our difficulties. I am strongly of opinion that, whether we like it or not—and it is not a pleasant subject for anyone to contemplate—the people of this country will be compelled to face the question of a levy on capital in the future. That is broadly the policy which I think ought to be followed in trying to find a successful way of overcoming our financial difficulties. As I have already said, in that opinion I carry with me the consent and approval of the overwhelming majority of the Labour forces of this country. I hope, like those who have spoken already, that these matters will receive the early and serious consideration of the Government. If they are not prepared to give effect to them, I believe that in the near future some Government will have to, in order to enable the people of this country to overcome the extraordinary financial difficulties with which we are face to face as a consequence of the War.

The SECRETARY of STATE for WAR (Mr. Churchill)

The decisive impression which was produced upon the House by the massive and masterly speech of the Chancellor of the Exchequer left me in some doubt as to whether it would be necessary for me to intervene in the course of this Debate. But I thought it might be convenient to hon. Members who are taking part in the discussion tonight and to-morrow to have also in their minds that portion of the case which relates particularly to the War Office, and to the increases of expenditure required by the War Office, in order that they may be fully equipped to do justice to the different points of the Debate. In February, when I made my first statement to the House on behalf of the War Office, I was unable to present Estimates. The circumstances were too uncertain, and the difficulties of measuring were too numerous, for my financial advisers to be able to present precise detailed estimates. Such Estimates aught to be presented, and they will be presented before the House rises from the Autumn Session. Instead of Estimates I then made a forecast—a general forecast of the expenditure and of the numbers of the Army which we then thought would be likely to be required during the year. It is that forecast which I wish to review to the House, and in regard to which I ask the House to increase the provision of money.

Let me say at the outset that, contrary to the general impression, there are very few factors in the original forecast which have been falsified by the course of events. In the main it was an accurate forecast, in the light of all that we then knew; but certain new things have happened which, on paper, at any rate, make a considerable apparent change, and which to a much lesser extent make a change in reality. I am going, if the House will permit me, to go through the White Paper which has been laid on behalf of the War Office item by item. First of all, let us take the falling-off in receipts. We assumed in February that we should receive £70,000,000 from Germany in payment of the expenses of the Army of Occupation on the Rhine. Through reductions in that Army, through the fact that we are maintaining a smaller Army than we thought would be necessary, our claim against Germany is no longer £70,000,000 for the expenditure of the current year, but will be reduced to something in the neighbourhood of £48,000,000. Of that £48,000,000 we have received a little more Than £1,000,000 in the shape of the local currency provided in Cologne for the use of the troops.

It has been considered impossible, by the International Commission which is dealing with the question of reparation and indemnity from Germany, to secure a payment in the present financial year; but this £48,000,000 that we should have received this year will inure to the advantage of the State next year.

I have not been one of those who took the most sanguine view of the amount which we should secure from Germany. I remember that during the election I named the figure of £2,000,000,000, and, although I hope much more may be got, I am entitled to rest myself upon that figure. But this is not a question of £2,000,000,000, or £40,000,000,000, or £20,000,000,000; it is a question of 148,000,000; and, under Articles 249 and 251 of the Treaty, the payment of the sum due for the maintenance of the Army of Occupation has absolute priority over every other form of reparation and indemnity. Therefore I say that this £48,000,000 is a good debt. I cannot conceive that anyone, let alone those who take a more sanguine view than I have taken in this matter, will quarrel with me for counting it as such. The Dominions owe the War Office £50,000,000 for the maintenance of their troops in the field during the War. We budgeted in our forecast for a payment of £35,000,000 during the currency of the present year. We now anticipate, owing to the financial difficulties in Australia, that we shall not receive more than 15,000,000 in the currency of the present year. The other £20,000,000 is a perfectly good debt, on which the Dominions are paying interest and it will roll forward for the advantage of the State in a future year. Therefore of this £108,000,000, which constitutes the offending of the War Office, £67,000,000, or considerably more than half, is deferred payment, involving no loss to the State, involving an immediate increase of burden, but affording a proportionate release to the State in the forthcoming year. So much for the falling off in receipts which are due to causes completely beyond our control.

Now let us look at expenditure, for after all the gravamen of the charge of extravagance is the launching out into a larger and more lavish establishment and scale of expenditure than was contemplated at the time of the Estimates. The expenditure of the War Office has risen on paper by £60,000,000. Let us see how it has risen, and let us first of all take items which cannot be disputed. The pay has been raised to an extent involving a further charge of £12,000,000. That is the second time the pay has been raised in the currency of the year. The first time it was provided for, but this additional increase, following on the increases a naval pay, has involved us in a charge of £12,000,000. The gratuities have increased by £13,000,000. That does not mean that any new expenditure has been embarked upon, but £6,000,000 of gratuities which we thought would be paid in the last financial year over rolled into the present one; and as we have paid all gratuities as from 4th August so as to wind up the system, another £6,000,000 which would have been paid next year has been discharged in this way in the present year. £1,000,000 has been due to slightly larger gratuities being earned during the year. Twelve millions pay and £13,000,000 gratuities, which is pure displacement and no increase—that is £25,000,000. The strike delayed demobilisation by a fortnight, and it is not believed that we can catch that up until about January, and it is estimated that the cost through the delay that resulted was £5,000,000. The rupee exchange has altered greatly to our disadvantage. We have to make enormous payments to India for Indian troops which are being used, and charges we have to defray and £7,000,000 additional to our burdens are caused by the automatic operation of the rupee exchange, over which I have no more control than I have over the weather. £3,000,000 are due to the fact that railway rates for the War Office have been raised by the Railway Executive, with which the Government is associated—I do not complain at all—by 50 per cent., and therefore with practically the same amount of travel—there is a slight increase in the amount of travel—we had to pay £3,000,000 more.


Have those rates been raised since you made your statement?


Yes, to bring them up to the ordinary rates. It is a pure transference of money from one Department of the State to another. That brings us up to £40,000,000. There are £6,000,000 a payments to foreign Governments, to France and Italy chiefly, for railway charges, about which we were negotiating before this financial year began, and which it was expected would be settled then. But the negotiations have proved very protracted owing to differences of opinion which have arisen, out of which we hope to obtain some modification of the charge, and in consequence of this £6,000,000, which would have been paid before the 31st March of the present year, will now fall due for payment in this year. That again is no increase in the expenditure of the State, but only a payment which would have fallen in one year and has fallen into another. That brings my total to £46,000,000 out of £60,000,000 of increase.

I ask is there anybody who wishes to challenge any single one of these items? Not only can they not be challenged on their merits, but it cannot be shown that any one of them was avoidable, except perhaps the pay—that we had an option about I agree—nor can it be proved that any one of them was foreseeable when in February these Estimates were prepared. There is left £14,000,000—not £118,000,000, but £14,000,000 — to account for. £8,000,000 are due to minor variations, which I am advised it is safe at this stage of the year to allow. These minor variations include a probable increase of pay to Indian troops, a probable charge on account of supernumerary officers in the Regular Army owing to permanent Regular commissions having been given too freely during the period of the War, and to expenditure on civil administration in Syria—refugees—Egypt, etc. That accounts for £5,000,000, and we have allowed £3,000,000 to guard against a possible drag in demobilisation such as may easily arise on the working of such an enormous system from day to day and from week to week. There only remain now £6,000,000, and that is frankly due to the fact that we have not succeeded in demobilising the Army as fast as we originally hoped. That is the sole item on which I admit the slightest impeachment, the sole variation of an adverse character for which any criticism may be levelled against us.

May I illustrate this financial position in another way? If the good debts of £67,000,000 on which we had counted had been recovered in the year, as they will be recovered, we should have had a surplus of £9,000,000 in Appropriations-in-Aid instead of a deficit. [Interruption.] It they are good debts that is a relevant observation to make. If mere displacements of expenditure from one class of account to another are allowed for, that is to say gratuities, settlements with foreign Governments — £13,000,000 gratuities and £6,000,000 settlements with foreign Governments—the excess on the gross expenditure would be £41,000,000 and on net expenditure £32,000,000. Of this £32,000,000, the pay £12,000,000, the rupee £7,000,000, the strike £5,000,000, and the railway rates £3,000,000 account for £26,000,000, leaving an actual increase of £6,000,000 from delays of demobilisation out of the £118,000,000.


Has the right hon. Gentleman forgotten that the proceeds on the sale of horses were £31,000,000 more than was expected?


Certainly that is perfectly true, and nothing I have said in any way conflicts with it. If the £67,000,000 of receipts which we have not received are good debts and will be received by the State, there is no loss except the loss of deferred payment, and the £31,000,000 additional Appropriation-in-Aid, which we have received through what was the extraordinarily well managed sale of horses, has also inured. That is a real advantage and a real relief which we are entitled to count in every way, and which benefits our position exactly to that extent. But that is not all. The stores and the salvage collected and guarded by the Army and handed over by the troops to the Disposal Board have involved us in an enormous work at great expense. At the Armistice there were in the possession of the Quartermaster-General's Department property and stores valued at over £1,100,000,000. About half of this immense mass had a highly marketable value and the rest consisted of ammunition, guns, and war material of a technical kind which have hardly any marketable value, but are, nevertheless, important. This property was littered about the surface of the globe in every theatre of war into which our armies had penetrated—in East Africa, in Mesopotamia, in Egypt, in Palestine, in India, in Salonica, here at Ironic, and of course the great bulk was in France and Flanders. More than £250,000,000, according to our accounts—because of course valuation and the realisation do not always correspond—of marketable stores have already either been sold by the Army or handed over to the Munitions Disposal Board. Between £300,000,00 and £400,000,000 of marketable stores are still on our hands, and are being handed over in great blocks every day.

I am not claiming on behalf of the War Office that we should appropriate in aid of our expenditure the profits realised from these enormous sales, but the heavy charge which has been imposed upon the Army in taking charge of all these stores, in keeping men to guard them and salving them, collecting them and holding them in good order and handing them over is a heavy charge which I am credibly informed is nearer £30,000,000 than £25,000,000, and ought to be taken into consideration, as it is of course in the accounts of the country, but ought to be taken into consideration by the public and by the House in judging the general total of Army expenditure, because it is perfectly certain that if we could, when the Armistice stopped, have simply neglected the problem of stores altogether and marched our troops home without any regard to them, handing them over to some civil organisation, there would have been a large and substantial saving which might amount to £30,000,000 due entirely to the accelerated demobilisation of men which would have been possible if the stores had been taken off our hands. I am not complaining a bit of the arrangement so long as it is clearly understood that we have this charge imposed upon us, that it burdens our Estimates pro tanto, and that we do not receive the cross credit which naturally should be accorded to us.

7.0 P.M.

I have dealt with all these points, and now I come to one where I admit I have to defend myself and my advisers against the charge of having somewhat under-estimated the expense and over-estimated the rate of demobilisation. I hope the House will realise the immense complexity of the business of demobilisation. Almost a year has passed since the fighting stopped. At that moment we had nearly 5,000,000 men in the Army and Royal Air Force scattered about the world, toget1r3r with these enormous masses of very valuable stores, which are an immense asset. Surely it would have been absurd to expect that these enormous armies and mountains of stores, which it has taken you with all your efforts more than four years to dispatch and distribute all over the globe, could by a wave of a wand in a few months have been brought home and have been dispersed here or otherwise properly and satisfactorily disposed of. I know well the kind of comment which says that we are spending £500,000,000 on the British Army in time of peace. That is a delusion. We are not spending £500,000,000 on keeping up the British Army in time of peace. We are spending £500,000,000 this year in keeping up the Army and in demobilising and dispersing the gigantic war armies which were in existence at the Armistice. There were these millions of men spread about all over the globe. They had to be brought home. Until they could be brought home they had to be fed, they had to be paid, and when they were brought home their accounts had to be settled up. That is the cause of the expense of the Army Estimates this year, and by no conceivable exercise of administrative skill and by no explosion of wrath, however vehement, could that expense have been avoided. The War had to come to an end some time or other. Whenever it did come to an end, and after it had come to an end, all these things had to be clone and paid for.

Three formidable factors operate upon the speed on which demobilisation can be carried out; they operate independently, but they act and react one upon the other. First of all, there is the limitation of rail and sea transport, and in that I include the capacity of the rest camp on the lines of communication, and the dispersal stations which exist in this country. Broadly speaking, subject to local hold-ups, subject to hold-ups in particular theatres which existed through special causes, we have kept the proportion of shipping allotted to us fully employed during the whole period since the fighting stopped. The average number of men released per diem from the Army and the Air Force, taking Sundays out of the seven days' week, from the 11th November last, which is almost a year—only ten days short of a year—has exceeded 13,000 a day. Anyone who has in his mind the spectacle of one of the great pageants we have seen of the return of the Guards or the Victory Pageant can focus in his mind the kind of procession which has been taking place from the Army to civil life every single day since the Armistice. That is not all. Quite apart from demobilising this great mass of men, over 2,750,000 in the compass of the last eleven months, we have had to provide for the leave of the men who could not be demobilised, and more than 2,500,000 men have been carried home and carried back again over these same limited means of transportation, through these same rest camps, and depots on the lines of communication. Unless we had given this leave to the Army, it would have been impossible to maintain that contentment which, I am thankful to say, we have succeeded in preserving. That is the first factor.

The second factor consists in the political and military situation in each of the theatres. Take India. In India we have had internal trouble and the menace of actual war with Afghanistan, causing a serious delay in demobilisation. In India, before we could relieve the men we had to create an Army here and to send it out, unit by unit, to take the place of the indispensable men who have to come home. Take Egypt. There have been most serious disturbances, and I hear of some recrudescence of it, judging from the reports. Then there is the Black Sea, Constantinople and the Straits, and Mesopotamia. In all these theatres there have been disturbances, unrest, and menace which is due, as the Chancellor of the Exchequer pointed out, very largely to the great difficulties the Allies are experiencing in arriving at a settlement with Turkey. There is no doubt the situation in Turkey is not getting better but worse. It is getting worse as the delay continues, and the United States is unable to say at the present moment whether they will or will not accept the great responsibility of becoming a mandatory Power over Turkey. Their difficulties in this respect must have been enhanced by the lamentable and regrettable illness of their great President. I have to face the result of facts. It is no use scolding the War Office for these facts, which are not in the power of one Department or of one Government, but which are matters of the most profound difficulty and anxiety to all the Governments of the world, and matters of deep concern to all the populations of the world.

The War Office has absolutely definite and precise duties to discharge. It has to maintain the security of those different regions for which our Government accepts responsibility; and it has to secure the safety of the troops in all those regions. Further, in all these theatres, before you can relieve any of the soldiers, you have to send out new volunteer units from home, and bring home the tired, war-wearied soldiers. These new units have to be created, built up, enlisted by voluntary service, trained, organised, and embarked, and they have to arrive on the spot before you can complete the demobilisation of the men who are out there. While this is going on, you have not only the men who are preparing to relieve them here at home, but you have the garrison abroad awaiting release. You have a double charge upon you at that time, and no one can see a way in which that difficulty or embarrassment can be avoided. A large proportion of the troops in India have already been released. A considerable proportion of the troops in Egypt, Mesopotamia, and the Black Sea have already been released, and we are in a position, broadly speaking, except for a very few technical and special ratings, to release every single man, certainly every single unit, employed in the Middle East and India as fast as the shipping can be provided to carry the New Army out and to carry the old Army home. I think it is a tremendous achievement for the administrative staff and the Army Council to have carried through in the compass of about eight months—to create a new Army of nearly a quarter of a million men, to form it into its units, and to carry out this release and interchange while the whole of this other great business of demobilisation is flowing over our communications in the different theatres.

One hon. Member said he was very gratified to hear of the Government's intention to economise, but that pressure had been brought upon Parliament from outside, otherwise they would never have thought of it themselves. He said the Government had only just begun to realise the need of economy, or words to that effect. As far as the Army is concerned, it has only just begun to be possible to make these large, sweeping reductions in the number of men with the Colours. My right hon. Friend has pointed out that up to the middle of July we did not know whether we might have to advance into Germany or not. We had to hold ten divisions in good order on the Rhine, We had to retain and keep three or four other divisions from the troops in France and Flanders ready to advance. If we had not done that, we should have been put to a trouble and expense far greater than we have been. One great difficulty is that dangers which are warded off and difficulties which are overcome before they reach a crisis are utterly unrecognised. Eaten bread is soon forgotten. In this case the public does not know that it is being provided. The cost of taking these necessary measures continues to be a real fact, and the necessity of maintaining this powerful striking force until the moment when the Germans gave in was a fact which undoubtedly has imposed expense upon this country.

It was only in the middle of August that Marshal Foch was able to consent to large releases of troops, and since then every available troops we could get from France and Belgium has been crowded with a regular flow of the Army of the Rhine demobilising, and in addition to that, we have made large evacuations from Antwerp and Rotterdam.

When I addressed the House the other day on the question of Russia—I shall he expected to say a word or to o about Russia—[HON. MEMBERS: "Hear, hear‡"]—and I am not in the least reluctant to do so—there were 250,000 men on the Rhine. Now there are 80,000. By the 15th November there will be 45,000, and then almost immediately there will be a drop to 30,000. That garrison will consist, roughly speaking, of about 14,000 men who are now considered necessary to garrison the city of Cologne, and about 16,000 men who form what we call a "plebiscitary division". Under the Peace Treaty, certain disputed areas in Germany and Poland are to hold an election to settle their destinies, and the presence of impartial Allied troops is necessary to secure their having a fair chance of choosing. I am directed to hold that force in readiness, to dispose it and to move it into those districts, and I am told to hold it there for six or seven months, or more. Otherwise the reduction would have been greater.

Now I come to France and Flanders, and I know that these theatres have been made the subject of criticism. It is in France and Flanders that the greatest amount of clearing up and salvage work has been done, because there were great dumps of enormous masses of stores, gathered together by the energy of the country and the forethought of the administration for the campaign of 1919. There we have enormous masses of the greatest value, and that has imposed a burden upon us.

We had in France 198,000 German prisoners to guard, and the guards as well as the prisoners had to be fed. That involved the elaborate organisation of transport of supplies which is necessary for feeding large bodies of men artificially gathered together in particular localities. In addition we had over 100,000 Chinese and native labourers, whom we have been getting rid of as fast as we possibly can after the salvage work was done. We had also in France and Flanders to maintain the great depots and rest camps at Marseilles, Boulogne, Calais, and Le Havre, through which flow the demobilising troops on their way home. Lastly, we had to engage a special corps of 18,000 men to exhume the bodies of 160,000 soldiers lying in isolated graves, and gather them together into cemeteries and put the cemeteries into good order before they are handed over to the Imperial War Graves Commission.

In some of those newspapers which take a great interest in these matters—I dare say as far as they go they exercise a salutary influence—I read sensational accounts of the activity and bustle of motor cars at Headquarters of the Army in France and Flanders. It is not surprising that there was activity and bustle, in view of the enormous volume of work which was being transacted, which was of enormous value and importance. Having given very careful attention to this particular point, I feel it my duty to say that much less than justice has been done to the work of the officers and staffs responsible for this clearing up of France and Flanders, and the admirable manner in which they have been discharging their duties.

I may now say a word about prisoners of war. It is very important that the House should know what is the argument on this subject. If they do not know the argument they do not know how to attack it. If, on the other hand, the argument is good, then they are riot able to answer the criticism of others who do not care whether the argument is accurately founded or not. We had in England when I last addressed the House about 70,000 German prisoners; we had in France and Flanders about 200,000; we had in Egypt 120,000 Turkish prisoners and in Mesopotamia about 30,000 Turkish prisoners—or a total of about from 400,000 to 500,000 prisoners of war on our hands. We only obtained authority to begin the repatriation of these German prisoners in September. We were very much indebted to the French Government for agreeing to what was a modification or mitigation of the Treaty stipulation, and in that respect I am very much indebted to my right hon. Friend the late Foreign Secretary (Mr. Balfour) for the exertions to which he went in Paris to secure us this authorisation. That was early in September. All the prisoners of war in France and Flanders have already been repatriated. Those in England are now passing off as rapidly as the shipping will allow.

Turkish prisoners arc a more difficult matter. We have not yet made peace with Turkey. Though we hold Constantinople and the neighbourhood, there is widespread disturbance throughout Turkey, and we certainly do not wish to send these men back in order that they may proceed to join the standard of some rebel Army. Even if we did so desire we could not do so. The routes by which we can send them back are very limited. They are very much obstructed by the movement of foreign troops which is going on, or the movement of supplies, and, in addition, delay would be caused by the inefficiency of those routes. Therefore, though we are repatriating to a certain extent these prisoners, we have to do it with very great discrimination, and I am afraid that it is proceeding rather slowly. At the Armistice the numbers in France and Flanders and Germany of British troops, prisoners of war, Chinese and natives—that is to say, mouths to feed on the ration strength of the British Army—were over 3,000,000. When last I addressed the House they had fallen to about 1,000,000. On the 15th November they will have been reduced to 300,000. They will be down to 90,000 by Christmas. By the end of the financial year France and Flanders will be completely wound up. There will be nothing left. Only the Cologne garrison and the plebiscitary division will still remain of our great commitments and enterprises on the Continent of Europe.

There is a third limiting factor which acts and reacts on the other two. That factor is the rule under which priority of release from the Army is organised and arranged. Here I must remind the House of the condition of the Army in January and February of this year. I do not wish to dwell on it unduly, but it was a condition which caused widespread anxiety and was marked by many episodes that were very regrettable and even alarming. In consequence new rule, of demobilisa- tion were instituted of which, as the House knows, the fundamental principle was that those who had been out longest and had first rights, and those who had suffered in wounds, etc., got home first. I do not say that in working these rules we had not to introduce an element of elasticity so as to get the greatest volume of men out of the Army. But those rules have been observed and, coupled with the large increases of pay which have been given to the Army, have restored the contentment of the British Army, and I think that the spirit of loyalty and the good discipline which the Army possesses have been of great value to the State during the present year and during particular periods and episodes in that year.

It would have been quite impossible to throw over all those rules without throwing the Army into the same disorder and discontent from which it had been rescued. For instance, a wholesale and indiscriminate release of men in this country who had never been out to the War, or of men in France and Flanders who had only just joined the Army, would not, I believe, have been tolerated by the men of three and four years' service, who were themselves left out in France, Mesopotamia, and other places. Therefore to sum up this part of the argument, which is the delay in demobilisation, and which is the only part of the count whereon I admit the slightest impeachment, I say that delay in demobilisation was caused by restriction of means of transport and the military and political situation in the different theatres, and could not have been dealt with without carrying out the dispersal of the Army according to broad and general rules which troops could understand. When we consider the enormous scale of this business and the extremely small percentage of error which was involved I think I may claim on behalf of the Army Council that they have discharged this extremely difficult task with very great efficiency and speed. I know that you can point to instances of valuable stores deteriorating in the open because they have not been properly looked after, and, on the other hand, of soldiers and units with nothing to do who would have been much better employed at home. It would have been incredible if there were not numerous instances of that. My answer is this. We will do everything we can to reduce them to a minimum. But when all is said and done, the care and salvage of our great stores and the demobilisation of our troops constitute one of these achievements of great efficiency which may bear comparison with some of the other great events of the War.

The House sanctioned Estimates in February under my forecast which provided for an Army beginning with 2,100,000 British soldiers and falling to 825,000 British soldiers at the end of the financial year. We have already reached a lower-figure than 825,000. On 15th November—it would have been 1st November but for the strike—the total of British soldiers will have fallen to 500,000 instead of 825,000, which the House accepted from me as the figure when I produced my forecast at the beginning of the year as the figure to be reached on the 31st March next year. Of the 500,000, 45,000 are war-wounded men who are being nursed in hospitals and discharged as they get well. By Christmas the total will have fallen to about 430,000, and by the end of the financial year, that is to say the 31st March, there will be 300,000 British troops, all voluntarily enlisted men, instead of the 825,000 which the House approved in the Estimates of the year.

It it said "you have demobilised too slowly." Have we demobilised too slowly for the labour market? We have demobilised 3,750,000 men in the year. It is very satisfactory that nearly 3,500,000 of them are productively employed, but there are 274,000, I gather from a statement made by the Minister of Labour the other day, who still receiving unemployed benefit, arid when we were demobilising at the maximum rate the number of men on unemployment benefit had risen to over 400,000. I am not pretending for a moment that we have delayed demobilisation on account of the labour market. We thought it our duty to go ahead as fast as we could. We had quite enough difficulty and obstacles as it was, but had we succeeded in demobilising another 300,000 or 400,000 men you might easily have lost unemployment benefit any saving you would have made within the limits of what you distributed. I do not know whether the House would like me to say a word about Russia. There will be a Debate next week on the Vote on Account of the Army, on which perhaps it could be more fully debated, and I think that nothing but advantage will be derived from debating the subject.


In reference to the Vote on Account next week on the Army, is the right hon. Gentleman going to submit the Estimates for the Army which he promised, or does the Vote on Account stand for it?


I must have the money, I am sorry to say, as it is running short, and the constitution admits of no delay in these matters. Therefore, I must take the Vote next week. But before the Session is over this Vote will in no way relieve me from the obligation of laying those Estimates.

Now coming to Russia, there is a very great improvement in Russia from every point of view since last I spoke in this House. We have extricated our forces from North Russia safely and skilfully, without disaster to the Russians, who had been dependent on us, without disaster or loss to ourselves and without dishonour to our reputation. That great and anxious business, that grave operation of war, has been concluded successfully, arid with it stops the main cause of expense as far as Russia is concerned. Some acknowledgment is due from the House and the public to the soldiers who were employed under depressing and difficult circumstances in North Russia, and to Lord Rawlinson, who, with so much skill and firmness, discharged what was not only a difficult but in many respects a painful task; and with Lord Rawlinson I should certainly not forget to mention the name of Generals Ironside and Maynard, who, with such slender resources during last winter, maintained their forces with security. That, I am sure, is a great relief to the House, because there was much anxiety at the time I last addressed them on the subject. There has also been a great improvement in the position of the anti-Bolshevik forces. That has been developing through out the whole year. General Denikin, who was in such a precarious position at the beginning of the year, has now gained an enormous territory—the richest part of Russia, including the corn, oil, coal and iron, the greatest supplies of all these vital needs of Russia, including also four or five of the greater cities, comprising a population of between 35,000,000 and 40,000,000 of poor persons who welcomed his troops.

I know how easy it is to pervert the truth on this subject. [Laughter.] I see that the subject of perverting the truth has received a good deal of attention in some quarters of the House. I am certain that the facts I am laying before the House will not be affected by the scornful of one or two individuals whose minds are always violently convulsed when [...]r the subject of Russia is mentioned The Army of General Denikin has tai en more than 270,000 prisoners since it began its advance in May.


How many of them are alive?


The humanity which has been practised to these prisoners is vouched for by every British officer I have seen who has returned. That Army now amounts to between 300,000 and 400,000 well-armed and organised men. Trade is beginning on a small scale, the railways are beginning to work, and there is every hope that that part of Russia may be spared the privations and suffering which the rest of the country has endured.

I w ant to give a figure which I think will serve as an illustration much better than the movements of an Army moving from one town with an unpronounceable name to another. It is a figure which arises from the general calculation made by the Intelligence Department and one which I believe to be as nearly correct as it possibly could be. In March, when the fighting began in earnest, there were on the Bolshevik fronts around Russia 430,000 Bolshevists and 320,000 anti-Bolshevists, or four Bolshevists to every three opponents. In September there were 460,000 Bolshevists and 640,000 anti-Bolshevists, so that their position has fallen from a superiority from four to three to an inferiority of two to three. These are remarkable facts, and justify me in saying that the situation is steadily improving from the point of view of the majority.

I stated in the White Paper that the operations in Russia are no cause of the present excess. Now that I have explained to the House in detail the causes of that excess, they will see that that statement is by no means extraordinary. But here is the full explanation: When the Estimates were framed in February we had 12,000 men in North Russia, 5,000 in Siberia, and 23,000 in the Caucasus, a total of approximately 40,000 men. The estimating offices in the Department — policy having hot been settled at that stage—took in their forecast of expenditure money to provide for the maintenance of these troops during the whole currency of the financial year up to 31st March, 1920. Here we are only in October and the whole of these troops have gone. Only about 2,000 individuals, officers and men, who have volunteered and are employed, not in fighting, but in the technical and organising services of the Russian Army, remain behind. There is a brigade still at Batum, but in a few weeks that will have been withdrawn. In consequence of that there is not only no extra charge involved over and above what we had originally asked the House for on account of Russia, but there is a substantial saving out of the £10,000,000 taken —£6,000,000 have been expended and £4,000,000 are unexpended on personnel. The same is true of sea transport, because we have to supply all this number of men for only seven months instead of supplying them throughout the year; and, anyhow, we had to provide for bringing them home once at the end of their tour. Neither do the munitions and stores which we have used in Russia or supplied to the Russian Army affect the total of these Estimates. Practically the whole of the munitions and stores have been provided out of that enormous surplus of £1,100,000,000 which we had on our hands after the War, and no addition to cash expenditure—although you might quite well say that there was a potential Appropriation-inAid—arises from this cause.

I will lay before the House before the next Debate on Army matters a revised statement of the expenditure which we have incurred in regard to Russia. It is a very little increase beyond the limit of the statement which has already been made, but I will have it brought up to date and presented to the House. We have left all these places except for these missions, and we have notified General Denikin that we shall expect his army to become self-supporting after the close of this financial year. The House knows perfectly well the explanation which the Prime Minister has given. We had a duty to these men, whom we called into the field at the time of the German War. No one will interpret that duty as one which has an absolutely indefinite scope. I see no reason why General Denikin should not be able to be self-supporting with his armies after the date I have mentioned. He has this great area of country in his possession, with all its wealth, and so forth; he has a strong army, well armed and equipped and means of raising it; he has arsenals and factories; lie has the means of trade for the purchase of war material, and I see no reason why if the people are with him in his neighbourhood, if his Government commend itself to them, he should not be in a position to maintain himself without calling for further grants from us after that date.

Meanwhile the Cabinet have approved, and I think the House ought to know it, of a final contribution to General Denikin of surplus stores to the extent of approximately £15,000,004 sterling. That will be sent out gradually during the course of the winter months. Thus, to sum up the Russian case, I say that we have either extricated ourselves or are approaching the end of our entanglements in that country, and we are approaching it in the way which at the same time is securing the main objects and interests of those with whom we had entered into a joint responsibility. I am very much obliged to the House for listening to all I have had to say on this subject, and in conclusion I trust that we shall not be reproached with pursuing a militaristic or megalomaniac policy at the War Office. Alone among the nations of the world, of tile great Powers, we have of our own free will taken all the steps which in a few months will abolish Conscription in this country. Many people have on their lips the sentiments of the League of Nations, of peace, of disarmament. The only Government in Europe which has practised what it preaches, which has translated these sentiments into a great and swift policy of disarmament, is the Government which asks, and I believe will receive, the confidence of the House of Commons.


We have heard a very reassuring speech from the Chancellor of the Exchequer, who has invited the House to discuss a Resolution The few remarks I shall have to say will be addressed to the last part of the Reselltion—"reasonable proposals, however drastic, for the reduction of expenditure and the diminution of debt." I think the House will agree that it is a commonplace to say that you cannot make war without incurring debt. The greater the war the greater the debt. The logical consequence of that is that as we have had the greatest war in history so we have the greatest debt on record. Whatever economies the Government may make, a deficit must remain. Heavy rates of interest on capital will still await payment, and a large Floating Debt will have to be met. Sooner or later fresh capital must be raised. How is that capital to be raised? And what is the mew Loan to be? I think the Chancellor of the Exchequer must have doubt as to the success of another Loan on any ordinary terms. The last Loan certainly cannot be called a success, and yet everyone in the House will agree that everything that could be done was done to advertise that Loan. Every sort of advertisement that could be framed was issued in order to get as much money as possible for the Loan. The total amount applied for in cash or Treasury Bills was £6,000,000,000. Half of this was in Victory Bonds. What are Victory Bonds? They are £100 bonds issued at 85 as against the Funded Loan issued at 80. What was the inducement to take up the Victory Bond as compared with the Funded Loan Bond'? The inducement was first, that when an investor died, if his estate became liable to Death Duties, these bonds would be taken as payment at par value for those duties. That was all right for large investors, but what was the inducement for small investors? They were to get is. 6d. per year until their £85 was returned plus £15. There was one more inducement, and this is the point which I want to emphasise. A certain number of bonds were to be drawn yearly, so that one investor out of 200 was to get his money back with a £15 prize. The Government by this issue of Victory Bonds admitted the principle of chance. I suggest to the Government that to meet the present situation they should extend that principle, that premium bonds should be issued at £85, that they should not be all of one denomination, but of various denominations ranging from £5 to £1,000, and that they should not be available for Death Duties, because the idea of Premium Bonds is to get money from the small rather than the large investor. I would give away 5 per cent. in prizes.

May I tell the House about a scheme which I have drawn up? I am sure it is quite possible to give very large sums in prizes to each series of investors who hold these bonds, the higher prizes being given to those who take the £1,000 bonds and the lower prizes to those who take the bonds of small denomination. But in no case would I allow the first prize for the lower bond of £5 to be less than £100. In order to make the issue a success we must be certain of three things: First, that the existing Government issues for large and small investors are not sufficient for the country's financial needs in the present situation. I do not think that anyone will say that they are sufficient. But we must go further than that and we must ask whether or not there is a field of investment at present untapped, and we must see that the amount of money to be tapped is large enough to justify a departure of this kind. We must also see that the issue of Premium Bonds will not prejudice our financial credit and standing either at home or abroad. It would not be possible for me in the short time I can occupy the attention of the House to go at any length into these propositions, but I have read very carefully the findings of the 1917 Committee on Premium Bonds. That Committee came to the conclusion that so far as large investors were concerned the evidence was conclusive to show that Premium Bonds would have no effect on the larger Government investments or the banking interests involved. They also came to the conclusion that they were satisfied, as far as the general public and small investors are concerned, that the present Government issues failed to enlist the financial support that might be expected. Large sections of the public who are in trade, and wage earners, invest in non-Government securities because of their desire for more remunerative although necessarily speculative stock. This sort of financial competition could only be met by some more attractive Government issue. They also pointed out, what must be obvious to anyone who has studied the subject, that the smaller investor does not care for, and does not indeed want, the few shillings a year given to him by way of interest. He has no use for them. If a man or a woman has saved up £20 and wants to put it into something, rather than put it into a. Government Loan from which they would only get a few shillings half-yearly, they will spend it on something else. If you had Premium Bonds you might obtain all these amounts and the total would be very considerable.

As regards the effect of the issue Premium Bonds on the financial prestige of the country there was a division of opinion in the Committee. The larger num- ber of witnesses who gave evidence as representing financial interests were of opinion that for the purposes of the War when conditions were abnormal it would be in no Way detrimental or prejudicial. This matter of Premium Bonds was considered in 1916 by the War Loan and Small Investments Committee, and the conclusion they came to was that Bonus Bonds, as they called them, would probably be a very attractive form of investment and considerable sums might be obtained by such an issue. But, on the other hand, objections would not improbably be taken to any proposal in which the element of chance was involved, and the opinion of the Committee being sharply divided they were unable to make any recommendation on the subject. That was in 1916. However, the Premium Bonds Committee sat in 1917, and in 1919 the Chancellor of the Exchequer issued his Victory Bonds. The view taken by the 1916 Committee as to the difficulties that would occur if the element of chance was brought into the question of loans, therefore, disappeared altogether, because the Chancellor of the Exchequer issued the Victory Bonds and thereby introduced the principle of chance. The same misfortune which befell the Victory Premium Bonds in 1916 also befell them in 1917. There was a sharp division of opinion on the Committee, half of whom were in favour and half against, and in the end they thought it better to say, "We will make no recommendation for the issue of Premium Bonds at present, but will leave it to the future." Out of thirty-five witnesses called eighteen were in favour of Premium Bonds, twelve against, and live neutral; and the Committee in their Report say that they note with interest that even that the division of opinion did not follow on clear and regular lines, as, for instance, even in the ranks of ministers of religion, who naturally held strong views against gambling, there was by no means unanimity as to the morality of the Government's connection with Premium Bonds.

At the present moment the French Government are contemplating the issue of a Lottery Loan, another form of Premium Bonds. One pound is now equal on the present rate of exchange to thirty-six francs. Is it not human nature for people, finding there is no Premium Bond issue in this country, to subscribe to the French Loan, more especially in view of the favourable rate of exchange? I am told by several bankers that a great number of inquiries have already come to hand asking when the French Loan is coming out, and suggesting the selling out of securities in order that the money may be placed in the French Lottery Loan. That would be most disastrous for this country, and I appeal to the Government to try and do something to stop the money leaving this country. I suggest they should come to An immediate decision on the matter and forthwith issue a Premium Bond Loan. If that does not commend itself, if, as the Chancellor of the Exchequer tells us, no fresh taxation is likely to 'be forthcoming—and that is a very pleasant thing to hear—I suppose we may also take it there will be no fresh Loan issued. Personally I do not think that can be so, and it may be that the right hon. Gentleman w ill alter his decision and within the next six months we shall have the issue of a Loan which will have to be a very large one. May I then make a further suggestion to the right hon. Gentleman? Let him set up another Committee. This is an entirely new House. A great number of its Members never heard of the last Committee on Premium Bonds, and inasmuch as the views taken by the new House differ entirely on many things from the views of the old House, it might be well to set up this Committee at once and give the House an opportunity of deciding whether or not it wishes to have an issue of Premium Bonds. If that is done, I have no doubt whatever that the Committee will come to a favourable conclusion in regard to the issue of Premium Bonds, and I trust that that will be one of the proposals put forward by the Government for the diminution of our debt.

8.0 P.M.


I welcome this Debate because of the grave concern regarding our financial position which exists all over the country and which is reflected in this House. I listened closely to the Chancellor of the Exchequer this afternoon, and I find it somewhat difficult to understand the position the right hon. Gentleman adopted to-day as compared with that which he adopted a few weeks ago. I do not wish to cover ground which has already been so well covered. But I cannot help remarking that if the view which my right hon. Friend took ten weeks ago regarding the financial condition of the country was correct, there is an entire lack of evidence in his speech to-day that the position has materially changed. I do not know whether my right hon. Friend is a deep student of Scripture, but having regard to his speech ten weeks ago, I should have thought that he had then, if his attitude was correct, been taking a course in the Lamentations of Jeremiah, but since that time he has evidently gone in for something like, shall I say, Pelmanism, which gives one a more exact sense of proportion and perspective. In any case, I was very glad that he managed in some way to dispel the gloomy atmosphere which he conjured up in this House about ten weeks ago, because under his speech to-day, so far as I could gather the impressions of the House, that gloomy atmosphere disappeared like a morning mist before the noonday sun. I was very interested indeed to hear that he has taken steps to reconstruct the system which has hitherto obtained in the Treasury, because the few observations which I meant to make tonight had something to do with the antiquated system which has hitherto obtained in the Treasury. I do not think it is any good raking up the past except in so far as it provides lessons for the future, and with that object in view I wish to refer for a very few minutes to the position of this country as at the date of the Armistice, 11th November, 1918. Up till that time, for four and a half years, war had been the staple industry of Europe, and in our own country we had had two gigantic war machines at work. One was a recruiting machine to collect and send men into the Army; the other was to provide equipment and fighting material of all kinds necessary for the Army and Navy. On the 11th November the recruiting machine stopped dead, but the wheels of the other machine continued for a long time to revolve. Why? The Armistice had been signed, and if we had not at that stage won the War there should have been no Armistice. I do not mean to suggest that at the 11th November the doors of every munitions factory should have been closed, or that the hammer in every Government dockyard should automatically have become silent. That would be absurd and ridiculous, but I think it was equally absurd that we should have gone on implementing contracts which had been entered into as if there had been no Armistice and no certainty of peace.

This has a very direct bearing on the financial position to-day, and I should like to know—and this is intimately connected with the Treasury—whether there was any break clause in those contracts which were entered into by the Ministry of Munitions and other Government Departments? In this connection may I refer for a moment to a statement which was made by the Parliamentary Secretary to the Ministry of Munitions? He stated that at the 11th November there were 30,000 contracts outstanding and that these involved a liability to the State of £347,000,000. One hundred million pounds was saved to the nation by the whole question of contracts being put into the hands of Sir Gilbert Garnsey. 1 do not deny that the saving of £100,000,000 may have been a great business achievement, but even having regard to the extraordinarily great operations of the Ministry of Munitions, I should like to know why it was ever possible to have a contingent liability of £347,000,000. In this statement which was made by the Parliamentary Secretary—a most ingenuous Minister—he made several amazing admissions. He said that at that time 1,000 accountants were employed by the Ministry of Munitions who were going into the earlier accounts of the Ministry and recasting them upon the basis of a double-entry system of bookkeeping. That was five years after the War started. I do not know what impression that conveys to this House or to the business men in this House, but I should say the impression is very much the same as if he had announced that instructions had been issued to his staff that they were to cease now reckoning accounts on their fingers and were being instructed in some sort of elementary system of arithmetic. It is in that connection that I wish just to say a word or two about the Treasury. There has been all through this War a certain measure of Treasury control. I cannot imagine that a great Department like the Treasury could sanction the spending of huge sums of public money without providing in a definite way a proper system of keeping accounts. There is no trading concern to-day in this country of any standing which does not regard as a vital essential an up-to-date system of keeping accounts and scientific accountancy, and it came to me as a great surprise to find that the system in the Treasury began and ended with demanding a voucher for every payment. I am not aware that to-day at the Treasury there is a single individual who has been trained in scientific accountancy. I wish to make no attack at all upon the able and distinguished men in the higher division of the Treasury, but however great their. academic attainments may be my information is that, so far as accountancy is concerned, they are in the elementary stage, and I am quite prepared to give proof of that statement. I think it will make my point clear if I may be permitted to read a short extract from a letter which appeared in the "Times" regarding the Treasury system of keeping accounts. It was written by Sir John Keane, and appeared on 27th August, 1919. I am sorry to trouble the House with an extract of this nature, but it has got an important bearing upon the question of expenditure, for which we in this House must accept collective responsibility. He says: The recent efforts of the House of Commons to control expenditure have been almost pathetic. Few, however, of those who attack the Government really appreciate why the Government is so elusive and at the same time so successful. A comparison between Government and business methods soon reveals the reason. In the latter, control is exercised through the medium of a scientific account, showing complete expenditure in an incontrovertible form under headings corresponding with the functional organisation. In the public service the whole account leads up to one object, which is to ascertain the cash required for the Budget. There are no accounts in scientific form, services rendered by one Department to another are not charged, and even within one Department the headings are by classes, not objects, which the mind can grasp, and the general form is useless for control by costings. I believe that to be an absolutely true statement of Treasury control as it exists at the present time, and if it be so I cannot wonder at the perfectly justifiable charges of Government extravagance which have been brought against the spending departments of the Government. A loose system of keeping accounts pre-Tailed in every Government spending department during the War, and however much we may wish to allow for the storm and stress of war; I think there is a great deal to be explained, both in the Ministry of Munitions and in the Air Ministry, where I believe enough money was wasted to have paid a year's interest on our present colossal National Debt. What is the remedy? I am very glad that the Chancellor of the Exchequer has outlined some system of reorganisation, and that he is bringing Sir Warren Fisher from the Board of Inland Revenue. I do not know personally his qualification, but I do know that in the lower division of the Inland Revenue there are accountants second to none in the country. I do not wish to detain the House for any length of time, but I want to make it clear that any indictment which I level now is at the Treasury and not necessarily at the Ministry of Munitions or the Air Ministry, which were got together in such a hurried manner and which had every right to be guided in the matter of keeping accounts by the Treasury. It is elementary, when I read the evidence even of Sir J. Bradbury before the Sub-committee for dealing with public accounts, that he himself confessed in his own words that he only knew the broad principles of bookkeeping, and although we have an Officer of Public Accounts he himself also admitted before the same Committee that he was not ha any way a trained accountant and knew nothing of the system of scientific accountancy. I do hope that the Chancellor of the Exchequer will see that this very necessary element of accountancy is not left out in any new arrangements that he is making at the Treasury.

I only wish to say one word more on a slightly different line. We charge the Government with extravagance. I have done so outside the House, and I am not going to run away from anything I have said there, and I propose in a minute or two to give the House a practical example of extravagance in the present spending departments. The House is aware that the Admiralty during the War requisitioned a large number of steamers. They requisitioned a considerable number of very large passenger steamers, and some of these were converted into armoured cruisers. These are now being handed back to the owners, and I wish to refer to two steamers which were requisitioned and are now in the process of being handed back. They belong to the Royal Mail Steaul Packet Company, and these two steamers are called the "Arlanza" and the "Almanzora," of a, united tonnage of about 31,000 tons. After the wear and tear of about four years of war, when these vessels are to be handed back to the owners one elementary process was necessary. They ought to have been dry docked. I am sorry no one is here at the moment from the Admiralty on the Front Bench, because what I have to say concerns them very intimately indeed. These two steamers are now being handed back, and instead of being dry docked a. senior Naval officer decided that they should be reconditioned. They were reconditioned. That took six months. After this process, it was then discovered that the rudder posts of both vessels had gone, and would require to be renewed. This process is now being gone through, which means a delay of another six months. What does that convey to the House The Admiralty are paying to the Royal Mail Steam Packet Company a sum of £2 per month on gross tonnage, which means, roughly, £30,000 per month on each vessel. The combined operations could have been carried through in six months. The vessels could have been dry docked, the bottoms and under fittings examined, and the reconditioning carried on at the same time, and the whole process finished in six months. It now means a year for the cry docking and the replacing of the rudder posts. Therefore, on this operation alone, the nation is paying something like £366,000 on those two vessels which it ought not to have paid, and a decision of that nature is left in the hands of the senior Naval officer at Belfast. I challenge inquiry in this matter. Not only is all this expense involved, but if there is one thing that we want to-day it is shipping tonnage, and for six months these vessels, which might have been carrying meat from the Argentine are out of commission entirely, meaning a double loss to the nation.

It is extremely difficult sometimes, when one wishes to offer helpful criticism to the Government—because I wish to offer nothing eke—to get at facts, and the Front Bench is very adroit in avoiding giving any assistance to any of us who wish to get at the facts. But I have got the information which I have now given to the House from an authoritative source, and I would like to know what the Admiralty intend to do in a matter of that kind. We know very well what we should do in business, but the serious part of the whole matter to me is this. I have got this information in quite an exceptional way and a tiny bit of the curtain is drawn on one side, and we see part of the stage. I wonder what the effect would be if the whole stage were revealed, and we saw all those players at work in this waste end extravagance that is going on. I am quite sure the Government, as a Government, is as anxious as we are who criticise them, to prevent this waste and save expenditure, but surely it ought not to be possible for any officer in the Navy to come to a decision without proper supervision and control which would render such an amazing act of this kind impossible. I do hope that this matter will be represented in the proper quarter, and that proper disciplinary steps will be taken to see that this officer is brought to book for his action in this matter, not only for his own sake, but to serve as an example to those who might be tempted to follow him.


I should like to-make one or two observations, seeing that I occupied a position under the Government which brought me into contact very much with heads of Departments and civil servants. I would like to say that I consider confidence is the basis and the first essential on which all businesses are built and developed, and I feel that we in this country need that confidence today in our national affairs. The newspapers which have started the "stunt''—if I may be allowed to refer to it as such—against the Government for waste, were, up to the month of May, the loudest in their demands that money should be spent to uphold the Army and Navy and meet the expenditure that was necessary until peace was signed. I wonder whether this attack has some reference to a certain speech that was made by the Prime Minister in reference to a certain newspaper proprietor. Personally, whilst I associated myself with what he said in a way, I was rather sorry the Prime Minister did make those observations. Still, I think they were true, and it is just as well the truth should come out. I, at any rate, as a supporter of the Prime Minister and the Coalition Government, do not intend, so far as I am concerned, that that attack shall succeed in defeating and destroying the Government. At the same time, none of us is foolish enough to imagine that the Government are perfect. They are far from perfect, and we have on occasions to address observations to the various Ministers, but I would say in any connection I have had with heads of Departments I have received every courtesy.

I was very pleased with the statement of the Chancellor of the Exchequer, because, personally, I do not know there is anything to be alarmed at if we only set our hand to the work before us, and do something. I believe we spend too much time in discussing what is past, and, so far as I am concerned, with regard to a lot that has been said, the water has gone under the bridge and gone past. What I am concerned about is harnessing up the forces we have undoubtedly got and turning them to good account in the future. It is no good our having made the terrible sacrifices we made during the War, and it is no good our having gone through our experience with the large undertakings we have had, if we are not going to learn some lessons for the future as to how to carry on the large national businesses, which ought to be carried on on a business footing. I notice in the Paper that there is an item of £1,800,000 for the British Dyes. I have the honour to represent Huddersfield in Parliament, and I think I told hon. Members of this House that we have got a lot of blues from the British Dyes which were not very pleasant; but what we want from the British Dyes is efficiency. A good many manufacturers in Huddersfield are very much concerned that, whatever protection you give to the British Dyes, unless we get into the British Dyes the development that is necessary, no amount of protection will enable them to meet the competition which undoubtedly comes from Germany, and will continue to come, and I personally must make this appeal to the Government. If the British Dyes at the present time cannot give us colours that will stand milling, then we must get them from Germany. Of that there is no question.

I would also like to refer to an item I notice, that there is probably going to be a loss, according to the estimate, on the Post Office. It is expected that we shall receive £43,000,000 and it is going to cost us £44,400,000 to run the Post Office. To me it is a very serious matter that we should have the service we have in the Post Office, and especially in the telephone, and have a loss. If I am in order I should like to relate that I met to-day a City man and a banker, and he told me he would like to take over the Service from the Government and give them a guarantee of £500,000 profit for the next six years. That does not mean that this gentleman would reduce the staffs, but that he would get them efficient. If that is a fair criticism on the part of this friend, I think it is time we had our house put in order and saw to it that we get value for the money, and not make a loss.

I am very sorry that through no fault of my own I was not able to be here when the Profiteering Act was discussed. Tam very concerned that the scheme put for- ward by the President of the Board of Trade should not have received better and more considerate attention than it did receive. As some hon. Members know, during the War we had to buy considerable quantities of cloth. I happen to be in a position to know that there must be at Pimlico huge quantities of cloth which we shall never require if we are going to carry out our intention to reduce our Armies. It is absolutely suicidal from a business point of view to keep those stocks at Pimlico and not turn them into money, so enabling us to meet the demands of the market that our manufacturers are now called upon to face, and develop the export trade, which is the lifeblood of this country. I feel this matter strongly, and I get up to make this protest. 1 believe that at the present time that the heads of the various Departments have no more co-ordination than a cat and a dog have. I dare say some hon. Members will remember the story of the man who was visiting an old couple whom he heard quarrelling. He entered, and, seeing a cat and a dog lying amicably together on the hearthrug, turned to the couple and said: "Why don't you be as agreeable to each other as those are?" "Ay," said the old man, "but tie 'em together and see what they will do."

The point of that is this: That our head 3 of Departments ought, at any rate, to be there for one purpose, and that is to give the best value for the money they receive and the best attention they can to the country. In place of that I am absolutely certain there is no co-ordination between the Ministry of Munitions, the War Office, and the Board of Trade in regard to the offer that was made by the Wool Council as to the provision of standard suits which are needed in this country. These were offered. Three months afterwards—that is to say this month—a letter was received from the Board of Trade saying that they did not intend to avail themselves of the offer that was made by the Wool Council. This is a body consisting not only of employers of labour but of eighteen or nineteen members of the Labour party. This is the sort of thing which destroys confidence and worries people who are anxious to work for the country, as these Labour men have worked for the Government—during the two and a-half years I was at Bradford they worked most loyally —and it makes us wonder whether the promises that were made are going to come to anything, seeing that the moment you get an opportunity of putting into operation some practical scheme you put it to one side and so make the finest scheme on paper not worth the paper on which it is written‡

I desire to be very emphatic in saying this: We must have co-ordination in our spending Departments. There has been a lot of ridicule in regard to the proposed Ministry of Supply. During the last financial year, which ended in March, a certain Department saved over £50,000,000 in regard to the supply of wool, leather, and various commodities. If we have learnt anything during the War, surely we have learnt something that we can put into operation to help us during peace‡ I want to make the point that we must concentrate in regard to our buying. We want it to be arranged so that the Prime Minister or anyone in authority can send for the head of the particular Department and get to know what the expenditure is going to be. At present everybody tries to put the responsibility on to another. Which reminds me of the story of the old Yorkshireman who had two sons, terrible fellows at drinking and the rest of it. The old man was very concerned about these boys. He talked it over with a friend on one occasion, and the friend said: "Bill, if those lads were mine I would do so and so." Yes," replied Bill, "if they were your boys that's what I would do too." The point is this: that during all these discussions we are more or less telling what the other chap should do. We talk about production. So far as I am concerned, the deficiencies of production in this country are not to be put on the shoulders of Labour alone. I am an employer of labour, but I have also been a worker. I am not ashamed to say that I worked full time before I was twelve. Therefore my sympathies are with the workers. Whilst we talk of increased production we must give increased facilities to the workers and see that the conditions of work are better than they have ever been. Can we get these conditions unless we restore confidence? Therefore I welcome this discussion.

We have been the victors in the War. Are we going to be a second or a third-rate power in the commerce of the world? We shall be unless we improve our methods very soon. I appeal to the leaders on the Front Bench that they should see that we stop unnecessary spending; that we give opportunities for production on the best possible lines. I feel if we do that we shall certainly not have had this discussion in vain. We require at this time a united purpose just as we did during the War. I sincerely hope that as the Debate goes on it will evolve some such spirit as has hitherto been shown, because, after all is said and done, I question whether this matter would have been raised if it had not been for the personal feeling outside. Personally, I am satisfied that we shall do well to have every confidence that this country will come out on top, but it will need "a long pull, a strong pull, and a pull altogether."

Captain LOSEBY

I have deliberately chosen the time when the majority of Members are otherwise and possibly more —[An HON. MEMBER: "Wisely?" perhaps wisely employed, because I frankly acknowledge that I am very anxious to raise what to a certain extent is a side issue so far as this Debate is concerned. I venture to represent the point of view of those of us who are afraid that the widespread feeling throughout the country in favour of economy will be exploited by selfish and interested people. I shall endeavour to represent the point of view of those of us who have the most complete confidence in the wise judgment of the present Government, but who have at the same time very serious suspicions in regard to the bonâ fides of some of the most ardent and insistent critics. I am anxious to represent the view of those who are afraid lest the Government should attach to criticism which we regard as interested an importance which we think it does not deserve, or turn aside to even a small degree from the programme of ameliorative reform to which they have set themselves.

It appears to me that the more violent critics of the Government at the present time may be divided into three classes. First come those who are prepared to make use of any weapon, preferably poisonous, with which they can undermine the Government, in the hope that they may eventually bring about its downfall. Secondly, there are the selfish and interested persons who see in the present agitation in favour of economy an opportunity of stifling ameliorative reforms which might bring inconvenience to themselves and possibly expense. Thirdly, there is a class of impartial minded and perfectly honest people who are genuinely alarmed at the present financial condition of the country, who, I believe, have not the same confidence in the Government that we have. It is because I am afraid of the second class that I venture to rise and as respectfully as I can to issue my warning to the Government. In regard to the first two classes, I hope that the country at large will recognise the motives of those who are promoting the agitation, and will discount it accordingly. With regard to the third class, and it is not inconsiderable, who are genuinely alarmed at the present financial position of the country, I would ask them to examine one or two elementary facts.

First of all, I would ask them to remember how this huge debt came in the first, place to be contracted. The Government of this country, faced with a national emergency spent money, I acknowledge, at a prodigious rate. I have no doubt there were people in this country who made use of the opportunity at a time when the Government could not stay to haggle and bargain by taking advantage of the situation. I would remind them that of the sums of money that were at that time expended I believe only 13 per cent. flowed out to foreign streams, and 87 per cent. went back to the source from which it came. The volume of water in a river is not to be measured by the volume which flows down some small tributary to the mill beyond, but it is to be measured by the volume in the river itself. The wealth of a nation is not to be estimated by the temporary surplus or deficit of the Exchequer, but by the sum total of the wealth of the individuals as a whole. Although it is true that the funds of the Exchequer at the present moment are somewhat low, I do say that in the country as a whole there is every evidence of wealth. This is the warning which I venture to give. I think the vast body of the people of this country are satisfied in the wisdom of the Government. Like myself, they believe that they realise full well the necessity of economy. Like myself, I think they believe that they will exercise their judgment in a determined and skilful manner and do everything in their power to eliminate waste. At the same time I wish to point out the direction in which, in my opinion, true economy does not run.

No undue proportion of the weight of this burden of debt which rests upon the shoulders of this country should be necessarily borne by those who are serving tie State in a direct capacity. In the business world throughout the country due allowance is made for the decreased value of the sovereign, and the spending power of money. For example, in the Civil Service, particularly in the lower grades, there is a danger of the Government being afraid of the false cry that will be levelled at their heads of being extravagant, as it was raised in regard to the £1,500 required for a Parliamentary Secretary at a time when we were passing a vote for millions. Let me give an illustration. Take the judiciary of England at the present time. Take the present position of County Court judges who, as we all know, do work of inestimable value to the country. At the present time, owing to the decreased value of the sovereign and the amount of taxation, they are finding it difficult to meet their ordinary obligations, and the position may come when the Government will find in regard to their Civil servants that not only is it not possible to decrease expenditure, but from a sense of equity and justice they will find it necessary to in. crease expenditure, and I hope if such is the case they will act boldly and according to their own discretion with a wise judgment, free and unhampered, regardless of outside influence.

I have only two more points. In regard to questions of ameliorative reform there are at the present moment questions involving expenditure and increased expenditure, which I do not see in the Chancellor of the Exchequer's estimate this afternoon. Some of us are fighting for them and we intend to go on fighting, and we know that we shall be met by the cry that the country will not stand it and the demand for economy makes it impossible. This cry will be raised by the second class to which I have referred, who see in this present agitation an opportunity for stifling ameliorative reform. I will refer to one question which the Chancellor of the Exchequer has overlooked. The right. hon. Gentleman at no very distant date will be confronted with a demand for certain increases in regard to the pensions of disabled soldiers. I will ask him to remember, as he remembers in regard to old age pensions, that there is a certain Committee sitting at the present time, and that that Committee will be making recommendations which will involve increased expenditure. It is not economy to fail to redeem your pledges. It will not be considered economy by the country at large, and I should like at this early stage to discount, if I can, the clamour which I know will arise. And so it is in regard to housing and education. Those of us who are anxious to see certain reforms effected at an early date in the direction of education know full well that they will cost money, but we shall not be deterred, because we believe that this time of emergency, when the consciousness of the War is upon us, is the time to get these reforms through at all costs. I have every confidence in the judgment of the Government, and that they will exercise their judgment with a wise and true discretion.

Captain C. COOTE

Not so many days ago the right hon. Gentleman the Lord Privy Seal (Mr. Bonar Law) warned the Members of this House against paying too much attention to the clatter outside. Possibly because this is admittedly an important question—indeed, the most important question—the amount of clatter which exists outside is proportionately great. I have been rather amused, as the Debate has progressed, to observe that it has degenerated, if I may use that word, from an attack upon the Government to a criticism of detail or to the making of suggestions. That is the only possible course which such a Debate could take, because it is perfectly true that no great general saving on policy is possible. You can, of course, save on detail, though, as my hon. Friend who has just sat down has said, there are certain things, certain broad issues of policies, upon which it would be foolish, and even more than foolish, upon which it would be criminal, to economise. For myself, I would not willingly consent to see one penny saved upon such matters as the payment of fair and just pensions and education, upon which I believe the whole future of the country depends in a degree of which the large majority of people are not in the least aware. Therefore one who tries to, be an impartial observer is reduced to the conclusion that there are only certain directions in which saving is possible. Those directions are fairly obvious. They were mentioned in detail by the Chancellor of the Exchequer in his speech. They are, of course, upon the armed forces of the Crown, upon State subsidies, upon the unemployment dole, and upon certain minor points of detail, all of which in the aggregate count, and in my opinion it is very important that they should be dealt with in the most drastic spirit.

I was very impressed, as I am sure every Member of the House, whatever his politics, was, with the statement made by the Secretary of State for War (Mr. Churchill). He made out a very clear case that his Department, so far from having been actually silly in expenditure, have used, so far as the War Office, with which I have been in contact many times, are capable of using, a very wise discretion in the matter of expenditure and saving. I would just like to quarrel with his figures upon one point. He admitted the impeachment that he was responsible for an error of £6,000,000 in the Estimates, and he said that it was due to The delays in demobilisation. Almost in his next breath he said that, so far from the total number of men now under arms being more than lie estimated they would be at this date, they were considerably less. If demobilisation has been delayed it is rather curious that there should be fewer men under arms now than he expected there would be when he made his estimate. I merely make that point and pass on to some few suggestions whereby I venture to hope some saving can be effected. Although, as I have said, saving can only be effected in matters of detail, yet it is just those very matters of detail which most impress the people of this country, because you find that what impresses a man most is what he sees going on next to his own door. That is why this campaign in favour of economy, this anti-waste campaign, has gained such a large measure of support, and quite rightly, in the country. For example, a pensioner or a soldier sees a palatial residence marked up "Ministry of Pensions, Re-survey Board." He says, and says quite rightly, "The Ministry of Pensions, Re-survey Board," whose work he knows just as well as the Ministry itself, "have taken this great building at an enormous cost. If they can afford to do that sort of thing, they can afford to pay me more money. If they can afford to take this enormous building, surely the financial position of the country is not so very bad." Then he looks at his newspaper and sees vague threats of impending ruin, and he is naturally prejudiced against the Department and against the Government which is spending money at this great rate. I venture to suggest to my hon. Friend (Mr. Baldwin) that he should call the attention of the Ministry of Pensions to this matter, because the Re-survey Board does not need a palatial residence in which to hold its meetings. I do suggest that is one of the little ways in which economy can be effected.

There is one other point I should like to mention in the way of possible economy. I believe that great economy could be effected in the Coal Control Department. That Department, as far as I have been able to gather, has cost the taxpayer since its inception some £10,000,000, and I think it is perfectly true to say of it, as Mr. Gladstone said of Austria, "You cannot lay your finger upon a single spot of the earth's surface and say, there Austria did good.'" That may be using rather strong language, but I fail to see why it should be necessary to have a Government Department in control of coal when in my opinion you could perfectly easily appoint a special committee of the Board of Trade to administer the legislation which already exists in the Price of Coal (Limitation) Act and the Coal Mines Control Agreement, and thereby save the expense entailed and necessarily entailed, by the setting up of an independent Department with an independent staff.

Those are two of the small details in which I venture to suggest economy is possible—but upon the general point of policy on expenditure as a whole, my position is perfectly clear and my view thoroughly upholds the statements which the Chancellor of the Exchequer and other Ministers have made to-day, that really it is impossible during a war, when everything is abnormal arid when everything is bound to be abnormal, to expect that you can make both ends meet. Some critic might say that possibly the great method of achieving economy is to economise in the interest on your debt, that is to say, to concentrate upon paying the debt off. That is perfectly true, but I would point out this very important fact, that our debt is not the same as it would be if the great part of it was owed to foreign countries. If I may make an analogy I would say if all the Members of this House owed each other £1,000,000 it would not make much difference to people outside, but it would make a very great deal of difference if a Member of this House owed some constituent £1,000,000, and in that case I think the member would be more likely to pay attention to what his constituent said I realise to the full how very necessary it is that we should get back to a normal condition of affairs as quickly as possible, and I do hope that the Committee of Inquiry into the possibilities of instituting a levy upon war accretions or upon fortunes made out of the War will be productive of the most happy results. I should myself have preferred to see any levy which is made of rather wider application, because of course the objection to every form of Capital Levy is that it hits the wrong man. You cannot hit an individual who has made money and spent it, and that is the great objection to any form of Capital Levy. If you make your levy of wider application then, at least, you have more chance of roping in the right people. I am sure many other hon. Members have valuable suggestions to make, and I ill only say in conclusion that I do hope that the House will not allow itself to be led into extravagance of word or deed by the noise, the exaggerated noise, which is being made outside this House. It is perfectly ridiculous, in my opinion, that it should be possible in these days of easy communication, and of easy methods of making one's views and opinions and the true state of affairs known to the outside world, to get up noise and excitement of this sort. I say nothing of the cause of tie excitement., which may be entirely from patriotic motives, but which has an unfortunate result, and I hope that the verdict of this House will be to give it s, very decided set back.

9.0 P.M.


I think that the outcry against the present financial position is-to some extent justified, and at any rate, without meaning any unkindness towards the Government, I think it will have the effect, if it has not already had it, of encouraging the various Departments of the Government to watch carefully how they are spending their money. But I am perfectly confident that the general body of the taxpayers of this country will not support any proposal for additional taxation. There is no getting away from the fact that under the very noses of the people there has been seen unnecessary squandering of money, which has made them fully alive to what may have been an exaggerated outcry in the Press. I am bound to say that the Chancellor of the Exchequer some months ago presented so favourable a, Budget to us that I was greatly surprised. We have been through a terrible time and have had to get out of the War period and are going through the transition period, and I am not surprised now that we have to face an extra deficit of £223,000,000 in order to bring about equilibrium in the national balance sheet. I listened to the speech of the hon. Member who advocated Premium Bonds, and I think that the Government might Ns-ell look at this subject, since it is now only straining at the gnat after swallowing the camel in the shape of the premium on Victory Bonds. I listened with great sympathy also to what the hon. Member for Huddersfield (Sir C. Sykes) said. He pointed out that the milk had been spilt and said now let us get on with the work of putting the country right. The right hon. Member for Peebles (Sir D. Maclean) enunciated a theory which we must all hold, although perhaps it is not realised sufficiently, namely, that trying to correct the mischief of excessive expenditure by excessive taxation is no remedy at all. It is only a fresh type of the vicious circle. In my opinion a continuation of a policy of excessive taxation would eventually so injure the economic recovery of this country as to widen the gap between income and expenditure. Reduction of expenditure is the necessity and not increase of taxation.

Upon what does all the revenue of this country depend? It depends upon the prosperity of trade. The hon. Member for Erdington (Sir A. Steel-Maitland) mentioned the depreciation of the American exchange and reference was made to the Americas` debt. The only way to reduce the adverse exchange is to stimulate our export trade. Reference was also made by the right hon. Gentleman the Member for Peebles to the elements which go towards recovery. The greatest of the elements which we require in order to get recovery is confidence. How is confidence shaken? I have heard to-day in this House two points discussed which have been discussed during the past months ad nauseam and which go more to destroy the confidence of manufacturers upon whom you will have to depend for taxation to pay your debt than any other points. We have heard this constant talk about confiscation or a Capital levy and a Tax on War Profits or increment. I have during the last few days seen letters from a distinguished judge, a Noble Lord, a professor and a gentleman who bears the same name as myself, although he is not a relative, advocating either a Capital Levy or a Tax on Profits. I have no patience with such people, and for this reason. What do they know about the troubles of our manufacturers who have to do our export trade? Not one of those men has ever been out into the markets of the world to sell goods, and not one of them knows anything about the difficulty of getting capital from the bank or granting credit to customers or finding the money for wages and the purchase of raw materials. Yet, despite that, they would advocate taking away what is the life-blood and seed-corn of industry. The advocacy of such a policy at this time is shaking confidence, and confidence is one of the great necessities in order to stimulate the export trade. I dare say all those policies are possible, but we have seen years ago the Prime Minister's own propaganda in favour of increment taxation on land values, and we know what the yield has been. I am convinced that this threat of a Capital Levy or a Tax on War Profits is doing a great deal of harm, and must do incalculable harm if put into practice. I would go further and say that sooner or later, unless the talk about these two taxes is stopped, you will shake incidence to such an extent that you w ill prevent the manufacturers getting on with the export trade.

I will give the House a further example of the crazy ideas people have in order to pay off the Debt. They are in too great hurry to repay the Debt. I read in a well-known financial weekly paper not many weeks ago such a proposal as this; that the whole of the Church property should be taken away by the State, that Westminster Abbey should be sold, and the proceeds—as it would be probably re-sold back to those from whom it was stolen—should be used to pay off the National Debt I When people talk editorially in that strain in a responsible weekly paper whose name is well known throughout the country you see to what lengths of folly people turn when they are talking about financial matters and are obsessed with the idea of the quick repayment of loans we had to issue to keep the War going. I will tell the House what happened within my own knowledge and experience during the last three or four months owing to threats of attack upon capital, and this proposed attack upon war profits. I must remind the House that most of the war profits earned in the country have already yielded 80 per cent. of their bulk to the Government and Income Taxes also, and during the present year they will yield 40 per cent. plus Income Tax and Super-tax. I saw a probate affidavit sworn by three executors. The business had been the dead man's father's business and his own business. His son has to pay Estate Duty. Every penny the dead man possessed is in his factory, machinery and buildings this son came to me and laid the matter before me. He has to pay a large Estate Duty, which is quite right, and then Excess Profits Duty which has accrued during the past year. All the money the deceased man has left is in the business. The Estate Duty has to be taken out of the business, restricting the purchase of raw material and the opportunity of giving credit to customers; in addition Excess Profits Duty also absorbs a large sum. This young man came to me and said, "I have enough orders for export trade to keep me going for two years, but I have no money. The bank will lend me £30,000 or £50,000 but I am not going to keep awake at night worrying over borrowed money from my bankers, borrowed to stimulate export trade and then be merely a slave of the tax-gatherer for my pains." I can give the Financial Secretary to the Treasury the man's name. I have seen the affidavit with my own eyes. He is frightened to stimulate export trade—the very tiling we want—because of these stupid attacks on capital or war profits. It is the old story that if you load a camel to such an extent that he cannot bear the burden he lies down under it.

That will be the effect of these Capital Levy and War Profits Tax proposals. It would be a foolish thing on the part of the Government to give the slightest lip-service to such proposals as a Levy on Capital or a tax on war profits, because, on the whole, they would do more harm than good. If there is a class of men who wish to back the Government up in putting the country right at the present moment, it is the commercial community. When the elder Pitt was winning victories in North America and India, his great support was Beckford, and the commercial community surrounding Beckford, the Lord Mayor of London. I came this morning from a meeting of the Associated Chambers of Commerce of the United Kingdom, a body which represents the chambers in the no cities of this country, every chamber itself containing the principal manufacturers of its district, and this body is dead against these attacks and threats to which I have referred. It cannot and does not pay the Government in the long run to get endways with the commercial community. Even if you discontinue these hints of attack you s all leave something impalpable in the minds of the public with regard to the safety of capital, which has the effect that when industry needs to borrow money in preference or ordinary shares or debentures, to run an existing business or extend it, industry has to pay more money in interest than it would do otherwise. This puts up the price of money in the market. Again, it puts up the price of money when Vie Government want to borrow on Treasury Bills. It all comes back with repercussion on the taxpayer and on the poor. The whole thing is a vicious circle of the worst kind, and the sooner we realise that the better.

Suppose you do take the money—I do not want to explore all the nooks and crannies of the arguments in favour of these particular proposals; you con.c1 easily take the money—when you have done it you will have reduced this country to the position of Turkey and Persia. No one will dare to own or care to earn any money. We are suffering in India] at present from the same sort of trouble. We see silver to-day at 66d. We find great difficulty in getting silver rupees for India. We find the whole export trade from India hampered on account of the shortage of silver. Why Because through many generations there has been an attack on the ownership of anything in India. The ryot and the middle classes in India, for fear of the tax gatherer or extortion in the past, and from lack of confidence, have buried money or hung it upon their wives' arms as bangles and put nothing into industry. That is the outcome of attacking a man who has come by money honestly. You may now create the same fright in Britain that we are trying to allay in India. In Britain you see now evidence of it. The price of pearls and diamonds in this country has gone up materially owing to the fear of the timid that their profits or incomes may be taken. They make that the excuse for buying expensive jewels for fear that the-money may go to the Government in another form. There is a type of thought in this country which is very anxious to pay off the £8,000,000,000 debt in a hurry. The Chancellor of the Exchequer has told us that he has a half per cent. Sinking Fund to pay off the Debt at the end of fifty years. I think that quite soon enough.

Let me give the parallel of the debenture debt of a great business. This country had to fight for its life. A business has to do that sometimes. It has to spend money in advertisement and on capital expenditure, it has to put in fresh machinery, it has to bring out fresh types of patterns, all of which means great expenditure. It borrows on debentures from the public to pay for these things, but it does not five minutes afterwards set to work to pay them off. That only takes the seed corn out of the business. There is no necessity to hasten unduly the repayment of this £8,000,000,000. I believe the half per cent. Sinking Fund provided in the Budget of last May is ample for the purpose we have before us. Any acceleration will by the sweep back do more harm to the country than gradual repayment. Ever since we have been a trading nation this country has seen, decade after decade, a growth of revenue. I am certain that if von leave industry to work ahead on its own lines and do not tease or threaten it, you will see, decade after decade, an increasing annual revenue, more than enough to meet the annual expenditure of £800,000,000. Another point which has not been referred to in the Debate is that one of the Ministers on the Treasury Bench pointed cut that America was a long time coming in to take up the white man's burden in Turkey. There is another burden of which a good many thinking Americans are equally conscious, and which they regard with some qualms of conscience. We rushed in to save civilisation early in the War. We had to find a great deal of money for Russia, Italy, and France. The time has come when responsible men in the United States think they should pay their fair dues towards that early expenditure. Our dignity is not involved. It is a question of fair play. They should be asked, and I think they would be willing, to take off our hands part of the debt which Italy and Russia have incurred with us. We do not want them to repay us the money, but they might credit us with a large amount of this money we have lent to Russia and Italy, so that they might release us from the indebtedness which we owe them for money which we borrowed of the United States. It is not unreasonable that the United States should be asked to review the whole question. We came in first to save civilisation. They benefited from our efforts and should be called upon to bear some of the burden. I have no patience whatever with people who not only are in a panic about the present finances, but are in a panic about what is going to happen to the country. If you read Cobbett, about 1814 lie was making the same lugubrious remarks as some of our countrymen are making to-day. He was talking about the dead-weight of debt which ought to be repudiated. There was his talk about bank notes which ought not to be taken, and everything he said has been reproduced in the last two or three months by speakers and writers in this country. I have no patience with people who are pessimistic about the country. Let us remember the Budget of "Prosperity" Robinson a few years after Waterloo. We shall show a deficit between our exports and imports at the end of this year of £700,000,000. People may think that is a large gap between imports and exports. I think very little of it. And I think towards this £700,000,000 excess of imports over exports there is a very large figure of invisible exports which we have not taken credit for. Shipping, which brings us a great deal of money now, is very likely to contribute £350,000,000 towards that. There is banking and insurance bringing in £100,000,000, and dividends upon stocks and shares another £150,000,000; that is £600,000,000 of invisible exports against £700,000,000 excess of imports over exports. Then you must give credit for £75,000,000 we owe to America in the form of interest per annum, which brings us down to a credit of £525,000,000 in hand in the form of invisible exports to pay for this £700,000,000 excess of imports over exports. It is a marvellous thing, and I congratulate the country that within twelve months of the cessation of the War we can bring our excess of imports over exports to within £175.000,000. I believe that can be brought down a good deal, because of the remittance from Irish people in America to their friends in Ireland. I believe that there are other invisible credits which will reduce it further lie who are identified with manufacture have every confidence that we can put the country right. I have come to-day from a meeting of our executive council of British Chambers of Commerce. I never heard one of these representatives of the 110 big towns of England saying anything that looked like timidity or fear. They were full of orders, full of hope, and full of enthusiasm. All they said was "Leave us alone. Do not paralyse our action by threatening our capital. If only Labour will stand still side by side with us, and not rock the boat, we, the British manufacturers, will pull the country through again, as we have always done in the past."


We have heard a number of very interesting speeches tonight. The speech to which we have just listened has been a very noticeable one from its point of view, and it has been an answer to the one which preceded it. The speech in which the [...] Exchequer originated the Debate gave us an easy and soothing dose of opium from which we were rather disillusioned by the more defensive attitude of the Secretary of State for War. But such a speech as that of the hon. and gallant Gentleman (Captain Coote) is just the kind of speech that makes me think it absolutely necessary to insist afresh upon the broad facts of the case. That class of speech is only too much inclined to mislead public opinion in general, and make it think the financial situation of the country is not so very bad after all. Let us bear in mind that the gross capital debt next March is estimated at £8,075,000,000, that that will involve a payment of interest amounting to £400,000,000 a year, and that there is a £473,000,000 deficit on the present year's Budget instead of the £250,000,000 which was originally estimated. One is justified in asking, however much we believe in the expert knowledge of the Treasury, and however certain we are of its bona fides, whether arch official prognostications are not very much apt to create anxiety.

It cannot be repeated too often that we must cut our coat according to our cloth. It is almost a platitude in these debates. I have used it often myself—but it cannot be repeated too often, and we must live within our income and not live on our capital. The position becomes all the more anxious to my mind when we remember that there are, I believe, authentic cases of paying taxes out of capital. It is a matter upon which people are very reticent, and are not much disposed to tell you that they do it. But there is considerable reason to suppose that during the last year it has been done, and if that is so, it is a very serious note of warning to the nation. That cannot go on indefinitely, and I was very glad to hear from the Chancellor of the Exchequer that the Treasury in these matters of enormous expenditure fully realises its responsibility and that the responsibility is not only with the Chancellor of the Exchequer and the Treasury primarily, but is a Ministerial responsibility for which the whole Cabinet is and ought to be responsible. If he is strengthening financial control in the various departments of the Government he is following up a suggestion which has been made frequently from the days of the Public Retrenchment Committee, on which I served and for which I originally moved in this House, to suggestions which have been made more recently that there must be more strict Treasury control, and that the Treasury must not be merely a spending department, but must be one which regulates and watches the others effectively. All that is perhaps merely repeating what has been said before but it needs to be repeated.

Then we come to the general national position and what is to be done. Our chief remedy is increased production, a vital matter upon which much has been said and I will not now add more. Then there is the question of increased taxation. We are all conscious of a desire for social reform. Many of us have our special hobbies, on which we desire to see great expenditure, but Whatever those hobbies be they ought to be subordinated to the position of the national finances. I have long been interested in education, from the days when I served on the old extinct London School Board, onwards, but I do feel that even such admirable legislation as the Education Act of last year must be considered, I will not say reconsidered, from the point of view of our serious financial situation, and I am gad to see the President of the Board of Education present. That Act involves, ultimately, an additional £10,000,000 cost per year to the nation. I know it is constantly said that you cannot invest your money better than in improved education. That is an admirable argument, and I feel the strength of it, but I am not quite certain that from the point of view of finance it is wise to borrow money in order to make a good investment. That is a method of procedure which would not be sanctioned everywhere in the City. It has to be borne in mind that if you are to incur this incileased.£10,000,000 expenditure for improved education it probably means that we are to go on longer borrowing money instead of paying our way and making a proper balance-sheet. If that question does arise we should have to consider whether it would be wise to suspend the provisions of that Act for a time or to find other methods by which we can bring our balance-sheet more into conformity with strict balancing.

I am not sure. I do not express a definite opinion about education—perhaps I am too strongly in favour of it—but there are other Departments in which that can be done. I am not certain about National Health Insurance, whether there is not great waste there which might be very well suspended or reduced for a time. I am perhaps still More doubtful about the Labour Exchanges. Sometimes they are said to have been of some use; but if I go to the employers I am always being told that they cannot get the men they want to employ from the Labour Exchanges, that they are utterly useless, and that so far as they are concerned they can be abolished. On the other hand, the employâs say that they waste a great deal of time in going to the Labour Exchanges, that they go constantly and never find the job they want, and they do not care whether they exist or not. The Minister of Labour, in reply to a question that I put to him yesterday, said that the Labour Exchanges cost £1,600,000 a year. I suggest to the House and to the Chancellor of the Exchequer that there might be some drastic curtailment of national expenditure in these directions. I know it involves a broad question of policy, which cannot be considered by the Department alone. For instance, it could not be decided by the Department alone whether Labour Exchanges should be abolished or not. These questions might be very well considered by the new Cabinet which has just -been reconstituted. All these things would certainly help to make up a better national balance-sheet.

I am inclined to differ from the hon. Member who has just spoken as to paying off the National Debt more quickly. It seems to me that fifty years is rather a long time, and I should certainly not pronounce definitely that I would not support increased taxation in order to get the debt paid off more quickly if the Chancellor of the Exchequer in his discretion thought it wise to impose it to a limited extent. It must be remembered that when I speak of increased taxation I do not mean exces- sive taxation of existing wealth. Excessive taxation of existing wealth would not protect the country from bankruptcy; it would rather hasten it, as there would be no source from which to obtain production. We ought to recollect that there must be a point at which a further rise in the Income Tax will be non-productive. To take an extreme and absurd case, it would be non-productive if it were 20s. in the £, but it would be so some way before that, owing to several reasons. There would be an atmosphere of resistance amongst taxpayers and a sense of injustice, which is always a potent power and one which it is very undesirable to stimulate or create. Again, there would be evasion, with which many people would sympathise; or, again, utter indifference to saving.

I want to make a suggestion to the Chancellor of the Exchequer as regards the Income Tax and the Super-tax. At the present time we talk about a 6s. Income Tax. That is very misleading to the public, and I think it would make for better feeling between different classes if people really knew what the high tax was and what the low tax was. We all know that the poorest are exempt, but people do not realise adequately that those far up in the scale have to pay not 6s. but 10s. 6d. in the £. Why we should persist in talking of an Income Tax of 6s. when really the taxation is in the maximum case 10s. 6d. I have never been able to understand. Super-tax ought to be abolished and Income Tax graduated downwards so as to remedy that defect. Hon. Members opposite urge upon the Chancellor of the Exchequer a Capital Levy. I am entirely opposed to a Capital Levy. I believe it would impoverish the country in the long run, it would penalise saving, and it is not business. It would discourage accumulation; it would encourage spendthrifts; it would raise enormous difficulties of valuation, which would invite evasion, and it would hinder production. It would do one thing more, which I have never heard referred to in this House. If you impose a Capital Levy you arc seizing money which often brings in more than 5 per cent. interest in order to pay off National Bonds which bear only 5 per cent. interest. That cannot be a business proposition. That must be impoverishing to the country, and those who glibly talk of Capital Levies never deal with that point. It never seems to occur to them that they are seizing money which produces more for the benefit of the country in order to pay off that which pays a lower rate of interest. I hope that that point will be dealt with by the hon. Member for Penistone (Mr. Arnold), who takes a great interest in this subject, and others who advocate a Capital Levy, before they proceed further with their propaganda.

Let me turn to the other side, where I believe economies can be effected. We have heard a brilliant defence from the Secretary of State for War this afternoon. He has very skilfully and cleverly impressed upon us how much his Department has done. I cannot help thinking that there were a good many matters on which he might have said how much his Department have omitted. Perhaps, if he had not rather challenged the House to deny that the administration of his Department had been excellent throughout, I should not have been disposed to give to the House some information which I got very recently about one specific case. It is not an isolated case. It is a sample of many similar cases which bear upon this question. The particular case is that of the railway to Blandford Camp in Dorset-Shire, near which I sometimes reside. That is, to my mind, a flagrant instance of official waste and expenditure. The construction of the Blandford Camp railway was not commenced until July, 1918. I was completed in February of this year. The first goods train was not run over the railway until 30th June, 1919, months after the Armistice. The goods traffic consists of one train a day of about six trucks. On the 1st September they commenced to run one passenger train per day in each direction, which conveys about 430 girls who are engaged on clerical work at the camp. The Government have paid the railway company no less than £7,447 for the year ending October, 1919, for conveying the girls to and from their homes in the neighbourhood. Thousands of pounds have been paid to the local authorities for damage done to the roads during the construction of the railway, and the camp is going to be abandoned very shortly. It will be interesting to know what is the cost of the railway. That kind of thing has been going on everywhere, and when the right hon. Gentleman the Secretary of State for War was speaking I' could not help wondering how many of these and similar cases are still going on which are causing tremendous public expenditure and ought to have been stopped months ago when the Armistice came about.

That is one class of remedy which I should have liked to see. Then there 9ze the others to which I have referred, such as the possibility of doing away with Labour Exchanges, or the disappearance of the unemployment donation, which 1 hope the Government will also consider. If all these steps are taken at once I venture to think that the re-establishment of the gold standard, the basis of international finance, will naturally follow, as also lower prices and improved Continental exchange. The free use of the printing Press to produce fresh notes is very dangerous. We have got an object-lesson in this from Russia. The best way to deal with these matters is, first of all, for the Government to grip the situation firmly, and in the next place for all of us to try to contribute as much as we can towards this result. I should like to inculcate the spirit of saving throughout the whole nation, the spirit of self-denial, and, above all, the spirit of unselfishness between class and class in respect of each others interests. The strikes have lost the country a great deal of money. I do not believe myself that better conditions will really prevail until we attain better relations between capital and labour, until we disregard agitators on one side or the other and learn to appreciate them at the proper value, and until we exercise clearer foresight and form a more frank and earnest determination to pull together for the common good.


The right hon. Member for Aston (Mr. Cecil), who has just addressed the House, brought us back in the earlier part of the speech to the serious realities of our financial position, and, although I do not agree with some of the remedies he suggested, I admire his candour in stating those remedies to the House. We have listened to marry speeches in which there has been an entire absence of suggestion for dealing with the difficulties with which we are con fronted. It appears to me that the Government, of all people, should welcome this Debate. National interests are very seriously menaced by our present national financial position, and I do not care which Government is is power, it ought to be prepared to welcome criticism, suggestion, and advice from any quarter, in order to find that remedy that is essentially important to the future development of the country's interest, sand I believe that in the sense in which I use the suggestion the Government would be prepared and will be prepared to welcome this Debate. As 1 listened to this Debate in the earlier part of the day it occurred to me that there was a danger of the Debate failing on one point particularly—that there was an unwillingness to face the situation with a view to ascertaining how far our present financial difficulties are the inevitable out come of the policy which we are pursuing. Could I satisfy myself that the embarrassment that we are suffering was going to be temporary, or, in other words, that we were in a period of transition between the cessation of hostilities and the country settling down to its normal position, then I think we need not be very much alarmed. If that was all we had to meet I think that the country would be prepared to face it, and it would not be long before it overcame the difficulty.

Let me give one example of the point which I am endeavouring to make. Take that part of the expenditure upon which the Secretary of State for War dilated so freely this afternoon—our War expenditure. I do not think that any section of the House can be satisfied that everything has been done that might have been done so to shape our international policy as to enable the country to rid itself of an excessive annual expenditure for the maintenance of armies and the supply of armaments. No one could have followed the provisions of the Treaty, a treaty which provides for the disarmament of the great Empires with which we have been for five years engaged in the greatest struggle the world has ever known, gathering as we did from that Treaty that Germany had to be disarmed, without feeling that there had been some policy of reserve or hesitation or lack of frankness that had landed this country or other countries with an annual expenditure from which we had hoped that the world-war would for ever have delivered us. I think that illustrates the point endeavour to make, that we are not sufficiently analysing the position to see whether after all the expenditure is not the direct outcome, the inevitable outcome in fact, of the policy which has been adopted. I should like during the remainder of the Debate to turn attention to that aspect of the case. We listened to two speeches from the Government benches, and I do not think it is any exaggeration to say that those speeches left a doubtful impression upon the mind of the House. the Chancellor of the Exchequer was frank and fair so far as his statement went, but I think those who listened to him must be agreed that, as with the Resolution he proposed, he was very reluctant to deal with remedies for the position in which we find ourselves. In other words, he said far too little with regard to the future, and it appears to me that it is the future that ought to concern this House most keenly. He made a very interesting statement with regard to the reorganisation of the Treasury and he told us about the new Finance Committee appointed in connection with the Cabinet. Well, it is never too late to mend, and if the organisation of the Treasury has remained bad until the present I would remind the House that he was occupying his present position for the second term, and that very closely associated with him, and in fact members of the new Cabinet Finance Committee, are the Prime Minister, a former Chancellor of the Exchequer, and the Leader of the House, a former Chancellor of tile Exchequer, and I suppose they will not be prepared to disown some share of the responsibility for that disorganisation in the Treasury that was brought so clearly to the notice of the House.

We hope that by this reorganisation, this unity of control which has been established by the taking away of one of the heads and throwing the responsibility upon the shoulders of one individual whose appointment those who know the Government officials most strongly welcome—we will hope that this may secure some improvement in the carrying on of the finances of the country. May I say that this did not take us very far in the direction that I think the House wants to go or in the direction in which, I think, the. majority in the country want to go—that is in the direction of finding the drastic remedies referred to in the Government Resolution, remedies which the Chancellor of the Exchequer has not expounded to the House on this very important occasion. What shall I say about the speech of the. Secretary of State for War? I can only say this, to use a phrase that is familiar to all of us he had a good time with himself. I do not know that I ever saw him enjoy a speech so much as he enjoyed his.

own speech this afternoon, but when it was all finished, I ask in all seriousness, except that he satisfied himself and endeavoured to satisfy the House that be lived up to his previous statement, except that he forgot to state one item of £31,000,000 that he had to be reminded about, is it an exaggeration to say that he did not contribute one iota to the important matter with which we are confronted, which is to find a remedy for the present serious financial position? He did defend his Department. I thought during the time he was addressing the House that if all the spending Departments had had the privilege that he enjoyed this afternoon this two days' Debate would have closed without anything very serious being done in the direction of dealing with our financial trouble.

I believe I am right in saying, and I hope the Government will believe this, that all sections of the House, including the Labour party, are exceedingly anxious to see this financial situation grappled with firmly, expeditiously, and effectively. After all, there is far too much of a. disposition, I think, on both sides, on the Opposition side and the Government side, to come to the conclusion that we view the policy pursued by each other purely from the party standpoint. I know it is sometimes said—it has been said during the present week—that the Labour party have only one object in life, and that is to get the Government down. I want to make this statement with all seriousness. Is there any opposition, I do not care whether it be the Labour party, the Liberal party, or any other party, that need have any strong desire to take hold of the present position? If any party has an overwhelming desire to do that under existing circumstances all I can say is they do not appreciate the difficulties of the position with which they will be faced immediately after accepting the responsibility of office. I would like to have heard from the Prime Minister and of the other occupants of the Front Bench that there never did obtain such a desire as obtains to-day amongst all sections to assist the Government if the Government will allow us to assist them to try and retrieve the unfortunate impasse in which we find ourselves. I believe strongly that until this position is retrieved it will be impossible for 03 on the one hand to occupy our proper position amongst the competing nations of the world. We will never be able to get that industrial development which is essential in the interests of the country until we grapple with this financial question. Neither will we be able to establish that equilibrium so far as the workers are concerned that will prevent us getting more of that serious unrest which we have known during the past few months.

If we all realise the seriousness of the position then I am led to ask, what are the remedies that are suggested for meeting that position? I have heard it suggested more than once to-day that we ought to go in for a policy of retrenchment. All sections of the House will agree that waste should be prevented wherever possible, and that wherever economy -can be practised it should be practised. But we are exposed to the danger in the country and in the House of going too far in these directions. Retrenchment, yes, but not retrenchment, I hope, in the direction I have heard suggested here to-night, and which I read in responsible newspapers in the country. I listened with a certain amount of apprehension to one of the suggestions made by the Member for Aston (Mr. Evelyn Cecil). It is a suggestion advocated by a Member of another place, a Noble Lord who can use very freely the columns of his own newspaper. And what is that suggestion in the way of retrenchment? It was that my right hon. Friend the President of the Board of Education should scrap that magnificent Act which was placed on the Statute Book mainly for dealing with the masses in the country.


If the right hon. Gentleman refers to me—


I do not know that my right hon. Friend controls newspapers.


You said I referred to, education.


Yes, I said you referred to it, but I also said it was a Noble Lord who had advocated scrapping the Education Act. I think all my right hon. Friend did was to say there might be retrenchment in connection with education.


That it might be worth while suspending some of the expenditure upon the Education Act. I do not want to scrap it.

10.0 P.M.


I did not suggest that the right hon. Member wishes to scrap it. I said a Noble Lord had suggested that the Education Act might be scrapped. [An HON. MEMBER: "Suspended?"] No, I think I am right in saying he suggested that it might be scrapped. My right hon. Friend opposite said we might suspend a part of it. I hope we are not going in for that. It will be penny wise and pound foolish. After all, if we are going to interfere with education it ought not to be the first but the last step. Not only has it been suggested that we should deal with education in this way in order to save money, but it has also been suggested that the Government should drop its housing scheme. I hope the Prime Minister will not listen to that suggestion. If he does, he will have some difficulty in explaining away yet another of his election pledges. I do not think the right hon. Gentleman will be prepared to do anything of the kind. May I add here in passing that I hope the Prime Minister and his colleagues will not even listen to the suggestion that the standard of our housing should be reduced? The danger to which we are exposed to-day is not that they will cease their efforts to build the number of houses promised, but that they may be tempted for the sake of economy to build 1,000,000 inferior houses, and to build 1,000,000 inferior houses might almost be worse than to refrain from building at all for the time being, for the more inferior is the housing of the working classes the sooner you get into slumdom. God knows we have in this country, and it is to our disgrace, miles and miles of slums that ought never to have been allowed to be brought into existence. After all, if there was any seriousness at all in the talk of that new world which was to he the outcome of the War, I say that neither education nor housing ought to be touched in any way as long as there is wealth in this country that can be tapped, as the Government might tap it, in order to serve our financial interests at this moment of -crisis. Another suggestion which was made by my right hon. Friend, and which I hope will not be listened to, was that we should interfere with health insurance. Just at the moment when the Government has created a Ministry of Health, and when we all realise the importance of preventing disease by giving all possible assistance to the great masses of the nation, we have it suggested that we should interfere in some way with the great scheme for which the Prime Minister made himself responsi- ble some years ago, and I believe fathered with such pride. We have heard it suggested that we should propose the suspension of the working of the National Health Insurance Act. I venture to say that all these suggestions may be false moves, and if they are followed may prove both unwise and dangerous.

May I make one further reference to this aspect of the case? The Chancellor of the Exchequer made an announcement with regard to the date when the unemployment grant was going to expire. I think he said it was the 20th November, and I marvelled to note the satisfaction on the other side of the House. [HON. MEMBERS: "Hear, hear‡"] I suppose that is a further approval of the suggestion. [HON. MEMBERS: "Hear, hear‡"] Hon. and right hon. Gentlemen may be a little too previous in this palter. You had far better concern yourselves with stopping unemployment. Hon. Members tell me that is the way to stop it. But have you looked at the unemployed records in connection with our Labour Exchanges? Are you aware there are thousands to-day who want employment, who want to sell their labour, but cannot be given an opportunity to do so. [HON. MEMBERS: "What about the railway strike?" "What. about Oldham?" "What about the bricklayers? I am well aware of all these things. One hon. Member said something about Tariff Reform just now. This is not the occasion to talk of Tariff Reform. We have had all that over in this House years ago, and I think there is less disposition to accept that position to-day than ever. I am dealing with the question of unemployment and of the unemployment grant, and I want to say, with regard to the unrest there is in this country, that no one deplores these strikes more than I do. [HON. MEMBERS: "Oh, oh‡ "] I am going to repeat. it for the benefit of some people who do not know it, and I am prepared to ask the Prime Minister of this country, who knows more than any other man the work that I have done in preventing strikes for the last few years—

The PRIME MINISTER (Mr. Lloyd George)

Hear, hear.


I say again that I deplore these strikes, and for twenty-five years through conciliation I have done as much as any man living to prevent strikes, and I think I did a little to assist in. getting the nation out of its serious diffi- culty in the recent railway strike, as the Prime Minister will be the first to admit. Therefore, I think we ought not to be subject to such jeers and laughter when we refer to these matters. I want to say here with all plainness of speech that some of the strikes are due, first of all, to the general spirit of unrest and to the difficulty that members of great trade unions have to get their grievances that arise out of the increased cost of living redressed. I am not going into the merits or demerits of the railway strike or of the moulders' strike. I did what I could to prevent the moulders' strike, and I have no executive responsibility for it, for I hold no other position than that of honorary president of the union, but I say this, that the cost of living had a good deal to do with bringing about that struggle, and I am afraid that until the Government can by some means or other assist in getting prices lowered and the cost of living made easier, we will be exposed to the danger of these recurring industrial struggles. I might have gone further, but this is not the time, and I shall have further opportunities of raising the difficulties that have been put in our way to get an industrial council that might have had the effect of stopping both the railway strike and the moulders' strike if it had been agreed to. I again repeat, and I want the Prime Minister to take note of this point, that to stop this unemployment grant, unless there is a very serious endeavour made to find work for the increasing number of unemployed, may be to make the position of this country very much worse than it is to-day, and it may eventually cost us more than would a continuation of the unemployment grant to all persons who arc genuinely unemployed. I want to say here, before I leave this subject, that there is not a Member on these benches who is not anxious to do everything in his power to prevent malingering and to prevent any advantage being taken of the unemployment grant, but so long as we are faced with the fact that we have tens of thousands of people compulsorily unemployed, and especially men who have served in the War, we have a right to demand that they should receive the grant. When I say served in the War I do not mean only the men who went to the front, but the men and the women upon whom the Prime Minister will have to admit he had to depend for the supply of his munitions, many of whom are unemployed to- day through no fault of their own, and it would be better to continue the grant. I have no hesitation in saying, than to risk what we might be called upon to risk if there was a serious industrial upheaval in this country taking the form that we never wish to see it take here.

Having dealt with some of the suggested remedies, I want again to ask what is the remedy? After all, as the House know to-morrow, we of the Labour party have taken our courage in our hands, and in our Amendment we have laid down two positive principles that we think ought to be applied to assist in retrieving our position. But I examine the Government Resolution, and what do I find? The House is invited to give its hearty support to the Government in all reasonable proposals, however drastic, for the reduction of expenditure and the diminution of debt. With have had it pointed out to us by the Secretary of State for War that it is only a few months since hostilities ceased. It seems to me that though the months have been few there has been ample time for the Government to have examined this position, and instead of coming and asking the House for a blank cheque, to trust it implicitly, to wait and see what it is going to produce in the way of drastic remedies, it might have come to the House with some definite proposal. My right hon. Friend the chairman of the Labour party brought before the House this afternoon the fact that as long ago as January last year we made a proposal, by a communication that was sent to the Prime Minister, that a Royal Commission should al; once be set up, and we afterwards took the responsibility, when we were invited to state our position more fully, of sending suggested terms of reference for that Royal Commission. Here it is, and amongst the things suggested were the methods to be adopted for dealing with the liquidation of the National Debt, the system and incidence of taxation for liquidating the debt and for meeting the annual charge thereon, and to consider the banking system of the country in connection with the promotion of State Loans.

We at any rate can claim that as long ago as January last we were prepared to have this situation faced. What would have been the position to-day if the Government had acted upon our suggestion? They would have had nearly two years in which to make this inquiry. I have noticed in the Press, as is usually the case, that the paper that made the suggestion a few weeks ago and was followed by other papers, is taking its contemporaries to task for having, as it were, stepped in and stolen their plan. They had made it a few weeks ago, and I have now shown—and I do not think the Prime Minister would question the statements made by my right hon. Friend and myself—that we made the suggestion very considerably over a year ago. What did we want? We wanted to find out exactly what the wealth of the country was, and surely, having regard to the National Debt with which we arc confronted, having regard to the Debate that is going on here and in the Press with regard to either of the proposals we make, an expropriation of war fortunes or a general levy upon capital, we would have been in an infinitely better position to-day to have faced the realities of the situation, and the Government would have been backed up by the recommendations of a Royal Commission, and could have come down here and said, "For many months we have had this inquiry going on, and all the evidence taken, and now we are satisfied, first of all, that the general levy on capital is not workable." Or they may have said that a general levy on capital would be repressive and restrictive so far as industry was concerned, or that a general levy on capital would be unfair in its incidence so far as people with small incomes were concerned. They would have been in a position to have inquired into the question of the expropriation of those accretions, as the leader of the Liberal party said this afternoon, that are due to our national emergency.

Here we are without the Report of the Committee, and the only suggestion that I heard this afternoon from the right hon. Gentleman was that we should now begin an- inquiry into one aspect of the case, or, at any rate, into one of the methods suggested. I hope the Prime Minister will tell the House. I have no doubt he has his reasons. I have no doubt he will tell us how he engaged in the War and other things, but while that might hold good for the period up to the termination of hostilities, I do not think it can hold good for the period since the Armistice was signed. Let me just say one word in conclusion. The Labour party has come to the conclusion that the position is so serious that no policy of retrenchment will meet the necessities of the case. Let us by all means go in for retrenchment, provided always that it is wise, that there is a certain amount of discretion used; but when we have done it all, I do not think, having regard to what I believe the right hon. Gentleman stated would be the normal expenditure, that we can meet the situation by any mere policy of retrenchment. Therefore, we have got to find some new source of income to deal with the position, and we put the question to ourselves in this way—we may be wrong, but I hope the Prime Minister, if he is going to reply, will deal with the point—we put it to ourselves in this way; whether abnormal taxation for a long period of years is going to be more oppressive, more difficult so far as industry is concerned, than tackling the thing once and for all by sonic general Levy upon Capital properly graduated.

We talk in these days about equality of sacrifice. I do not think there ever can be equality of sacrifice in this matter, but we might try to approximate to equality of sacrifice, and, in order to do so, there ought to be very steep graduation of the general Levy on Capital, and then it might be necessary in some cases, where there is merely a living income, to exempt them altogether. But whatever may be the views of the Government on this aspect of the case, I do not think there can be any doubt whatever that fortunes that have been made entirely as a result of the war should not only be taxed, but expropriated in the national interest, and I hope that one outcome of this discussion will be that the Government will persevere with the suggestion that the right lion, Gentleman made, and if an inquiry is to be held that it will be short and sharp, in order that we may have this expropriation of what are called war fortunes put into operation with all the expedition possible. May I just say that I hope the Government will not lend a deaf ear to the suggestion of the right hon. Gentleman the Leader of the Liberal party to give up some of the remaining time before Christmas to a full consideration of the financial position? There is much to be said for the suggestion if can be done without interfering with the necessary legislation—that is the legislation that has been promised during the Autumn Session. I think the Prime Minister and the Chancellor of the Exchequer might give the suggestion further consideration in order that we may explore the position to the fullest possible extent.


The right hon. Gentleman who has just sat down seemed to be as much concerned as to his claims of suggestions for new taxation as certain gentlemen are said to whether or no they had invented the tank. He proceeded to refer us to some document in January last which was so vague in its terms that it is very difficult to know that it gave him justification for the claim he made. I would point out to the House that a thing which has been very much overlooked in this question of a levy on capital is that every time the Treasury prints a few million Treasury notes it makes a levy on capital By successive issues there has been an enormous levy already, and the capital of everybody has been diminished to about one-half to what it was prior to the War. The right hon. Gentleman and those who preceded him in these arguments are endeavouring to make a still further levy which I think would be very unjust in its incidence. Because, after all, the debt is owed by the people who have the capital, and on whose credit the War Loan has been incurred, and surely it is only fair that they should have the right to say whether they prefer to pay an exaggerated Income Tax or a, sum down? But levy on capital is a totally different proposition to that of the war fortunes. There is nobody doing more to confuse the issue and to protect the war fortunes than these Gentlemen who get up and talk about Capital Levies. They are placing themselves shoulder to shoulder with the owners of war fortunes, because, mark you, the owner of a war fortune who might have a 10 per cent. levy would still be very cheery. It would not be much upon him, but it would be a very serious loss to the man who by the issue of Treasury notes has had his capital confiscated to the extent of about one-half. There is a fundamental difference between the two propositions. I would ask the right hon. Gentleman to distinguish between them, and consider the people are now immeasurably poorer than those who have been trading and have been able to pass on the increases to their customers. These are the people who are richer, and, of course, they cheerfully also look for aid to the right hon. Gentleman opposite, and they take every chance to mix themselves with the ordinary crowd of capitalists, and ma-lice out that the War profiteer and the ordinary capitalist are one and the smile.

I listened with considerable pleasure, though with something like amusement, to the hon. Member who dealt with the chambers of commerce that he said had met together, and whose members had bemoaned the prospect of having, if a levy on war fortunes was made, to behave like Indians, Turks, Belgians, or camels, who lie down if heavy burdens be put upon them. I have every sympathy with the chambers of commerce. At the same time, it must not be forgotten that these gentlemen traded during tie War, and with great success, because it did not matter how high prices were, or what taxation was laid upon them, they bore cheerfully the burdens for a while, and passed them on, probably with increased profit to themselves. If extra burdens were imposed upon them, well, they raised their prices accordingly, and it made no difference to them at the end of the day except that they were richer than they were at the beginning. They gather into their own treasuries a great part of the savings of the middle classes and the investing classes, and they say, "Oh, do not interfere with our trailing and capital, because we are the backbone of the nation," I do not blame them. I do not blame them for what they did. I know one shipping man who said he sincerely trusted that when we concluded the War a large portion of the profits would be handed back to the Treasury. He said that he could not help making these profits, and if he did not keep up his freights somebody else would get the benefit, and he said he was prepared to account for the larger proportion of them. That is the view of a large number of these men, and they are just as honest as the rest of tie community and are desirous of doing the patriotic duty. [Laughter.] Hon. Members laugh, but I know a great many of these people, and I have been told by many of them that they are perfectly willing to account for their war profits if all are treated alike.

Why should we believe that it is only the young men who gave their lives who were patriotic? There are plenty of owners of war fortunes who are just as patriotic when it comes to matters of pounds, shillings, and pence. The owner of a war fortune has a conscience, just the same as the rest of us, and they will prove to be just as honest as any other member of the community if you treat them in the right way. I believe when investigation is made into this proposal it will be found to be quite feasible. Some hon. Members have talked about the difficulty of calling up capital from businesses, but they do not need to do that; they can form their businesses into limited liability companies and allot a part of their shares to the Government, and the money realised can go to the redemption of war debt. I do not see any difficulty in this problem of war profits, and if this is done it will put an end to a great deal of discontent and unrest. You will always find a certain number of war profiteers who are ready to buy the earth, and it should be brought home to them that there is a day of settlement coming.

The right hon. Gentleman (Mr. Henderson) made one or two remarks in connection with the economies which have been suggested, and there arc one or two points I would like to deal with. He spoke of the Housing problem, and economising on housing as being false economy. There is a great deal of truth in that, and spending too much money on housing is also very false economy. If the right hon. Gentleman were to look at the real slums of some of our big towns he would find that they were nearly all composed of the great costly houses that used to be occupied by people who did not realise that a house is not a thing that should last for ever, and they gradually degenerated into slums. That is the fundamental mistake we make in building in this country. We build our houses so permanently and so costly that long before the houses are finished the whole face of the district is changed and an entirely different and new type of house is wanted. Almost, the whole of the population of Canada and America live in houses which we should consider to be flimsy, but which they find quite serviceable and comfortable. Our system of housing is something like that of the Russian peasant system of clothing. They wear leather suits handed down to them by their grandfathers. If you can secure that a man is always born of the standard size, it works very well, but you cannot, and the suit does not always fit. That is what is wrong with our houses. I can name towns built of the most stately and beautiful stone houses 100 and 150 years old, with abominable basements. Our population would have been very much happier if they had never been built, and if instead of them there had been built some cheaper houses. You want a pleasant house, but you do not want a costly house or a. house that will last a great many years. You want a house to last one generation and no more. Let our sons build houses to suit themselves.

Then with regard to the question of education. The Education Act is a measure as to the efficacy of which I for one have the greatest possible doubt. I have the greatest possible doubt as to the benefit that it will be to the community. I know that it is a source of enormous expense country districts where the rates are rising to colossal figures, because educational authorities are going about spending -money in a very extravagant method buying the most costly buildings that they can possibly find to house their permanent officials. We have all been brought up to the theory that a long and costly education is a thing greatly to be desired, but it is an exceedingly doubtful proposition. I have always been of the belief that the reason a large proportion of the sons of the middle classes do not snake good in life is because they are kept too long at school away from the university of life, which- is the only place where a man really gets his real education. If you are going to keep ad the young people in school during the age of adolescence it is going to inflict au enormous hardship upon the poor. It has been put to me by many a working man with a large family: "How is it possible for me to support a large family if I am not going to get some assistance from the elder members of my family to support the-younger members of it?" I believe, too, that it is a moral education for a youth to go out when he reaches years of fairly moderate strength to assist his father and mother, and I do not believe that there is much to be gained by keeping young people at school during their years of adolescence. At the best what do we all remember of What we learned in school Mr. Stephen Leacock in one of his books gives a description of the remnants of a good education as so many half pages, and when you look at it most of you will find that it is about all that you do recollect. It is quite a mistaken and superstitious view that schooling makes a man. A man educates himself. It is his own study and thought; it is not what he is taught by a school- master. We all know that schoolmasters are very admirable men, but they are not very wise men. I will tell you a professional secret. No counsel who has any sense or desire to have a reasonable judgment in a jury trial ever allows a schoolmaster on the jury. He is always challenged because he will not give a common-sense and businesslike decision. He will also have a tendency to bully and lecture the other members of the jury. No doubt schoolmasters have been very badly used. The schoolmaster recollects all the things that we are wise enough to forget and he cannot understand why he is getting ahead so slowly while some other man who was not nearly so clever in school is getting on very well in the world. As a result he is much disgruntled and dissatisfied. I submit that the schoolmaster should have got a much larger pay, but as for the great and costly scheme of education we have embarked on, it was never asked for by the people of this country. It was passed through by an expiring Parliament, and the people of the country were never consulted about it. You have people going up and down the country talking about education and prating about it, and pretending to be great authorities, and delivering speeches, and you will find that not one of them has got a child of his own to raise. They are totally ignorant, therefore, of the subject. They may know something about universities, but they know nothing about the moral and spiritual well-being and bringing up of the child. The main thing in education is not a matter of the information that is packed into a child's head. Have you taught him to be truthful, upright, and honest, arid all the various moral attributes that go to make a good citizen—that is education and no other. That is what you want, and that is what I doubt very much will be in any way facilitated by this great and costly Act. I think in this time of stress when so many are more concerned about their daily bread, which, after all, comes first, that that Act might very well be suspended until a further period of time when the country had regained some of its financial resources.


I cannot speak in the same optimistic strain as that which has characterised several of the speeches in the Debate, because I take a very serious view of the financial situa- tion. It is sonic three months ago since the question was first raised in this House, and it is more than two months ago since the Prime Minister's urgent Circular on the question of extravagance went round the Government offices. I believe it is time we really were informed what steps, if any, have been taken, and are going to be taken, to remedy that state of affairs. Hitherto the House has not been given what it asked for—some reasonable suggestion to reduce expenditure. All we have had is the apologia on the subject of renewed extravagance and general expenditure. It is also three months ago since the Government made up their minds that it was necessary that something should be done to enable this country to live within its income and to do that very necessary thing, namely, to curtail the daily expenditure which was being indulged in by all the Government Departments. Let me remind the House that some four months ago an effort was made—an effort assisted by advertising on a scale hitherto undreamed of in this country—to raise a gigantic Loan which was to consolidate our floating liabilities and to place the national credit on a sound footing. That effort received the unstinted help of all sections of the community. I think I am right in saying that something like 80 or 90 per cent. of the Members of this House went down to their constituencies to address meetings in support of that Loan. The newspapers were full of the most cunningly-designed advertisements puffing the Loan and endeavouring to persuade the potential investor that as an investment it was an opportunity the like of which had never been seen before and would never be seen again. In short, all the devices of the modern science of propaganda were invoked to its assistance.

That Loan was a gigantic success—at least, the Chancellor of the Exchequer has assured us that it was a success, and he ought to know. To-day already half the net proceeds of that Loan have been spent. Does the House realise that at the end of the current financial year the entire net proceeds of the Victory Loan will have been dissipated, not on reducing the appalling National Debt, not on consolidating tile floating liabilities which are impairing the trade and commerce of this country? It has been expended on everyday, hand-to-mouth current expenditure. That is in addition to a 6s. Income Tax, plus a Super-tax which is an almost crushing burden, plus taxation on many of the necessaries of life of a magnitude undreamed of for generations. In addition to the proceeds of this taxation, half the Victory Loan has already been spent, and the remaining half will have been spent by the end of the current financial year. It has been spent on the upkeep of bloated and gigantic Government Departments, whose principal work is the sending out, the receiving, and the filing of innumerable forms, which nobody reads and which nobody wants. It has been spent on the maintenance of hordes of officials whose one duty is to endeavour to make work, first of all for their own Department and then for some other Government Department. It has been spent on the printing and publishing of innumerable forms and pamphlets, in which the official mind rejoices. It has been spent on expeditions —I have heard them called filibustering expeditions—to all the farthest and unhealthiest corners of Europe, where our troops act as an unpaid police force, where we have fed the inhabitants on our own rations, and where we have purchased their goods at prices which they never dreamt of realising, and yet we pat ourselves on the back because they do not want us to leave them. It has been spent on a determined hut. I am glad to say, unsuccessful attempt to pamperise the workers of this country by placing a premium on idleness and calling it unemployment donation. It has been spent in subsidising the railways of this country at a cost the estimate of which varies from £50.000,000 to £100.000,000 per annum, instead of insisting that those railways should at once be placed on a sound financial basis.

Lastly, it has been spent on pandering to every demand for an increase of wage and salaries of Government officials, regardless of the fact, which the Government ought to have known, but which apparently they did not know, that the net effect of any widespread increase of wages is a corresponding increase in the cost of living. It is more than two months since that has been realised, and the House is entitled to know more than our hon. Friend told at present of what steps are being taken to reduce that expenditure. We are told it is being cut down on every hand and the most rigid economy is being practised, but we still see examples of extravagance on every side. We still hear of armament firms employed on the construction of warships. We hear of their being told to cease work one day, told to recommence a few days later by another Department, and then ordered to cease again by a third a few days later still, which certainly seems to me to show a lack of co-ordination between the various Government Departments. The new Ministries appear to vie with one another with regard to the amount of public money they can expend —the Ministry of Labour, the Ministry of Education, and the other two new Departments. They seem to think the word "extravagance" and the word "importance" are synonymous, and the more money they can expend the greater their importance must necessarily be. But, in spite of all their efforts, it is to the War Office, the greatest spending Department, that we must turn if we wish to effect those economies without which the country wilt be in an extremely parlous state.

A few months ago, nearly six months after the signing of the Armistice, Estimates were presented totalling the gigantic sum of £44,000,000, and we were told that it was necessary because we were still at war. Peace has been signed since then, and we are still without any visible and outward sign of economy on the part of that Department. We still have an Army of nearly 200,000 men in France, and we are told the work they are doing is clearing up. The Secretary for War himself said that the normal value of the material they were recovering, and the actual value that it might be expected to fetch in the open market were two very different things. It seems to me it is quite likely that we are spending more money on recovering that material which has been lying derelict in France than we should lose if we handed it all over at once to the French people to look as they desired. I should he the last to suggest such economies as would prevent our reaping the fruits of the somewhat barren victory we have won. But I cannot help thinking that kind of expenditure in which the War Office is now indulging is quite unnecessary. For example, at Marseilles to-day there are still British military hospitals with expensive staffs and equipment. Probably they are there to facilitate the evacuating of men from Egypt and Mesopotamia. No doubt it is the shortest and quickest way home, but those men would be no worse in any way if they were brought back by sea, and the Government ought to have realised by now that we cannot afford the exorbitant charges which are demanded by the French Government for accommodation on their railways and in their towns. There was no real need for a single British soldier to have been in France six months after the Armistice was declared. There was infinitely less reason for having a single British soldier in France to-day, but there are 179,000 of them by the latest return, and that is a figure which has been reduced very largely during the past few months. Probably some hon. Members may ask me what about the lines of communication; why not use Antwerp and the Belgian railway lines of communication, or, if Antwerp is unsuitable, why maintain a Vice-Commandant and an expensive staff there? We have heard nothing about the Military Mission at Vladivostok, which, I believe, consists of a lieut.-general and something like 150 officers. I do not know whether they have been withdrawn, because I have not had any communications from them of late, but I know that until quite recently they were there and were having an extremely good time. I cannot for a moment agree that that is a necessary expenditure which the country is sufficiently well off to indulge in at the present time. So much for the larger economies that must be effected. It is proverbial that if you take care of the pence the pounds will take care of themselves, and it is only by dealing with the smaller and minor economies that we can effect these reductions by which the financial position of this country can be saved. No single man and no single unnecessary unit should be maintained for a moment longer than is necessary. A most rigid example of economy should be set on all sides. No doubt we shall be told that that is being done, but we see, or we din see until quite recently, men driving to swimming baths and cricket matches in Government motor lorries; we see, or did see until a month or two ago, the young ladies of the Army Service Corps Motor Transport driving to dances in Government cars. The young gentlemen of that same distinguished regiment went one better than that and they and their lady friends were fetched from all parts of London and driven to entertainments by Government drivers in Government cars. That is a fact which has come to my own notice.

We ought to demand to know what economies, if any, the Government intend to adopt. So far they have given us no definite line that they intend to take up. They have found excuses for the increased expenditure. They have maintained that these things are necessary. They may be necessary, but the time has come when we must demand to know whether we can afford even necessaries. These things may be small and unimportant, but they total up in the long run, and, what is much worse than that, they are a bad example and make the work of economy infinitely more difficult. It is only by attending to these minor details in addition to the large ones that the solvency of this country can be maintained and the danger of national bankruptcy averted. The Prime Minister, in his letter to the people, which was published, "The Future," a short time ago, said that the old world had come to an end, and it was the sublime duty of all to assist in building up the new world. No doubt he is right, and I am sure that 90 per cent. of the people of this country are ready to assist him in every way. I am ready and anxious to put my shoulder to the wheel and to help him, but let us take care that the world we build is not worse than the world that has gone before. Let us take care that the world we build is not a world of poverty. In the world to-day there are rich men, and I am sorry to say there ate very poor men; but the majority of people are tolerably well-to-do and tolerably well contented. Let us take care that in the new world there is no such poverty as we knew in the years before the War, and no such poverty as we have known in modern Russia. That is where the disaster of national bankruptcy will lead us. States such as San Salvador or Honduras can be bankrupt and still prosperous, but for us who have to buy our bread abroad national bankruptcy can only mean starvation.


I beg to move, "That the Debate be now adjourned."

Question put, and agreed to.

Debate to be resumed to-morrow (Thursday).