HC Deb 11 April 1921 vol 140 cc768-830

I beg to move, to leave out from the word "That" to the end of the Question, and to add instead thereof the words this House is of opinion, in view of the present state of the country's finances, that there is an imperative need for more economical Adminstration, and urges the Government to lay down a definite policy for the limitation of national expenditure to an amount dependent on national income. I am rather sorry that our Debate on this somewhat important question should take place under the cloud of this crisis, because it is very difficult at such a moment as this to discuss as calmly as we otherwise should do the question of finance, and all the more I intend to be as moderate as possible in my remarks and to say absolutely nothing which can be called in any way an exaggerated statement of the case. In fact, I do not think anything could do more harm to the cause of national economy than an exaggerated statement of what the present situation is. I feel that our case is quite strong enough without any exaggeration at all. In fact, I think it is an over- whelming case, and I very much hope that, not my speech, but the Debate which follows upon it, will really help the Government, and especially help to strengthen their hands in regard to the various Departmental demands which are always being made upon them. To my mind it is quite clear that unless we can get the expenditure down we shall not be able to get taxation down, and unless we can really get taxation down to a very large extent we shall never be able to solve this great problem of unemployment. I do not know whether hon. Members realise what taxation is like at present as compared with other countries. Take our own country first. We are paying in taxation six times what we did before the War; we are paying in rates three times what we did before the War; and if you take taxation and rates together we are paying five times what we paid immediately before the War. When you look at foreign countries, you find that they are in a much more favourable position. I am not taking into account the question of the different exchanges, because it does not benefit, say, an Italian that the exchange is either for or against him if he is buying goods in his own country. We are paying to-day in taxes £22 13s. per head of the population. In France they are only paying the equivalent of £16; in the United States of America they are only paying half as much as we are in taxation; in Belgium they are only paying a third; and in Italy they are only paying a fifth.

I suppose during the last few months almost every great industrial organisation has passed resolutions on this subject. A few weeks ago the Federation of British Industries passed the following resolution: To-day British industry is fighting for its life. The next 12 months will be the most critical in the economic history of this country. High taxation is a burden on the community, which reacts most prejudicially upon industry. The Federation urge the Government to exercise economy. That is only one of the very many appeals which have been made during last year. I sometimes hear the Government take a good deal of credit to itself for the way in which it raises taxation from the country. I have heard the late Chancellor of the Exchequer take a, good deal of credit to his own administration and to the Government as a whole for the way they have been able to raise such an enormous revenue. I really do not think there is much credit in doing that. It is very easy to raise taxation, and, after all, taxation itself is a very bad thing. I do not suppose taxation has ever done the slightest good of itself, and, to my mind, the only excuse for taxation is to maintain national efficiency, and therefore every single penny which you raise over and above the amount that is absolutely required for national efficiency is taxation bad in itself. I do not believe we can go on on the present system of finance and expenditure without grievous harm to the community as a whole. Looking up the figures of last year, I find that there were nearly 4,000 more industrial failures than the year preceding, and there is absolutely no doubt at all that those failures are very largely due to heavy taxation, that taxation, without a doubt, is owing to excessive expenditure, and that expenditure is very largely inflated by expenditure on the Civil Service Estimates.

To come to the actual subject before the House, the Civil Services to-day cost seven times as much as they did before the War. There are nearly 90,000 more officials in the Civil Service than there were before the War. I want to be perfectly fair on this question, and therefore I will cut out the whole of the services arising out of the War, and I will go still further and cut out the whole of the Ministry of Pensions, which also includes, I believe, the administration of old-age pensions. I find the Civil Services still cost 3¼ times what they did before the War. That being so, what happens really to the 2½ times that we are always hearing advanced as an argument from the Government side? The Civil Services are not costing 2½ times, they are costing 3¼ times, what they did before the War. I do not think we ought to aim at a pre-War figure multiplied by a certain amount. The reason given for this multiplication is always that the cost of living has gone up, and it is perfectly right on the assumption that you have to maintain the old pre-War level. But a private individual when he emerges from a great struggle, almost bankrupt, a much poorer man than he was before, cannot go back to his old standard of living. He has got to cut his old standard of living down. Therefore, when Ministers tell us that everything costs 2½ times what it did before the War, they are really begging the question of economy altogether. Other persons, private individuals, and businesses have to economise, and really the Government must make up its mind to economise too. I should very much like to congratulate my hon. Friend (Lieut.-Commander Hilton Young) on the post which he has lately been given. When he was sitting on these Benches I always regarded him as a very sound financier, and I very much hope he has not only been chosen for his natural abilities, but also because he is a sound economist, for the post which he now fills. I am rather afraid the Government up till now has been afflicted with what we might call the war mentality. During the War they spent millions of public money; they had to. They had to run risks, and necessarily a great deal of money was wasted during the War, but I hope we shall now return to peace finance as quickly as possible.

Only the other day we had an expensive omnibus Health Bill—one of the most expensive Bills ever introduced. There was a great outcry, and the then Leader of the House said he found out after all that the Bill was not at all necessary and half of it was dropped on account of the threat of a bad Division in the Lobby. Not so long ago on a Friday afternoon, much the same sort of thing took place. There was a great outcry on a Supplementary Estimate and the then Chancellor of the Exchequer practically promised a Committee of Estimates at the last moment. It really looks as if the Government will not adopt economy except almost at the point of the bayonet. I do hope that in future they are not going to be so much dragooned into economy, but that they will show a willing spirit and a determination to economise wherever they can possibly do so. I have here a leaflet called "Squandermania Charges Answered," which was issued, I think, from the chief Conservative office, in the name of the late Leader of the House. I am not sure whether it was a speech or whether it was an article written by the late Leader of the House. In it he said that the whole cost of the public services before the War was £200,000,000. He then multiplied that by 2½ and that works out at £500,000,000. He was trying to get at what he called a normal Budget. He then added the post-War debt and war pensions, and arrived at a sort of ideal post-War Budget of £943,000,000. That was quite incorrect. The £200,000,000 that the late Leader of the House was talking about included the pre War debt charge which is a constant figure. Why multiply that by 2½? There is no reason in it at all. Moreover, the pre-War cost of public services was not £200,000,000 but £197,000,000. If you do not multiply the pre-War debt by 2½, and if you take the cost as £197,000,000 instead of £200,000,000, the multiplication works out not at £500,000,000 but at £456,000,000, and we get a total not of £943,000,000 but a little under £900,000,000. Therefore, the late Leader of the House was £50,000,000 out of his reckoning. If we humble back-benchers made statements like that it would be called sloppy finance, but when Members of the Government do it I am afraid that what is said is, "Why do you take notice of such very unimportant details?"

I should like to know why we need to multiply by 2½. Salaries have not gone up 2½ times. I have made careful inquiries from various officials, and I am told that, taking them as a whole, salaries have not gone up very much more than from 65 to 75 per cent. I am inclined to think that 2½ times is an arbitrary kind of figure to suit the exuberance of Departmental expenditure. That is not the kind of statement which will lead to Government economy. The only cure is the pruning knife, and it ought to be used remorselessly in the Government Departments. The Departmental demands are enormous. It is absolutely useless for an hon. Member on the back Benches, like myself, to get up and make a Motion of this kind unless he gives some reason for doing so, and a certain amount of detail, which I will do as briefly as possible. To strengthen my case, I must give an indication of what I mean when I say that I believe the Departments in many cases could save a good deal of money. Take the Estimate for Law and Justice. I find that the Police in England and Wales cost 62 times what they did just before the War. That seems to me perfectly stupendous. The increase is due to enormous grants to local authorities, meaning a very heavy cost in additional rates. I have the figures which I could quote if necessary. There is also a very large increase in the cost of the County Courts. The County Courts cost 47 times as much as they did before the War. That increase is due to the fact that while salaries and other expenses have increased, the fees payable by suitors, fines, etc., have decreased. While the work of the County Court has apparently been reduced the staff remains the same, and is paid nearly double.

Then we come to the Ministry of Health. To my mind the Ministry of Health is one of the most extravagant Departments of the State, or it has been in the past. In April, 1919, the late Minister of Health said that 350,000 new houses were required, and 370,000 more houses for replacements, bringing up the total to 720,000 houses. The Prime Minister came down a little over a year later, I think in December, 1920, and added to the figure. He said that 500,000 new houses were required and 500,000 for replacements, or 1,000,000 in all, and it was on these figures that the late Minister of Health based his administrative requirements. These figures are a gross exaggeration. Only the other day the Registrar of Births and Deaths publicly estimated that the number of new houses required in England and Wales, exclusive of replacements, was 140,000. Why did not the Minister of Health before making his Estimates go to, I suppose, the greatest authority on this question in the country? These very inflated Estimates have led to an enormous inflation in the Departments, and huge administrative schemes have been based on fallacious figures. I find that in the Ministry of Health there are now nearly 3,000 more officials than at the Armistice, or nearly double. Surely it is possible to cut down expenditure on the general staff and the various housing commissioners on their staffs. It is true that there has to be a certain amount of work in clearing away slum areas and town planning schemes, but the time has come when we could get more money economised in this Department In England alone the amount for salaries is half & million more than last year. The salary of the First Secretary goes up from £2,000 to £3,000, apart from War bonus, and the salary of the Second Secretary goes up from £1,700 to £2,200, apart from war bonus. In the old days, when the Department was the Local Government Board—it has practically merely changed its name—there was one Permanent Secretary, with a salary of £2,000, and now we have two Permanent Secretaries, with salaries of £5,200, plus bonus. Very nearly every single section in the Ministry of Health has gone up in staff and in salaries since last year. The Welsh Board of Health has had an increase of staff this year over last year; the Scottish Board of Health has an increase over last year, and the Irish National Health Commission has an increase over last year. A certain number of low-salaried officers have been dismissed and their places have been taken by officers with much larger salaries. I could give hundreds of instances. Apparently the Ministry of Health is paying very large increases of rent for premises. Why, I cannot make out. The rent of building premises for services arising out of the War shows an increase this year over last. That I cannot understand, because the Ministry of Health is spending this year over £350,000 for adapting buildings to house their staff. One would have thought that that would have reduced the amount paid in rent. Why in addition they should be paying extra rent for housing these officials I cannot make out.

It is very difficult for private Members to give specific instances of extravagant expenditure. It is so easy to defeat a private Member on a specific instance, although his general contention may be absolutely sound. It is the Department itself that must keep down expenditure within the Department. It is the Department itself that has to deal with specific instances. What is happening under the Ministry of Labour? I refer specially to the Unemployment Insurance side. The Rules and Regulations now issued by the Ministry of Labour are so complicated in character and so stringent that practically no contracting out under the Insurance Act is possible. The Government actuary showed the other day that there ought to be at least 3,000,000 people contracting out under the Act. When a person con tracts out he only costs three-farthings a week, but when he does not contract out he costs 2¾d. a week. If you work that out with a personnel of 3,000,000 you find that you would save £25,000 a week, or £1,250,000 a year; but practically nobody is contracting out, and the reason is that the Regulations now being issued by the Ministry of Labour make it almost impossible for anybody to contract out. I hope the Government will look into that question and try to save a little money in that way. The Ministry of Labour has also got an enormous building programme. I should have thought that this was the worst time, when building is so costly, to start new building schemes. The increased building estimate is £60,000 over last year. I cannot understand why they should have any building at all. I should have thought that all the heavy work in connection with the Act took place last year, and that all the building schemes would be getting done. There is an expenditure of £170,000 this year for the extension of the Claims and Record Office at Kew; and for a dining room, £30,000; new Employment Exchanges at Liverpool, Newcastle and, Glasgow, over £100,000. All these schemes if they possibly can be postponed—and I am sure a great many of them could be postponed—ought to be postponed until the country can better afford them.

I believe that a great deal of money could also be saved in connection with the Board of Trade. If you take the ordinary services, and not the services arising out of the War, the salaries are £120,000 more than last year. There are 626 more officials than before the War. This is not in connection with services arising out of the War, but in the permanent Department. This year there are increases in a great many Departments over last year. Let me give one item which may be looked upon as rather ridiculous. Last year there were 23 charwomen employed at the Board of Trade in the principal Department; this year there are 44; last year 49 messengers, compared with 55 this year. I merely mention these things to show what I think is the case, that the Government are not doing their best to save every possible halfpenny they can. If you turn to services arising out of the War at the Board of Trade you will find that there are nearly 3,000 officers at the present time, including over 1,000 in the Food Department. We had fondly hoped that the Food Department had gone, but the Food Department has not gone, and so far as I can see there is no chance of its going. The Food Department, so far as I can understand it, has merely been taken over in its entirety by the Board of Trade. I shall have to drop practically all these notes of details, because, though very important, I must cut them short. They will have to be raised on the Estimates as they come up. I trust, however, that these give the total of the Civil Service Estimates. I hope that the Government are not coming down with an enormous quantity of Supplementary Estimates in addition. We know that they are coming down with one Supplementary Estimate, an Estimate of £5,000 for a Minister without Portfolio.

I see a note on page 13 that there is to be a saving of £5,000 a year through doing away with the salary of the Minister without Portfolio, but now I understand that this is to be changed, and that we are to have an estimate with regard to him. Last financial year we had Supplementary Estimate after Supplementary Estimate. There was an enormous Supplementary Estimate, for raising the salary of civil servants, for over £500,000, in addition to the War bonus. The Treasury pointed out that the only reason that they agreed to that Vote was that it was going to be met out of savings in the Departments. The savings amounted to £300,000, but the increased cost, quite apart from War bonus, was £250,000. It is not fair to other people outside the-Civil Service that these salaries should be increased so enormously at present. Civil servants have got security of tenure and pensions, and they ought to take their fair share of the bad times after the War. The Departments know that they can afford to disregard the original Estimates, and they come down to this House when they want to spend more. The vice does not end there, because they come and ask for money which they have actually spent. The Chancellor of the Exchequer told us the other day that out of the money actually asked for in the Supplementary Estimates, over £11,000,000 had already been spent, and he said that that large sum was allowed to be spent on account of what he called the Civil Contingencies Fund Act. He said that that Act was passed purely for the purposes of the War. I suggest that it should now be repealed, and that it ought not to be legal to spend money unless with the authority of Parliament. It is a wrong principle that a Department should be allowed to overdraw its account and then come to this House and ask for more money to make it good.

The Government may ask where expense is to be cut down. If I felt that I could have done so properly, I could have gone through these various details and shown where expenditure might be cut down. I hope I have said sufficient to show that there is no doubt that expenditure can be cut down to a very large extent. Many of the schemes proposed are very good. For instance, the Ministry have proposed many schemes which in themselves are very good, but we cannot afford them. There are lots of private persons who could do with better food, far more holidays and more of the amenities of life, but they cannot afford them and they have got to do without them. The Prime Minister wrote, I think in an article in a paper, in 1919: The state of the national finances is such that only what is indispensable to sound administration should be maintained. We must be willing to content ourselves with the second best if the best is too costly. That is true to-day. Unless the Government make up their mind to deal with this question, the crushing burden of taxation is bound to continue and the problem of unemployment will never be relieved. I hope that the Government, in their answer, will not blame the House. It is not the fault of the House of Commons. To-day the Executive is all-powerful. This is almost the weakest House of Commons in influence over the Executive that has existed for the last 100 years. It is the business of the Government to advise the House of Commons. If private Members of whatever party suggest expenditure, it is the business of the Government, if they think it wrong, to refuse that expenditure, and if those Members are strong enough to beat them, then it is the business of the Government to resign. This expenditure is not the fault of the House of Commons. It is the fault of the Government, because up to now the Government have not been strong enough in answering the demands of the various Departments. We have got a Committee on National Expenditure with a very able chairman and very able members, who present most valuable reports, but that is not nearly enough. They present these reports and nothing is done. I do not believe that we shall ever do any good until we can get a strict system of rationing the Government. I believe that my Noble Friend the Member for Hitchin (Lord R. Cecil) was the first public man who made that proposal.

Let us have an independent Commission of persons who can look into the whole matter of national finance, a commission appointed by the Government to advise what the country can afford on expenditure. I do not for a moment suggest that that Commission should dictate to the Government. The Government in the last resort must be itself responsible, but if that Commission is composed of experts, of men who can be relied on, then the Government ought to ration itself down to the figure proposed by such a Commission. Of course, if a national emergency arose the Government would only have to come to this House, and if they made good their case they would get the money straight away. My Noble Friend made another suggestion, not only that the Government should ration itself to a definite maximum figure, but it ought to ration every single one of the Departments. I believe that that would have the effect of making every responsible official in the Departments careful to see that money was spent only on necessities. It would make these responsible officials also think twice before embarking on new schemes and make them look ahead instead of doing things in a hurry at twice the expense. The Amendment which I have put down has been drawn with this object alone. I believe that this kind of scheme is the only kind which will ensure reduction of expenditure and the introduction of a system of rigid economy into every Department of State.


I beg to second the Amendment.

When I was asked by my hon. Friend to second this Motion, I sought diligently through the speeches and writings of contemporaneous authorities for some quotations with which to substantiate my argument, to mitigate, if possible, in some degree the impertinence of a novice such as myself addressing this House on the subject of high finance. I found myself in a certain difficulty in this work, for by far the most happy pronouncements from my point of view were to be found in the speeches and writings of my hon. Friend (Lieut.-Commander Young) who will reply for the Government from the Treasury Bench. I anticipate that to-day he will develop an equal facility in destroying the arguments which I shall strive to advance, but that will not be in any way destructive of the purpose of this discussion. My hon. Friend who moved the Motion pointed out that we do not desire in any way to lay down a doctrinaire dogma of finance, or in any way to insist that the remedies we advance are the only methods by which this precarious situation can be met. All we desire is to evoke from the Government a reasoned contravention, if possible, of our gloomy view of the situation, and, further, a definite proposal for the re-establishment of sound conditions of finance.

During my brief period in this House the chief lament which I have heard from the lips of hon. Members has been that Parliament to-day no longer exercises that close supervision and control over public finance which prevailed in the past. It is only with the object of discovering some means by which this House may occupy once again the position which it occupied in the past as custodian of the public purse that I take part in this Debate. As to the serious nature of the financial situation, there are many authorities whom I could quote It is only necessary to read very briefly excerpts from one or two of the speeches of chairmen of leading banks at the beginning of this year, who emphasised very clearly the character of the situation in the view of their banks. I will be very brief and will refer only to two. Mr. Walter Leaf, at the annual meeting of the London County, Westminster, and Parr's Bank on the 3rd of February last, said: The pressure of taxation is such that savings are seriously diminished. That is the real reason of the diminution of credits. It is mainly in the direction of Government retrenchment that we must look for the possibility of restoration of our resources. Mr. McKenna, on the 28th January last, at the meeting of the London City and Midland Bank, said: In consequence of the trade depression there will be a great decline in the national revenue without any diminution in the permanent liabilities of the Government, who will be obliged to increase taxation or to borrow. In the present overburdened condition of the country, however, new taxes can only be met by traders borrowing from the banks, and it will follow that whether by the Government or by the taxpayers recourse will be had to bank loans, and credit inflation will ensue. 5.0 P.M.

He goes on to say that the only way to secure deflation is that of economy by the Government. I will not weary the House by reading extracts from the speeches of any more banking authorities. My hon. and gallant Friend (Lieut.-Commander Young), who now sits upon the Treasury Bench, is well aware that at the beginning of this year nearly all the leading bankers ascribed the present condition of industry in a large measure, and the financial position of the country primarily, to the taxation of the Government, and they held that it could be very seriously reduced. This opinion can be substantiated to a large extent, if not quite definitely, by a consideration of the actual figures which are available. They form some guide in ascertaining the taxable capacity of the country. It is frequently argued that it is impossible to ascertain what is to-day the taxable capacity of the country. I think it can be discovered, or approximately discovered, by a very simple process of reasoning. To define the taxable capacity of any country, it will be universally admitted that the taxable capacity is represented by the surplus of production over individual consumption. Before the War our annual Budget was some £200,000,000, and it was estimated, almost unanimously by economic authorities, that the annual saving of the community, which was utilised annually for the replenishment of capital, amounted to £400,000,000, making in all a surplus of production over consumption of £600,000,000. If we assume, for the purpose of argument, that the margin remains the same and we translate £600,000,000, pre-War, into present monetary value, assuming pounds sterling before the War to be worth about two-and-one-third times the present value, we find to-day a surplus of production over consumption amounting to £1,400,000,000 a year, upon the assumption that the margin remains the same. Having arrived at that figure, we have to consider what factors to-day are likely to achieve an increase or a decrease in that margin. There are many factors which point towards a probable decrease.

Firstly, it is estimated that our production to-day is only some 80 per cent. of our pre-War production. Secondly, it is generally recognised that the consumption of the country as a whole has gone up; the standard of living is higher and we are probably consuming more to-day than we consumed before the War. Thirdly, before the War a substantial proportion of our national income arose from the interest on our foreign investments. Those have vanished and to-day we are faced with a foreign indebtedness and a prospect of paying interest on that indebtedness for many years to come. Lastly, there are other factors. The rates of the country have to be considered before we can form an estimate of its taxable capacity. They have doubled since the pre-War period and to-day are approximately £150,000,000 a year, or very nearly as much as our total pre-War Budget. All those factors tend to a diminution of our pre-War margin of production over consumption, and it is obvious that if we are to estimate the taxable capacity of the country we must subtract a substantial sum from the £1,400,000,000 pre-War margin represented in the present monetary value. It was in view of those considerations, I believe, that Mr. McKenna estimated the present taxable capacity of the country. He said not very long ago: For my own part I believe that examination will show that a Budget of £1,000,000,000 is as much as the nation can possibly carry at the present time, and that even this figure would not leave a sufficient margin for the increase of capital necessary for the reconstruction and development of our industry. If we allow our pre-War sum for the replenishment of capital to-day at the present monetary value, we should require very nearly £900,000,000 a year. That subtracted from the £1,400,000,000 leaves just over £500,000,000 to meet the annual Budget. Of course that is impracticable, and we have to lower our standard of annual capital replenishment. But it is evident that, allowing practically nothing for the annual replenishment of capital (which is vital to industry) the taxable capacity of this country cannot be much more than £1,000,000,000 a year. From the Estimates already adduced it is evident that the next Budget must amount to nearly £1,100,000,000. If the sum of £110,000,000 is allowed for debt redemption, which the Chancellor of the Exchequer adumbrated on a former occasion, the Budget must amount to over £1,100,000,000. If my estimates are anything like correct they demonstrate that the nation to-day must be paying a certain portion of its taxes out of capital, and that no sum whatsoever is available in the form of savings for the annual replenishment of capital. That opinion is vividly illustrated by the fact that most of the leading bankers have recently stated that many people are borrowing from the banks to pay their taxes, and are, in fact, paying them eventually out of capital. An hon. Member (Colonel Wedgwood) reminds me that many people have in the past borrowed from their bankers to pay their taxes, but they have not done it in anything like the present degree, and to-day, apparently, it is almost a universal habit or is followed extensively. It is a very serious condition of affairs and requires no emphasis in this Debate. I shall be very happy if these figures can be entirely refuted by the Financial Secretary to the Treasury. A consideration of them demonstrates, if they are approximately correct, that the taxable capacity of the country is to-day being exceeded, and that the direst financial retribution is liable to descend upon us in the very near future.

I ask the House for a few minutes to consider the present system of taxation from another standpoint, already touched upon in this Debate and originally advanced by the late Leader of the House. As the Mover of the Amendment said, the late Leader of the House arrived at an estimate upon the following basis. He took the pensions and the debt charges, which aggregate the sum of £450,000,000 a year, and he added to them the total pre-War Budget, multiplied two-and-a-half times, making a sum of £500,000,000, and thus arrived at a total Budget of £950,000,000. For the purpose of argument, I will assume that the proper increase in the cost of running this country should be the 150 per cent, laid down by the late Leader of the House, and in the light of that criterion I will turn to the Civil Service Estimates for this year, from which I subtract the pensions charge. The Civil Service Estimates in 1913–14 amounted to £53,901,000, and the Estimates this year, minus pension charges, amount to £267,477,982, or an increase of some 377 per cent.—not 150 per cent, as laid down by the late Leader of the House, but 377 per cent. two and a half years after the end of the War, when the index figure for the increased cost of living is round about 130 per cent. If the Army is taken, an increase is shown, not of 150 per cent, over the figures of 1913–14, but of 270 per cent. I have many figures which I could give to demonstrate the effect of this finance upon the industrial position of the country, but I will do no more than read a few percentages. Let us take a comparison of our trade figures between the year 1920 and the year 1913. We find that our imports were 11.6 per cent, less in 1920 than in 1913; our exports were 29.1 per cent, less; our re-exports 10 per cent. less. The figures are also especially noteworthy in the export of goods wholly or mainly manufactured, where a very substantial diminution is shown in 1920 compared with 1913. The Financial Secretary to the Treasury is far better acquainted than I am with the present financial position of the country and is fully familiar with the very ominous facts of the case. Although he will probably argue that they have nothing to do with the financial system of the present Government, a very direct relationship can be traced between excessive taxation and industrial depression.

While I fully admit that this country is facing at the moment difficulties which are not entirely attributable to taxation, I think it will be admitted that the present taxation, exceeding as it does the taxable capacity of the country, is largely responsible. The lesson of all this seems to be that our present system of national finance has failed. The machine is inadequate for its task and has broken down. It is failing to grapple with a difficult and dangerous situation and some radical innovation must be devised. There are as at present constituted three main checks upon expenditure. The first is within the spending Departments themselves, the second is in the Treasury, and the third is in Parliament. Take the first. Anyone who has had any acquaintance with the inner working of these Departments is well aware of the absolute dependence of the political chiefs upon Civil Service subordinates. Even in the old days this was so, and in the infinite ramifications and the multitudinous and diverse duties of the modern Department, the rule becomes increasingly correct. Today the political chiefs are entirely and absolutely dependent on their subordinates. The danger of the situation is increased because we have not got altogether the old type of civil servants. There are many admirable civil servants, many very estimable people. Some of the temporary officials may undoubtedly realise only too well that a cessation of the activities of their Department means also the closure of their own employment. Then again, it is often the very best type of civil servant who is more responsible than any other for spending money unnecessarily, because the best type is actuated by a profound belief in the importance of his own Department, to the detriment of his vision of the general situation. The type of man who is really keen, who is immersed in his work, and who is longing to initiate beneficent schemes will always use the most powerful arguments for the proposals which he lays before the Minister, and which the Minister ultimately lays before this House. It is always easy for the Department to bamboozle the Minister, and it is still easier for the Minister to bamboozle the House of Commons with the arguments supplied to him from his Department. So long as we continue viewing projects for expenditure, not from the standpoint of whether we can afford them or not, but from the standpoint of whether they are desirable or not, we are bound to find ourselves faced with incontrovertible arguments for the expenditure of tremendous sums on projects which are usually useful, but which are bringing financial ruin upon the country.

The second check upon finance is the check of the Treasury. The Treasury, as hon. Members are aware, is largely the offspring of Mr. Gladstone's ideas, and was devised to meet conditions totally different from those which prevail to-day. In those days, when the annual Budget was considerably under £200,000,000, there was no chance of our annual expenditure exceeding our taxable capacity. In comparison, the activities of the Departments were far smaller. There was more time for the consideration of the very few new projects which were advanced, and an expert Treasury staff was available who were familiar with the inner workings of the Department, and had ample time and opportunity to consider in detail all the projects laid before them. How very different are the conditions to-day. The Treasury staff is not materially larger than before the War. An expert staff to meet the new situation is certainly not available. Further the old Treasury outlook is really inadequate for this situation for the Treasury official was schooled in the belief that proposals for expenditure must be considered solely from the standpoint of their desirability. It is really a new outlook that is required for these matters, an outlook not in accordance with the original Treasury traditions, though I am well aware these have been considerably modified to meet the present position. The last check of all is Parliament. The inadequacy of this has been conclusively demonstrated during the past few months. Supplementary Estimates to the extent of over £100,000,000 have been produced in the course of the current year. A great deal of the money had already been spent. Hon, Members were fully aware that the country could not afford the spending of that money, but on every single occasion they were confronted with irresistible arguments in favour of the expenditure, and, while fully conscious that the country could not afford it, they were obliged to vote for it. Parliament always finds itself defeated in detail. To begin with, we are all economists, but we all want to economise on somebody else. For my part, I should probably like to begin to economise on what are called military adventures, and on things like red uniforms for soldiers. Others would start to economise on education or hospitals. In the course of these Debates each Member advances his own individual view, and the representative of the Government points first to one and then to another, and says quite rightly that our proposals are conflicting, and argues that this factor constitutes in itself an absolute excuse for the Government doing nothing at all. So nothing at all is effected and the economists are played off one against the other. The system of the Treasury check and the old Parliamentary control has largely ceased to operate, and its failure has resulted in a very serious situation in which we find ourselves to-day.

I do not wish to stress the latter part of my argument. I want rather to refer to my opening remarks, when I endeavoured to demonstrate that the taxable capacity of the country was to-day being exceeded, and in the light of those facts to ask the Government to advance their own proposals for the re-establishment of some real check upon the expenditure of this country. Personally I agree with my hon. Friend who moved this Amendment, that the only real way to curtail our expenditure is to adopt the advice often given to individuals and to cut our coat according to our cloth. I think a Commission of Experts should be constituted to advise upon the taxable capacity of the country, and having regard to that figure—which should not be exceeded nor even taxed up to—the Government should formulate their proposals, and then it would be open to hon. Members of this House who have alternative proposals, to put them forward, always keeping within the limit laid down. That is really in my view the only conceivable way in which this House can reassert its old control over the public purse. There may be another way, and a better way. I hope my hon. Friend when he comes to reply will advance his proposal. In view of the statements which are available from leading bankers of this country, and the almost unanimous opinion of leading economists, it really can be demonstrated that to-day the financial position of this country is exceedingly precarious. Our old system is failing entirely, and the moment has arrived when we must have a new system, an unprecedented system, to meet a situation which is without parallel in the financial history of the country.

The FINANCIAL SECRETARY to the TREASURY (Lieut.-Commander Hilton Young)

I am sure hon. Members will realise the diffidence with which I follow in the footsteps of my right hon. Friend who now holds the office of President of the Board of Trade. His abilities and his wide range of knowledge are such as those who come after him cannot hope to rival. This at least they can hope to do, to seek to imitate his unfailing assiduity and unfailing courtesy. It is with that desire I rise in this Debate, and not to rebut in antagonistic terms the extremely moderate and reasoned criticisms which have been put forward by the Mover of this Amendment and by the hon. and gallant Member for Harrow (Mr. Mosley), who seconded. In the course of their speeches they have swept rather widely over the field, and they have touched upon many subjects which would be more properly discussed in a Budget Debate than in a Debate on Civil Estimates. To cover the whole field of national expenditure and revenue is hardly proper to this occasion. I, at any rate, will not attempt to deal with some of the aspects of this question which have been raised, because I could not do so without anticipating the Budget discussion, which would be neither desirable nor seemly on my part. Nor indeed can I attempt with any utility in the course of this Debate to reply to those more detailed criticisms on the economy and expenditure of various Departments which have been advanced by the hon. and gallant Member for Wood Green (Mr. G. Locker-Lampson). The reply to those criticisms in detail must necessarily come from the Departments themselves. The aspect of the criticisms to which I desire more particularly to address myself is the criticism directed against the Civil Estimates and the remedies proposed for the alleged extravagance in that direction. I would only suggest that, as has been stated here, all Members of this House are economists, all are interested in the same cause, so far as that is concerned, and there are no two parties on that subject. We must consider, however, that there are two sorts of criticism: the sort of criticism which is useful and the sort of criticism which is not. The criticism that is useful takes due regard of what has actually been done in the direction desired. The other sort of criticism—which really puts back the cause we are all desirous of advancing—thunders denunciation, interferes with whatever reforms might have been expected, and, as it were, shuts the gates of mercy upon the economiser. That only tends to produce, as it were, a sense of desperation in the unfortunate economiser, which does not tend towards the continuance of his admirable work in the right spirit.

What has been done in this direction? Let me deal with what we are properly concerned with only in this particular Debate, and that is the Civil Service Estimates. I shall attempt with a very few figures to demonstrate to this House that a great deal has been effected already. I recognise a feeling almost of a sense of despair in the utterances of the Mover and Seconder of this Motion, and I believe that is due entirely to the fact that they were not aware of what has been done to meet their desires already. The total Civil Estimates of this year amount to £379,000,000, and that is a total reduction on last year of £155,000,000. The reduction in the two years 1920–21 and 1921–22 is no less than £264,000,000 on the Civil Estimates, and I think it is impossible that anybody who sees those figures should not begin at any rate to suspect that there may be, in spite of prejudices held, a very considerable economy effected. Let us see how we stand now. Already in this year 1921–22 our Estimates on strict comparison amount to less than the Estimates that were given by my right hon. Friend the Leader of the House, when Chancellor of the Exchequer, for his normal year. The comparison there must be made omitting all transitory and special war charges. The Estimate for the Civil Services in the normal year on that basis was £305,000,000; omitting the transitory charges, we have already attained to a figure of £289,000,000, or £16,000,000 less than the Estimate for the normal year.


Is that the first or the second normal year?


The third.

Lieut.-Commander YOUNG

The final figure was £305,000,000 for a normal year. These figures need, no doubt, a further examination, which, with the patience of the House, I shall attempt to give them, but one cannot see them without seeing that there is cause for a preliminary presumption that there has been a great achievement towards economy. I know that it has been said by the hon. Member for Wood Green (Mr. Locker-Lampson)—and it will be said again—that these are Estimates, and what guarantee can we have that they will not be falsified again by Supplementary Estimates? Of course, it is a commonplace of finance that for regularity and economy the first essential rule is to maintain with the greatest possible degree of rigidity the first Estimate as laid down, that the Supplementary Estimate is always an evil and sometimes an unnecessary evil, but I will call attention to this fact, that there has been, since the beginning of the return to financial normality, a progressive decrease in Supplementary Estimates. In 1919–20 they were £124,000,000 and in 1920–21 £52,000,000, or a decrease of more than half. There is every reason in common sense to expect and believe that that progressive decrease will be maintained. The great increase in the percentage of Supplementaries was clearly due to the break-up of the ordinary system of estimating caused by the Vote of Credit system, in the first place, and the tightening up of the screws of the old system has taken time with the return after the War to normality. In the second place, the chief disturbing element has been the great variations in the value of money and in prices. Those may be expected gradually to become less extreme in their variations. For those two reasons, there is every reasonable-prospect in looking ahead to think that the progressive decrease in the percentage of Supplementary Estimates may be relied on to continue.

I would ask the House to fix their attention upon this figure of £155,000,000 of reduction in the Civil Service Estimates for this year on last year. That is the gross measure of the attainment of economy on the Civil Estimates. How is it made up? Of course, it is made up as to by far the greater part, by a cessation of transitory war services; that is in the nature of the case at present. The transitory war services have decreased in this year in comparison with last year by no less than £150,700,000, so that of the £155,000,000, all but £4,300,000 in the reduction is due to the cessation of transitory war services. The exploit of the reduction in the permanent ordinary services of £4,000,000 may not be great, but it is encouraging. It is, as it were, the turn of the tide for economy, that this year it is possible to make this reduction of £4,000,000 on the permanent ordinary services in the Civil Service Estimates. So important is it that I think it is desirable that I should give the House one further analysis of how that £4,000,000 is composed. As the House will expect, it is a composite balance of decreases against increases. The principal decreases in the permanent and ordinary services are the decrease on war pensions of £11,000,000 in comparison with last year, a very interesting decrease due for the greater part to the possibility now of making closer estimates as to what the amount will be; then such a decrease as the decrease in the Welsh Church grant, and the fact that nothing is required this year for the Development Fund. These decreases on the permanent and ordinary services mount up to £18,700,000. Against those there are, of course, various increases to be set, and I would ask the special attention of the House to the nature of the increases on this year's Civil Estimates. They are, education, £7,600,000; unemployment fund contributions, £2,600,000; health and housing, £2,600,000; Royal Irish Constabulary, £1,000,000; and others, £600,000; thus making £14,400,000 to be set against the £18,700,000 of decrease, giving us our £4,300,000 of savings on the ordinary services this year.

The point to which I wish to call attention is this I know there is both inside and outside the House in some minds a somewhat vague idea that the increases in expenditure are spread over a great elaboration of small services and go into the pockets of civil servants. If there, is anything in this little analysis which I have ventured to give—and I believe it is really the root of the matter—it will be seen that the increases which cost us the balance of £14,000,000 which we should otherwise have saved this year are not gone in a general distribution over small scattered services, which might be said to be wasted, and they are not going into the pockets of civil servants as individuals, except in the single case of the Royal Irish Constabulary, an expenditure which has been made in this House certainly not with disapproval. For the rest, these increases are going to the three great national services of education, unemployment, and health and housing. That, I say, is the actual achievement this year in the direction of economy on the Civil Estimates, a total saving of £155,000,000 in comparison with the year before, of which £4,000,000 is absolutely due to a cutting down of permanent and ordinary services; but now, if I follow the arguments advanced by the hon. Member for Wood Green and those who agree with him, they will not be content with a comparison with last year and the showing of a saving there, but will say that even so we are spending too much on the Civil Estimates. Let me take the standard which he himself has suggested, and, if I may venture upon that degree of reminiscence, it is the standard which I remember myself suggesting upon one occasion from the Bench close to where he now sits—that is, the standard of the pre-War expenditure upon the Civil Services. That, I believe, will give the most common-sense guidance as to whether the Civil Service Estimates for this year are unduly swollen or extravagant or not, and, of course, it will require to apply to it an examination of some carefulness.

I hesitate to fatigue the House with the figures necessary, but I think I will venture to do so, because I sincerely believe it is impossible to get a true view upon this comparison with the pre-War standard without a really careful examination of the figures. The hon. Member for Wood Green has arrived at the result that there is an expenditure in this year of three and a quarter times the pre-War standard. I shall be able to show, I think, that that is very much too big, and that the comparison will show that this year the expenditure is very much less in comparison with the pre-War standard.


Leaving out all war services?

Lieut.-Commander YOUNG

Yes. I will adopt the hon. Member's method of approaching the matter by cutting off from this year all that it is necessary to exclude in order to arrive at a true comparison with the year 1914–15, which is the last, year in which there were pre-War Estimates. The things to be excluded are temporary War services, to which he has referred; also those permanent, or semi-permanent, charges which have been left upon the country as a result of the War, I mean the War pensions. In the third place, we must cut out certain special, abnormal charges which exist at the present time, and which were not in existence in the year 1914–15. In the fourth place, we must remember to make allowance for new charges which have been thrown upon the Exchequer by fresh legislation since that time. Then we must surely make some allowance for the normal growth of the population and the general expenditure of the country since then. Last, and certainly not least, we must allow for the fall in the value of money. War charges may be estimated very closely indeed, as they are estimated this year for the first time on the Civil Service Estimates at £89,700,000. That reduces our figure from £379,000,000 to £289,300,000. I am including in that allowances to ex-service men £16,000,000, and the liquidation of the Railway and Canal Agreements, put very approximately at £30,000,000—certainly a very safe item. Next we come to the permanent, or semi-permanent, War charges left upon the country by the War. Those may be estimated very closely at £119,300,000. Of course, by far the most important item is War pensions, which are this year £111,500,000. I would mention also the Housing Subsidy to the local authorities, £5,500,000. This £119,300,000 reduces our figure of £379,000,000 to £170,000,000.


The two together reduce it?

Lieut-Commander YOUNG

Yes, Let me continue. The abnormal charges for the present year are a difficult item to estimate, though they are a fair item to allow. I estimate them at £4,000,000. The principal item is £2,000,000 for the Royal Irish Constabulary. The last charge of this sort to allow is also very difficult to estimate. It is new charges for legislation in the course of this year. Those may be estimated on a very conservative basis, leaving out every doubtful item, at £12,500,000 more now than in 1914–15. The principal items are: Police Grants for England and Scotland, £7,500,000; and Health Grants, £2,000,000. These two further charges, £12,500,000 and £4,000,000 for the new legislation charges, and the abnormal charges, will finally reduce our figure of £379,000,000 to £153,500,000, so that if you are going to apply this pre-War standard of the year 1914–15 to see whether the Civil Service Estimates this year are extravagant, or in excess of that standard, then you will find that you have to compare with the figure for 1914–15, which was £59,000,000, the figure in the present year of £153,500,000. There are two other considerations which the House will observe it is necessary to consider—the allowance for abnormal growth in the population and the expenditure of the country. To get some idea of that, the only way is to take the normal growth in the expenditure of the country for seven years, say, before 1914–15, and see at that rate of growth to what the expenditure for 1914–15 would have grown at this time.


Do you base it on population or wealth?

Lieut.-Commander YOUNG

The rate of growth of the Civil Service Estimates. At that rate of growth, the Civil Estimates for this year would have grown from £59,000,000 to £87,000,000. I might at once say that it is fair then to compare the corrected figure of £153,000,000, this year's Estimate, with £87,000,000 for the corrected figure of 1914–15. But I do not think that extreme approximation of the two figures would be a scientific or a fair one, because in those last years, in which the period of growth would have taken place, there would have been undoubtedly fresh legislation and growth of abnormal charges. I think, therefore, it would be more fair and more scientific to compare this increased figure of £87,000,000 of the year 1914–15 with our own reduced figure of £170,000,000, not allowing for the new legislation expenses or the expenses of the special, abnormal causes. If we take those two figures as our final comparison, we cannot get a just view of the comparison unless we take those corrections, and, taking those corrections, we find that the total increase of expenditure on the Civil Service Estimates for the year 1921–22 at £170,000,000, compared with the corrected figure of £87,000,000, for the year 1914–15, the increase is less than 100 per cent. The index number for the rise in wholesale prices for comparison is at the present time about 90 per cent., so that you find the actual increase, on a just comparison between our Civil Estimates this year and 1914–15, is just what would be expected to result from the fall in the value of money and the increase in prices.

Let me turn from that aspect of the matter to deal very briefly indeed with the actual wording of the Amendment to-day. My hon. Friend laid some stress, but not very much stress, at the close of his observations, in urging the Government "to lay down a definite policy for the limitation of national expenditure to an amount dependent on national income," and that is the Amendment to which the House is asked to assent. That is, I suppose, as near an approach as can be made by those who have to formulate the Amendment, on behalf of their supporters, towards a practical system of rationing, and I want to ask the House to see what is the practical possibility of dealing with this as an effective and a businesslike system of imposing a supreme and fresh check upon national expenditure. The theory, as I understand it, is that a fixed sum is to be laid down in relation to the total amount of 'the national income. What does that mean? I think nothing is better known than that it is perfectly impossible to arrive either at any statistics to enable you to calculate the national income or, if you got statistics which might begin to serve as a basis, to construct upon them a reasonable theory as to what relation there should be between that income and the Government expenditure. The initial difficulty is the difficulty of setting values in a fluctuating market. How, for instance, could you at any given moment examine the national income during this long period of rapidly fluctuating prices?


Is it not a fact that at the Brussels Conference our own representative advanced an estimate?

Lieut.-Commander YOUNG

Let me take an estimate which has been put forward. I believe it to be totally illusory, for this reason, among many others, that it totally disregards that very large section of national expenditure, namely, the expenditure in the redemption of debt which is not withdrawn from capital available for savings, but is returned for savings. There is another circumstance which makes the particular estimate referred to totally illusory. It is that another large element in national expenditure, interest on debt, is paid out in the form, of incomes which are themselves liable to taxation. Failure to allow for these two circumstances makes the particular estimate in question, I believe, totally illusory. Other estimates have been made by authorities even greater than those to which my hon. Friend has referred, increasing that estimate of £1,000,000,000 to a figure as big as £1,500,000,000. I believe all equally unsafe as a practical guide, and that to bring imaginative, speculative figures, open to continuous controversy and grave doubt, into relation with such a hard and fast, and practical and vital, matter as the figure we ought to put upon the Budget and the Estimates would be a practical absurdity.

6.0 P.M.

Now let me ask what it is really proposed that the House should do by a system of rationing. As I venture to argue, figures are not available, and theories are not available, to enable you to bring the speculative estimate as to the total national income into relation with the hard and fast facts of expenditure. But it may be said, "Cannot you, by taking a general look round, achieve this purpose?" It might be done, but if it were, not done with a regard for what was actually essential for the services of the State, there would be no reason to suppose it would have any relation whatever to what those services required. If it happened to be just as much as the State required during that year, well and good. What would happen if it were otherwise is that either it would be more than the Rationing Committee fixed, or than the State required, and so would be a straight indication to the State Departments to spend more than they needed; or it would be less than required by the State. What then could be more fatal than to impose an impossible limit upon the expenditure of Departments, and so oblige the break-up of the original limit imposed upon the year's estimate and budgeted for, so making a Supplementary Estimate a necessity and impossible to be avoided? No, the practice of any reasonable tribunal, of any reasonable body, whether it be this House, or other Committee or Commission appointed to consider the matter, could only in practice arrive at a method of rationing Departments by considering the actual needs of the Departments, and by fixing a sum. That is the process which would have to be gone through. It must be done upon evidence of requirements, and if it were so done, how does it differ from what we are doing now?

That is exactly the old-established and present system upon which our finances are regulated. The Departments are rationed by the votes in the Estimates, by the Government in agreement upon the amount in the Estimates; the House considers those Estimates and rations the Departments by imposing the amounts in the Estimates. That is the process now carried out. It could not be carried out without considering the evidence from the Departments as to what is necessary to their requirements. When you have admitted that, you find the very system you have at present. Let me ask the House this: Supposing you attempted to do something more and to made a sort of super-law, higher than even the financial traditions and sanctions than we have at present, and say, "No Department must spend more than the amount originally voted in the course of the year," except under some extreme pain and penalty which has yet to be devised. What prospect would there be of your really being able to make such an arrangement? Consider what has happened in the course of the past week. Let me ask how any rigid question of rationing, more rigid than at present, upon certain Departments would have been able to survive the recent great emergency, and similar emergencies which may occur in the future?


It would have stopped you mobilising the reserves against the working classes.

Lieut.-Commander YOUNG

The only result it must have in such cases would be to stop the Government of the country.

Lieut.-Commander KENWORTHY

Stop this Government!

Lieut.-Commander YOUNG

Let me conclude by referring to the final question asked by the hon. Member for Harrow (Mr. Mosley). What, he asked, was proposed by the Government of any form or method of improving control over expenditure both in the House of Commons and in the Government? In the historical account he developed in the matter and method of control, I would remind the House of one very important element to which no reference was made; that was the growth in the system of control outside, the Treasury but inside the offices and supplementary to the great growth in the administration of the business of the country. No account of the modern system of checks and controls of expenditure could possibly be complete which did not lay very great emphasis upon this great increase in the direction of control which has been devised inside the Departments themselves, in many cases, in order to supplement the administrative control generally.

I have laid the principal emphasis upon two things—upon the fact that there has been a great achievement, in round fiugres, in the actual expenditure in the Civil Service Estimates this year in comparison with preceding Estimates. In the second place, I have taken up what might be called the friendly challenge of my hon. Friend the Member for Wood Green (Mr. Locker-Lampson) as to the comparison with pre-War years. I would draw the attention of the House to various considerations which seem to show that we have already arrived—due allowance being made—at a state of expenditure in these Estimates which shows we are practically back, if not below, the standard of the expenditure for Civil Service purposes of the sort before the War. Let me add that if I have said anything at all in the course of my speech which would give the impression that I do not welcome any possible criticism and every assistance in the effort after economy, I would seek to remove that impression. I do hold now, as always, most firmly the conviction that while much has been achieved in the direction of economy in the economy campaign carried on by the Government in the course of the last two years, yet much remains to be achieved. [HON. MEMBERS: "Hear, hear!"] New methods and new directions for economy present themselves, and as the disturbances of the War pass there is no doubt at all that opportunities for further economies will arise. I would seek to connect that, however, with the wider view of the subject. If these economies are delayed, and do not come as fast as could be desired, it is not wholly because of the inability or inefficiency of this, or any other Government, but partly because of the reluctance, and the very natural reluctance, in the public mind fully to face the consequencies of the War. This country is not now so rich a country as before the War. The same things cannot be had for the same money, or as many of them. [An HON MEMBER: "Do without them then!"] It would be to abandon all hope of success in that joint campaign for economy on which we have all embarked if we were not to make up our minds to these circumstances as regards the great co-operative services rendered by the State for the nation. We must be prepared in this direction or in that for sacrifices. An effort should be made to recognise that as the years go on there are sacrifices still to be made by this nation on behalf of the great cause of the Allies, not perhaps so great as those made during the War, but still not less directly connected with the victory of that cause.


I am sure the House will join with me in congratulating the hon. and gallant Member on the ability and the courtesy he has displayed in discharging his first important official duty in this House. We shall look forward with pleasurable anticipation to many other expositions of the Governmental financial policy from him. It was, perhaps, inevitable that in his first speech he should have taken the rather rigidly official view. He complained that the speeches of several hon. Members were rather depressing and discouraging to those who were anxious in Government circles to save money. I hope he will not think me hypercritical if I venture to say that the repetition of the extreme official view that we really have saved all the money we could save, or ought to save, or, at any rate, that we have saved a very large sum of money and are doing very well, has perhaps an even more depressing effect than that of excessive criticism. What is the claim of my hon. and gallant Friend, or rather of the Treasury, as to the savings that have been already achieved?

He says we have saved no less than £155,000,000 as compared with last year. When that comes to be examined it appears that £150,000,000 of it are-for transitory War services that are, so to speak, saving themselves. Only £4,000,000 have been saved by economy. When that again comes to be examined it is met by a balance of account by which £11,000,000 are saved—if you are to call it saved—out of War pensions, and £8,000,000 out of some other charges which he did not go into very fully—Welsh Church charges, and what not—and that these again have been met to some extent by some increases in education, unemployment, housing, and the Royal Irish Constabulary. I do not think that is a very encouraging account of the amount of economy that has been carried out last year. I do not know that we should regard War pensions as a subject on which we would be most glad to see economies carried out. On the other hand, there are certain items which we certainly ought to look upon with a great regret, whatever our opinions may be: mainly the extra £1,000,000 spent on the Royal Irish Constabulary. If the £4,000,000 saving is regarded as an adequate contribution to meet the really serious financial position in which we are placed, then, I think, we shall feel that our observations in this House have not yet born fruit in the Government Departments.

In another part of his argument my hon. and gallant Friend says that we have already cut down the Civil Services expenditure to an amount, at any rate, not exceeding—when all possible allowances have been made—the pre-War amount. I confess that I felt less convinced by that portion of my hon. and gallant Friend's argument than I did by the former part. He gays, "Oh, you must take off quite reasonable transport and war charges, and the pensions and all the permanent war charges." But that makes it all the more necessary to save in other respects. I cannot agree with my hon. and gallant Friend at all that he is entitled to take these; to disregard what he calls the abnormal expenditure. There is always abnormal expenditure every year, and you cannot rely upon there being no abnormal expenditure in any year. It only means that whereas you may spend an extra amount in Ireland in one year you may have to spend an extra amount somewhere else another year and there will always be abnormal expenditure. I cannot admit that the hon. Gentleman is entitled to disregard the expenditure imposed by legislation because the Government is just as responsible for legislation as it is for administration. Neither can I accept the hon. Member's doctrine that he must be prepared for a normal growth of expenditure which he puts at £87,000,000. I do not think that is a sound doctrine. The hon. Gentleman says the expenditure was £59,000,000 in 1914–15 and that normally it would have grown to £87,000,000. If I may say so, I think the last passages of the hon. Gentleman's speech seemed to dispose of that part of his argument.

We have to economise. We cannot allow normal increases to take place. We have to get the expenditure down and not allow it to grow and then say, "There it is, it has grown in the ordinary way." I do not accept in any way the doctrine that the Civil Service expenditure has been reduced to such a sum that, allowing for the change in value of money, we may say that we have got down to the pre-War standard. I should have thought it was common ground that we are spending too much money, and while we are spending so much as this in Civil Service expenditure we must not forget the other immense drains going on upon the resources of the country. There is considerable extra military expenditure. The Army is still some four times as expensive as it was before, and there is no doubt that there is a vastly greater number of civil servants now being employed than were employed before the War. I will not go into the details, but it is rather striking in that connection that although we have abolished three or four Ministries apparently we have not succeeded in abolishing more than a small fraction of the officials employed in those Departments. I do not think there is any real doubt that we are spending too much and that the rates and taxes are beyond our taxable capacity at the present moment.

The mere fact of the 'warnings from prominent bankers as to the excessive degree to which taxpayers are resorting in borrowing money in order to pay their obligations is conclusive that too much money is being spent. There is no doubt about it. I remember the present Leader of the House last year finishing his speech by saying he had no doubt that we had reached—I believe he said surpassed—the extreme limit of the amount of taxes that ought to be imposed. What I should have been glad to have heard from the Secretary to the Treasury is a more definite acceptance of that position, and of the view which I am sure is very widely held, that some broad effective policy must be adopted in order to reduce expenditure. I want to press upon the Government the necessity of recognising that we are in essentially a new situation financially. It is not the same thing as before the War when there was no doubt that our taxable capacity had not been reached. I do not mean to say that it was not even then desirable that economy should be carried out. I accept the old doctrine generally accepted that all taxes are an evil as far as the prosperity of the country is concerned, and Mr. Gladstone's phrase about "money fructifying in the taxpayer's pocket" is a perfectly sound doctrine, and if you take that money out by taxes you diminish the amount of money available to increase the prosperity of the country.

Although it is true that economy was desirable, then there was nothing like the acuteness of the call for economy that there is now. I think we must start from the proper position that the expenditure is definitely too high, and is producing very serious evils. I have no doubt at all myself, and I do not believe any hon. Member in the House has any doubt, that the recovery of industry is being seriously retarded and impeded by the high amount of taxation. I have not the slightest doubt that important improvements in equipment are being unfortunately put off, and uneconomically put off, by reason of the want of capital. I have no doubt that we are prevented from embarking on equal terms in some cases with foreign competition owing to the difficulty of improving our methods of manufacture through want of capital. I have not the-least doubt that we are being really han- dicapped in the prosperity of the country by reason of the amount of taxation that is being levied. Under these circumstances I do not think, with all respect to the Government, that the House and the country would have heard with pleasure that they really were prepared to adopt some new system for limiting and checking expenditure.

My hon. Friend spoke more or less with approval of the present system, and he said he thought it was quite impossible to have a fixed amount of expenditure. I want to remind the House of the great evil of the present system. I believe it is bad because it does not secure economy in the total amount of the expenditure of the country, and I believe it is still worse because it encourages extravagance in the Departments. I do not believe that you will ever be able to achieve a great deal of economy or the destruction of waste by inquiries from outside. They are useful because they call the attention of the officials of the Departments to the necessity for avoiding waste, but ultimately the only way you will really avoid waste is by the efforts of the officials themselves. You have to get that point of view adopted by the officials, not least of all by the naval and military officials, but by all the officials of the country. What is the present system? You have a Department putting forward what they regard as the necessary expenditure for the year. That is submitted to the Treasury and they criticise it, and you start from the point of view that you have to find whatever is necessary, however large it may be. My hon. Friend rejects positively the doctrine that you are to say to any Department: "You are not to spend more than a certain amount." He says the Treasury has to consider what is necessary for the State, and then find the money in some way or another.

Lieut.-Commander YOUNG

My right hon. Friend is somewhat misinterpreting my remarks. My contention is, that it is impossible to fix a definite limit in the original Estimate beyond which the Department must not spend without considering the representations of the Department as to what they require.


What does that mean? Does it mean that in point of fact the Treasury will make up its mind what the country can afford to spend in the first instance, and having done that, will see how much below that will be sufficient? The Departments have to build up a case showing it is necessary to spend here and there, and it is contended that the Treasury can only criticise. That is a very bad system when you really want improvement and serious economy. It is a bad system for several reasons. In the first place, I believe it never will produce a very large diminution of expenditure. In the second place, it is a, bad plan because it is perpetually putting the officials of the spending Departments in opposition to the Treasury, and the result is they will get to regard the Treasury as their natural enemies. It is their business to make out a case, and it is the Treasury's business to destroy it. Broadly speaking that is the attitude. If you proceed on the present system that is inevitable, because each Department has to make out a case for its expenditure.

The Treasury, very rightly, has got the credit of being an extremely able and industrious Department, but it is not manned by super-men, and for them to really examine the details of the expenditure of each Department from beginning to end is quite impossible. What happens is that, if it happens to be an old expenditure, not much is said about it if it has been incurred in previous years. On the other hand, if it is a new expenditure, a great battle immediately takes place. I remember once it being recommended that certain messengers should receive payment for overtime for Sunday work, and it was only a matter of a very few shillings. That matter required a letter from the Treasury, and there was a regular correspondence on the subject. I also remember that a friend of mine told me that he went as Ambassador to a particular post, and by the ordinary custom so much was allowed for the equipment as a matter of course. It happened that his predecessor had only been in office a very few months, and therefore the Embassy did not require this expenditure upon it. The amount was passed as a matter of course, but my friend, being a public-spirited man, called the attention of the Treasury to the matter and returned the sum. It is evident that a system which permits anything of that kind is necessarily ineffective. It means practically that all new expenditure is suspect and that all old expenditure comes before the Treasury with a strong case. But it is very often the new expenditure which is right and the old expenditure which is wrong. Unless the Department is convinced that the new expenditure ought to be sanctioned it is very difficult to get it passed. There has to be a very strong case made out for it.

My hon. Friend asked how it was possible to fix what ought to be the expenditure of the State, and he said, speaking with the authority of his position, that no Estimates of national income are really trustworthy. I dare say they are not perfectly trustworthy, but I have not the slightest doubt, if my hon. Friend got a small committee of really expert economists to go into this matter he would receive very great assistance in arriving at what was the amount the country could really afford to spend. He himself would be one of the best of the experts. After all, sooner or later, we shall have to settle that. We cannot go on allowing expenditure to increase indefinitely. There must come a time sooner or later when it will be no use telling us a thing is necessary. If we cannot afford it we must sooner or later say so, and we must have a fixed outside limit beyond which the expenditure of the country should not go. When the Chancellor of the Exchequer admits, as was done last year, that we have nearly reached or even got beyond the limit of what is actually possible, he must mean something. He must have arrived at that opinion somehow. It shows that there is a figure which could be fixed as to what is the taxable capacity of the country. I am convinced, therefore, in spite of the observations of my hon. Friend, that it is possible to fix in the first place, under proper advice, a limit beyond which expenditure should not go. That does not mean that we ought to spend to the full limit of our taxable capacity, but taking that taxable capacity as one fact and taking the demands of all Departments as another fact the Treasury could, I am satisfied, fix an amount at the beginning beyond which the Budget ought not to go.

It is asked, if you have anything like this coal strike, or some similar sudden emergency, what are you to do? Of course, you must be reasonable people, and to meet some sudden emergency you must have some emergency power, but it ought to be hedged around with the strictest precautions. It ought not to be allowed without the special permission of this House, and that special permission should not be granted until the whole finances of the country have been taken under review in the House in relation to this special additional expenditure. I do not say that the system can be made absolutely cast iron; that is impossible; but a great deal could be done. I attach just as much importance to fixing an amount for each Department. I am sure that is in some respects the most important part of the proposal, because it means that you will give to each Department beforehand a definite figure, beyond which it must not go, and a definite indication that it must economise in every way it can. It must make the sum go as far as it can be made to go for the purposes of the Department. I am satisfied that would be a far safer way of dealing with expenditure than any system we have now. I ask the Government not to treat this as merely a matter for discussion here, or as a matter to be settled by old Departmental and historic prejudices. The situation is really very serious. We must economise. My hon. Friend will agree that we must do that if we desire to accelerate the recovery of the prosperity of this country.

Let me remind him of certain broad facts. We were originally told that the normal expenditure of the year ought to be £880,000,000. That was the first figure put forward by the present Leader of the House. Later on it was extended to £945,000,000. Then we heard something of the figure of £1,000,000,000, and this year's Estimate, I understand, approaches £1,038,000,000, which does not include the emergency expenditure occasioned by the strike or make any allowance for the reduction of debt. It is evident that the expenditure will go up to £1,100,000,000, and possibly £1,200,000,000, this year. It is a figure which must be reduced somehow, and if the Government are not prepared to accept the suggestions which we have made of rationing the expenditure of the country, and of rationing the Departments, then it is really important that they should announce a definite and complete policy of economy and put it before the House without delay—I hope in the next Budget. It is no use saying we have an old system which has worked very well. It is no use saying that all that is necessary is to apply old methods, and to apply, them more thoroughly. We have to face a novel situation with which we have not been faced, at any rate, for more than a century in this country, and to meet that situation we must have new methods. If we do not, the prosperity of the country will suffer, and the Government will suffer also.


It is a fortunate fact that while the destinies of the country are being decided elsewhere the House of Commons is permitted to take up its old prehistoric work of criticising the expenditure of the Government. We are also happy in having a poacher newly and recently turned gamekeeper on the Front Bench. These changes are apt to be rapid, but we have caught very young this newly "gamekeeperised" official, and we may hope on this occasion therefore to produce some effect on the Treasury Bench. I wondered just now if the present position of the hon. Members for Wood Green (Mr. Locker-Lampson) and Norwich (Lieut.-Commander Young) had been reversed whether the speeches would not also have been reversed, and if the present Secretary to the Treasury would not have shown himself one of the principal critics of the Government. I hope he will, in spite of his speech this afternoon—a speech so ordinarily provided by Departmental officials—I hope he will, when he really gets into office, do something to make the Treasury what it used to be in the past, and possibly something better. I thought his reply to the hon. Member for Wood Green on this particular subject was extremely weak. The case made out for economy was not based solely on the amount of expenditure as compared with that in pre-War years, but rather on what we can actually spend at the present time, and how we can still further cut down the Estimates. It was based, not on comparison with pre-War years, because then we were a rich people, but on comparison with out present poverty, and it is on those lines we really want to tackle this problem afresh.

The suggestion made by the hon. Member for Wood Green is that there should be a Committee of experts appointed to scrutinise the accounts of each of the Departments and also to decide what is our taxable capacity. Like the Secretary to the Treasury, I am not a great be- liever in these estimates of taxable capacity and of national income. I know perfectly well that if taxation rises so also does the income of the capitalist rise. We are all capitalists even here on these benches. If you tax us we manage to pass the tax on to the consumer, so that although our taxes are larger our income also appears to be larger and to cover the addition. The enormous increase in this Estimate of national income is easily due to the enormous increase of taxation, which shows itself in the increased gross income. I am not a great believer in these Estimates of national income. Estimates must necessarily vary according to the views and inclinations of the men making them. The other part of the position of the hon. Member for Wood Green is one I am a great believer in. It is one of which I have had some practical experience.

The Noble Lord the Member for Hitchin (Lord R. Cecil) put his finger on the spot when he said that the Treasury, in its good old days, did always scrutinise very carefully any fresh expenditure. When I was there as an under-strapper it never bothered to look at anything if the amount was the same as the year before. There was no effort made to cut down old expenditure, but all new expenditure was very carefully scrutinised. It is the cutting down of old expenditure that is of vital importance, and that is what this Rationing Committee is wanted for. In the old days I happened to be in the Civil Service in South Africa, and there, just after the Boer War, people had very lordly ideas as to what salaries should be paid and as to how bottomless was the purse of the public. It was not a question of exceeding income; it was a question of the expenditure being multiplied five or six times the income. Lord Milner was in charge then, and he adopted the rationing policy. He told the heads of Departments, "I do not care what you want, your expenditure must come down 25 per cent." He left it to the heads of Departments to say how it should be done. I was the head of one Department and I had to reduce my staff 25 per cent., and, what was still more unpleasant, I had to cut my own allow ances down. In the same way the heads of Departments in this country would do it. At present it is expecting too much of human nature to imagine that the head of a Department is going to make himself gratuitously objectionable to every one of his subordinates. But if you give him an excuse—if you go to the head of any of these Departments, and not only to the head, but to the minor chiefs, and say, "Your quota is so much, and you have got to get it out of your Department somehow; it is either your salary or those of your subordinates that will have to go"—you would find that your expenditure would come down, and you would get that check upon expenditure which the Treasury has never had in the past, a check upon permanent expenditure and a real economy.

Many people in the Civil Service now are demanding higher salaries. There was a case only just recently in which the salary of an official went up from £1,700 to £2,200, plus bonuses. And it is not only that these people want more money, but, if the salary of one civil servant goes up, that of every other has to go up too, because his status depends on his salary. There is going to be a very serious attack made upon the wages of the working classes in this country; is it not about time that we tackled the people at the top as well? Unless you bring down the salaries of the Civil Service, you will never get down the heavy salaries of people outside. We are setting a bad standard. If you want economy, you must begin by rationing the Departments, and making the heads of the Departments, whether they like it or no, cut down the expenditure of their Departments. It is often supposed that we on these Benches are not interested in economy, that we are the people who do the spending. That is quite erroneous. We know on these Benches, perhaps even better than those on the other side, that the heavier the taxes the more people there will be unemployed. If you tax Mrs. Jones's sugar, Mrs. Jones cannot spend so much money on other things that she wants. She cannot get the kettle that she wants, and consequently the men who would have been making the kettle are out of work, because Mrs. Jones cannot buy the kettle she wants, because you take her money in the tea tax or the sugar tax or in some other way.


I hope the hon. and gallant Member will excuse my interrupting him, but has he forgotten that he is a Member of the Labour party?


I will give you some economics straight from the Labour party. We have to study economics on these Benches; it is not necessary on those opposite. The fact is that, the higher you raise taxes, the less people are able to spend, and the more people are out of work. There are some people who think that taxes are only paid by the rich people. The tears that they shed over them show that they think they have to pay them. But when you put on the Corporation Profits Tax, we know that every company passes it on to the consumer. All taxes are not paid by the person who hands over the cash to the Treasury; they are paid by someone else to whom he passes them on. In fact, as hon. Members on these Benches know, every tax is passed on except the one tax that cannot be passed on—the tax upon land values. The taxes laid upon capitalists are shoved off, and other people pay them, so that all money raised in taxes, with the exception of the one I have named, comes ultimately from the consumer, reduces his purchasing power, and throws other people out of work. That is why we on these Benches object to heavy taxation. We know that sooner or later—generally sooner rather than later—it hits the working man, reduces his purchasing power, and increases the number of his fellows who are out of work.

All taxation is not taxation. There is a great deal of difference in the way in which the Treasury spends the money. If you spend money on giving a man £2,200 a year when he will do the work just as well for £1,700, you get nothing for it whatever. It is certainly not reproductive. Any expenditure which does not show itself in increased convenience to the community, so that the community is carried on more cheaply, which does not show itself in some reproductive way, in improving the producing capacity of the country, is waste, and that is the sort of expenditure that you want to cut out. We do not want to cut out expenditure that is useful. Take the case of education. Our expenditure on education is not expenditure that is thrown away. It is not useless; it is reproductive. Because the people of this country are better educated than they are elsewhere, they are more capable citizens, more capable producers, more capable thinkers. We want to encourage education, not in order to squander the money of the country and make more people unemployed, but in order to produce citizens who will be more useful to themselves and to the community. Expenditure on these lines is perfectly justified. We have heard about the taxable capacity of the community. Let us consider old age pensions. The money spent on old age pensions is not really new expenditure. Money was spent on old age pensions, before the old age pensions came in, by every individual in the community Dutiful sons and daughters put their hands into their pockets; charitable people did the same; and the old people were helped along and kept alive. That was swept away as an individual duty and became a charge upon the State. The old people were kept alive by a general levy instead of by a vicarious levy. It appears as an enormous increase in the expenditure of the State, but, really, it is not an increase in the expenditure of the community at all.

Very nearly the same amount of money was being spent on the old, before and after that change in policy. So far as the productive power of the community was concerned, so far as the whole community was concerned, just so much of the wealth that they produced was taken by the old people before that change as after the change. Again, take the familiar case of the trams. Suppose that we freed the trams. People are always thinking that we are going to make wonderful experiments of that sort. If all the trams were made free, it would be a heavy additional charge upon the Exchequer, but it would be a very small additional charge upon the community as a whole. Instead of paying their three-halfpences and twopences for tram rides, people would be paying the money in a lump sum. Where you are dealing with communal services and expenditure, you must not judge all that sort of expenditure as being essentially bad. I may say that I do not advocate that change; I am certain that if the Government got hold of it they would have a Department as large as Somerset House conducting the tramways; but it is an illustration of the different sorts of taxation. What we want to stop is expenditure that is not useful or necessary, but is merely a dead weight going on year after year because it has gone on year after year. The best way in this country for getting rid of that expenditure and cutting down these Estimates is the way suggested by my hon. Friend the Member for Wood Green, namely, that a Rationing Committee—I should prefer it to be a Committee of this House—should ration each of the Departments and make a definite effort to resurrect the Treasury as the real watchdog over the expenditure of the country. The Treasury started at a high normal, and now they are only cutting down expenditure beyond that normal; they have no eyes beyond that. We want to start them with a low normal. I do not mean a permanent campaign of rationing, but let us at once start the Treasury on a low level, and so check any expenditure in excess of that amount.

When I hear it stated that the normal year is going to be next year I despair. What has ruined the finance of France and all those countries on the Continent is this constant habit of having two Budgets for what they call ordinary expenditure and extraordinary expenditure. They are always about a year behind with their extraordinary expenditure, and the extraordinary in time becomes permanent. We are doing exactly the same here. We are talking about our normal Budget, and showing how our really normal Budget is almost too insignificant to notice, while the other things are all accidentals put on top. Let us treat our finance in the future, as in the past, year by year, as being, not a question of abnormal expenditure or accidental expenditure, but of what we have to face as a nation, and then let us try to make that finance a little sounder at the other end. We have had too much of the Treasury's taking as revenue money received from the sale of ships and war stores. It was urged by the hon. Member for Harrow (Mr. Mosley) that we should get back to the conditions of Mr. Gladstone. I do not know what they were, but I take it that it means going on sound financial lines, which would be a change for the Treasury just now. There are two alternatives before this country. You can either go on the lines of sound finance, cutting down your expenditure, and restoring something like conditions of soundness to the finances of the country; or you can go the way of all the Continental countries.

7.0 P.M.

I really do not know, sometimes, whether it would not be better to depreciate the £ and send it downhill. If we did that, then these swollen salaries would go down too. There is a way, if you like to take it, of paying off your debt and reducing your salaries by depreciation. It is not a way that I should recommend, because it is dishonest, but it has been a very usual way on the continent. If you want to avoid that—and I believe that every decent Englishman does—there is only one other way, and that is to get the Treasury to start making real reductions, instead of playing with this question of economy as has been done during the last few months. We know that all these offices exist in order to keep themselves in existence. Every man feels that it is almost brutality to sack any one of his officials, because he would only come into the already overstocked labour market. But unless we really tackle this problem from the top, and force these Departments to make economies, we can never expect them to make them on their own initiative. Therefore I support this Motion, and I hope that everyone who really wants economy, and does not want to keep these offices as reservoirs for younger sons, will support it—not with a view to embarrassing the Government, and least of all with a view to embarrassing the hon. and gallant Gentleman. I am certain that, the more power you give him to fight his own officials, the better he will be pleased, and that the more power you give to the Treasury to fight the other Departments the better the Treasury officials will be pleased. Every man's vote to-day is given for economy, is given really to do what the Front Bench want, and I think even the tamest Coalition Member should give a vote for good conscience even though it will be a vote against their Whips. You will be quite safe in your seats and at the same time you will have spoken a word for economy in this country.

Lieut.-Colonel ROYDS

There are only two points I wish to put before the House and the Government. I understood the hon. and gallant Member (Lieut.-Commander Hilton Young) to say that the Government and the Departments were in fact already rationed by reason of the Estimates we pass, discuss, and approve in this House. That may be so with regard to most Departments, but it certainly is not so with respect to one Department, the Ministry of Health. In regard to a very large part of the expenditure of the Ministry of Health no Estimate of any sort is submitted to this House. The Ministry of Health has ceased to be a competent Department for controlling expenditure; it has become a very large spending office; and I do not think matters will ever be put right in that respect until the powers of the Ministry of Health in that respect are transferred to the Treasury? What happens? The Ministry of Health requires local authorities to prepare schemes. It imposes the obligation on them. They submit these schemes to the very party who required them to make the expenditure. There you go round in a vicious circle. They encourage local authorities to incur expenditure and pass the estimates themselves without submitting them to the Treasury. That seems to me to be a leakage in the national expenditure. The Government have expressed their desire to do all that can be done to control and limit national expenditure. I would like to ask whether they are prepared to follow the recommendations of the Report of the Committee which sat in 1918 with Lord Haldane as Chairman, in which was recommended exactly what I have pointed out, that such relations between the central government and the finance of the local authorities throughout the country should be in the hands of the Treasury instead of in the hands of the Local Government Board, now the Ministry of Health. That is a practical suggestion which I make for limiting, checking and controlling national expenditure, in regard to which there is no check at all at the present moment. That is certainly a great defect in our finances which I think should be remedied at the earliest possible moment. This Committee recommended that course as far back as 1918, and I hope the Government will now announce their intention of making that change at an early moment.

There is only one other point. When the Chancellor of the Exchequer prepares his Estimate of national expenditure for the year, that Estimate only relates to charges which are provided for by the taxes. It does not relate to any charges provided for by means of rates. If we are to ascertain the taxable capacity of the country, and prepare a national balance-sheet showing what charges in the way of rates and taxes we are imposing on the people of this country, it is necessary that the Chancellor of the Exchequer should submit a real Estimate of expenditure annually. The hon. and gallant Member who moved this motion (Mr. Godfrey Locker-Lampson) said the rates were now £170,000,000. He was only dealing with last year. He does not know the Estimate for the current year, nor does anyone else. No Estimate of any sort is prepared or submitted to any authority. If we are to get a proper Estimate of our national expenditure it ought to be an Estimate of our whole expenditure, whether by means of rates or taxes, and every county council ought to be required to send up to the Treasury annually before the 1st March an estimate of their total expenditure, so that we can have a real national Budget, and not a false one. Until we get that we shall never get to know what the real expenditure of the country is going to be. I make these two practical suggestions to the Government, as they have so often expressed their desire to do what they can to reduce and control expenditure, and I hope they will take these two matters into most serious consideration.


The Debate this afternoon has revealed the intense desire of the House of Commons to curb the spending powers of the Government, and the proposal which has been moved by the hon. Member for Wood Green is that a Committee of this House—


Not necessarily of this House.


Not necessarily of this House; but a body of individuals should fix the total sum which is to be found by way of revenue every year. The total revenue which can be raised is partly an economic problem and partly a problem of psychology. For instance, a frugal Government would more readily take larger sums out of the pockets of the taxpayers than an extravagant Government, because the people in the long run might well say, "An extravagant Government are not to be trusted with our money, and we will refuse to grant them the necessary supplies which they demand." So the problem is not so easy as has been mentioned this after- noon. Whether the country can afford £1,000,000,000 or £1,100,000,000 or £1,200,000,000 is very difficult to say. I suggest that the constitutional course for this House to adopt, if the Government are extravagant, if they are asking for more money than the country can afford, is to refuse to grant supplies. In a debate in this House last December I outlined, after much study, the total sum which I thought the Government could spend in the coming year. That amounted to a sum of £935,000,000. I think the Noble Lord (Lord Robert Cecil) in the course of his speech mentioned that a sum of £1,100,000,000 would be required in the coming year. If the Chancellor of the Exchequer is to set aside a full reasonable amount for debt redemption that figure of £1,100,000,000 will be exceeded by at least £50,000,000, and under the present Estimates which have been introduced into this House the country will require to find a sum of about £1,150,000,000 for the service of the State during the coming year.

This House has made several attempts during the last few years to curb the spending power of the Government, first by Committees, which I am bound to say have been of little effect. They have not directly instilled that spirit of economy in the minds of the Government which we had expected. My complaint against the Government in the Estimates for the coming year is this, that they have allowed the execution of their policy to dominate their thoughts, that they have not, instead, taken the finances of the country and allowed the interests of the taxpayers to dominate their thoughts. That is a very broad distinction between the policy of the Government and what I think the Government should have adopted this year. We speak of our national income before the War and of our income having increased during the War. As this House knows, we have wasted our substance during the last five years. What we could readily afford in pre-War days we cannot afford to-day. The attempt by the House this afternoon to ration the various Departments will, I think, also break down. This House is not an administrative Assembly; it is a deliberative Assembly to curb and check the power of the Government; and if the House attempts either to fix the sum which the nation can find by taxation or to fix the exact proportion which each Department should spend, I am afraid their efforts will end in failure. This House must look at the broad position which has been revealed by the Estimates which the Government have presented. These Estimates, in my judgment, are extreme. They are not in keeping with the first object of statesmanship, which should be the conserving of the finances of the country. I am not concerned as to how the money should be spent, to start with. The Government are taking out of the pockets of the taxpayer more than the country can afford, and until this House deliberately votes against the Government, and not only votes against the Government, but is prepared to turn the Government out, you cannot expect the Government to listen so readily to protests in this House. As I have already mentioned, I, after much study, decided that £935,000,000 was sufficient for the needs of the State this year. The Estimates have exceeded that figure, and if a reduction is moved later on I shall record my vote in favour of economy in the public interests.


One has listened with very great pleasure to what has been said on both sides of the House in respect of the need for economy in national expenditure, but there is one particular that has not been touched upon in this Debate which to my mind is vital and essential, and that is economy in respect of our Imperial protection. Much might be said from these benches in respect of its drastic cutting down, but many of us who believe in the perfect and proper protection for the daughter nations—and to whom we owe the responsibility of parenthood—feel that the Treasury Bench have not considered the needs and the necessities of the heavily-taxed industrial populations of this country in contradistinction to the newer and fuller opportunities of self-government—commonly known as Home Rule—as, for example, in India, in Canada, and in Australia, In the new and greater responsibilities which have been given to them, we have not considered the need of their now carrying some greater taxation in respect of the Navy and Army and general Imperial Defence. For example, let us consider that great and splendid people, the nation of India. When we consider how we have given power to India to impose taxation on the toilers in Lancashire in respect of their great industries, particularly of cotton, and have given them no corresponding responsibility for protection of their own land, naval and military, I do suggest that the Treasury have not, in the best interests of this nation and of the Empire, done their duty in respect of the contribution we should have from India, from Australia, from Canada, and the overseas British nations generally, in respect of Imperial defence. Therefore, the first matter the Treasury should consider, is a higher quota in respect to Imperial defence from all our daughter States, and especially from India.

Secondly, I suggest that the extreme competition of local and national finance has not been adequately dealt with by the Treasury. We who belong to the North country know that during and since the war days, in respect of our industries, we did, and can now, obtain money cheaper than the best gilt-edged security the Treasury had to offer, and if we mere trading industrials by our means and methods of finance and by the prestige of our undertakings can so raise loans at a cheaper price than the Treasury, there is something definitely wrong with the methods of the Treasury and those people who have the national finance in their keeping. How often do we know that in respect to municipal undertakings the Treasury have not that grip of the spending proclivities of municipalities and urban councils that they ought to have. You may take any of the great spending Departments—the Ministry of Health, the Ministry of Education, the Ministry of Agriculture, and many others. If there is money to be spent locally they send down an academic gentleman who has a theoretical knowledge of the subject, and there he sits to adjudicate as to whether trams shall be municipalised or washhouses or new town halls erected. Those who have some knowledge of municipal undertakings know that where either a municipality or the nation deals with industry—whether tramways or municipal wash-houses—the cost of such service to the taxpayer is doubled or sometimes trebled in comparison with the service of private undertakings of the same sort or kind. Therefore, in the acquirement of the monies required for municipal or county purposes, as well as for national purposes, there should not be the competition that there is between the municipalities and the national Exchequer in getting money; and, secondly, there should not be that slackness of practical economic decision which obtains in regard to the adjudicators when claims which are put forward by municipalities as to encroachments on industries—I care not whether they are massive town halls or municipal washhouses or tramways, of which latter not 3 per cent, that are handled by municipalities pay. The Treasury have not a sufficient and proper grip in respect of these matters. Then there is the question of unemployment. What obtains there? If the Treasury would inaugurate a definite system dealing with labour and industry, employers and employés, employment doles would be eliminated, and if they could by definite careful work inaugurate schemes dealing with necessary municipal and urban undertakings—in the hands of free contractors—employment would come which would give opportunities for those much decried capitalists to deal with taxation and unemployment in such fashion as would be economical for the country and so give a wider opportunity and a broader horizon for all sections of the communities. If opportunity is given to the great industrial chiefs in respect of support to enable us to face the foreign markets, we, for example, in the textile industry know that if the Treasury would give much greater facilities and proper insurance, Lloyds and other great corporations would support that Treasury credit, which would give opportunities in the cotton, wool and machinery trades, and we could supply the nations needing our goods but who cannot at present pay for same, and this would provide work for the masses and eliminate the heavy charge upon the Exchequer of the unemployment dole.

Again, something has been said about general schemes. He would be a foolish and improper man who in the slightest degree prevented the very finest and best opportunities of education which could be presented to the people, but book learning—which is sometimes inaugurated in substitution for education—is not the best for the people. In this country we give opportunities for bread and butter getting under what is known as education. We give opportunities of special technical knowledge. I do not for a moment decry technical training, but initiative and character building is true education. The Treasury, therefore, ought to have a firmer grip on the application of those schemes in rural, urban, and county districts, so that we know we get proper value for the money spent and ensure that the methods which are given in regard to tuition and training under the great scheme of education are really progressive and evolutionary. There is no section of our public life which is so misunderstood and non-comprehended as the scheme which we know as education, and when it is misunderstood and misapplied it becomes wasteful extravagance. Not for a single moment do we decry the full opportunity of permissibility for the child to get forward to the highest possible training, the enlargement of character, the wider horizon, which is true education, but when we see misspent money, because of sometimes ignorant and untrained local educational authorities, it is vital for the Treasury to see that proper value is obtained for education. Again, in regard to housing, something should be done by the Treasury to put pressure upon housing authorities to see that the great commercial rings which now handle and hold up the prices of commodities and the price of building should be dealt with drastically and in due and proper form. Though much may have been done by the Minister of Health—and he has done great service to the country—that has been a weak point. There has been no body of men, either amongst industrial workers, financiers, or bankers, nor in the Chancelleries of Europe, who have correctly understood the power of finance and money, and a great people like ourselves should have some distinctive comprehension and knowledge of the direct application of finance in all the sections of our civic and national life.

Something must be said about international considerations. Until we have a perfect equipoise in respect of training between this nation, the United States, Germany and France, there will be a correspondingly increasing power of taxation needed by this country to carry forward our burden and our finance. The Germans are flourishing. During the last year they inaugurated 44 new industries. We understand that 120 large corporations have increased their capital, and that 12 industrial firms have raised a capital of £35,000,000 during the last three months. To-day every part of Germany is busily engaged in commerce, and yet our merchant chiefs are struggling to keep their heads above water, by reason of the immense and terrible taxation that rests upon us, as well also as by the uncertainty of organised labour. It is a vital duty in these dark and difficult days for the Treasury to watch every single outlet of expenditure, whether municipal, national or Imperial. I hear to-day the silent tramp, tramp, tramp of 700,000 British dead, and the men who sit on those Benches carry the responsibility of finance as also a power which will make it either possible or impossible for us who remain to carry on the splendid work those men inaugurated and died for. Therefore I want to strike the ideal. I want to lift this above the mere sordidness of money and finance alone. I want to help those who represent the Treasury in giving that wider, broader view to carry forward the splendid opportunity given to us, so that when the history of these days is written it shall be said that not only was this nation powerful and capable in the War days, but in the prosaic bread and butter existence that followed we, by our finance and by our ordinary industrial life, were able to strike a lesson and give an example to Europe in respect of our common life and commonweal.


The subject on which the House has embarked is a very large one. I wish to attempt to indicate one principle and method of financial soundness which is a thing that has been talked about a great deal without much elucidation to-day. One of the paradoxes of the present time is that from all parts of the country and all parts of this House there comes complaints of Government spending. The Government raises taxation on an unexampled scale and takes, takes, takes every day of the week and every week of the year. From all over the country, and from all over this House there come at the same time demands and a very urgent expectation of grants of Government money, and the same people who shout against the Government for spending money are usually the people who shout at the Government to give them money. It seems to me that we have drifted, not only this House and all parties in it, but the whole country, into a condition as regards finance of sheer humbug, that we scold the Government for taking, and we shout at it to give the whole time. I want to inquire for a moment into the historical origin of all this, and it seems to me to go back to Victorian notions, and to a kind of philanthropic and missionary movement which was very popular with the general public, the Press and statesmen in the second part of the last century. The missionary idea consists of this, that the Government has cleared its mind about a great number of social objects on which money ought to be spent. It wishes the local bodies to spend this money. The local bodies do not see the necessity, and therefore the Government says "we will give you a grant and then you will do it," and the Government has been giving grants for 70 years and the local bodies have been getting into the way of doing the thing and accepting the grant.

But the whole affair has now reached a stage which is thoroughly rotten. It is quite allowable that in order to start a good effort locally the Government should bribe a local authority by money to get on with it, but once the Government has taught the lesson and gone about the beginnings of the experiment all over the country, it seems to me it is time for them to stop. If what the Government has by bribery fastened upon the local administrative system of the country is good, then let it go on, but let it go on without Government help and without these interminable grants. If people believe in education in Manchester, Leicester or anywhere else, let them have their education and pay for it themselves, and do not let them come to Parliament for grants of money. I wish to suggest what may seem to many Members of this House to be a paradox, and that is that people should only have what they wish to have and what they ought to have, and that when they have got it they should pay for the whole of it and should not corrupt themselves and the standard of public life throughout the whole country by being doubtful or cynical regarding the goodness of things that they do, and only convinced about the goodness of getting money out of the Government with which to do them. Some speakers have said that what is wanted to-day is much stronger control over local expenditure. I beg to differ. The price of control of local expenditure by the central Government is always that the central Government has to pay a great deal of that local expenditure. The less we control the expenditure of local bodies the less, I believe, in some ways will be that expenditure, and the less we control it, much less shall we have to pay of it. I do not wish to labour my point. I began by saying that there is a profound paradox and falsity in the present cry for economy, because everybody expects the Government to do things but nobody is prepared to pay the taxes, which is the only way by which the Government may do these things. I wish, as my second point, to say that soundness and sincerity will never come back to our finances until the people who indulge in the ventures realise that they must, therefore, conscientiously pay for the ventures, and until we get past the puerile belief that anything that we can get the Government to pay for by entreaty or by threat is a thing worth doing.


When the hon. and gallant Gentleman the Member for New-castle-under-Lyme was speaking it was clear that a great many hon. Members took the view that the Labour movement of this country is not very sincerely interested in the reduction of expenditure by the State. I appeal for the consideration of hon. Members opposite when I suggest that not merely has Labour within recent times devoted a great deal of anxious inquiry to the question of expenditure and taxation, but that Labour realises quite clearly that there can be no section of the community perhaps more acutely penalised, if I may use that phrase, by high taxation, than that body of people who depend upon regular, continuous, and remunerative employment. Our difficulty is that we must try to discriminate in expenditure and discriminate in economy, and to that end I wish to make what appear to me to be one or two practical suggestions. I have always regretted, in the first place, that the former Chancellor of the Exchequer did not see his way to adopt a proposal which was made by the majority of the members of the Royal Commission on Income Tax, although a fair part of their recommendations have already become part of the law of the land. While they all recognised that it is very difficult to reach final conclusions on the taxable capacity of the country, the majority of the members of the Royal Commission suggested that in the present circumstances this country had a great deal to gain from a perfectly impartial and fair investigation of what Great Britain could bear in the way of taxation, and perhaps many suggestions might have been made in the light of our experience with reference to what form that expenditure and taxation should take. It may be too late to adopt that suggestion now. I do not take that view. I think the inquiry is worth while, and that it could be extended to the sphere of considering whether we best employ a good deal of the resources we now possess or whether there are suggestions that could be made for the better use of those great essentials to enterprise in Great Britain.

The question to which I desire more particularly to come from the point of view of Labour is the bearing of heavy taxation on industrial recovery. I regard that as almost the most important issue which could concern the masses of the workers of the country at this time. Unless we can recover our overseas markets, unless we can place our goods at the disposal of the world on conditions which enable us to compete with other countries, I see very little hope for the 44,000,000 of our people. I am very much impressed, not only in the present, but, so far as we can see, the future position of British labour, by the great danger which even now confronts this country in many of the most important markets of the world. I do not want to exaggerate that. I know that there are incurable optimists in economics and in finance who suggest that bad as our position is in expenditure and taxation, it is not so bad as the position of many of our comparatively serious competitors. They point to the tremendous increases in the taxation of industrial undertakings in the United States, and suggest that that very heavy internal taxation in America means that American competition in markets which we are also trying to enter will be limited or restricted. They add to those suggestions the view that on the Continent of Europe the position is undeniably worse than in this country; that they have had recourse to financial and other devices which we should not readily adopt in Great Britain, and that, everything considered, there is no reason why this country should be anxious regarding the future. I would prefer simply to say that we should admit the internal conditions of other countries, including the non-belligerents, who have all great burdens of debt and taxation, as we have; that we should simply accept those countries for what they are worth in other parts of the world, and that we should remember that, everything considered, we had the best financial system in pre-War times, and that the present time is a time of great opportunity for this country, if we could only realise it, in adjusting our expenditure and taxation to the duty of recovering world markets and the prosperity of Great Britain.

If it were possible now so to reduce our taxation or to improve our finance that we could give the maximum encouragement to the recovery of industry and commerce, I suggest that, without serious difficulty—assuming the good will of our people, which I think would not be denied—we could recover those markets, we should probably bound forward to greater times of prosperity than we have ever enjoyed. To that end we are sincerely desirous on these Benches of reducing expenditure, and that leads me to some illustration of the methods by which we desire to attain that end. It is idle to ask the people of this country to reduce expenditure in education, in public health, and on the scientific and other investigations of industrial processes while we squander millions of public money in adventures up and down the world, or in militarist preparation, or on schemes which are from practically no point of view productive in character. The reduction in expenditure must be all round. The Noble Lord (Lord R. Cecil) pleaded for what he called a great, broad policy. The broad policy which British labour specially advocates at the present time, from the point of view of curtailing expenditure, is that in the first place there should be a determined effort on the part of this country to make the League of Nations an effective reality, that we should bring down to the lowest possible point expenditure on military preparation, and that in those territories in which we have any influence or any part we should restrict our outlay at the earliest possible moment, put them, if we can, upon a self-supporting basis, and at all events get rid of militarist expenditure so far as they are particularly con- cerned. That means not a few million pounds—not the kind of economy we could get by interfering in public Departments, although I recognise that that may be necessary—but an economy of many millions of money, which would be reflected almost immediately in reduced taxation in this country, and would give very great encouragement, from the public point of view, to the line of policy which we all want to see pursued. I, therefore, strongly suggest that until we have that attitude and disposition on the part of the Government and the country, until the people get to feel that this call for the demilitarisation of Europe and the world is something sincere and earnest, we are not going to get response from the 44,000,000 of people who are acutely affected by the great burdens of taxation which we are trying to carry at the present time.

So far as the swollen bureaucracy of this country is concerned, we have no desire whatever to perpetuate it. In the Labour movement there is, I am glad to recognise, a growing feeling against centralised Departments. In Scotland in particular there is a healthy revolt against London control and a desire that we should give the maximum of power and responsibility that we can safely entrust to the locality. Above all, there is a desire to see industry and commerce run on healthier lines, and under a better system, by people who understand industry and commerce and not by people who only view it from the bureaucratic or State standpoint. In that connection if we embark upon the reduction of expenditure we are compelled to keep clearly in mind that we shall never recover our markets and that we shall never safeguard employment if we are going unnecessarily to restrict expenditure on either housing or public health or on the provision of better education for our people. I recognise in connection with the attacks which have been made upon the Ministry of Health that we have a Department which has been perhaps sincere and earnest in the main, but which has been guilty of almost incredible error in the execution of its duties. It has not been efficient. It has not secured the lowest possible price for the work in which it has engaged. Very often it has put a great deal of expense on the locality in housing and other concerns which have meant the unnecessary expenditure of additional millions by the State, but I am going to press strongly that we have nothing to gain by the sacrifice of proper housing or failing to treat to a very large extent the diseases from which unfortunately millions of our people are suffering at the present time. I wish hon. Members who make wholesale attacks upon the Ministry of Health would only inquire a little more closely into the undoubted gains which have already come from a great deal of medical enterprise in Great Britain. I would ask any hon. Member of this House whether he is prepared to face the responsibility of allowing either tuberculosis or venereal disease or any other affliction of the community to proceed without the treatment which we all recognise to be urgently necessary. If we could only measure up the industrial inefficiency and national loss which arise almost everywhere as a result of the existence of these two diseases—to mention no other illness—we should recognise wise expenditure at who make wholesale attacks upon the the present time as part of our duty in the sphere of British economy.

I extend very much the same argument to the sphere of education. Circulars have been issued in favour of economy. A very large number of hon. Members are apparently quite prepared to see education suffer meantime, because, as they put it, we cannot afford it. I prefer to state the case in another way. I say, without the slightest fear of contradiction, that we cannot afford to run the risk of continental and other competitors defeating us on a plain matter of technical or other education in our enterprise to recover the markets of the world. A few days ago an interesting report was issued as to the steps which even now are being taken in the depressed parts of Europe—depressed from the point of view of the awful losses they have sustained by the experience of the last few years—to rebuild technical and other education, and there cannot be any doubt that, if they are successful in the steps which they are taking, we shall be penalised as a country in many spheres in which we were penalised in pre-War times in trying to secure markets and failing to get those markets simply because we had not the technical knowledge at our disposal. This problem must be viewed as a whole.

There are many other reasons which I could suggest from the point of view of labour why it would be suicidal to restrict education at this time. Outside the country in many of the most important councils which we hold the campaign is not a campaign against people who are ill-disposed, who have no desire to do their best. It is a campaign against frank, blunt ignorance, which it is the duty of this House to recognise. That is not a lofty statement. It is a plain statement of fact. Can we go on without injury to British stability and security, and above all, without great risk to British economic prosperity? I think we cannot. Accordingly we reach the conclusion that while it is quite possible to effect a certain readjustment in the finance of education and it is possible also in the sphere of housing and public health, yet we must not fail to make the necessary financial provision in those spheres which are going to contribute to our industrial recovery. If we combine the policy of cutting down seriously the militarist expenses with the policy of using wisely what we spend on really constructive schemes and endeavouring to press on all sections of the people to give up the luxury which even now exists in the State, I think that we have got a programme which will commend itself to the overwhelming mass of the British electors.


During the last few years there have been a good many economy Debates in this House. So far as I can judge the present one has taken pretty much the course of its predecessors, that is to say, there is a vague expression of opinion that all things have got to end and that we must be living beyond our resources. I have no right or title of any kind to go into the matter of high finance. I might confess to the House that I have never had enough money to allow myself to be called a financier, but there are one or two points on which an ordinary lay person might be allowed to express an opinion. It seems to me that we are starting in some quarters with a false idea of what economy means. Economy is not, as has often been said, the mere saving of money. It is the wise saving of money, just as it is the wise expenditure of money, and I cannot but feel that in some of the speeches this afternoon there has not been any word of recognition of that fundamental fact. It is very poor economy to save a pound just now if the result is, as I am almost certain it will be, to have to spend pounds more in a very short time, and I am afraid that our policy with regard particularly to education is leading us in that direction.

It is generally agreed that for many years the educational services of this country were very largely starved, with the result that we find now that the supply of teachers even for our elementary schools, irrespective of the higher schools or universities, is not in any way equal to the demand. That means that we cannot even keep up our present educational level, and that there is a danger of our falling back relatively to the standards of other European countries. It means also that in a very short time we must take steps to make good that supply, and that cannot be done without a very largely increased expenditure. It means also that the children of this country will be less well equipped for the work that lies before them than they have been in the past. I am indulging in no exaggeration when I say that our problem at present in education is to keep to the level which we have had for several years back. It did seem for a while that we were at the beginning of a strong advance. Things have gone against it. The Treasury has issued its ukase, and economy must be practised, and it seems to me that there is going to be very fatal economy indeed. I hope, therefore, from the former record of the Financial Secretary, that in these matters of education, housing, and health, the Government will stand firm and not give way to the panic cry of Economy which we have been having from many quarters.

I do not wish to make any reflection upon any Member of this House or upon anyone outside, but I would like to be convinced as to the genuineness of the quarter from which this cry for economy comes. No person has the right to make a call on others to practise economy unless he can show that he himself has clean hands in this matter. It is not for anyone in this House or outside it who has done well in the War to ask the House to economise, and especially to economise at the expense of the children of this country. The very reactionary speech of the hon. Member for Leeds (Mr. J. Murray) seemed to be going back to the time which I thought this country had left far behind it when the locality was allowed to decide what its educational system was to be. It was said that the people should get the kind of education they pay for; but it must be remembered that education is not for the grown-up people who are to pay for it, but for the children, who are, after all, the greatest asset of the nation. I believe we shall have an opportunity of discussing the question of education to-morrow, but I wish to make a protest against this indiscriminate cry for economy. Without defending unnecessary expenditure in any way, I think that there is not a little ingratitude in the cry that all Departments should be cut down irrespective of what services they have rendered to the community in the past. I hope that my attitude will not be misunderstood to be that of one who wants to squander millions, but if this country takes its courage in its hands and looks forward, as it has done in the past, it has still a great future before it.

Question put, "That the words proposed to be left out stand part of the Question."

The House divided: Ayes, 128; Noes, 92.

Supply considered in Committee.

[Sir E. CORNWALL in the Chair.]

  1. CLASS I.
  2. cc829-30
  3. ROYAL PALACES. 91 words