§ Mr. MARRIOTT
I should have liked nothing better than to be permitted to continue the discussion which has been proceeding for a great part of this afternoon. The question which we have been discussing is a vital question, and personally I should have been very glad to have had an opportunity to 1218 remove certain misconceptions that arose from the speech I delivered in this House when I spoke some weeks ago. But I must resist that temptation because I want to call the attention of the House to an entirely different matter.
To raise a question of what I may call pure finance on the Consolidated Fund Bill is, I am afraid, a rather daring deviation from the established conventions of this House, but I hope the House will forgive me, and will agree that the occasion is not an inappropriate occasion. By the passing of this Bill we reach a very important stage in the financial history of the year. We gather up, so to say, the results of the financial debates and discussions of the last two months. We are now in a position—and have not before been in a position—to realise, and I hope to realise to the full, the financial responsibilities which lie ahead of us for the next 12 months. Perhaps I am over sanguine in saying that we realise it to the full, but I think we realise it in very large measure. After Easter we shall, of course, plunge into a new phase of the problem, the problem of Ways and Means. We shall then have to consider how we are to meet our liabilities, but that is another stage in our discussions. Thus far, we have only been considering the expenditure side of the account. We now know—at least, I hope we know—pretty well what is the burden we shall have to shoulder next year. That would be true of any Consolidated Fund Bill at the end of March, but I want to submit to the House that this particular Consolidated Fund Bill has a special measure of significance, and for this reason.
The hopes and the expectations both of this House and of the country at large—perhaps more of the country at large than of this House—the hopes and expectations of the taxpayers of the country groaning under a load of taxation which1 has become almost intolerable, have been, raised to a very high pitch. By what have they been raised? They have been raised by the appointment of a Committee of business men who were to wield a mighty axe and slay the dragon of extravagance. That Committee has presented its Re-port, I venture to say one of the most remarkable documents, remarkable both in the comprehensiveness of its survey, and remarkable also in the minuteness of 1219 its investigation. It is one of the most remarkable documents in our financial history. I am not referring to the document in these terms because I subscribe to every detailed recommendation that the Geddes Committee have made, or because I think that the Report was in any sense verbally inspired, but because it has for the first time enabled the person who is called the man-in-the-street—why he should be I have never been able to understand—to realise precisely how we stand in regard to national expenditure. The country has had several weeks in which to study that Report, the Government Departments have had, I suppose, several months in which to study that Report, or a great part of it, and we are now in a position to see how far its recommendations have been taken to heart in framing the Estimates for the coming year.
I am not going to ask the House to traverse ground which we have been covering during the Debates in Committee of Supply. That is not my intention at all. What I want to do is to ask hon. Members of the House to realise precisely how we stand as regards our financial position as a whole, of course only on the side of expenditure. What is our position? We have had all the Estimates now presented. The Navy has asked for £64,000,000 odd, the Army for £62,000,000 odd, the Air Service for nearly £11,000,000, and the Civil Service and Revenue Departments for £383,500,000 in round figures; a total—and it is the total that I want to impress on the attention of the House—of £521,630,348. Let us call it £521,500,000. That total of £521,500,000, represented by the Estimates laid before this House, compares with the total of £603,000,000, as presented in the Budget of last year. It was 10 months ago in the middle of the coal dispute that the Treasury began to exhibit some signs of alarm, and on the 13th May, last year, the Treasury addressed to the various Departments a Circular urging the necessity of securing a large reduction in the Estimates for the financial year 1922–23. The Treasury, referring to the Budget speech of the Lord Privy Seal on the 25th April, showed that on the expenditure side, on the present basis, including debt 1220 redemption, the amount to be raised was not likely to be less than £950,000,000. The Lord Privy Seal said:Clearly that is too high and it must be reduced. It is our business to reduce it if we can.Proceeding, the Treasury Circular says:So far as can be seen at present the ordinary revenue of the State in 1922–23, even if no taxation is remitted in that year, is not likely to exceed £950,000,000. Against this sum there must be set in the first place not less than £365,000,000 for debt (interest only) and other Consolidated Fund Services, and in the second place a substantial sum, not less than £100,000,000, to meet already existing contractual liabilities to holders of particular War Loans and some part of the debt maturing for payment in 1922–23.They contain no provisions for the Floating Debt or for sinking fund charges, but it will be seen that even under the minimum provision of £465,000,000 out, of £950,000,000, that leaves a balance of £485,000,000 for all ordinary Supply services. That is the meaning of the Treasury Circular presented in May of last year. According to the Circular, there was to be a balance of only £485,000,000 only for all ordinary Supply services. The Treasury very properly asked the Departments to reduce their Estimates for the coming year 1922–23 by the sum of £113,000,000, bringing them down from the £603,000,000 provided for in the Budget of last year to £490,000,000. That was the calculation made in May.
The House will remember what happened in the latter part of the summer. During the summer of 1921 things went from bad to worse, the industrial war continued, trade went from bad to worse, more and more expenditure was called for to meet unemployment, and so in the autumn the desperate device was adopted of appointing a Business Committee. What is the position revealed by the investigations of the Geddes Committee? They found when they began to go into the question that the Departments which had been appealed to by the Treasury in May to reduce their Estimates by £113,000,000 were preparing to reduce the Estimates for the coming year, not by £113,000,000, but by £75,000,000. I am sorry to have to inflict such detailed figures on the House, but the point I am going to make is of great importance. The Estimates, let us always remember, started from a figure of £603,000,000 as the Budget Estimate of last year. The 1221 Departments were preparing, when the Geddes Committee started work, to reduce that by £75,000,000, and so reduce the Estimates for the coming year to £528,000,000. Then the Geddes Committee were further instructed to get off another £100,000,000, and what did they do? They did as a matter of fact make recommendations of reductions which amounted in the aggregate to very nearly £87,000,000. Those were the aggregate reductions proposed by the Geddes Committee. They made it clear in their Report that there were further reductions in view, for they said:In order to make the further economies necessary, we have invited your attention to a reduction (1) in the naval expenditure, as a result of the Washington Conference; (2) in the naval expenditure under the heading of oil stocks and oil storage; and (3) in military expenditure upon a review of the foreign garrisons abroad. We are confident that under these heads more than £13,250,000 necessary to complete the total of £100,000,000 can he realised.Their actual recommendations amounted to something short of £87,000,000. I ask the House to observe the position in which we actually stand to-day. Starting again from the basic figure of £603,000,000, the Departments have knocked off, or were prepared to knock off, £75,000,000 so reducing the coming Estimates to £528,000,000, and the Geddes Committee recommended a further cut of £87,000,000 so reducing the total Estimates for the coming year to £441,000,000. I hope I have made the figure clear to the House.
Speaking about a month ago—on 1st March—on the Geddes Report, the Chancellor of the Exchequer said that he saw his way to reducing the Estimates—I think his figure was to £484,000,000 for the coming year. I want to ask him, to-night whether he adheres to that figure? Because, when I look at the Estimates themselves, I find that the aggregate of those Estimates amounts to £521,500,000, and not to the £484,000,000 mentioned by the Chancellor of the Exchequer on the 1st March. I suppose the Chancellor of the Exchequer will tell me that I ought to compare these figures, not with the £603,000,000 of last year's Budget, but with the actual expenditure of the year which is coming to an end, which is £603,000,000 plus the Supplementary Estimates of £62,000,000, amounting in all to £665,000,000. If that is the line the Chancellor of the Exchequer is going to adopt, I do not see why I should do that. 1222 I am trying to compare like with like, and compare the position to-day with the position a year ago, and I am prepared to give the Chancellor of the Exchequer the advantage of two further months of extended knowledge, and compare the position to-day with the reading of the Treasury circular of last year. I adhere to my figure of £603,000,000. That was the Estimate for 1921–22. I take off the £75,000,000 of Departmental savings, reducing the amount to £528,000,000, and I compare that with the total aggregate of the Estimates now presented to the House, and that aggregate amounts to £521,500,000.
Where, then, are the £87,000,000 of the Geddes cuts? Where have they gone to? Taking the aggregate expenditure as a whole, the Geddes cuts of £87,000,000 have been reduced to £6,500,000, and that is the aggregate result of the falling of the formidable axe and the proposals of this masterly and exhaustive Report. Why am I urging this matter on the anxious attention of the House of Commons at this moment? I am doing so for this reason. We have been discussing during these last months the Estimates in detail, and when you are doing that you are sometimes a little apt to lose your perspective of the whole. One Department after another has come down to this House and, with the most disarming modesty, they have shown that they have gone very near to the fulfilment of the injunctions of the Economy Committee.
Now look at the aggregate result! What do all these efforts of all the Departments come to? As I make them out they come to £6,500,000, which surely is a striking illustration of the tiny mouse begotten of the labour of mighty mountains. There is one other point that I wish to urge because the House is well aware that the Supply Services with which alone I have dealt down to this point are only one portion of our expenditure. In addition to the ordinary Supply Services which are going to cost next year £521,500,000 we shall have Consolidated Fund Services of £371,000,000, making in all £892,500,000. Now I invite the attention of the House to the words which I read from the Treasury Circular of the 13th May which shows that in addition to the 1223 charge for debt which the Circular put at £365,000,000 and other Consolidated Fund Services there would be wanted a substantial sum which the Circular put at £100,000,000 to meet already existing contractual liabilities to the holders of particular war loans. To the £892,500,000 we must therefore add another £100,000,000 making an aggregate of £992,000,000 against a maximum revenue anticipated last May of £950,000,000. It is perfectly obvious on the showing of the Government itself that you must by one means or another get your ordinary Supply Services down by at least another £80,000,000 and that would bring it to the exact Geddes figure of £441,000,000 for the coming year. Even that would only give you a surplus of £50,000,000 on the existing basis of taxation—only £50,000,000 for all possible contingencies and possible Supplementary Estimates to which we have been so long accustomed in this House. That is, of course, on the existing basis of taxation. Everyone in this House and in the country 'hopes, however, that the existing basis of taxation will not be maintained. That is a question into which, I suppose, it would be out of order for me to enter. At any rate, I do not propose to go into it just now. The House will be very pleased to learn that I am getting very near to my final calculations. The Consolidated Fund Services, £365,000,000 plus £100,000,000; total, £465,000,000. Ordinary Supply Services (the Geddes' figure), £441,000,000; total, £906,000,000. That would give on the basis of existing taxation a surplus of £44,000,000 for the coming year, for Supplementary Estimates and so forth. I venture to contend that if we are to have a chance of reducing taxation we want another £100,000,000 off the Estimates somehow, and even then we shall only have got down, if we get that further £100,000,000, to the figure contained in the Memorandum of the then Chancellor of the Exchequer, the present Lord Privy Seal, which he gave for the information of the country and the House in October, 1919. I ought to remind the House that that was very soon revised by the Chancellor of the Exchequer himself. I do not want to make any point which is not fair. But the right hon. Gentleman did in October, 1919, give us an estimate of expenditure 1224 in a normal year, and that estimate was based, as he told us, on the following assumptions:
Of all these conditions the most important is the last, because the cost of labour and materials does differ materially from what it was in 1919, and it differs to the advantage of the Chancellor of the Exchequer in these calculations. Prices, I am told, to-day for material, etc., are nothing like what they were in October, 1919. There is one other point in the Memorandum of 1919 to which I want to draw the attention of the House. The Chancellor of the Exchequer at that date estimated the War Pensions at £120,000,000. We are all very glad to learn that they are going to be £90,000,000, so that he gets the advantage of £30,000,000 on that one item alone. His aggregate expenditure was £808,000,000 for a normal year in his original Memorandum of October, 1919. I and many others who have given some attention to this matter have time after time in this House expressed the considered opinion that about £800,000,000, the figure given by the Chancellor of the Exchequer in 1919, is the very maximum which we can at present afford. We have also firmly expressed the opinion that the only means of attaining to that desirable end is by a rigid rationing of the Departments, not an arbitrary one, but a reasoned rationing of the Departments. That is the real pith of the Geddes Report. They say t
- "(1) That all War service will have ceased and that trading Departments (i.e., food, shipping, etc.) will have been wound up.
- (2) That all subsidies (broad, railways, unemployment donations, etc.) would have been withdrawn.
- (3) That no further loans would be made to the Allies and Dominions.
- (4) That the training scheme for ex-soldiers, etc. will have been completed, and nothing new arisen in their place, and
- (5) That the cost of labour and materials will not have differed materially from that now obtaining."In our opinion the time has come when the Government must say to these Departments"—the fighting Departments—how much money they can have, and look to them to frame their proposals accordingly.That principle, as I have said, was suggested by the Geddes Committee as ap- 1225 plicable to the fighting Departments. I submit it must be applied equally to all the other Departments, and under the circumstances of to-day there is even more need that it should be applied to the other Departments. It is only, I am convinced, by a stern application of this principle, by a stern and continuous application of it, that equilibrium can be restored in our national finances, that the grievous burden of taxation can be lightened, that the wheels of industry can be set in motion, and that the hideous nightmare of unemployment can in some measure be dissipated.
§ Sir DONALD MACLEAN
My hon. Friend who has just spoken has dealt with the very complicated situation with that genuine zeal for economy with which we are all familiar. I do not propose to follow him in the queries he has addressed to the Chancellor of the Exchequer, but there are one or two points I wish, if possible, to make. The first is this: to remind the House and the Chancellor of the Exchequer that the real question we should address ourselves to now is not what was our expenditure in the year succeeding the War, nor what will our expenditure be this year, but what expenditure the nation can afford. That really is the question which we have to answer. This year, of course, the Chancellor of the Exchequer has had the good fortune to have raised the Income Tax on the basis of three good years. Next year he will have to raise it on the basis of two good years and one bad year, and in the year following—I do not know whether he will be responsible for that or not—he or his successor will have to face the terrible prospect of raising it on two bad years and one good one. I do not propose to project that very lamentable vision into any further years. That is where our main source of revenue arises, and that is the prospect with which the House and the country are faced. At present, to put it in more popular phraseology, out of every 12 months in the year those who pay Income Tax at the rate of 6s. in the £ are devoting four months' payments to the service of the State. One-third of the Income Tax at-68. in the £, quite apart from the Super-tax and other taxation, goes to the service of the State. One week in every three is devoted to the same altruistic service.
1226 These are striking and appalling facts. If we had an abounding trade, or if we were fairly certain of the luture—that next year would see a revival of trade, not a mere temporary flutter, but one based on such a foundation as will prove to us that our future will be progressively satisfactory in regard to finance,—then we might take a more cheerful view, but no one has any confidence at all that that is going to be the case. The most we can hope on any ground of reason is that we shall not get very much worse this year, and that next year we may find ourselves safely planted on the bottom and begin to rise to a higher and more satisfactory position. That being the case, and it is the only reasonable view to take of it, what is the position of the House of Commons in its greatest duty, its financial responsibility to the nation? It is without any doubt at all to address itself to the Estimates of this year with a determination to see that every possible economy is effected. Our duty is not only to take the Estimates which are furnished to us and the recommendations which are made in regard to them, but to take unto ourselves the task of seeing whether any further reductions can be made. That is what we ought to do. I realise that this is a counsel of perfection.
I know this House intimately. I have been in it for 14 years. I sat on the back benches, and for six years I was occupied with the duties of the Chair. The Chancellor of the Exchequer is quite justified in what he may have in his mind at the moment, but when we propose economies, how many Members do we get support from in Committee? Our duty is to rise above the pressure from constituents or from powerfully organised bodies and to discharge our public duty. I do not know how far I shall be able to do that myself. One, of course, realises one's own imperfections just as much as one realises the imperfections of others. But that is what we ought to do. To get down to this most serious business, and this year to lay the foundations for the much more difficult financial years yet to come. Taking the basis of the Income Tax alone—in regard to that my right hon. Friend the Chancellor of the Exchequer knows that I am right in saying that the position must be serious indeed next year and the yearafter—how can 1227 it be done? It cannot be done in the limited time at the disposal of the House in dealing with these Estimates. We ought to have more time to deal with them. This is an old and favourite subject of mine, and if the Leader of the House were here, I would urge it on him. We have 20 days for Supply, and very often these days are not devoted to their proper use, and we go on to irrelevant topics, but that does not alter the fact of what the duty of the House is, and we ought to have at least 30 days for Supply this year. There should be no difficulty about that. The legislative programme of the Government is the most modest which has been presented by any Government for the past 10 years. I am not discussing its merits, but it consists of merely trivial Bills, and there are vast tracts in the time of the Parliamentary Session which ought to be devoted to the overmastering topic of national finance. When my right hon. Friend comes to reply, he should be able to say that he, as the chief financial trustee in this great matter of finance, will use his best endeavour to see that more time is given to this most important question of discussing supplies.
§ The CHANCELLOR of the EXCHEQUER (Sir Robert Horne)
In this discussion, and in all the previous discussions in which I have taken part on the question of finance, I have listened to some very excellent sentiments with which I entirely agree. The difficulty is that I get very little help from a large body of the House when I try to put these sentiments into practice. My right hon. Friend the Member for Peebles (Sir D. Maclean) is to-day in this happy position that he can quite rightly criticise expenditure on the part of the Government, while his friends in the country are not only sympathising with but abetting criticism of the Government on behalf of the unfortunate victims of the curtailment of expenditure. He therefore seeks to get votes on both hands, on the one side because the Government is extravagant, and on the other because we seek to control extravagance and are dismissing some of their constituents who are the victims of restriction. I agree entirely—I am sure that the House will acknowledge my sincerity in this matter—with the 1228 necessity of curtailing expenditure in every possible direction, and I think my right hon. Friend will agree that I have, at least, made some considerable endeavour in that direction. I am sure it is true, as was stated by my hon. Friend the Member for Oxford (Mr. Marriott), that high taxation is a burden upon industry, and that in order to relieve many of the troubles we are at present suffering from, it will be necessary to get rid of that burden to the greatest degree possible. For that purpose it is necessary to reduce expenditure. These are general sentiments about which there is no difference of opinion. The only difficulty is the practical application of those very admirable principles.
There are one or two figures I would like to clear up now. The House, I am sure, will not expect me to repeat the elaborate sets of figures which I gave upon the last occasion when this matter was dealt with. I think that at that time my right hon. Friend by some mischance was not in the House, and we did not have the benefit of his opinion upon the proposals we were making, but equally I think he did not get the benefit of our reply upon the questions which evidently have disturbed his mind, because many of the problems he has dealt with have already been dealt with in the speech I made on the previous occasion. There is, however, one figure which has created misapprehension. I stated, and this, I think, has not been observed, that by putting in force the reductions which we were able to accept from the Geddes Committee, I could bring the ordinary Supply expenditure down to a figure of £484,000,000. My right hon. Friend says: "You make it £522,000,000."That is where the whole fault has arisen. The figure of £522,000,000 is not only the ordinary Supply expenditure, but contains a large figure for special Supply expenditure.
That figure for special Supply expenditure is £60,000,000. He will no doubt say: "You have succeeded in bringing your ordinary Supply expenditure down to below £484,000,000, because if you take £60,000,000 from £522,000,000 you are left with £462,000,000, which is £22,000,000 less than the £484,000,000 to which you refer. "That is perfectly true. The explanation is that in the £484,000,000 there was included £22,000,000 of expenditure 1229 which applied to Ireland. That is an expenditure for next year which has now to be deducted, but that does not mean an extra saving of £22,000,000, because at the same time as we save that expenditure on Ireland we are losing the revenue from Ireland. The figure of £522,000,000 is made up thus: £484,000,000 of ordinary Supply expenditure which included Ireland; less £22,000,000 applicable to Ireland, bringing the figure to £462,000,000, and there is added to that figure £60,000,000 of special expenditure, making £522,000,000, a figure which of itself naturally would cause some misapprehension. When my right hon. Friend compares £603,000,000 with £522,000,000, again he makes an erroneous comparison, because the figure of £603,000,000 did not include the special supplies and, therefore, whatever was in that figure for special Supply expenditure has to be deducted before we get a fair comparison. I think that explanation will clear up the whole difficulty.
If my right hon. Friend takes the explanations which I have given, I think they will disabuse him of the view that in point of fact we have only adopted £6,000,000 of the reductions which are proposed by the Geddes Committee. He asks: What has become of the suggested reductions of £87,000,000? As I explained to the House, we have adopted £64,000,000 of these reductions. But it falls to be reduced by a figure of £10,000,000 because we cannot put all these reductions into force so as to realise the benefit of all of them in the course of the next year. But we adopt them for next year and we shall succeed in realising our hope of the £54,000,000 reduction recommended by the Geddes Committee.
My right hon. Friend complains that we have not adopted all of them. He says we ought to have deducted another £100,000,000. It is idle to talk of reducing expenditure in the vague. You can only reduce expenditure by cuts and economies in particular details. It is not any good to say to us, "You must effect economies by a certain amount," if you then vote in this House for expenditure which makes it impossible to realise those reductions. Where are the places in which the Government has found it impossible 1230 to follow the recommendations of the Geddes Committee. They are all included in the Navy, the Army, the Air Force and Education. In regard to all the other Services we have practically realised the same amounts as the Geddes Committee suggests, and in some of them we propose to realise greater reductions than they suggested. There is the Pensions Department, where we shall save a figure of £6,000,000.
§ Sir R. HORNE
No, that is not a fair statement. In point of fact, we propose to realise that by administrative economies. My right hon. Friend may say, if he likes, that that is an overestimate, but in point of fact it is effected by cutting down salaries in certain directions and making economies of that kind. The point I am making is that the places where we fail to establish economies to the full extent which the Geddes Committee has recommended are in those great services, the Navy, the Army, the Air Force and in Education. I would like to remind the House of what I explained before, that so far as the Navy and Army are concerned, the only reductions which we did not see our way to realise are in connection with matters where no specification was given by the Geddes Committee, where we were left in the dark as to how they thought those economies could be obtained. But, taking them as they are, these are the services in which we cannot see our way to obtain economies to the extent they recommend. I want to remind the House of what has happened during the last ten days. We have had the Army Vote before the House; we have had the Navy Vote; we have had the Air Vote, and we have had a discussion upon education in the House this afternoon. Let me remind the House what has happened. Was there any suggestion made on the Army Estimates that too much was being spent upon our military forces?
§ Sir R. HORNE
I venture to say if you will examine the Debate on this question, you will find that the great difficulty of the House was that they thought we were taking too big risks in cutting down expenditure on the Army. I ask my right 1231 hon. Friend if I am not giving a true representation of the character of that Debate? Does my right hon. Friend suggest that there was an appreciable body of opinion in this House in favour of cutting down the Army Estimates further?
§ Sir D. MACLEAN
Yes. It depends upon what my right hon. Friend means by an appreciable body. Our numbers in the Lobby were small. I agree the majority in the House of Commons was in his favour and against us.
§ 8.0 P.M.
§ Sir R. HORNE
The most important part of the Debate, as I think the right hon. Gentleman would agree if he had been here or if he had read it since, was taken up with discussing our military position in reference to the weakness of the force with which we are going to be provided in future.
§ Sir R. HORNE
Not only by the military men, but by the House as a whole. We had a precisely similar experience with regard to the Navy. It was the same with regard to the Air Force. What has happened this afternoon with regard to education? We failed to realise £12,000,000 of the reduction in expenditure which was recommended by the Geddes Committee. Has there been anyone who could say to-day that we should have cut education expenditure still lower down than we are proposing to do? There has not been a voice raised in that direction. How is it possible to say we must realise another £100,000,000 when we go through this experience every time we put up an Estimate, and we find that the whole weight of opinion of the House is against us? I find not only that this is the course of conduct in this House. It is reflected in the Press outside. I read persistently in the Press attacks on the Government for not achieving the reductions which the Geddes Committee recommended, but I do not see the same Press urging us to cut the Army down or the Air Force or the Navy, or suggesting that we ought to reduce teachers' salaries so as to bring the Education Vote down to a lower figure. If people are going to indulge in criticism 1232 they must have the courage of their views, and that is something one seldom finds in this matter. We shall probably have some testing Votes in the near future on other matters, but one sees the House that ordinarily cries for economy in general voting for large extra supplies on particular things on which they think their constituents will be against them if they do not vote in a particular direction. We ought to get rid of that kind of sham and put ourselves into a position to resist the persistent demand made from every part of the country—great organisations and large bodies of constituents—for particular forms of expenditure, and I hope very much the maxims the right hon. Gentleman has laid down in connection with the matter will be followed, not only by himself, but by all those who support him.
§ Colonel WEDGWOOD
We have listened to the usual recurrent homily from the Chancellor of the Exchequer. He has no friends. No one loves him. He proposes every economy imaginable and the House turns him down. I commiserate with him. He is Chancellor of the Exchequer in a Government whose ideal of governnig is always to discover what is the majority behind it. What is popular is their guide to salvation, and it is rather difficult to discover what is popular when you are cutting down taxation. The hon. and learned historian who sits for Oxford City introduced the Debate by telling us he was going to discuss pure finance. I like that epithet. We on this side of the House sometimes cast doubts upon the immaculate conception of that subject. I think it is on pure finance that we want the Chancellor of the Exchequer to concentrate his attention and to give us a little light and leading. I am sorry he has merely given us the usual homily about how good he wants to be and cannot be, instead of trying to realise the far more important question of what is the Treasury's actual mind on the question whether it is best to inflate or deflate the currency. That seems to me to be the critical question that our Treasury has to face, because the unfortunate Government we have in front of us is trying on one side to stop Government expenditure and on the other side to increase it—trying to stop it in order to improve trade and trying to increase it in order to increase trade. It 1233 is not often that you find one Government trying to do both things, but this Government does. The axe came along about six months earlier than the idea that it was necessary to spend Government money in order to meet unemployment, and we had a curious instance of the Government economising on some subjects and at the same time urging the Board of Agriculture to spend more money on afforestation, to do something which would not be done ordinarily as sound finance in order to solve unemployment, and at the same time cut down somewhere else so as to improve trade. I wish the Government would make up its mind which horse to ride. Is it best for the unemployed position of the country to increase employment by squandering money or to increase employment by reducing taxation? You cannot have it both ways.
It is difficult to argue with a convinced Tariff Reformer, but it is necessary that the Treasury should have a clear mind on the subject. If you are going to benefit trade by lending large sums of money to foreign countries, or to the Colonies, in order that they may order goods here which they otherwise would not order here—if that is the right solution that means more Government expenditure. It means possibly deferred expenditure, but the rest involves ultimately a certain amount of Government expenditure. Is that right or wrong? Or might I ask the Chancellor of the Exchequer, is it advisable for this country to be a creditor nation or a debtor nation? Sometimes we are told the whole- position would be solved if only we owed Germany several thousand millions instead of Germany owing us several thousand millions. Of course mere Labour Members cannot possibly know what is the best position for the country to be in. If we owe other people a thousand millions everyone here will be busy manufacturing in order to send a thousand millions of goods to the other people who want them. On the other hand, if Germany owes us £1,000,000,000 all the Germans are employed in manufacturing the goods which we want and all our people are standing idle. Which is the right position? Do we want to be a creditor or a debtor nation? Would you rather owe or be owed £1,000,000,000? I do not know which the Treasury believe in, but the other day we had a deputation to the Prime Minister 1234 to urge upon him the necessity of so amending the foreign policy that the trade of this country might be improved, and my right hon. Friend the Member for Platting (Mr. Clynes) pointed out that in France there was no unemployment to-day. The Prime Minister sprang into the breach at once. He said, "No. There is no unemployment in France. That is because the Germans have destroyed the industrial area of France. "The result of that destruction evidently has been the employment of the French people. I suggest that in that case we had better burn down London and improve employment by building it up again. It is the same argument. But I do not know where to have this Government. Sometimes they are all for war or earthquakes or fires to increase employment and at other times they come here with their pure, hard faced finance and say, "No. Cut down every sort of expenditure. Save money. That is the way to cure unemployment." Which way does the Chancellor of the Exchequer think is the best way? Has it ever occurred to him that the Chancellor of the Exchequer ought to make up his mind whether we want to be a creditor or a debtor nation, whether we want to inflate or deflate the currency.
Several leading bankers, Mr. Walter Leaf, for instance, and, I think, his predecessor, Mr. McKenna, think a reasonable amount of inflation is now desirable. Is that pure finance or is it pure nonsense? Do we want the £ to be restored to its gold standard, or do we want it to pursue the mark down to 6d? Which is good for trade? Which will ultimately help the situation? These are questions I want the Chancellor of the Exchequer to answer and not to get up and tell us that the House is such a wicked lot of people that it is always trying to be popular and thwarting the energetic Chancellor of the Exchequer, who sees the way to save 6d. but is not allowed to do it by the wicked House of Commons. We are told this year the Government are going to have a bright brain wave in order to enable them to reduce the Income Tax by 2s. in the £, and the bright brain wave apparently is not to pay pensions out of revenue, but by borrowing. That is what is called inflation. I wonder if that is supposed to be good or bad for the country. It will be so interesting, if the Government bring that forward, to 1235 see what argument they bring forward in favour of increasing debt instead of paying it off. It may be the Secretary to the Treasury will tell us it is all very well to criticise them and ask them what their views are, but what should we do? I can tell him quite frankly. We believe not in inflation but in deflation. We want the currency deflated and the £ restored to its normal gold value, and we propose to do that quite simply by a capital levy, in which the money will all be earmarked for the repayment of the debt. We believe by a capital levy, if you like, in lieu of the existing Death Duties, and recurring at fixed periods, not used in any way as revenue, we shall be able to pay off part of the National Debt, and to put our finances in such a position that we shall be able to convert the balance of the National Debt. That is sound finance. That is pure finance. Unfortunately, this Government dare not tackle it that way. But I think if the right hon. Gentleman would speak quite frankly in the privacy of his private apartment, he would admit that the foundation of any restoration of trade in this country depends not upon balancing income and expenditure but in starting to pay off that load of debt, in order to cheapen capital and to reduce the rate of interest on the balance, and I think he would admit that it is only possible to do that when you do not merely raise sufficient revenue to balance expenditure but go in for a drastic capital levy which shall found the finances of this country on the good old principle of saving instead of on the bad new principle of extravagance.
You can meet emergencies by extravagance, you can meet emergencies, no doubt, by giving everyone £10 apiece. The immediate result of endowing every man, woman and child with £10 in new bank notes, signed by Fisher or Bradbury, would be a boom in trade. There would be any amount of money to spend. The demands upon manufacturers would increase, and that too often is the sort of policy—exaggerated, I admit, but the sort of policy this Government has adopted to meet the situation. You may meet a temporary emergency in that way but, unfortunately, you always have the horrible result of Monday morning following. As a result of any such inflation and of any such extravagance, although it may be done with the best 1236 of motives, you always have deeper depression and more unemployment, and it always becomes more difficult to return to those orthodox lines of finance upon which this Debate was to turn.
§ Lieut.-Colonel ASHLEY
May I say one word in support of the right hon. Gentleman the Member for Peebles (Sir D. Maclean), who suggested that it would be well if the Government could see their way to give the House more days to discuss the Estimates. It is perfectly true, as he pointed out, that the legislative programme this year, thank goodness, is a very restricted one. Apart from the House of Lords Reform Resolutions, there is practically nothing of first-class importance with which we have to deal. That being so, and as, obviously, the first and primary duty of this House is to look after finance—we are elected more for that than to legislate—it does seem rather ridiculous that we should be restricted to these 20 days for Supply. It is only a modern innovation, because there used to be a great deal more time allotted in olden days, and sometimes there were no restrictions at all. When the state of our national finances is the most important thing to discuss, and when we have the opportunity of devoting more time to finance, it does seem to mo that we should return to our first duty of looking after finance and that we should be given more days to discuss the Estimates than the 20 days which we have had allotted to us for the last few years. May I therefore enforce the appeal made by the right hon. Gentleman, with the approval, I am sure, of those who sit behind him, that the Government, if they can see their way, should give us these extra days? Nobody is asking this in a hostile spirit, but simply in order to try and help the Government to economise wherever possible.
The hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) advocated what he called sound finance, and sound finance in his idea, apparently, is a capital levy. I have a great deal of objection to a capital levy for two reasons. First, it is repudiation or legalised robbery, and, secondly, it is a further extension of the Death Duties, which really mean that the country, instead of living upon its income, is using capital money which belongs to the country for the expenditure of the year. 1237 If you once extend that system of using chunks of capital every year for the services of the year, then our finances, which are bad enough already, will soon reach a stage from which it will be impossible to recover.
The Chancellor of the Exchequer said, and I am sure it is perfectly true, that the Government have carried out practically all the recommendations of the Geddes Committee except those which deal with the Army, the Navy, the Air Force, and Education, and that the reason they had not carried out all the recommendations with regard to those four Services was that they would not get the support of this House if they did so. Even the economies which they did put forward in respect of those four Services received but little support from any side of the House. There is a certain amount of truth in what the right hon. Gentleman said, but I would point out to him, and especially to hon. Members opposite, when they complain that too much is being spent on the Army, that, taking the amount of money spent on the Army this year and reducing it to the prices which existed in 1914, the Army this year is costing us £10,000,000 less than it did in 1914.
§ Lieut.-Colonel ASHLEY
I disagree with my hon. and gallant Friend. Our commitments are infinitely greater than they were in 1914. I do not know whether it is in order to go into that matter, but, as was pointed out by the gallant Field-Marshal the Member for North Down (Sir H. Wilson), though Germany may have disappeared, there are to-day as many armed men in Europe as there were then, and we have commitments all over the world which we did not have then. As far as the Army is concerned, the Government have done the utmost in the way of economy that they possibly could have done. The same applies to the Navy and to the Air Force. Is there not, however, some way in which we could save on those three Services which the Government have not suggested? It is never a popular thing to suggest reductions in pay or salary, but I do not think it would be unjust if we said that after a certain date, say in two 1238 or three months' time, any man who joined the Army or the Navy or the Air Force should have considerably less pay than the men already in those Services. Of course, it would apply to all ranks. Everyone who joined the fighting Forces say from the 1st May would have considerably less pay than the men at present in those Services. It is well known that when the rates of pay were fixed a couple of years ago prices were much higher and trade was much better, and we could now get men for considerably less than we are paying the men at present in the Services. I do not see why the State should go on paying an inflated wage to people in this particular branch of the State service when they can get men under the voluntary system for considerably less. I think we could make considerable economies in that way.
The right hon. Gentleman said that there were economies in education to the extent of £12,000,000, recommended by the Geddes Committee, which they had not carried out, partly because, I take it, they thought that they were not sound, and partly because they were afraid of a popular outcry. Taking even the values of 1914 and comparing them with the values of 1922, we are to-day spending substantially more upon education than we spent in 1914. Education is an excellent thing, but, like other excellent things, you cannot have it unless you have the money to pay for it, and it is unreasonable for anyone to expect us to pay substantially more in 1922 than in 1914, considering the enormous debt of the nation and the unemployment that there is in the country. I think that there the Government have not shown the courage that they might have shown, and that they ought to have made a far bigger cut in education.
I have never been satisfied that we want any new Ministry compared with 1914, except the Ministry of Pensions. Nobody has given me any real reason why, considering the state of other finances, we should go in for the luxury of all these new Departments—the Ministry of Transport, the Ministry of Mines, and all these mushroom institutions. We must have the Ministry of Pensions, but, except for that, I would sweep them all away. You might there make considerable and drastic reductions.
After all, expenditure depends upon policy, and until the Government have 1239 made up their minds as to their policy abroad, we shall not know what our commitments and our expenditure are. I would ask the Financial Secretary, when he comes to reply, to let us know whether, in the Estimates for 1922–23, the Government are budgeting for our not having any more commitments in Constantinople. Have they taken into consideration the fact that, when this arrangement goes through between the Greeks and the Turks, as it obviously will, a very substantial body of our troops will be released, and a heavy expenditure, which amounted last year, I think, to about £6,000,000, will be taken off our shoulders? Have the Government taken that into consideration, or, if not, may we hope that the Budget of next year will be £6,000,000 better than was anticipated? Then we might make a substantial reduction if we reconsider our policy in Palestine. I never could see why we should spend the money of British taxpayers for the purpose of looking after Palestine and making a home for the Jews. If the Jews want a home for themselves, I think they might pay for it themselves. There are plenty of places at home where we want the money. If the Government will turn their attention to these various matters of reduction in our fighting forces, the abolition of these Ministries—which are certainly not wanted by the people of this country—and reduction of our commitments abroad, I think we might make a very substantial reduction on the Estimates of 1921–22.
§ Mr. HASLAM
I hope I may receive the indulgence of the House while I make a few remarks on the important question of foreign exchanges, which I feel sure ought to be submitted to, and thoroughly examined by, the delegates to the Genoa Conference. The exchange difficulty would largely vanish if the various countries which are now issuing fiduciary paper money without let or hindrance would cease the increase of such issues in the future. In this respect Russia appears to be in a hopeless condition. In fact, money in Russia has become virtually meaningless. The case of Germany, however, is totally different. German financial experts know very well what they are doing, and it is their deliberate policy to cultivate German interest and German industries by every 1240 possible expedient. Germany's financial affairs are managed in an extremely astute manner. One of their principal objects at the present time is to make the world believe that they are too poor to meet the costs of the reparations. The truth is, however, that Germany is growing wealthier day by day in real wealth, while we are experiencing the reverse process. By their issue of paper money, which costs them nothing but printing expenses, they are enabled to purchase good currency abroad, to buy the raw materials they require, and to produce finished articles at a much lower cost than we can.
Our difficulties are increased by our highly increased cost of production, especially in labour and freight charges. In calculating the wealth of a country we must take into consideration, not so much money values, as the amount of real produce, that is to say, of exchangeable goods, which the country possesses. If we take that criterion as a gauge, we shall find that Germany has increased her commercial commodities and means of further production continually. Germany produces much more cheaply than we do, and deliberately takes advantage of her depreciated currency, which, at each stage of depreciation, causes her labour costs to be comparatively lower and her profits on industry comparatively higher, thus encouraging their extension. By working full time and at lower rates of real wages, she has gained the advantage of cheap production, and her industries are, therefore, generally fully engaged. Germany has under 200,000 unemployed, while our unemployed number at least 2,000,000. At the same time our Poor Law statistics are growing continually worse. I believe there are only two ways of meeting this foreign competition, and decreasing the cost of living here. One is by lowering the cost of production, and this is the more important; the other is by obtaining greater fixity in foreign exchanges—a result which can never be obtained until the issue of dishonest money is stopped in foreign countries.
Dr. William A. Shaw in an article, recently published, shows clearly, by comparing the taxable capacity of Germany and of the United Kingdom, that Germany bears at the present time considerably less than half the taxation we have 1241 to bear here. It must also be borne in mind that about 1,000,000 men are being employed in German industries who, before the War, owing to conscription, were serving in the Army and Navy. Not only do the Germans gain by the industry of those men, but they save also at least £100,000,000 a year in naval and military expenditure, while we have to bear a very heavy expenditure for these Services. It does not matter what kind of industry in Germany we take into consideration—whether it is iron or steel, cotton, woollen, electricity, coalmining or any other industry—we find that the Germans are virtually working at full pressure. In fact, some industries are so much engaged that they refuse to take further orders, and their exports to neutral countries are continually increasing. As an instance of the industry of Germany, I may quote the production of lignite, of which 92,000,000 tons were produced in 1913. In 1921 this had increased to 123,000,000 tons. In this country the coal used for domestic and industrial purposes was 189,000,000 tons in 1913, and 130,000,000 tons in 1921, the decrease being 59,000,000 tons, while Germany's production of coal and lignite was 245,000,000 tons in 1913 and 232,000,000 tons in 1921, or over 100,000,000 tons more than our coal produced and used for domestic and industrial purposes. Against the loss of the Saar and Alsace coalfields, Germany has the advantage of huge forests, and no doubt a considerable amount of heat is obtained from the consumption of wood. The main point, however, is that the units of heat generated in industry in Germany are very much greater in number than the units of heat generated in the industries of this country.
It is said that the people in Germany are suffering on account of their low wages. As evidence against this, I may quote General Booth, who was lately in Germany. He reported that he saw far less poverty and destitution in Germany than here, and that there was far more evidence of prosperity in Germany than there is in Great Britain. That evidence comes from a witness who has thorough knowledge of the condition of the poorer classes, and is therefore qualified to make a fair comparison. In making these remarks, I wish it to be distinctly understood that I have no desire to cripple 1242 Germany, but I do desire that the position should not be obscured by German financial experts. I am convinced that German influence in Great Britain reflects itself in our Press to a considerable extent, and we are thus unwittingly misled as to the true financial position of Germany. I am particularly anxious that our representatives at Genoa shall be fully informed as to the real wealth of Germany, reckoned by the internal value of her mark, and that the comparative incidence of taxation shall be ascertained. It is absolutely essential that the currency problem to which I have referred shall be placed on a sound foundation before foreign business and credits can become more normal and before exchange rates can begin to show signs of recovering stability.
§ Mr. G. LOCKER-LAMPSON
I understand that hon. Members are rather anxious to raise another question on this Vote, and, therefore, I will cut my remarks as short as possible. When the Chancellor of the Exchequer spoke just now, he made, I think, rather an inaccurate statement about the Debates on the Army and Navy which we have recently had. He was quite wrong in saying that no reductions were proposed and that, if I understood him rightly, no instances of extravagances were adduced. I sat through all those Debates, and my experience was that from every part of the House, and especially from these benches, a great many instances were adduced of extravagance in the Army and Navy—not in regard to fighting men, but in regard to subsidiary services—which certainly ought to be remedied. I am glad that my hon. Friend the Member for Oxford (Mr. Marriott) hag raised the question of finance because it is the most important thing we have to consider. If you ask any ordinary man in the street, if you ask any hon. Member who has ah independent mind, I am sure he would say that financially this is the most vulnerable Government the country has ever known. Having got into very deep water indeed, threatening to drown not only themselves, but everyone else, the Government appointed the Geddes Committee in the hope that it would pull them out. I have two complaints to make as to the Government's action. The first is that the Government got us into this financial 1243 mess. The reason for that is that the Government do not know their minds from day to day. They have no settled policy. They seem to be guided by opportunist considerations from hour to hour. We have seen a complete reversal of agricultural policy; we have seen a complete scrapping of the housing programme; we have seen—I do not say whether it is right or wrong—a complete postponement of a large part of the educational programme; we have seen a transport Minister erect an enormous transport edifice and spend millions of money and then himself subscribe, within two years, to the extinction of the very Department he set up. We have seen also the Chancellor of the Exchequer, who flits from figure to figure and from Estimate to Estimate, always changed, quite unable to control his own Department, and he has to call in an outside Committee to do it for him.
I believe that the country, and I am sure this House, if it honestly asked itself the question, is getting very tired of this amateur finance and amateur statesmanship. The sooner we get back to the old system before the War the better it will be. My second complaint is that the Government are not only not carrying out a large part of the Geddes Committee's recommendations, which I think they ought to carry out, but we are experiencing a terrible amount of delay in carrying out the recommendations upon which everyone is agreed. The essence of the Geddes Committee's recommendations was that the proposals ought to be carried out without delay. I have here many quotations. There are three volumes of the Geddes Committee Report. In them the Committee never tire of pressing upon the Government the enormous importance of going ahead with these proposals and carrying out the reductions at once, so as to get the results properly shown in the coming financial year. It was a pure waste of breath, or rather a waste of energy, because, so far as I can see, nothing is being done even in regard to the recommendations upon which everyone is agreed. Let me give an instance of what I mean. There is the memorandum issued by the Secretary of State for War the other day. In nearly every paragraph he tells us, not what he has done so that we may see the results in the coming financial year, but what he 1244 intends to do. You will find in the memorandum such phrases as these: The London district will be merged in the Eastern Command," "The establishment of the Army Education Corps will be reduced," "The fees at Woolwich and Sandhurst will be raised," "The Gentral Gas School will be closed, and the amalgamation of certain other schools is being considered," "A reduction of about 17 per cent. of the wages bill is in contemplation," "The establishment of horses will be reduced," "The peace establishment of vehicles will be reduced," "The Army establishments will be examined," "Arrangements are under discussion with the Minister of Pensions in regard to administrative reform," "The privilege of travelling by rail will be withdrawn, "and so on and so on; but not one of these things is now being done so as to show the results in the coming financial year.
To my mind the state of War Office finance is very serious indeed. After all, this is a question for the Chancellor of the Exchequer. We find that the cost per head in the Army now is more than double what it was before the War. You find a worse state of things in the Navy. In the Navy the cost per head is three times what it was before the War. I feel very strongly that until you get some kind of co-ordination between the three Services you will never get proper economy established. At present there is an entire want of co-ordination between the Army, Navy and Air Service, and the Geddes Committee point that out over and over again. There is continued overlapping, continued duplication, continued superfluity of effort and energy. Let me give one instance. Each one of these Services, the Army, Navy and Air Force, has a medical service of its own. Each has also a dental service of its own. In the Army, although there are 20,000 fewer men than there were before the War, they have 441 more Royal Army Medical Corps people and dentists. Take the Navy, with its own medical and dental service. In the Navy the cost per head for medical and dental service is £12. That is for every single person in the Navy. Naturally, when these figures were disclosed the Geddes Committee recommended a serious cut in the expenditure. The Committee's case is absolutely unanswerable. It is out- 1245 rageous that you should spend £12 per head per year in the Navy for medical and dental services. Under the National Health Insurance Act the medical costs for far worse lives than the lives you get in the Navy are only 11s. 6d. per head; that is to say the Navy at the moment is costing more than 19 times as much in medical and denal services as it is costing the nation for the ordinary civilian population insured under the Health Insurance Act. I hope that that fact is to be investigated.
Take the separate Service of the Air. You have there a separate dental and medical service. I am pointing these things out because the Chancellor of the Exchequer is continually saying, "Why do you not give some specific instances and show the way in which expenditure can be reduced?" It is perfectly easy to show the way. If you co-ordinated these medical services you would save hundreds of thousands of pounds every year. Although there are 10,000 fewer persons in the Air Service than there were last year, you have a very large increase in the cost of medical practitioners, and a very large increased cost in regard to nursing service. That is only one point showing that where these three Services are concerned co-ordination would effect enormous saving. If the proposal of the Geddes Committee to set up a Ministry of Defence, co-ordinating all three Services, were carried out, it would result in the saving of millions sterling every year. We find to-day that the staffs of the Admiralty and the War Office are more than double what they were in the year of the outbreak of war, although the fighting forces are reduced by no less than 50,000.
Unless the Government act at once we shall not get taxation substantially reduced in this country, and taxation must be reduced. It is crippling trade, and—I do not know whether I shall carry my hon. Friends of the Labour party with me in this—I am quite sure, in my own mind, that this heavy and grievous taxation is one of the principle causes of unemployment. On 5th December, at a meeting, the Chancellor of the Exchequer showed that a reduction of £175,000,000 was necessary to enable revenue to meet expenditure. As everybody knows, the Geddes Committee proposed a cut of £86,750,000 over and above the voluntary savings by the Departments. As the hon. 1246 Member for Oxford has pointed out, the Government are only adopting £54,000,000 of that £86,750,000. Where is the reduction of taxation to come from unless the Government go much further than they have done, especially in view of the enormous Supplementary Estimates presented to us year after year?
The Supplementary Estimates represent a most sinister feature of present day finance. Supplementary Estimates are very largely responsible for our inflated expenditure to-day. As the hon. Member for Oxford pointed out, the total Supply services in the last Budget amounted to just over £600,000,000 when the Budget was presented. They have since increased to about £794,000,000. I have here all the Supplementary Estimates presented to the House since the last Budget. I got them out of the Vote Office, and I added them up as carefully as I could, and I find they amount to no less than £142,000,000 sterling. In view of these Supplementary Estimates, the Budget, as presented to us, is no criterion of the expenditure we are asked to meet. The Government under-budgetted by £140,000,000 last April, and while I hope the figures will not be so inflated, yet the same kind of thing is certain to happen in the coming financial year. It always will happen as long as the administration of the day spends money without coining to the House to get the consent of the House. The only way to cure this is by laying down a hard-and-fast rule that no money shall be spent in any Department until that Department has received the consent of the House to that expenditure.
An immediate reduction of expenditure is absolutely vital. We have several instances of how it could be effected. The Geddes Committee recommended the abolition of the Overseas Department. They recommended the abolition of the Transport Department and of the Mines Department. No one of these Departments has been abolished. I have not the slightest doubt but that the Ministers of these Departments went to the Government and the Treasury, and pointed out that to abolish them would cost far more money than to keep them in being. Now they are all in being, and out of £100,000,000 which the Chancellor of the Exchequer himself asked the Geddes Committee to indicate as a saving, only about half has been adopted. If we ex- 1247 clude the savings consequent on the Washington Conference, even less than one half of the amount recommended by the Geddes Committee has been adopted.
May I draw the attention of my hon. and gallant Friend the Financial Secretary to the Treasury to these figures? To-day we have got, in round figures, over 350,000 Government officials, or 74,000 more than we had in 1914. It is owing to the pull of the Government Departments against the Treasury that reduction in taxation is being seriously jeopardised to-day. In every Department of State, except the Post Office, there is a larger staff than in 1914. What I complain of is that during the last 12 months these Government Departments have done practically nothing to reduce their staffs. I have looked into the matter very carefully, and I find that since 1st April, 1921, there has only been a reduction of 4 per cent. in the staffs of the various Departments. It is up to the Chancellor of the Exchequer not to listen to any Departmental excuses whatever if they do not hold water. I go further any say that if the Chancellor of the Exchequer cannot get his own way with the Government Departments, he has a remedy at hand. He can resign and hand the reins over to somebody else who is able to effect greater reductions in our national expenditure.
§ Sir GODFREY COLLINS
The hon. Member who has just spoken speaks with knowledge on the subject. He has brought to the attention of the House several cases which, on close investigation, reveal very clearly that the dominating policy of His' Majesty's Government is certainly not economy in the public service. This Debate has roamed over various subjects. My hon. Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood) advocated a capital levy as one method of solving our present trouble. I understand that hon. Members who advocate that policy always allow that the capital levy itself should be paid over a course of years. If that be so, it is 'really a deferred Income Tax, based, not on a man's income, but on his capital. When we consider, as my right hon. Friend the Member for Peebles (Sir D. Maclean) well pointed out, that every individual in the country to-day, who is 1248 paying 6s. in the £ Income Tax, is working four months every year for the Government or one week in every three, I think it is clear that there is a capital levy in active force and being levied to-day, which every citizen in the country acutely feels. Finance, in my judgment, is the main subject and a most difficult problem which this country must face. Finance dogs our footsteps whether we turn to the international situation abroad or to a consideration of questions at home.
I believe the true remedy, as far as our home policy is concerned, is contained in the old Scottish doctrine of living within one's annual income. Apply that test to the Government policy of this year. I find that the annual revenue is exceeded by the annual expenditure. Taking the figures up to the 18th March, the sum raised by taxation this year amounts to £895,000,000, while the expenditure for the same period amounts to £985,000,000. In other words, up to 18th March this year, His Majesty's Government are not living within their yearly income. It is true that the total revenue exceeds the total expenditure, but, as hon. Members well know, the total revenue is swollen this year to the extent of £145,000,000 from the sale of War stores. The sale of War stores to implement your revenue is unjustifiable, and until that system is stopped, and until the Government of the day live within their yearly income, there will be an indirect process of inflation, the fall in prices will be checked, and unemployment will continue.
That leads me to the main point put by the hon. Member for Oxford (Mr. Marriott) earlier in the evening, when he directed attention to the Estimates for the coming year. He pointed out that the Estimates for the coming year amounted to £520,000,000, and if we allow Consolidated Fund charges to amount to £340,000,000 there is a total of £861,000,000. To that must be added the charge for the interest on the debt to the United States of America and the Supplementary Estimates, which, as the hon. Member for Wood Green (Mr. G, Locker-Lampson) reminded the House, always amount to a large figure. If I allow £50,000,000 as the Supplementary Estimates for the coming year, the total expenditure during the coming year cannot be less than £930,000,000. If that is 1249 the total estimated expenditure for the coming year, what about the revenue? The revenue up to the 18th March amounts to £895,000,000, and allowing two weeks before the financial year closes or, say, £27,500,000 a week the total revenue from taxation for the present year will amount to £950,000,000. It is difficult to give with any complete accuracy a figure for the coming year, but bringing into consideration the continued bad trade which exists, and the point which was made by my right hon. Friend the Member for Peebles, that the Income Tax during the coming year will be levied on one or two years of bad trade, the revenue for the coming year cannot exceed £900,000,000. To that one must add the sale of War stores, which, in what is known as the Geddes Report, is put at £35,000,000, and if I allow a larger sum, say, £40,000,000, the total revenue, taking the most sanguine view, cannot exceed £940,000,000. That is to say, £940,000,000 of revenue on the one hand and a certain £930,000,000 of expenditure on the other hand. If these figures be at all accurate—and I think they are under-estimated in some respects—the charge we make against His Majesty's Government is this, that they are not living within their yearly income, that they are not conforming to the principle of every individual in the country, and so they are placing an undue burden upon the taxpayers of this country.
During the Debate yesterday questions were asked as to the Government policy at Genoa, and I would like to have asked the Chancellor of the Exchequer certain questions about the Government policy at Genoa on the financial side, but in view of his absence I will postpone doing so. The figures which I have submitted clearly reveal that the interests of the taxpayer have not yet received that consideration which they deserve from His Majesty's Government. During the course of the Debate certain figures have been quoted of what is called the normal year, and examination of the figures for the normal year in the Paper presented by the Chancellor of the Exchequer some time ago reveal this fact, that the present Estimates exceed the figures of the normal year on armaments, while the cost of social services in the coming year shows a decrease. That is a clear reflection of the policy of His Majesty's 1250 Government—curtailment of the money for social services at home and, on the other hand, increased expenditure on the Army and Navy and a policy of military adventure abroad. We must reduce the amount being spent on armaments. It is excessive, it is unnecessary. The figures for the normal year were £135,000,000, and when the Chancellor of the Exchequer, in his reply to my right hon. Friend, taunted him with not pointing out where economies could be effected, we point out quite clearly that the cost of armaments is excessive and must be reduced.
There are several other points I would like to have touched upon, but at this late hour I will not detain the House. This I will say, however, that the three years' financial record of His Majesty's Government reveals one very interesting point. Not only have they levied taxation at a higher rate than any other nation in the world, but they have collected £670,000,000 from the sale of War stores, which money they have spent, and, in addition to that, they have increased the National Debt during the past three years by £100,000,000. That is their record, and a comparison of our position to-day with that of three years ago is this, that the capital asset of the nation is £770,000,000 less than it was three years ago. I think the mere statement of that figure is a complete justification for the very short Parliamentary time which several hon. Members have occupied this evening on this subject.
§ Mr. NEIL MACLEAN
In the view of certain Members of this House who have been advising the Government as to the best method of getting out of the financial difficulties into which they have plunged the country, we on these benches are not looked upon as in any way interested in finance, whereas, as a matter of fact, we are the most interested party not only in this House but in the country. It is the labour of the working classes which has to provide the wealth not only in this country but all the countries in the world. That fact has been admitted unconsciously in various ways by certain speakers and in the Press, it being urged that one of the most powerful ways of bringing this country back to financial stability is to reduce the cost of production". I am not going to touch upon any of those points. I want to bring the 1251 House back to this point—that there is an easy way out of the financial difficulty. I see that the Financial Secretary smiles. I expect he knows what I am going to say. There is an easy way out of the difficulty if the Government has the courage and honesty to put it into operation. I have been bombarding the Chancellor of the Exchequer for some time with questions regarding the reduction of War Loan interest. I noticed in the Consolidated Fund Bill that the House is invited to pass this Bill allowing the Chancellor of the Exchequer to borrow money at a rate of interest not exceeding 5 per cent.
I should have imagined, in view of the precedents I have quoted from time to time, the right hon. Gentleman would have taken the example of other Chancellors of the Exchequer who have preceded him—men whose names appear in the history books of Britain, as well as in the Parliamentary record, as being among the greatest statesmen that this country has possessed, men like Pelham and Goschen. Pelham, indeed, put his scheme into operation following what, at that time, was considered a great war. He passed an Act to reduce the rate of interest, giving individuals the opportunity of transferring their stock into a security with a low rate of interest, first to 3½ per cent. and then to 3 per cent., or of being bought out in full by the Government. The following year, 1750, he passed a second Act, because the Bank of England and the East India Company refused to come up to the scratch, as they thought there was something invalidating their claims in the Act previously passed extending the period during which they could make this conversion, and, with the exception of £3,000,000, the Bank of England, the East India Company and all the other individuals and companies which had stood aloof under the operation of the previous Act, came in, and, with the exception of this £3,000,000, the whole of the loan was converted from the higher interest to the lower rate, 3½per cent. and subsequently 3 per cent.
I want to submit to this House that it can carry out the very same procedure now. There is nothing dishonest in it. It is an act of conversion, and, in another way, it is an act of justice. The working men have been told up and down the country that the cost of their living has 1252 gone down, and, therefore, they must submit to reduced wages. The cost of money has gone down, the bank rate having fallen from 7 per cent. to 4½ per cent., and the interest on bank deposits from 4 per cent. to 2½ per cent. Money has become cheaper to borrow, and yet the Government propose in this Consolidated Fund Bill to borrow, at a rate of 5 per cent. interest. In France, as I showed to the House in a question, the Minister of Finance has taken time by the forelock, and has reduced, as from the 10th of this month, the rate of interest upon Treasury Bills and National Defence Bonds. That, of course, has to do with all subsequent bills and subsequent bonds that are issued, but no further borrowings are to take place in these two categories at the high rate of interest existing before the 10th March, but they are to be at the lower rate of interest of 31 per cent. If France can borrow money so cheaply to carry on certain of her financial obligations, surely this country, which is outstanding as a nation of financial stability, as a nation that is always able to pay its way and not be behindhand, ought not really to find any difficulty in borrowing money at this low rate of interest.
I know that hon. Members, when I have suggested this matter before, have jeered at it. The time will come when you must have it. You are bound to accept it, and, though hon. Members may titter and laugh, if you wish to conduct the affairs of this country, if you wish to carry through the welfare of this nation, if you wish to attend to the things that have been promised to the people of this country, you must reduce the rate of interest, and reduce it in the manner I have suggested. No amount of equivocation on the part of the Chancellor of the Exchequer, no amount of side-tracking by trying to make out that these are dishonest proposals, is going to have its effect. In all parts of the country, in all industrial centres, in all mining districts, where working people have had to submit to reductions of wages that have brought them back to the conditions in 1914, they are asking why it is that the only pledge which this Government keeps is to the interest-drawers who advanced their money during the War. I say that by reducing the rate of interest from 5 per cent., the amount mentioned in the Con- 1253 solidated Fund Bill, to 4 per cent., you would save a matter of between £60,000,000 and £70,000,000.
I submit that that is a sum worth saving. It is a sum greater than the reduction proposed by the Government in reply to the Geddes cut. It is a, sum almost approximating that suggested as a saving by the Geddes Committee, and if you go further, and adopt the French Government's proposal, reducing it to 3½ per cent., you will save a very much larger sum and be able to make your accounts balance in the manner suggested. I might have replied to the right hon. Gentleman on the Front Bench, who seems to misunderstand the attitude the Members of the Labour party take up in their advocacy of a capital levy. It is plain he has yet to understand the real advocacy we put forward. He talks of the way we propose to make a capital levy as being equal to another Income Tax, and suggests that individuals who pay Income Tax at 6s. in the £ are already heavily taxed. The working classes of this country, whose food is taxed, whose beer is taxed, and whose tobacco is taxed, are taxed to the amount of 7s. 3d. per £ of the working man's wage. That surely is a sufficiently large Income Tax for the working man to pay. That is my argument, and my answer to the argument of my hon. Friend that 6s. in the £ is a sufficiently heavy Income Tax for those able to pay Income Tax. They at least have 12s. left to spend upon anything they like, while the workman has to spend his other 12s. 9d. in food and clothing for himself and his family. I suggest that the Parliamentary Secretary might at least convey the suggestion I have made once again to the Chancellor of the Exchequer, and point out to him that so far from his answers to the questions I have put to him being satisfactory I am still carrying on the same agitation, backed up by a vast support all over the country, by people who have to stand all the hardships and practically use what wealth they have in paying interest upon the War Loan.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hilton Young)
The hon. Member for Govan (Mr. N. Maclean) has apparently made a careful calculation of the amount that would be saved to the country if we repudiated our obligations in relation to the National Debt. 1254 Why should he trouble to over-elaborate his calculations? If we were to commence a policy of repudiation—
§ Mr. MACLEAN
On a point of Order. I do not think I mentioned repudiation. I pointed out Acts of conversion, and I quoted several Acts of conversion that had been passed by Pelham and others.
§ Mr. DEPUTY-SPEAKER (Mr. James Hope)
I do not think that is a point of Order. I may, however, say that on thinking over the arguments of the hon. Gentleman that it is clear they would involve legislation and therefore no more than a reference can be allowed in reply.
§ Mr. YOUNG
It may, perhaps, take a moment's reflection on my part to secure that that single reference permitted to me shall express in a concentrated form all that I desire to say. Let that reference be that, on behalf of His Majesty's Government, I absolutely repudiate following the doctrine suggested. If the moment comes, to which the hon. Gentleman referred, when we do in this House take part in a measure, which must and shall be described as repudiation, I sincerely trust that a policy so dishonest and so crude will be in the hands of the hon. Member and his party, and of no other party.
Various fascinating topics have been touched upon, but if I followed into the wide field of protracted argument, which is so tempting, I fear I should occupy more time than I desire to occupy. I must confine my reply to answering what seems particularly called for, and for the imparting of that information which hon. Members are entitled to receive. The hon. and gallant Gentleman for New-castle-under-Lyme (Colonel Wedgwood) invites from the Government a declaration of policy as to whether they are in favour of inflation or deflation' Upon the horns of that dilemma I must resolutely decline to be impaled. When one is offered the alternative of the frying pan or the fire, he may conceivably prefer the third comfortable alternative of the hearth. Why is it necessary to rush to either extremes? In his own observations the hon. and gallant Member has shown the absurdities that lie in the extremes of inflation and deflation. Is not the great evil of the present state of com- 1255 merce and international trade the fluctuations, the movements, the instability? Is not what we require the smoothing out of the fluctuations in exchange, and so in the matter of inflation and deflation. Is not what we require to try to manage to survey the whole sea and to steer cave-fully between inflation on the one hand and deflation on the other?
What I gathered from the remarks of one of the authoritative leaders of the Labour party was the astonishing pronouncement that he was in favour—I suppose on behalf of his party—of a policy of deflation. I really feel inclined to commend the hon. and gallant Gentleman's remarks to the members of his party who take an interest in the question of unemployment. They should be most careful, as certain analogies, commercial and industrial, make it clear that deflation reduces prices and by that process causes unemployment. Further, on that subject I would commend to the hon. and gallant Member the extremely interesting memorandum, which has already created much interest in financial circles, of Professor Cassel which suggests that the single cause of the whole unemployment wave from which we are suffering at the present time is the arbitrary deflation by the great nations. That is his argument. I believe the argument goes too far, but that this process of deflation can have a most adverse effect upon trade and may be the direct cause of unemployment is not surely to be objected to by any student of the subject? Whether trade be booming or the reverse, you must take steps to check the movements and the vibrations and to produce stability in the centre.
Let me, however, hasten past a subject so complex and so fascinating, and deal with the last criticism which has been advanced, in particular by the hon. Member for Wood Green (Mr. G. Locker-Lampson), whose criticisms of financial matters are always worth the closest attention. He criticises the Government for their delay in putting into force the Geddes recommendations. I doubt if, in this case, his criticisms are as well-conceived as we are usually accustomed to. There is produced for the consideration of the House a pronouncement made by a Minister who in a few days after the decision of the Cabinet, and within a few 1256 weeks of the issue of the Geddes Report, says that certain things will be done. The report covers the widest questions of policy, the expenditure of nearly £200,000,000, and indirect questions of administration. Is it a view of common sense, or consistent with past experience, to suppose that the measures to be taken in consequence of that Report have to be done with a crack of the whip or a stroke of the pen? In a field so wide and in measures of such complexity, I venture to say that had there been the sort of precipitate haste which seems to be desired by the hon. Member, we should have plunged many parts, and important parts, of the administration of the country into a measure of confusion which would have cost very much more in the long run than the amount saved by a few weeks.
Let the House remember another thing. Generally speaking, our financial commitments under our financial system are made for a whole year, and the very large bulk of the whole of the financial commitments of the country can only be reduced or increased at the end of the year. That accounts for a good many of the references to future action of which the hon. Member spoke. The changes can only be made with fresh Parliamentary authority at the end of the financial year, and many and so deep and wide are the changes introduced by the Geddes Report that a large number can only be made by fresh statutory authority. Any time that passes before some of these changes are made is not out of that wanton passivity which the hon. Member implied, but out of the necessary subservience to the authority of Parliament. In fact, in every possible manner in which such economies could be secured they have been secured. The House has already been informed that in this current year of 1921–22 the actual cuts made in consequence of the Treasury Circular that went out in the autumn and the Geddes Report thereon will amount, I think I am right in saying, to about £50,000,000. Is there "any evidence of delay in that? Next year, as explained to the House by the Chancellor of the Exchequer, the actual reduction will amount to £64,000,000. less the £10,000,000 which it is impossible to realise owing to the time that must pass before, for instance, we get the authority from this House to make the necessary changes, and so on.
1257 Then the old question of Supplementary Estimates arises in the hon. Member's criticism. Let us most heartily agree that Supplementary Estimates are the weak point of financial organisation. It must be, and is, the constant task and duty of the Treasury to fight against and resist Suplementary Estimates. It is, as the House has well recognised, the duty of the House to exercise the same function, but it will not serve any useful purpose to try and ignore facts in this respect. The Empire is a wide one; it covers distant fields, and unexpected contingencies will and must arise. Our annual Budget is a vast one, between £800,000,000 and £900,000,000, andaspractical men it is impossible to be sure that every conceivable penny of expenditure is going to be foreseen at the beginning of the year. No supplementaries is what we must strive for, but we must strive for that as an ideal. Let me remind the House that a too-absolute rule against dealing with an unexpected, unforeseen, and urgent contingency by way of Supplementary Estimates would only tend to weaken the fortifications of the year's finance, because if you try to apply the rule too hard-and-fast there comes a time when you will force Departments to make too wide a provision. Here, again, true wisdom lies in striving for an ideal while recognising that there must be exceptions to it.
A note that wakened a very sympathetic chord in my attention was struck by the hon. and gallant Member for Fylde (Lieut.-Colonel Ashley) when he appealed to His Majesty's Government to give more time for the consideration of the Estimates in Committee of Supply, That appeal should of course, I fear, in the first place, bead dressed to another quarter, but all those interested in the maintenance of financial control must join together in unison in desiring that the time given by the House to the discussion of its Estimates shall be not only adequate but ample, and shall be employed to the best possible advantage. Even in my short experience of the House I have watched the passage of Supply days enough to sympathise with what was said by the right hon. Gentleman the Member for Peebles, when he deplored the number of Supply days passed in discussing matters wholly irrelevant to financial control. I am confident there could he no stronger stroke struck for the restoration of that more 1258 powerful control of finance we all desire to see than the more careful adjustment of Supply days to discussions that are really financial, although, let me remind the House, that the hands of the Government are by no means free. The question selected for discussion in the course of Supply, according to the tradition and custom of the House, depend to a very large extent on the choice exercised by the Opposition.
There was but one other particular matter to which I would refer, namely, the criticism, advanced by the hon. Member for Wood Green upon the fluctuations in the total Government staff, a criticism which, owing to the brief time available, was mentioned in a manner so general as I think to have given a very misleading impression such as I am sure the hon. Member did not desire to convey. Briefly, the state of affairs is that if any Members interested will analyse the movements of the total of the officials employed in the Civil Service they will find the state of affairs to be as follows. There has been a substantial, and I would maintain a satisfactory, reduction all round in Government staffs as a whole, a reduction so substantial, as Members of the House are well aware, as to cause bitter searchings of heart in many quarters of the Government service. The total effect of that reduction has been masked by the fact that it has been necessary during the course of the year to take on a further increase of staff to deal with unemployment benefit. It was increased and also cut down afterwards, but the House will discover that no fair judgment can be passed on the very strenuous effort that has been made for the reduction of staffs unless it is realised that to a large extent the good effect of these efforts for reductions has been masked by the necessity of increased staffs in order to deal with the very great and urgent evils of unemployment.
These are all the various questions which I think it falls to me to say a single word upon in reply to the Debate, but let me, in conclusion, comment on the speech of the hon. Member for Greenock (Sir G. Collins) who, dealing with the Budget, pointed to a very gloomy future. How that will be will appear when the Budget is unfolded to the House. I will not attempt to deal with it at the present 1259 time, but with regard to that question with which we are particularly concerned at the present time, namely, the question of expenditure, it should surely not be allowed to go forth in the country as a whole or on the Continent of Europe that the effort that has been made towards the reduction of our national expenditure has been a feeble or halfhearted one. I am confident that both those who watch these proceedings from abroad at a distance and those who watch what we have done towards the reduction from a distance of time in the future will say it was one of the biggest efforts and the achievement of one of the greatest and most difficult tasks that was performed even by those post-War Governments in Europe which have been confronted with many tasks so great as this. I hope this will not lead hon. Members to believe that it will be possible in the future, by any means consistent with national welfare or national safety, to repeat a out of the same size as that which has obtained this year.