1. TEA.

HC Deb 01 May 1922 vol 153 cc1043-125

Motion made, and Question proposed, That in lieu of the Customs Duty now payable on tea, there shall, on and after the fifteenth day of May, nineteen hundred and twenty-two, until the first day of August, nineteen hundred and twenty-three, be charged the following duty, that is to say: — Tea - - the lb.- - eight pence. And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Mr. ASQUITH

It is not customary on the first night of the Budget to enter into any detailed examination of the proposals of the Chancellor of the Exchequer, and I think that is a good and a wise custom. It is necessary that we should be able to sleep over them before expressing an opinion I am only going to make two or three observations of a perfectly general character. First of all, let me congratulate my right hon. Friend not only upon the lucidity but on the terseness of his statement. I have heard a great many Budgets introduced into this House, and I plead guilty to having introduced two or three myself. But I have observed that very few Chancellors of the Exchequer are able to resist the temptations presented by a somewhat scenic occasion, and they have been in the habit of taking the opportunity to indulge in a general discourse de omnibus rebus and sometimes de quibusdan aliis, which often suggested to their hearers the interpolation of flashes of more or less extemporaneous humour with a reflection of the midnight oil. My right hon. Friend has avoided that temptation and, I think, has set a very good precedent, because he has shown, at any rate in the matter of rhetoric, whatever may be the case with his practice, the inbred and ineradicable frugality of his native country.

I will only say in regard to the review which he gave us, a very interesting and in many ways an encouraging review, compared with the forecast which was legitimately made twelve months ago, of the experience of the past financial year, that the Government has been indebted curiously enough for the progress made during the year—a progress which I welcome heartily both as regards the floating and the dead weight debt—that the progress it has made in reducing the national liabilities is due very largely to the depression of trade. Because trade has been so slack, because other avenues and channels of employment have been so blocked, or so sterile, we have seen this rise, predicted so far as I know by no financial experts a year ago, not even the great bankers to whom the right hon. Gentleman has referred, this great appreciation of Government securities, a reduction of the bank rate and so on, which has enabled the Treasury to pay off, I think, something like, up to this date,£300,000,000 of the Floating Debt, which I always regard as a great incubus. What is the situation as put before us by the Chancellor of the Exchequer? He proposes to remit taxation—1s. off the Income Tax, 4d. off tea, both very desirable things in themselves. But out of what is he going to do it? He has not got a surplus. Anybody who listened to his speech knows that, and no one knows it better than he himself. The£38,000,000 figure which he mentioned is earmarked for reduction of debt. There is the New Sinking Fund, and there are, as he himself properly admitted, contractual obligations in the way of redemption to be fulfilled to those who have lent money to the State. He makes up his surplus—the surplus out of which the remissions of taxation are to take place—by borrowing. I am not going to-night into any of the details.

I want to put to the Committee two general propositions which have often been emphasised by Chancellors of Exchequer and by critics of Chancellors of Exchequer, which are so obviously true that they have become part of the commonplaces of finance, and which were never more appropriate and never more worthy of being taken into account than they are in our existing situation. What are those propositions? The first is that the only legitimate ground for the remission of taxation, however heavy and burdensome and oppressive—I believe our present taxation deserves all those epithets, both direct and indirect—is a corresponding excess of estimated revenue over estimated expenditure. You have no business, and no Chancellor of the Exchequer has a right, to remit taxation out of a surplus artificially produced. There are various expedients resorted to from time to time, and they have been resorted to to-day, by which you can create an apparent and fictitious surplus.

One is by borrowing, which is the course the right hon. Gentleman proposes. Another course is by over-estimating your revenue, and that is fortunately an impossible expedient under existing conditions. The third is by under-estimating your expenditure. He arrives at his figure of£38,000,000 only by making an estimate of the supplementary expenditure for the present year of£25,000,000. What were the supplementary Estimates of the financial year just closed?£97,000,000, I think. If my memory serves me, I think we started the financial year with an estimate of something like£30,000,000 for supplementary expenditure.

Sir R. HORNE

It was quite clearly stated in the Budget speech that out of£177,000,000 surplus only£80,000,000 would be available for the reduction of debt, and the other£97,000,000 at least would be required for the ordinary expenditure of the year.

Mr. ASQUITH

That is quite a different point. When the Estimates were presented—the Estimates of the different Departments—could anybody have been led to suppose that those Estimates would be exceeded by£97,000,000? Of course not, and everybody knows it, and from a rather long experience very much emphasised and exacerbated by the present Government, I shall be more than surprised if the£25,000,000 put down here as a contingent Supplementary Estimate is not exceeded by one half or, perhaps, doubled. What then becomes of your£38,000,000? It does not exist. It is wiped out at once, if you can imagine an increase on the Supplementary Estimates in anything like the same proportion as has taken place during the last three years. My right hon. Friend (Sir D. Maclean) reminds me that the Supplementary Estimates during the last three financial years have exceeded£300,000,000, an average of£100,000,000 a year, yet the Chancellor of the Exchequer puts down£25,000,000. He is going to give the House of Commons an opportunity of making a great gamble—that is what it amounts to—upon which this estimated reduction of taxation is going to take place.

I wish to make another general observation—and here I am glad to think, from something which fell from the Chancellor of the Exchequer, that he really in his inner consciousness is in total agreement with me. It is the greatest mistake you can make; there can be none greater or more fatal, in the abnormal conditions under which we now live; to take a short view of finance. The Chancellor of the Exchequer must extend his vision beyond the 31st March of the current financial year—or, of course, such contingencies as a General Election. He must take a long view. Nothing is more important at this moment, when you are arranging the finances of the present year, than to put yourself in the position of the Chancellor of the Exchequer—I do not know who will occupy that post—this time next year. It may be it will be my right hon. Friend himself, in which case he will have to bear the burden which he himself has created. It may be that some unfortunate successor will have vicariously to carry that burden. You must put yourself in the position of the Chancellor of the Exchequer, who has got to Budget for the year 1923–24, and look at it from the point of view both of revenue and expenditure. Take revenue. It is quite clear that he cannot possibly anticipate any such revenue as my right hon. Friend is forecasting for the present financial year, and that for two very simple reasons—there are many other reasons, but two for the moment are sufficient. In the first place, take the item of Income Tax. You cannot possibly gather in anything like the sum that year as you will in this. The Income Tax is still the most productive single item in your source of revenue. We all know that he will be receiving his Income Tax on an assessment based on three bad years. The right hon. Gentleman has got a reasonably good year among the three years on which the present Estimate is based. The Chancellor of the Exchequer next year will have three bad years, and the produce of the Income Tax must necessarily be very substantially lower than the most sanguine can expect for the next 12 months.

There is another and equally obvious reason. You are coming to the end, you will then have practically come to the end of a source from which you have been drawing since the Armistice—the sale of War assets. I have always protested against that being included as part of the revenue of the year. About£700,000,000 has been received for the sale of these assets, purchased mostly with borrowed money—during these three years, and it has been treated every year as part of the revenue of the country, and has gone to help the Chancellor of the Exchequer's balance sheet. We have got to the end of that now—not quite the end perhaps. A figure was estimated for this year of£90,000,000.

Sir R. HORNE

The£90,000,000 included a great many other things.

Mr. ASQUITH

And the Chancellor of the Exchequer next year will have the bare remnant of this nearly exhausted fund. There again his revenue will be seriously depleted. So much for the revenue side of the account. Now look at the expenditure. The Chancellor of the Exchequer of that year will have to pay, in order to meet the interest on our obligations to the United States, not£25,000,000, but£50,000,000, so that he will be£25,000,000 on the wrong side of the account as regards expenditure. If you look forward as you ought to in budgeting not merely for 12 months, but for 24 months, all these things have to be taken into account, and your remissions of taxation this year, your diminished prospective income, and your necessarily enhanced expenditure, he will be a very clever man who is able without further borrowing to make both ends meet. I put these considerations before the Committee. They belong to the region of commonplaces. There is not one of them that is disputable in reason or fact, and I ask the Committee before we come to the detailed considerations of the proposals now put before us by the Chancellor of the Exchequer to take, not a hasty precipitate provisional view of what is popular or unpopular in the present year, but to take a large and far-sighted view of the financial position of the country, and to pause, and more than pause, before they assent to them.

Mr. CLYNES

I think that this is the first occasion on which my right hon. Friend has presented a Budget statement to the House of Commons, and, accordingly, I should like to add my own word to the congratulations which have been expressed with regard to the lucidity of the Chancellor of the Exchequer's statement. I do not recall any statement of Parliamentary importance given to us with greater clearness. Indeed, the right hon. Gentleman, without forfeiting any of the traditional force of Parliamentary oratory, was able to present the statement in such businesslike terms as almost naturally as evoke from us all a wish that this plan and method of presenting a complicated financial statement to us might be followed in future years. I congratulate the right hon. Gentleman, also, upon his cheerfulness and buoyancy in his struggle to convince us that the future will make it possible for him safely to remit the taxes the remission of which he has announced; but I recall quite recent statements of a very different character which were made by him when dealing in this Chamber quite recently with other subjects. It is all very well to congratulate the general body of taxpayers in this country upon their patriotism and the readiness with which they have responded to the national call. It is all very well to congratulate the country generally upon its financial stability. The fact, however, is that it was because of a great and increasing fear that we could not pay our way that only recently the Government created what we know as the Geddes Committee, in order that expenditure should be substantially reduced, whatever the consequences were to those who might have to suffer.

Some of my hon. Friends on this side of the House only a few weeks ago—as recently as 4th April—submitted to the House a Motion proposing that old age pensioners ought not to be penalised with respect to the receipt of their State pensions for the reason that they receive some of their small weekly income as a result of their past thrift, or because of investment by way of weekly contributions in friendly societies, trade unions, or other similar organisations. That proposal, had it been carried, would have cost the country some few millions of pounds, but it would have brought into many a poor home some degree of that cheerfulness which is now absent in their case, but which, apparently, is possessed by the wealthier sections of the community. The Chancellor of the Exchequer, in opposing that Resolution, made this statement, and I invite the attention of the Committee to it. I also invite them to compare it with the general tone and terms of the statement to which we have listened this afternoon. The Chancellor of the Exchequer said: The year 1923–24 is going to confront us with far more serious financial problems than even the year 1922–23. The revenue to be obtained from Income Tax then will have two bad years in the three upon which the average will be based instead of one. Miscellaneous receipts, so far as they are of a special kind, we may anticipate will have disappeared altogether, and instead of£25,000,000 interest on our debt to the United States we shall have to find£50,000,000.—[OFFICIAL REPORT, 4th April, 1922; cols. 2172 and 2173, Vol.152.] It would appear that, when an argument is necessary for the purpose of resisting an appeal from this side on behalf of the most needy sections of the community, terms of such gloom and difficulty as those which I have read can be used, but when it is a question of remitting taxation in the case of many who are still able easily to bear the burden, a very different argument can be found. I could not listen to the concession which the right hon. Gentleman announced in the case of the farmers and of certain landowners in this country without being reminded of the Government's policy quite recently in relation to farm workers, for such law as existed to guarantee them something like a living wage was brought to an end, and large numbers of them have been thrown back to a condition which, I am assured, places them on no better than a pre-War level of subsistence. I think that, in view of that recent Governmental action, the right hon. Gentleman might very well have stayed his hand with respect at this moment to any substantial financial concession to the farmer class.

I share the right hon. Gentleman's feelings with respect to the great national difficulties resulting from unemployment, and I refer to the matter in order just to draw his attention to what, apparently, the Government and the country are going to witness to-morrow. To-morrow night there expire the notices given to some hundreds of thousands of workmen who have asked for no change, who are pressing no demands, who are seeking no alteration of any kind in their terms of service or in their relationship to their employers, but who are to be locked out by the order of the employers, for the reason that they do not agree always to allow employers to decide for themselves what a material change may be when it is necessary to institute material changes in ordinary workshop working conditions. I ask the right hon. Gentleman to reflect upon the probable consequences of this lock-out, in view of the picture which he drew of the consequences which followed in the spring and summer of last year through the prolonged stoppage in the coal industry at that time. I cannot properly pursue the theme further, but I do suggest that, if any steps can be taken by those who may have power to prevent these industrial calamities, that power should be used; and I ask them, further, to remember, when dilating upon the consequences of industrial troubles in recent years, that in no one of those great troubles in recent years have the workmen been the aggressors, but that in all of them the workmen have been resisting some attack made upon their conditions of work or their rates of wages by employers.

I think the Committee has already heard quite a sufficient statement from my right hon. Friend who has just sat down, as to the risks which the Chancellor of the Exchequer is running by pursuing the lines announced in his Budget statement. I do not know whether the terms of his statement have been dictated by national necessity or by political strategy. An election Budget can be framed by remission of taxation this year, but with the certainty of a considerable deficit next year, and consequent alarm in trade circles, and consequent further business dislocation and, perhaps, other new taxes. It is for the right hon. Gentleman, who has the authority for the moment, to say which is the far-sighted view to take. The short-sighted view has often been taken in the House of Commons, in spite of repeated appeals on questions of finance from those who represent Labour opinion. Labour opinion foretold the end of the disastrous financial policy which Governments of recent years have insisted upon following. If Labour opinion on national finance had been followed, much more of our War debt would have been paid from current revenue. The right hon. Gentleman will have the opportunity, and I am sure he will take it. I repeat that, if Labour opinion had been listened to, and Labour plans accepted on questions of national finance, this country would have a far smaller burden of War debt than it has to-day, much more of our War expenses would have been paid out of current revenue, and War fortunes would have been prevented, or wealth which was improperly made during the years of the War would have been appropriated for national use, just as life during the War was demanded for national safety.

The debt inevitably incurred as a result of the War must eventually be redeemed, not by heavy taxation spread over a period of half a century, but it must be liquidated by a graduated levy upon accumulated wealth. In the meantime, we must ask ourselves what are the relative claims which may fittingly be presented in so far as any surplus, imaginary or real, may have to be handled by the Chancellor of the Exchequer? Who has the first claim to relief of taxation? I congratulate the right hon. Gentleman upon having remitted as much as 4d. of the tea duty. I consider it far better to have done that than to have remitted any lesser sum, which scarcely would have given to the poorer payers of the duty any certainty of actual advantage in their small weekly purchases. Next to food would come the case of those who have strong claims to abatement or to exemption altogether from Income Tax, because their incomes have remained low in spite of the high cost of living in recent years. They are a considerable and an extremely serviceable class. They are clerical workers very largely; they are not of the ordinary manual classes; but, while rendering extremely useful services, a large number of this class of the community have had to bear the very heavy and increasing cost of living and very heavy taxation, without anything in the way of a corresponding addition to their salaries or their ordinary weekly earnings.

6.0 p.m.

Taxes on food, tobacco, entertainments and beer form a formidable item in the weekly expenditure of an ordinary British householder. A family of five, it may be fairly estimated, pays not less than 14s. per week in relation to these items alone. Such a sum, applying as it does to millions of workers who have suffered extremely heavy wage reductions in the last 15 months, is felt as a very heavy burden, far more oppressive, far more irksome, than the burden borne by any of us who may complain of the rate of our Income Tax. If the tobacco duties, for instance, were reduced by a half, and if, in addition, all food taxes were abolished, the loss to the revenue would be far less than a quarter of the sum now paid in War Loan interest. Direct taxation of trade in the form of Corporation Tax and Excess Profit Duty since the end of the War has, of course, secured substantial revenue but much of it has been secured at the expense of serious handicap to business, without treating equitably the trade enterprises which have been subject to those taxes. On the whole, I think experience has shown that if business is to be encouraged, if adventure and enterprise are not to be restrained, business as such should be less subject to taxation. Taxes should be imposed more and more upon the individual and less upon the occupation. Trade and business enterprise should not be taxed so far as they have been, but profits, when they are revealed and when they are actually paid to the receiver, should be appropriately taxed as part of the total income of the taxpayer.

Let me revert to this burden of our War Loan interest. It is not too much to describe it as the most crushing of our burdens. About 82 per cent. of our present revenue is being spent, partly in interest, as payment upon past War debts, or in meeting present expenditure for the Air Force and the Army and Navy of today. There is presented to statesmen a big subject of policy, for until we can more and more reduce the outlet in this direction Chancellors will be troubled every year with the task of trying to find revenue from distracted taxpayers and from people who feel the oppressiveness of the burdens of these duties resting today upon our food. The annual interest on War Loan is nearly as much as the whole of the revenue from the heavy Income Tax of recent years. Indeed, so oppressive has it become that one might well say that this Debt, remaining nearly at the same figure year by year, stands out as almost our chief national possession.

Mr. MARRIOTT

Are we to infer from that that the right hon. Gentleman would reduce compulsorily the interest on the Debt—would repudiate a portion of it?

Mr. CLYNES

Certainly not. No such inference must be drawn from the observations which I am making, though there may be occasion for dealing with the question of alternatives as to how the revenue can be raised so as to diminish the weight of the Debt. I think it is advisable to pursue this matter a little because the burden is so universally felt, and because it is the heaviest item in the charge for which every year we are trying to raise money. This War Loan represents a debt per head of the population of about£160, and the annual interest on the debt is equal to a charge of about£7 per person. The process of raising money by Income Tax and the payment of War Loan interest is largely a process of transferring to the same men, to a very great extent, in the form of interest what is raised in the form of taxation. Most of the interest on the War Loan is paid unquestionably to the wealthier classes. A very large number of poorer people responded, within their humbler means, and invested their money, but the War Savings Certificates, being the form held chiefly by the poorer classes, amount, I understand, to a total of only round about£300,000,000 out of a total holding of more than£7,000,000,000. I think the figures, and any reasonable deduction from such evidence as is available, clearly prove that, after all, no very great amount of the interest goes to the humbler classes. In short, I believe Chancellors eventually will be driven to the expedient, which has been suggested by Labour, to raise a large sum of money for the redemption of this debt and, consequently, for a substantial reduction in the annual payment of the interest. If you shrink from a levy upon capital— [An HON. MEMBER: "We have it now!"] —I know it is borne now in another form, but the plan of Labour would put a more speedy end to the heavy taxation which annual incomes now carry and, therefore, give far greater relief to those who complain of the charges which Chancellors have imposed upon them in recent years. In fact, it was to be observed that the heartiest of the cheers which the Chancellor's statement evoked was given when he announced the remission of 1s. upon the Income Tax. Members of the House individually felt some sense of gratitude to the Chancellor and responded in quite a natural manner.

While people resent the plan which we suggest and declare that it would be a heavy tax upon capital, they tolerate with complacency the levy upon national energy imposed by landlords and property owners. This levy is in the form of excessive rent and high charges exacted from industry and from business for the use of space in which to carry on the industries of the nation. The right hon. Gentleman referred for a minor purpose to the Entertainment Tax. That is a lesser interference with the interests of the entertainment world than the enormous rents demanded for the use of land and premises for theatres, concert halls and cinemas. The wonder is that the business mind has not attacked more directly and more really the interference with business by those who can exact these heavy levies and charges merely for the premises to carry on the ordinary activities of the nation. Probably at some later date the real business man will come to this House—not the man who outside on the platform pretends to be a business man and when he gets here is absolutely mute or, if he says anything at all, finds that from the business standpoint the Government takes not the slightest notice of him. I fear that when 12 months later we are able to review the experience of the Budget statement we have had his afternoon, the Chancellor of that day will find that few, if any, of the anticipations of the present Chancellor of the Exchequer have been realised.

Sir SAMUEL ROBERTS

I am sure that whatever may be our opinion of the Budget which has been disclosed to us the Committee on all sides will sympathise with my right hon. Friend that it has fallen to his lot to bring forward his first Budget under the most depressing circumstances. Last year he was not able to do it, and the Leader of the House undertook the duty for him. To-day we have had two speeches from the other side of the Table. The only two suggestions made by the right hon. Gentleman the Member for Paisley (Mr. Asquith) were, first, that there was no surplus to dispose of and, secondly, that the receipts for materials ought not to have been taken into account. Receipts of that character always have been taken into account as a general rule. Generally, in my view, my right hon. Friend has done the best he could under the circumstances. The right hon. Gentleman the Member for Platting (Mr. Clynes) objected to the measure of relief which the Income Tax payers are to get, but they ought to get it when the Committee remembers that nearly one-half of the tax revenue is paid by the Income Tax payer. He has borne the heat and burden of the day all through the War, and it is not only the Income Tax payer himself, but all the workpeople and all the business of the country. That is why so many of us rejoice that this is being done. Coming to the Budget itself, the tax revenue was less than the Estimate by£107,000,000. There are three disappointing items. Excess Profits Duty was£89,000,000 below the Estimate, Income Tax was£11,500,000 below the Estimate, and the Corporation Profits Tax was£12,500,000 below the Estimate. There are two satisfactory items on the other side, namely, that the Supply Services cost nearly£69,000,000less than the Estimate, and the service of the debt is£12,700,000 less. One cannot help turning back to the Budget of two years ago when the trade of the country was exceedingly prosperous, people were making profits in all directions, and there was no unemployment at all. I was looking at the trade union unemployment percentages, and when the Budget was introduced in 1920 unemployment was less than one, it was 9. During that year the percentage kept very low indeed. It got to 6 per cent, in December, then when the year turned it got up to 6.9, in February,1921,it was 8.5, in March 10, and then came my right hon. Friend's Budget in April, when it went up to 17.6, excluding the coal strike. During last year it kept in the neighbourhood of 17. The right hon. Gentleman in that Budget budgeted to pay off£234,000,000 of debt, which he was able to do during that year. He stated quite correctly that that was on a 3 per cent, basis, that is, 3 per cent. of the total debt. He estimated that in a full year£198,000,000 would be received on account of the extra taxation which he was putting on.

When the Budget was introduced last year the Government saw that this year they were going to be in a difficulty unless great economies were effected, and the Treasury circulated a document to all Departments asking them to reduce for 1922–23 by 20 per cent. the Estimates of£603,000,000 in 1921–22 for Ordinary Supply Services. The Departments were not able to do that, but they volunteered a reduction of£75,000,000 instead of the reduction of£120,000,000 which was demanded. The Treasury were not satisfied. Therefore the Geddes Committee was set up, with instructions to make a cut of£175,000,000, including the£75,000,000 cut which had been volunteered. This they proceeded to do. We know the result. They recommended reductions amounting to£86,000,000 directly, but the Government could only make cuts of£64,000,000. In this respect I would draw attention to a paragraph in the first Report of the Geddes Committee. This is a very important matter, because it is a guide for the future. In dealing with£75,000,000 cut which the Departments had volunteered, the Report says: In many cases, the reductions proposed by the Departments are automatic, due to the fall of prices and wages, or to windfalls, or to the cessation of special expenditure on services arising out of the War. The reductions in Estimates shown in response to your circular are therefore by no means fully the result of curtailment of activity, or of economical administration, and this point cannot be too clearly brought out. The point I want to make is that in some way or other a Geddes Committee or some advisory committee of the Treasury ought to continue. I am quite sure that that is the opinion of most hon. Members. The Treasury could not get out of the Departments what they wanted, and the Geddes Committee had to be appointed. Is it not a lesson for us for the future, that the Chancellor of the Exchequer must in some way or other bring some such influence to bear upon the Departments, and that they will have to economise? I do not know what the exact form ought to be, but I would suggest that the Treasury appoint a committee of expert gentlemen like the Geddes Committee to advise them as to what rations are to be dealt out to the various Departments. If taxation is to be brought lower than it has been made to-day that is the only way to do it.

The Chancellor of the Exchequer regrets that the Income Tax is so high. It is paid either in whole or in part by 5,000,000 of people. There are 2,400,000 actually paying Income Tax, and there are 2,600,000 people whose incomes are covered by personal allowances, deductions, and reliefs from Income Tax. Therefore there are 5,000,000 of people who are being relieved by the reduction of Income Tax announced to-day. The amount of tax revenue last year was£856,000,000, nearly half of which was contributed in Income Tax. It is esti- mated that the total income of the country last year amounted to£2,700,000,000, and as the tax revenue was£856,000,000, it means that the country was being taxed to the extent of nearly one-third of its total income by the Government. That is a burden which cannot go on, and some further reduction must be made.

We cannot be satisfied with the taxation of the country as it is at the present time. I tried by a question a short time ago to get to know from the Chancellor of the Exchequer the taxation per head, reduced to the pound denominator, in this country and in other countries in Europe. He could not give me the exact figures because of the exchange. But 12 months ago I did get the returns, and I do not think the figures have altered very much. The figures which I got last year showed that we were far and away the heaviest taxed country. Reducing the taxation per head to American dollars, Great Britain stood at the top with taxation of 87 dollars per head. The United States came next with 56, France 34, Belgium 15, Germany 12, and Italy was at the bottom of the list with 5 dollars. Therefore the Committee will see that the taxation per head in this country is nearly as much as the taxation per head in the United States and France put together. The Treasury circular which was sent out to the Departments said: What is required in order to maintain and stimulate industry and commerce and secure full and regular employment in the country is a reduction of taxation and of the burden of the State's indebtedness as rapidly as possible, a process which can only be achieved by n continuous reduction of expenditure throughout the next few years. The only way to do that is by reducing our commitments Something has been said, and the newspapers have commented upon it, about a proposal to equalise the payment of pensions between taxpayers of the present generation and posterity. That is said to be unsound finance, but I do not think it is unsound finance. It is a matter of equity between the present taxpayers and those who are going to follow. The present taxpayer is paying the full amount because the pensioners are living. Every year that passes the amount will get less, because the pensioners will die. My proposal is that the amount should be equalised so that the taxpayers who come immediately after us should pay the same amount, either for the whole period of the pension for, say, 30 years or more, or for a certain period, 10 years or so.

There is another question of importance, and that is the international Allied debt. On 31st December, 1921, there was owing to the United States of America, exclusive of interest, the equivalent of£2,292,000,000. The Chancellor of the Exchequer told us to-day that£947,000,000 were owing by Great Britain to America. On the other hand, we are owed by our Allies£1,807,000,000, so that if they pay us we have a balance of£860,000,000 in our favour. A proposal has been made for all-round cancellation of these debts. If there is all-round cancellation we should lose£1,017,000,000, but if we have to pay the United States what we owe them, namely,£947,000,000, and if we have to let off or not collect what our Allies and our own Dominions owe to us we should incur a total burden of£2,911,000,000. That is much too big a thing. It could not be done. The United States are promoting an Allies Debt Refunding Bill, which means that they intend to collect the debts due to them and not to pay attention to the suggestions for cancellation. In my view these moneys were all advanced for one purpose, to win the War, and it is only a matter of equity that the various countries who have lent the money or received the money should meet and try to come to some agreement as to repayment over a long period at a low rate of interest. None of the countries, including ourselves, could pay now. Under the Monroe doctrine, which was established by the United States many years ago, the United States will not permit any European country to take a footing in either North or South America. It strikes me as if there were a kind of extension of the Monroe doctrine in this matter, that while they will not allow any European country to go to America they will not take any part in the affairs of Europe. It is a sad state of things if America has come to any such conclusion as that it will not take any responsibility for the purpose of preserving the peace of Europe or arranging peace in Europe. I believe that an urgent message to that effect has been sent from Genoa to America, but so far without any result. On the whole I think that the Chancellor has done the best he could. He has eased the taxpayer in an equitable manner, and I believe that the Budget will be received on the whole as the best that is possible in the circumstances of the moment.

Sir F. BANBURY

I congratulate the Chancellor of the Exchequer on having made one of the clearest and most interesting speeches which have ever been made during the course of the 30 years in which I have heard Budget speeches delivered. For the whole of an hour and a half he kept the interest of the Committee, and his speech was devoted to the subject which was before us, and, as the right hon. Gentleman opposite said, he did not go to extraneous matters. When I come to the Budget itself, I also think that the right hon. Gentleman has done the best he could in the circumstances, but whether the circumstances ought not to have been different is another matter. As I understand it,£90,000,000 of the revenue comes from special sources. I could not catch what those special sources were, but I understood them to be derived from the sale of certain stores, and matters of that sort. If that is so, the£90,000,000 being, as the right hon. Gentleman has said, the result of purchases made with borrowed money, there is no question that that money ought to go in redemption of debt, and not be treated as revenue. If that be so, then the situation is very much worse than it would appear to be on the statement made by the Chancellor of the Exchequer because, instead of having a surplus of£38,000,000, he will practically have a deficit of something like£50,000,000

I have done the best I could in my humble way during the last four or five years to secure the reduction of the very heavy burden of taxation, not by means such as were outlined by the Leader of the Labour party, such as the capital levy or vagaries of that kind, which would not only not relieve the situation but would render it far worse, but by the only way in which the situation can be relieved, and that is by the reduction of expenditure. There can be no doubt that it is impossible for the country to go on bearing the enormous burden which has been put upon it by Income Tax, Super-tax and Death Duties. The Death Duties themselves, which I think amount to £50,000,000, are open to the same objection as using for revenue the money derived from the sale of surplus stores. They are capital. In taking them you are taking away from the capital of the country and using that capital to defray your annual expenditure. The Death Duties, Super-tax and Income Tax, take something like 12s. or 13s. out of every 20s. which a very large number of people in this country receive. That cannot go on. If we wish to avoid unemployment savings must be made in order that business can be carried on.

The American Ambassador, in 1914, I think, in a very interesting letter which he wrote to some friends or relations of his in America, giving his impressions of England, said that England was not so very much superior to the United States in its methods of carrying on manufactures or industry, but that it had this advantage, that it had the savings of two or three hundreds years which America had not got, and that when in the course of time America could have that advantage and those savings, he would look forward to America outdoing this country in every branch of trade or industry. The American Ambassador was right. It is essential, not that there should not be rich men in the country, as some of the Labour people seem to think, but that there should be more rich men in the country. The more rich men you have, the more people employed the country will have. Therefore, in criticising the relief which the Chancellor is going to make, and which no one appreciates more than I do, I wish to emphasise the necessity of reducing our expenditure. But the Chancellor of the Exchequer is going to do what I think is often done in private life. Say that a man has an income of£1,000 a year, and he spends£1,000 a year, and that then his income is reduced to£950. He does not save the£50, but he goes to a bank, or sometimes less creditable people, and borrows£50 in order that he may make both ends meet. That is what the Chancellor of the Exchequer is going to do. [HON. MEMBERS: "No!"] He is going to borrow£25,000,000 in order to make the reduction—not the whole of the reductions but a great part, probably about three-quarters—which he proposes I do not allude to the suspension of what is called the new Sinking Fund, which amounts, I understand, to about£9,000,000, but to£25,000,000 of our con- tractual obligations, which he is bound to meet, and in order to meet these obligations he is going to borrow money.

I think that that is the beginning of a very bad course. I doubt whether this was done even in the times of the Peninsula War, but I am not certain, as I did not look it up. I did not expect that any Government in these days would borrow money to meet contractual obligations. I can understand the suspension of the new Sinking Fund. I do not think that that has been done for a considerable number of years, but it has been reduced, and I remember the present Prime Minister reducing it some few years before the War. But I do not attach so much importance to that— though, with a debt of£7,500,000,000, I think that we ought to take steps to reduce it—as I do to borrowing money to meet contractual obligations. And there is further danger in what the Chancellor is about to do. It is such a very easy thing. You satisfy public opinion, and you reduce a burden which is a grievous burden and which ought to be reduced, but everyone knows that once you begin to go down hill your pace tends to hasten, and I am afraid next year, when it is possible that the revenue will be still less than it is now, that the same fatal course may be pursued. I do not think that it is the fault of the Chancellor of the Exchequer. He is in a very difficult position. But the fault lies with the Government and with the whole conduct of the Government during the last four years. Though I have been repeatedly urging them to economise, they will not do so.

The fault lies to a certain extent also with the House of Commons, because, while Members are vociferous on the platform as to the need for economy, they are by no means so desirous of it when an actual reduction is proposed in Committee, and there are no greater offenders in this respect than the Labour party. I do hope that the Chancellor of the Exchequer—and I am encouraged in the hope by the excellent speech which he has made—will impress upon the Government the necessity of reducing expenditure. The Civil Supply is the side on which it ought to be reduced. There is plenty of room for it—at least£150,000,000, if you cut down various offices and Ministries which exist. It will be unpopular, but we cannot help that. We have got to such a state that we must do something of that sort. It is preferable to beginning to borrow. It is no uncommon thing in South American States and other places of that description to borrow money to pay your interest. That is practically what the Government are doing at the present moment. It may be said that the sum of£25,000,000 is a small sum, but it is no excuse because the baby is only a little baby, and though the borrowing is only£25,000,000, that is not a course which we ought to pursue. As the Chancellor of the Exchequer has returned, and though I disagree with his suggestions, I believe that he will agree with me as to the necessity of meeting our definite obligations without borrowing.

Mr. PRETYMAN

As the Chancellor of the Exchequer is here, I do not want to lose any time in thanking him on behalf of those who are interested in agriculture for the concessions that he has made to occupiers and holders of agricultural land. I can assure him that the reduction under Schedule B of one year's rent and the extension of the principle of the allowances for expenditure on maintenance and repairs will be very much appreciated, and appreciated all the more because my right hon. Friend made it clear that neither he in giving nor agriculture in asking for this relief did so from the point of view of any special treatment. My right hon. Friend made it clear that he had been handed all the figures, which some of us have had the honour of putting before him, and that he had satisfied himself that the alterations he was making were in the direction merely of putting the taxation of the owners and occupiers of agricultural land on the same general level as the taxation of the rest of the population. What we have always advocated—I and my friends —is that it is the principle of Schedule D which we want applied as nearly as possible. If that principle, that a man should be taxed on the actual profit he makes, is applied to agricultural land and on the same general basis as to all other industries, we have no right to complain. One point to which the Chancellor of the Exchequer did not refer is very urgent. It is that some relief should be granted in the direction of a reduction of the rates upon agricultural land. I do not want to press that point now. The right hon. Gentleman spoke of the increase in the allowance to be given for repairs and maintenance of agricultural property. The present fraction is one-eighth on land and one-sixth on buildings. I think the right hon. Gentleman said it was to be altered to one-fourth.

Sir R. HORNE

I did not say that; I gave no details about it.

Mr. PRETYMAN

There is to be an alteration in the fraction?

Sir R. HORNE

indicated assent.

Mr. PRETYMAN

No doubt we shall hear the figure later. As to the abatement of 1s. in Income Tax, will that carry with it a reduction of the 3s. level of tax on small incomes? Could my right hon. Friend tell us or will he defer his reply?

Sir R. HORNE

I would much prefer to defer it.

Mr. PRETYMAN

We shall hear in due course. The right hon. Gentleman who leads the Labour party spoke about the interest on War Loans. He seemed to be under the impression that that interest was paid indiscriminately to rich and poor alike, and that everyone received the same interest. He indicated that more interest ought to be paid to the holder of War Loan whose circumstances were limited than to the large holder who was much better off. Surely, he realises that under the present graduated system of taxation the small holder who receives interest on War Loan gets either the full interest, if he is exempt from Income Tax altogether, or nearly the full interest, whereas the large holder of War Loan, who has a big income and is a Super-tax payer, has sometimes as much as 11s. in the pound deducted from the interest he receives, 6s. deducted directly at the source and a further 5s. or more deducted later in Super-tax. Therefore the actual interest now received by a man of large income from War Loan is not 5 per cent, but more nearly 2 per cent.

The Leader of the Labour party told us it was a sound principle that direct taxation should be levied upon personal profits and not upon industry. I agree with him entirely. But when you get direct taxation up to a certain point it ceases to be personal and ceases to be subject to the general policy which this House has applied to the steep graduation of taxation, the basis being that people who have a lot of money to spend can afford to pay a tax on a very much higher level than people who have little money to spend. That is perfectly sound as long as the taxation is on a personal level. At what point taxation passes from the personal level to the level at which it must fall on trade and industry only is debatable, but no one will deny that at the present figure, or at the figure to which it has been reduced, or even lower than that, it is very much higher than can possibly be paid merely on the basis of personal and individual expenses. The principle of steeply graduated taxation is perfectly sound at the lower level, but is absolutely mischievous at the present level. The right hon. Baronet the Member for the City of London (Sir F. Banbury) referred to certain figures given in answer to a question I put to the Chancellor of the Exchequer last autumn. From this answer it was clear at the higher rate of Income Tax the sum of the three taxes, Income Tax, Super-tax and Estate Duty, amounted in the case of the higher incomes to 15s. 5d. in the pound. The person who would pay that 15s. 5d. in the pound would also have to pay Corporation Profits Tax, Succession Duty, the whole of his share of indirect taxation and the whole of his share of rates. It is practically 20s. in the pound. That means that the fund from which industry would be recruited and extended and from which employment would follow is depleted.

The most serious problem this country has to face to-day is the problem of unemployment. It is difficult to say what is the root cause of unemployment. There are causes which we cannot control. For instance, our customers are unable to pay for what they require and so on. As far as the thing is within our own orbit and power, I believe that the super-taxation of profits which are not personal, but are required to maintain and extend industry, is the principal cause of unemployment. The Chancellor of the Exchequer has taken a wise course to-day in reducing the heavy burden of taxation which bears upon industry. I do not look upon this as personal relief. Those who are getting the relief should look upon it as relief given to enable them to employ the money in industry, so to increase the production of the country and to restore some employment. There is the question of borrowing in order to make good our statutory obligations for repayment, a subject which was referred to by my right hon. Friend the Member for the City of London. He seemed to be under the impression that the borrowing was to pay interest due. It is not to pay interest due, but merely capital. It is objectionable. Nobody likes the suspending of a sinking fund, but at present we have first of all to look to the way in which more money may be made and how more goods may be produced. It is not a bit of use raising money to pay for current expenditure when you are getting it only by depleting capital.

Last year I stated what is now generally admitted—that it was impossible to pay taxation out of revenue and that a large, portion of it could be paid only out of capital. The Financial Secretary to the Treasury denied that statement in the first instance, but I think he has now-come to see that it was justified, and the action of the Chancellor of the Exchequer to-day proves the truth of what I then said. The measures my right hon. Friend has taken to meet the situation must be regarded, not as a precedent for spending money as revenue at the expense of suspension of the sinking fund, but as meeting the urgent necessity of the moment which is to leave money in those places where it can be productively employed. Unless the money is productively employed, it is impossible that legitimate revenue can be raised. With taxation as it is to-day we have reached the fatal point where an increase of the rate of taxation would mean merely a reduction of real revenue. On general principles I support the proposal of the Chancellor of the Exchequer, and I thank him that at a time when the whole of the taxpayers of the country are suffering and it is very difficult to consider any class of taxpayer, he has found it possible on the ground of mere justice to give some relief to the agricultural industry. I do not claim that that industry is in a more distressed state than any other industry, but it is bearing in proportion to its means a wholly unfair burden of taxation now, and it will be grateful for the relief which the Chancellor of the Exchequer has been good enough to give.

Sir D. MACLEAN

I wish to ask the Chancellor of the Exchequer a question with regard to the course of business. What Resolutions does he propose to ask the Committee to give him to-night?

7.0 p.m.

Sir R. HORNE

I propose to ask the Committee to give me all the Resolutions to-night except the last one. That would be in conformity with the Budget practice, the last one being reserved to continue the discussion to-morrow. Under that system any question can be raised on the last Resolution. It will be understood that when I get those Resolutions, at whatever hour, then in accordance with the practice on Budget nights the Chairman would leave the Chair.

Sir D. MACLEAN

I assume that, in accordance with the usual practice, the Chair would allow on the remaining Resolution a general discussion on the Budget on the same wide lines as to-day? If that be so, so far as I am concerned and those for whom I can speak, we have no objection to the Government having the Resolutions to-night in Committee, as, of course, they can be discussed and, if necessary, divided against on the Report stage.

The DEPUTY-CHAIRMAN (Sir Edwin Cornwall)

It has always been the practice to take the Resolutions that were essential on the day of the Budget, and it has become the custom to leave the one Resolution until the next day, and then to have a general discussion upon it.

Captain WEDGWOOD BENN

Do the Resolutions include any Resolution which provides for the remission of the Excise duty on sugar?

Sir R. HORNE

No.

Captain BENN

That would have to be done in the Finance Bill.

Sir WILLIAM PEARCE

I have heard a good many Budgets in this House, but I do not think any Chancellor has ever been confronted with a more difficult position than has the right hon. Gentleman to-day. He has had to choose between continuing the redemption of debt and the relief of taxation. In choosing the relief of taxation he has been accused of taking the short view. I hope, on the contrary, he has taken the long view, and I congratulate him on the decision he has made. The one fact which is of extreme importance is to recover the industrial and commercial prosperity in this country. Without that, we not only cannot carry an expenditure of£900,000,000, and unless our trade improves we shall find difficulty even in carrying£800,000,000. I can see no probability, unfortunately, in the next few years of any Chancellor having to budget for less than£800,000,000, and he will be clever if he keeps it down to that amount. With£350,000,000 for debt interest, and nearly£100,000,000 for pensions, it is hardly conceivable that a total of£800,000,000 can be improved upon. Therefore, although you can change the Government you cannot change its problem. We have to face the necessity of raising a very large revenue in the future.

At the present time, when industrial conditions are so depressing and every industry is fighting for its life and is without any money because it is paying its taxes out of capital, the Chancellor of the Exchequer was bound to make a reduction in taxation. In doing so I believe he has been wise in his own interests. After all, There is that scattereth, and yet in-creaseth; and there is that withholdeth more than is meet, but it tendeth to poverty. To-day the Chancellor has been wise in his day and generation. The productivity of the Income Tax does not depend on the rate at which it is levied; as has been pointed out, you can get to a point where the rate is so high that the production of the tax decreases. I have very considerable hopes, because I am an optimist as to the possibility of the recovery of industry, that this reduction of the tax from 6s. to 5s. may not mean any very considerable loss of revenue. If you once get the volume of the subjects of taxation increased you can get with a 5s. tax as much as with the present tax of 6s. All the best judges in finance with whom I am acquainted seem at the present time to be of one opinion, that there is a danger of overloading the taxation of the country; a 6s. Income Tax in the long run would be bad business, and that a reduced tax would be good business to the State itself. If this be true, and if it does encourage industry and commerce to revive and helps the clouds to clear, then not only will the Government get a satisfactory result in regard to revenue, but they will do so in the region of un-employment

What we want to-day is to get the wheels of industry going again. There were signs—except for those unfortunate industrial troubles, the signs would have been most encouraging in the last six weeks—of improvement in nearly every large industry in the country. I am sure that the filip and the tonic that the Chancellor of the Exchequer has been able to administer to-day by some reduction in the Income Tax will be of inestimable value in promoting a better state of affairs. Although he is giving something away, I believe that in the long run the revenue itself may improve by the concessions has been able to make this evening. If the volume of income is increased and if the enormous quantity of unemployment is decreased, it is obvious that the revenue will be improved, and the concessions which the right hon. Gentleman has made to-day will, I hope and believe, be in the very best interests of national finance.

Mr. MOSLEY

The Chancellor, with his accustomed felicity, has selected the 1st of May as a suitable date on which to introduce a Budget containing a substantial remission of taxation, and I have no doubt that he has materially improved his chance of being crowned Queen of the May in the subsequent electoral festivities. Before I follow him into the happy adventures which no doubt await him, may I draw attention to one of the many unprecedented features of the present Budget which has not yet received the comment in this Debate which I feel it deserves. For the first time in the history of this country the Budget proposals appear to have been revealed some days prior to the Budget statement. On Friday last an article appeared in the "Daily Chronicle" which, as is well-known, is the principal organ and supporter of the present Government. That article was not a mere surmise of the Budget proposals. It did not hazard the usual guesses as to the Chancellor's intentions. It definitely stated decisions which it alleged had been reached at a Cabinet meeting on the previous evening. The article of Friday last is headed, with large headlines, Budget good news," "Cabinet decisions yesterday," "Income Tax cut," "Reductions on tea and sugar," "Lower postal rates. This prescient correspondent then proceeded to open his article by the remark that The Cabinet met yesterday at 10, Downing Street, Mr. Austin Chamberlain presiding, to come to final decisions on the chief Budget issues. He went on to recite what the decisions were, not as any surmise, but as definitely ascertained facts. If the right hon. Gentleman reads the article in question, he will find that what I state is correct. It says: A reduction of the Income Tax was agreed on. The exact figure did not leak out from any official source——

Sir R. HORNE

I am afraid my hon. Friend is a very jéjune reader of the newspapers, if he attributes this only to the "Daily Chronicle." If he takes up any newspaper of last week, he will find that it not only not makes surmises, but contains definite assertions as to what has been done.

Mr. MOSLEY

I anticipated that the right hon. Gentleman would make some statement of that kind, and I took considerable pains to look through the papers of last week. There was not another newspaper which made a definite statement of that kind concerning a definite decision reached at the Cabinet meeting. There were many surmises and guesses, attaining a particular degree of accuracy, that I quite admit, but there was no definite statement arising from alleged Cabinet decisoins. What is more, no other journal, until this article had appeared, was able to forecast with entire accuracy what the actual Budget proposals were. [HON. MEMBERS: "What about sugar?"] This article is only wrong in one respect. It under-estimates the alleviation which the right hon. Gentleman proposes to the taxpayer in the matter of tea; otherwise the forecasts of its correspondent were entirely correct. These Budget proposals were contemplated, embracing considerable reductions and alterations over a wide field. How was it that not only the "Daily Chronicle," but subsequently the entire Press, for the first time that I have heard or read of, was able accurately to foretell the Budget proposals of the right hon. Gentleman? That, surely, is a matter deserving of some inquiry from the right hon. Gentleman, when a very evident leakage, whether specifically in the direction of one newspaper or another, is manifested, and he finds his entire Budget proposals correctly adumbrated in the Press some days prior to his statement in the House.

The right hon. Gentleman in his exordium dwelt at some length upon what he conceived was the discomfiture of those who last year had prophesied the collapse of his Budget. I venture to contend, however, that those prophecies have been entirely justified by the statement he has just made. The contention of last July, to which he referred in derisive terms, was that a grave decline in the revenue of the country was to be anticipated, and that unless expenditure could be substantially reduced a deficit would be apparent on the Budget being introduced. What have been the facts? The right hon. Gentleman states that the revenue of the country in comparison with the Estimate has declined by£91,000,000 and that he has effected savings on the original Estimate of expenditure—I include, of course, his estimate of£98,000,000 which he allowed for Supplementary Estimates—of no less than£69,000,000. Even so, the£80,000,000 which he then adumbrated as being available at the end of the year for debt redemption was not available, and in fact he only had a balance of£45,500,000 in his hands. In other words, the Budget failed to meet its declared obligations at the time of the Budget statement by some£35,000,000. If the right hon. Gentleman, under pressure from various directions, which he dwelt upon in the course of his speech, had not been successful in economising to the extent of£69,000,000, then a deficit of some£22,000,000 on the year would actually have occurred.

The history which the right hon. Gentleman has supplied to the Committee this afternoon entirely supports the contention of those who, even before the Budget passed its final stage last year, prophesied that unless expenditure could be substantially reduced below the estimate of the right hon. Gentleman there would be a deficit on the year, owing to the decline of revenue below his estimate. We have had supplied to us this afternoon Estimates of revenue and expenditure which may or may not prove as erroneous and as faulty as those supplied last year. This year the right hon. Gentleman is not budgeting for any surplus; he is not even hoping to secure a reduction of debt, and he is only allowing£25,000,000 for those Supplementary Estimates, which in the past three years have averaged something like£100,000,000 a year. Further than that—as has already been argued, and as has been repudiated from the Government Benches—the right hon. Gentleman is actually borrowing in the course of the current year to meet his obligations. He is borrowing in order to meet statutory Sinking Fund and contractual obligations to his bondholders. By borrowing in this manner he creates a fictitious surplus, and by that fictitious surplus he is enabled to reduce taxation. By a very simple equation that seems to point to the fact that in the present year we are actually borrowing in order to reduce taxation. This process has been welcomed by the hon. Member who spoke last, and by other commercial experts in this House, as providing a stimulus to trade in a time of depression. Surely, if we follow that argument to its conclusion the result is this, that in times such as the present it is better to borrow and have low taxation. If that be the argument, then it is the argument which Continental countries have been advancing ever since the War, and the argument which the right hon. Gentleman and his predecessor resisted with such indignation in past years. How often have I heard Government spokesmen declare. "We are not as other men. We are not like Continental people. We understand sound methods of finance. We are not going to stimulate trade by borrowing in order to reduce taxation. Let us stick to our old sound British methods." Then the right hon. Gentleman comes down this year and, with the enthusiastic approval of his supporters, proceeds to copy those Continental nations whom he has spent the last three years in condemning.

Sir R. HORNE

Will the hon. Member say which of the Continental nations to which he refers has balanced its expenditure by its revenue?

Mr. MOSLEY

I am afraid the right hon. Gentleman has entirely misunderstood the gist of my argument. I was arguing that Continental nations have borrowed to make their revenue and expenditure meet. The right hon. Gentleman and his predecessor condemned that, but now he is doing precisely the same thing.

Sir R. HORNE

No, not at all. The point I wish to put to the hon. Member is, "Can he tell me of any Continental nation which has not alone been paying off debts but has met its expenditure?" Is it his contention that paying off debt is part of the necessary expenditure, or at what point does he stop?

Mr. MOSLEY

I was trying to point out that not a single one of these Continental countries has covered its expenditure by its revenue. They have all borrowed, and now the right hon. Gentleman is doing the same thing. [HON. MEMBERS: "No, no!"] I do not expect, however, that the right hon. Gentleman listened to the beginning of my argument. It was quite unworthy of his consideration. [HON. MEMBERS: "Hear, hear!".] I have become so accustomed to this attitude on the part of hon. Members on so many occasions when circumstances have proved us to be entirely correct, that I am not so sensitive to it as when I first introduced myself to Debate.

Sir R. HORNE

May I put it to the hon. Member that if we are to meet our expenditure as the result of borrowing we must be increasing our debt? Does he say so?

Mr. MOSLEY

That is precisely one of the points upon which I wished subsequently to invite an explanation from the right hon. Gentleman. It is difficult to see how we can borrow-without increasing our debt, and yet in the course of his speech the right hon. Gentleman did make that contention. I understood from him that we are borrowing to meet certain Sinking Fund obligations and certain contractual obligations to our bondholders, to the amount of some£30,000,000 or£35,000,000. In former years these obligations were met from revenue. This year the right hon. Gentleman is borrowing to meet those obligations. By this means he creates a surplus, and by creating this surplus through borrowing he is able to reduce taxation. It seems to me to follow by a simple equation, as I have said, that therefore we are, in effect, borrowing to reduce taxation, and whatever conundrum the right hon. Gentleman presents to me as to whether or not we are actually increasing our debt, it in no way meets the point that we are creating a fictitious surplus and that by this means the right hon. Gentleman is enabled to reduce taxation. I hope either he himself or the hon. Member who replies for the Treasury will be able to resolve his own conundrum, but I confess it seems to me irrelevant to the point I was trying to make.

There is one possible advantage in the method pursued by the right hon. Gentleman. He is, by a devious route, carrying out a plan which has been frequently advocated from these benches, and is, in fact, rationing the country down to a low limit of expenditure. The process was successfully applied last year when the falling revenue compelled the right hon. Gentleman to save on the year by no less a sum than£69,000,000 in order to avoid a deficit. Having no surplus available and having only£25,000,000 against those Supplementary Estimates, which have eaten so deeply into our financial resources in the past, the possibilities are that the right hon. Gentleman this year— as indeed, he foreshadowed in his statement—will have to economise to a considerably greater extent than he has estimated for. The trouble about the policy of not shaping one's plans definitely beforehand and knowing exactly where one is going, but of having to economise in a moment of panic when it is found that revenue will not cover expenditure, is that the economies usually have to be made on services where economy is most vicious. For instance, we cannot in the middle of the year, if we find our revenue is falling suddenly, withdraw from great foreign commitments, involving the upkeep of considerable military forces, but it is comparatively simple in such circumstances, to cut the pay of some worthy civil servant or the pay of the teachers and to economise generally on social services. We find that the compulsory rationing, which the right hon. Gentleman has initiated as a method of finance, applied suddenly in the middle of a year when it is discovered that revenue cannot cover expenditure, will not hit those forms of expenditure which are most vicious, but will fall on many forms of expenditure which are far more worthy of our consideration.

The right hon. Gentleman has adumbrated a definite revenue and expenditure. No one can say whether or not the revenue will be realised. Most of us can hazard the prophecy that the expenditure—anyhow the£25,000,000 for Supplementary Estimates—which he has allowed for, will be exceeded unless the right hon. Gentleman can economise substantially as he did last year. He, in all probability, will find once again that his Budget has failed to meet its obligations. The right hon. Gentleman may hope that the result of a boom in trade, arising from this remission in taxation, may, in respect of future taxation, assist him in budgeting in future years, but, as has been pointed out, no immediate advantage to revenue in the present year will be derived from this remission of taxation, owing to the triennial basis on which our Income Tax is assessed. The advantage will not accrue until subsequent years. The right hon. Gentleman has presented a Budget which promises to fail even more conspicuously than his Budget of last year which has failed egregiously, and I suggest that if he ever has the opportunity of clearing up his own Budget mistakes, the right hon. Gentleman should on that occasion seek to budget on facts and not on aspirations.

Mr. MARRIOTT

The hon. Member who spoke last hinted not obscurely in his opening statement that this was to be regarded as an electioneering Budget. The implication is not quite a worthy one. I intend in a moment to apply another epithet to the Budget, but I confess chat I also am somewhat uneasy as to the borrowing of this£25,000,000 apparently to create a surplus which is more or less unreal. I am not quite certain, however, that the hon. Member for Harrow (Mr. Mosley) fully apprehends the nature of this transaction. Had the purpose of borrowing of this money been in order to meet expenditure, then I should have condemned it quite as strongly as the hon. Member for Harrow, but, as I understand it, that is not the case, because we are told the money is to be borrowed in order to meet, not expenditure, but capital obligations. I admit that these?, are contractual obligations which in happier circumstances certainly should have been honoured out of revenue, but there is a distinction between borrowing in order to meet expenditure and borrowing in order to replace existing capital. It is for replacing capital that the right, hon. Gentleman, as I understood him, proposes to borrow the money.

Now if I were asked in a single word to characterise this Budget, I should apply to it the epithet, not an electoral, but a psychological Budget. I believe that the right hon. Gentleman has had psychology rather than economics in view, and I am not blaming him for a moment for taking that point of view. Perhaps I may be allowed to join with other hon. and right hon. Members in congratulating, if I may respectfully do so, the Chancellor of the Exchequer on having expounded a very difficult Budget in an extraordinarily luminous and skilful manner, but no Budget in my memory—and my memory of Budgets goes back, I am afraid, for five and thirty years—has been awaited with such a measure of expectation and of curiosity as the Budget which has been expounded to us this afternoon; nor are the reasons far to seek. On the one hand, the people of this country know for the first time in detail how we stand in regard to national expenditure, and for that fact, as I have said more than once in this House, we owe a profound debt of gratitude—acknowledged, perhaps, in words, but not in effective action by the Government—to the business Committee presided over by Sir Eric Geddes. For the first time, then, we know precisely how we stand—and when I say "we" I mean the nation, and not the Members of this House only—in regard to the details of our national expenditure. That is the first reason why this Budget was awaited with unprecedented curiosity and interest. The second reason is the appalling condition of our trade. The trade conditions, in my knowledge and experience, have never been worse, and as a result every Member of this House has been confronted in his own constituency by the hideous spectacle of unemployment. My right hon. Friend beside me, the Member for Chelmsford (Mr. Pretyman), alluded to that spectacle as amongst the most grievous by which we could possibly be confronted, and most of us have found it very difficult to speak to these unemployed men any words of real encouragement or hope.

I say trade was never worse; and taxation was never so high, and, of course, employment depends on trade. You may meet the problem of unemployment with one palliative after another, but there is no cure for unemployment except employment, and employment and trade were never worse than they are to-day. Look at the returns which have lately been given to us—on which I presume this Budget was based—by the Board of Trade. Values are not of much account to-day, but if you take the total of our imports for last year, they amount to£1,086,000,000 and our exports to a total of£810,000,000, but if you turn from values to volume a very different picture is presented. The imports for last year represent in volume only 74 per cent, of the imports of 1913, and the exports of United Kingdom produce represent last year only 49 per cent, of the exports of 1913, so that a very eminent authority has lately estimated, on the basis of these figures, that the foreign trade of this country in 1921 amounts in volume to not more than 63 per cent, of the foreign trade of 1913. The same authority—I am referring to Dr. Cramond—putting our national income for the year 1921 at£2,700,000,000, compares it with£2,400,000,000 in 1913— not the Government income, but the national income, the aggregate of individuals incomes. If you reduce that to terms of 1913 values, you get a national income to-day, not of£2,700,000,000, but of£1,440,000,000; in other words, the national income is about 65 per cent, of the income of 1913, in 1913 values.

I quote these figures because the one has a remarkable bearing on the other. Our external trade is about 63 per cent, down on 1913, and our national income is about 65 per cent, down on 1913, showing the extraordinarily close connection—and this is the point which I want to establish —between the national income and our external trade; but if trade and employment have never been so bad, taxation has never been so high. My right hon. Friend the Member for Chelmsford has referred to the extraordinary burden of taxation which we are attempting to carry to-day. Going back to the year 1913, the tax revenue of that year represented only 9 per cent, of the estimated national income. In 1920 it represented 27 per cent., and if I add rates to taxes to-day, after deducting£345,000,000 of interest on the National Debt, which for this purpose I may legitimately deduct, the taxes and rates amount to 34 per cent., or more than a third, of the whole national income. If one turns from that to the per capita taxation, the figures are equally appalling, but I turn from the question of taxation in the past to the possibilities of next year, to the Estimate which the Chancellor of the Exchequer has put before us for revenue for 1922–23.

On the whole, I am comforted by the figures which he placed before us, and I recognise that on those figures he was not merely entitled, but, I think, impelled, to considerable remissions of taxation, and, in the first place, I thank him very cordially for what he has said, and still more what he has done, in regard to the remission of Post Office charges. I very strongly supported a year ago the Postmaster-General when he imposed additional charges, because I hold that no service of that kind ought to be carried on by subsidy from the State, but, on the other hand, I applaud the Chancellor of the Exchequer to-night, if I may be allowed to do so, for permitting the surplus on the Post Office revenue to go to a remission of the charges on that service. I think the State should neither subsidise the service nor make a profit out of what is really a tax on industry. Then I come to say one word in regard to the Corporation Profits Tax. Speaking for myself, I should have been glad if the Chancellor of the Exchequer could have seen his way to the entire abolition of that most unequal and, as I think, iniquitous imposition, the Corporation Profits Tax, because—and this is what I meant by describing in no unfriendly phrase the Budget as a psychological Budget—the Corporation Profits Tax is not spectacular in the same sense as is the Income Tax. Its existence is hardly realised by a considerable section of the general public, and therefore there is less incentive to its remission, but it is in effect an addition to the Income Tax. It is a more or less camouflaged addition to the Income Tax, and, speaking in general, it is equally penalising to trade, and is much more irritating in its incidence.

Two years ago, when the tax was first imposed, I made a very strong appeal to the then Chancellor of the Exchequer at any rate for the exemption of statutory or public utility companies, and I am afraid that my right hon. Friend the Lord Privy Seal thought that I was rather grudging in my gratitude when he gave me a remission down to the end of 1922. I am very glad indeed that my right hon. Friend the present Chancellor of the Exchequer has seen his way to a suspension of the Corporation Profits Tax as regards public utility companies for a further period of three years—I presume from December, 1922, the time when the tax would otherwise have been imposed on them—but I confess that I would very much rather he had seen his way to a total exemption of these statutory companies. It is very hard for these public utility companies, which cannot increase their charges, to be subject to a tax which is in effect a deduction from one portion of their profits. Perhaps I may be allowed just to illustrate what I mean by reference to the accounts of one or two railway companies. Take, for example, the London and South Western Railway Company. The operation of this tax on that company would have meant on the figures of 1921 a tax of rather over 10 per cent, on their ordinary stock, but as their ordinary stock is, as in the case of many other companies, divided into preferred and deferred stock, it would have meant on the holders of the deferred ordinary stock a tax of no less than 31.3 per cent., reducing the dividend for that year, 1920, from 40s. to 27s. 6d., which is equal to an additional Income Tax of 30 per cent. I am very glad the Chancellor of the Exchequer has seen his way to a suspension of this impost for a further three years. I very much wish that he had not left it in suspense, but had given total remission—at any rate, in the case of the statutory companies, so far as one Budget can grant it, for it is a terrible burden hanging over the future— and, still better, if he had got rid of the tax as a whole.

With regard to the proposed remission of Income Tax, we have heard from more than one speaker from the benches opposite this afternoon that this is a concession to the wealthier classes. I join issue with that sentiment. It is perfectly true that the Income Tax is actually paid by a comparatively small number of people. I think the people who actually pay Income Tax do not exceed 2,400,000, but in the protests which have come to me, as they have come to every other Member of the House, during the last few days, against the continued collection of Income Tax at the present rate, I have been very much struck by the fact that a very large proportion of those protests come from people who, I imagine, do not pay Income Tax at all.

Mr. AMMON

The Harmsworth stunt has done that.

Mr. MARRIOTT

I think I am sufficiently acquainted with the origin of the agitation, but I do not quite understand the point of the interruption of the hon. Member. My point was that my constituents, at any rate, were intelligent enough to perceive that a remission of the Income Tax was as much demanded in the interests of the poor as it was in the interests of the rich. [An HON. MEMBER: "And more!"] Perhaps more, and that is the point I would commend to my hon. Friends opposite. My constituents know, what not everybody realises, apparently, that an Income Tax is a burden not only on those who are directly assessed to it, but on the whole trade of the country. My right hon. Friend the Member for Chelmsford (Mr. Pretyman) entered on an exceedingly interesting disquisition as to the precise point at which a personal tax passed into a burden on industry. I maintain that an Income Tax levied at anything like approaching the present rate is a direct burden upon the industry of the country, and cannot be regarded only as a personal tax. We have relied in this country, as no other country in the world has relied, upon direct taxation. I find that, even in the year before the War, we were collecting in direct taxation 31s. per head, as compared with 3s. per head in the United States of America. In the last year for which I have figures, we were collecting£15 per head in direct taxation compared with 47s. in France and 43s. in Italy. We have deliberately adopted this method of taxation, though I may point out that our adoption has been comparatively recent. Times were when there was far greater equality between direct and indirect taxation. In fact, if you go back to 1841, you will find that the proportions between direct and indirect were almost exactly the reverse of what they are to-day. To-day I suppose we are collecting something like 80 per cent, of our revenue from direct taxation—at any rate that was the proportion in the last year of the War. If you go back 80 years, you find the figures almost precisely the reverse. I hold that the good period of taxation was about 30 years ago, when about 50 per cent, was collected from direct and 50 per cent, from indirect taxation.

I am grateful, both as an economist and also as a psychologist, for the remissions of taxation which have been made. I believe they will be an enormous encouragement to the trade and traders of this country, and will lead to enterprise in many directions. I a little bit regret that the Chancellor of the Exchequer has been compelled to take speculative chances, and I wish that he had balanced his Budget in another way, not only by remission of taxation, but far more by the curtailment of expenditure. The Chancellor spoke, I think, not quite fairly when he said that those of us who have shown ourselves zealous in regard to a reduction of expenditure were inspired by malevolent motives.

Sir R. HORNE

My hon. Friend is not taking upon himself the burden of the accusation I made against those who persistently reiterated that the Government had made no reductions in expenditure at all? That was the malevolence to which I referred.

Mr. MARRIOTT

I am much obliged for the correction. I hope I have never been so stupid as to say the Government have made no reductions in expenditure. The burden of my complaint has been that they have not made nearly enough reduction. It has not been inspired, however, by malevolence, but by benevolence towards my right hon. Friend who, I should have imagined, would have been the first person in the world to acknowledge and encourage the support of those who wanted to help to curtail expenditure.

Sir R. HORNE

I have done so.

Mr. MARRIOTT

There is one other feature about which I am a little uneasy. The Chancellor of the Exchequer has taken some credit, I think, to himself for including a sum of£25,000,000 for contingencies for Supplementary Estimates next year. When I was drawing up my own Budget in anticipation of to-night, I put down a sum at least double that amount, and I doubted whether that was enough. For the last three years we have had Supplementary Estimates averaging£100,000,000 a year. I think it is a very sanguine spirit—as, indeed, the whole spirit of my right hon. Friend throughout his Budget has been, happily hopeful—to anticipate Supplementary Estimates of only£25,000,000. One word only in conclusion. Any Chancellor of the Exchequer can remit taxation. Almost any Chancellor of the Exchequer can impose taxation, even if he cannot command the revenue; but it takes a really great Chancellor of the Exchequer, like Mr. Gladstone, for example, to condescend to the saving of candle ends and cheese parings, wherein true economy consists. Therefore, my final appeal to my right hon. Friend would be this—I am afraid final only for the moment, as he will guess—is to follow the example of his illustrious compatriot, and condescend in finance to things of low estate, and to save pennies rather than to spend pounds.

Mr. G. BARNES

I rise for a few minutes, first of all to congratulate the Chancellor of the Exchequer on having the privilege to submit a Budget which is very good in form, and not so bad in substance. I have been here, not like my right hon. Friend the Member for the City of London (Sir F. Banbury) for 30 years, but I have been here long enough to have heard 16 or 17 Budgets, and I have not heard one in which the facts and arguments have been more skilfully marshalled and concisely put. The outstanding feature of this Budget to the man-in-the-street will be the remission of taxation, and, on the whole, assuming that remission of taxation is justified, then I think the Chancellor has made a very fair selection of subjects for that remission. On the whole, I should say, of course, that direct taxation is much bettor than indirect for many reasons, the chief of which are, first, that the indirect taxation comes from the poorer members of the community, and, secondly, that the indirect taxation, which is levied upon those members of the community, does not all reach the Treasury. Therefore, for those two reasons, and for the further reason that direct taxation is a form of taxation in which everybody knows what he has got to pay, I would much rather have direct than indirect taxation.

8.0 P.M.

There are, of course, indirect taxes, and indirect taxes. I have no doubt the Chancellor of the Exchequer, like all of us, has been bombarded during the last two or three weeks with postcards and letters about the remission of taxes on whisky and beer. I have had as many as 50 odd in one day, and I dare say, if I totalled up the whole of the postcards and letters I have had about whisky and beer, they would run into a good few hundreds, possibly a thousand. I am glad he has been proof against that, because it had all the appearance—although it purported to be an agitation in the interest of those working-men who want a drop of whisky or beer at night—of a skilfully worked agitation from a centre in which there was any amount of money to spare. I have also had many appeals for the abolition of the Entertainments Duty. They have not the slightest weight upon my mind. The Entertainments Duty, as a matter of fact, is not paid at all by those people who have been busy circularising Members of Parliament, but is paid by the people who go to see the entertainments. Therefore, I am glad again that the Chancellor was not taken in by, as I thought, a rather superficial agitation. As I say, I think he has made a fairly good selection, and I say that, notwithstanding that the Income Tax, of course, falls to be borne, in the first place, by the relatively well-to-do man. I regard the Income Tax as a very important tax bearing upon industry, and I believe that the high amount of taxes imposed in that way has been a very serious check to industry during the last year. I welcome this proposal not because it is going to reduce the amount of taxation levied upon the relatively well-to-do, but because I believe that what will be left in their hands will very largely be used in order that they may feed and sustain industry, and that that, therefore, will lead to a reduction in the number of the unemployed in the country. This latter, to my mind, is the most serious problem with which we have to deal.

Dealing with this matter of Income Tax, might I say a word about the point made by the right hon. Gentleman the Member for Chelmsford (Mr. Pretyman) in regard to the statement made by my right hon. Friend the Member for Platting (Mr. Clynes)? The right hon. Gentleman the Member for Chelmsford was rather unfair or perhaps he misunderstoood the leader of the Labour party, for he charged my right hon. Friend with having made a claim in regard to the payment of interest upon the National Debt that some differentiation ought to be made in favour of the small holders of that stock. I never heard that suggested. What he did say, so far as I understood him, was that the payment of that interest was a great burden upon the community He did not suggest that there should be any lessening of the rate of interest payable to the holder of War Stock, but he did suggest that some ways and means might be found whereby not only the interest but the principal should be paid off more rapidly. With this I entirely agree. There should be found some ways and means of raising new loans or imposing higher taxation upon the higher-paid portion of the community whereby the National Debt could be paid off more rapidly, and I think that that would be a very good thing. But my right hon. Friend had something more to say in regard, as I think, to suggested differentiation as against the holders of the National Debt in favour of other people who put their money into other forms of investment. I cannot agree with that at all. It seems to me, if there is to be any differentiation as between one man who lent his money to the Government during the War and was paid 5 per cent. and the man who put his money into some form of industry or enterprise and got 10 per cent., that the differentiation should be in favour of the man who lent to the Government rather than the other man. I have no sympathy with these specious pleas sometimes put up about reducing the interest on the National Debt, but rather would I have the National Debt cleared off as rapidly as possible, either by some process such as has been suggested or some higher taxation upon the general community.

I welcome the remission of the 4d. upon tea. I rather favour taking the whole amount of 4d. off tea than splitting the amount, as might be done, by the remission of the taxation, say, between tea and sugar. The consumer is more likely to get the benefit of the 4d. than he would be if 2d. had been taken off tea and 2d. off sugar. Like other speakers, I am somewhat concerned about the difficulty that will follow in consequence of what the Chancellor of the Exchequer has done to-day. The next Chancellor—that is assuming there is an election before next year—or the right hon. Gentleman himself, in the event of there being no election—is going to be confronted with a very serious problem. In the first place, he has got to make good the money which he has taken for the remission of taxation and which ought to have gone to the Sinking Fund. Moreover, there are certain forms of expenditure that will then have to be met which have not yet had to be met, for instance, the£50,000,000 of the American debt. I hope that that will be paid without demur Still, provision has to be made for it. Then, there is the running out of the surplus stores. The amount is less this year than last year, something like£70,000,000 to£80,000,000. The probable income from those stores will again be lessened similarly. There are other things that will have to be made good next year. Might I suggest one or two ways and means by which these shortcomings may he met?

First of all I would support the suggestion already made about funding the pensions costs. I suppose the cost of pensions will run for perhaps 30 years. The War was fought not only for those who are living now, and paying at the top rate, but it was fought for those who will come after. It seems to me to be a perfectly fair proposition that the total cost of the pensions, spread over 30 years, should be paid more equally year by year instead of this generation paying a larger amount compared with what will fall due in 30 years. Therefore I would suggest that something might be done next year—I quite admit it is impossible to do it this year in view of having taken the money from the Sinking Fund—but next year something might be done in the way of funding these pensions payments so that we may have in the early years some considerable relief from this taxation.

A great thing, however, still remains to be done—and here I entirely agree with the right hon. Baronet the Member for the City of London—in the way of reducing Governmental expenditure. No one going into Government offices at the present moment can do so without seeing the methods employed there are far different from those in ordinary business life. I suppose many of us read what was in the newspapers recently about the rapid rise of salaries in Government offices, and the instance given of a salary of£500 of 10 years ago now raised to£3,000! It is perfectly obvious that that sort of thing would ruin any business concern. There is no reason why the Government should not be as careful about the nation's money as a business man is about his own.

A little while ago on this side of the Committee reference was made to the Inter-Allied Debts and a suggestion made that something might be done to wipe them all off. For my part, I hope that nothing will be done by the Government I to ask in any way an exemption from the payment of debts that have been incurred in this War. Nothing, it seem to me, could be more calculated to lessen our credit than doing that. At the same time I quite agree that the arrangements about these national debts as between one country and another is not a mere matter for isolated or separate arrangement between debtor and creditor countries, but is rather a matter of arrangement by the countries as a whole at some cenference where the matter could be discussed. I hope that these matters may be discussed at Genoa, and I would express the hope that if any arrangement can be made at Genoa as between the countries represented there, that that conference might be followed by another at which perhaps the United States may be represented, and at which the whole question could be discussed in the light, not of the indebtedness of one country to another, but in the light of the good of the whole and the promotion of trade from one country to another. What mostly concerns those countries who have lent large sums of money, and are now exacting large sums of interest, is not the getting back of that money so much as their power of absorption and its bearing on trade. This, I hope, will be the line followed in regard to the national debts. However, I am drifting away from the immediate matter, which is the Budget. On the whole, I think the Chancellor of the Exchequer is to be congratulated upon having, in the Budget, for the first time since the War, embodied proposals for the lessening of taxation. I hope, and believe, that lessened taxes will have a good effect in stimulating trade and thereby lessening unemployment amongst us. So far as indirect taxes have been remitted, I trust that that also will be a considerable relief to the poorer members of the community and, in turn, stimulate trade by increasing their purchasing power.

Mr. SEXTON

The right hon. Gentleman the Chancellor of the Exchequer is to be congratulated, not so much upon the subjects in his Budget, as upon the manner in which he has produced it. I recognise the difficulties of the position of a Chancellor in existing circumstances. I also recognise that amid the disadvantages of the situation he has kept our national credit up to the top, and that this Budget, too, will redound to the credit of the nation. I was rather interested with the right hon. Gentleman's statement that the reduction of 1s. in the Income Tax would be to the advantage of trade and would increase it. I am not a financier. Therefore I do not know whether that will be the effect or not. I am prepared to accept the statement; but I have no doubt, not the slightest—I am sure of it—that there are many struggling employers to-day—I say this even at the risk of being accused of heresy in certain circles outside the House —whom the reduction in the Income Tax will certainly help. If it will have the result of helping the employer to bring about better trade I have no hesitation in accepting the principle as advocated by the right hon. Gentleman.

But there are other people who are not in trade who are very largely interested in the reduction of the 1s on the Income Tax. There are great financiers, not only national but international, who will receive an enormous advantage from the reduction of this tax. One of the greatest I believe—it is so reported—who with his family invested money in war centificates and bonds will alone receive an advantage by the 1s. reduction of at least£20,000 a year. I am not complaining of that so much, because, after all, big financiers with big money and big fortunes who came to the help of the country in the time of war served a very useful purpose. I do not object at all to the amount of interest derived from the War Bonds. I will derive a small yearly advantage, perhaps£4 or£5, and therefore I accept the principle. But what I want to draw the attention of the House to is the hardship of the present system of Income Tax, and how it bears upon those who ought to be partners in industry, and ought to help to build up the industry of this country—that is the ordinary workman himself. I am pleading again for the bottom dog in our industries who has no particular or permanent employer, and he is a man in regard to whom I might say: They rattle his bones over the stones He is only a casual whom nobody owns. He has never got an employer, and these men are included under the Income Tax Regulations. I believe an arrangement was made by the right hon. Gentleman's Department or by the right hon. Gentleman's predecessor that all these men should be assessed, and if an Income Tax is to be imposed at all, I agree it ought to be imposed proportionately on everybody in the United Kingdom. I think, however, that when an exception like this is pointed out some consideration ought to be given. I believe the right hon. Gentleman's predecessor arranged that the casually employed man should be assessed quarterly. The intention of that proposal may have been good, but it has turned out in practice to be bad, because the casual labourer has his lean as well as fat quarters. A man may have a fat quarter this quarter, but he may have had a lean quarter before, and he may have, during that time, incurred liabilities in what is known as the "tommy shop," and in order to pay for the lean quarters he has to obtain credit. Unfortunately these men have been assessed upon the fat quarters during the loan quarters. As a matter of fact, the application for the payment of Income Tax never reaches these men when they are handling the money during the fat quarters, and the result is they have spent their incomes and cannot pay Income Tax. I know cases where summonses have been issued against them, and they have had to lose a day or two attending Court in order to give their explanation. May I read a letter from one of my own constituents, who is an ex-soldier I He says: I am an ex-soldier, being invalided out of the Army with malaria after 3£ years oversea. I am a miner, but have never worked since the lock-out. and I have had three quarters' Income Tax sent to me. Can I claim for the period I have been out of work, because the collector says as soon as I start work he will want the money? I would like to know if I go to prison, does that pay the debt? Some people say it does and some people say it does not. I hope my right hon. Friend will prevent any injustice of this kind being carried out. Figuratively speaking, these men have the sword of Damocles hanging over their heads all the time, and they are pursued all ends up. I want the right hon. Gentleman to consider if in cases of this character there could not be some modification of the application of the Income Tax to such men. I trust that, having brought this question prominently before the House and the Treasury, the right hon. Gentleman will give such consideration to these cases as they eminently deserve.

Mr. WISE

I wish to preface my observations as a back bencher by thanking the Chancellor of the Exchequer for the very clear way in which he has explained the difficult figures of the Budget. I feel myself that the Budget is made up of the problems of unemployment, of wealth, and of taxation. Perhaps I may be allowed, with the permission of the Committee, to refer to what happened during the Napoleonic Wars and after that period. Previous to these wars we had a debt of£50,000,000, and we ended them with a debt of£800,000,000. There were great difficulties in the people realising the large amount of that debt, and they arose owing to various details as to the people not realising the new basic value of money. We financed our allies, and we had also difficulties in meeting the Budget. During the war we raised money by taxation, and in Pitt's last Budget the total amount raised was£42,000,000.£18,000,000 was raised by loan and£24,000,000 by taxation. I feel I might refer here to words uttered to me when I was sent by the Peace Conference to Berlin in March, 1919, by the late Herr von Bethmann Hollweg. His first wrords to me were words of congratulation to our Chancellor of the Exchequer that he had taxed the people during the War. We had a similar instance a hundred years previously, as I stated, when Mr. Pitt, in his last Budget, taxed the people during the war. After Waterloo distress arose, not from any derangement of domestic policy, but more or less similarly as we now find by a derangement in the general state of Europe. In 1816 the debt was reduced; in 1817 we had a deficit of£14,000,000, which was really a suspension of the Sinking Fund and is, in some ways, similar to the Budget we have before us at the present time. Again, in those years Funds rose, which eased the position for the Chancellor of the Exchequer and allowed him to borrow money cheaper. We then had Members in the House similar to the Leader of the Labour party (Mr. Clyncs) and the hon. Member for Govan (Mr. Neil Maclean), who are always anxious for a capital levy or for a reduction of interest, and the Chancellor of the Exchequer, in those days, in reply to questions which were put to him, declared that the country would lose more in credit and in resources of every kind than it would in any manner gain by such an enormous breach of faith. These are very true-words. They are practically the same as have been used by our present Chancellor of the Exchequer. The "Times" has a practice of publishing extracts from their paper of 100 years previously. In its issue of last Friday it gave the following under the date Friday, 26th April, 1822: House of Commons. The petitioners expressed an opinion that the distress of which they complained was, in great degree, attributable to too sudden a contraction of the currency. The petitioners expressed a conviction that it would be found impossible for the country to bear its burden unless those burdens should be reduced as low as possible. Lord Nugent presented a petition from a very respectable body of his constituents. They looked to a reduction of taxation as the only means of relief. That is practically what we have to-day. The only way is to get a reduction of taxation, without which we cannot possibly expect the trade of the country to exist. During the War money was practically no object. The only thing was to win the War. During the War we inaugurated an external debt which we had not in August, 1914. I am very pleased to hear from the Chancellor of the Exchequer that some of this external debt has been paid off. An internal debt among the citizens of a country will never ruin any country as long as taxation is fair. As regards expenditure, we all want economy. Economy in the strictest possible sense of the word does not simply mean spending less, but it means using the resources of the nation wisely so as to secure the greatest possible return. I am very anxious, as is the hon. Baronet the Member for Sheffield (Sir S. Roberts) that there should be some Committee set up by the Chancellor of the Exchequer with a view to going into further details which were not, perhaps, touched by the Geddes Committee. We must have this expenditure down. It is only by reduced expenditure that we can get taxation down. In the old days Mr. Gladstone had one Budget with which he found great difficulty. I refer to the 1860 Budget, when he took certain risks, and he said: How can we keep ourselves going on a high tableland of expenditure? Enlarged productive power is the commanding aid of high finance. These words are very true. With regard to revenue, plain common-sense teaches us that when war has drained the economic resources of a country that country must give the most serious attention to the task of reconstructing its material wealth. What is wealth? There are three kinds of wealth. There is physical wealth—the physical wealth of the harvests. If we had two or three good harvests it would do better for Europe than any other means of stimulation. Then there is the-wealth of labour. We all know that only by hard work can we get the world back to its proper position. Also there is the wealth of credit. There is no country with better credit than we have. I remember that my hon. Friend the Member for Morpeth (Mr. Cairns) seemed to suggest that credit was a large application for shares, and he referred to the issue of the Anglo-Persian Oil shares. A. rise in stocks and shares is not credit. A large application such as the hon. Member referred to is not wealth. But what I feel will help the country as well as anything possibly can is the large amount of new issues recently made and the large amount of genuine capital subscribed. That will bring work to this country. In the first three months of this year£286,000,000 was subscribed on prospectuses, without counting Government issues. Since that date we have had the New Zealand loan of£5,000,000, of which£3,000,000 is to be spent in this country. That will help our trade. It is trade we want. It is through trade we shall get a reduction in the necessary taxation. The Prime Minister, when he spoke previously to going to Genoa, stated that international trade was working well in 1914. Yes, it was, but I do not think the right hon. Gentleman gave the actual reasons why it was working well. I contend it was working well because there was stability in one commodity, and that one commodity was gold. To-day we have not got that stability, and until we get it we will have variations of trade and variations of taxation affected by trade, as a matter of course.

Perhaps we do not realise how difficult this international trade is. We live on it, but yet we do not appreciate the enormous amount of the debts that have been raised by various countries in the world. In 1914 those actual debts were£9,000,000,000; in 1920 they were£53,000,000,000. All that must affect our trade and the taxation of this country. It must affect us because nations outside ourselves are not meeting their Budgets.

We are so interlaced with other countries that it is essential for us that other countries should balance their Budgets as we do. Take a country like Portugal. Portugal is only raising revenue sufficient to meet half her expenditure. Belgium is not meeting her expenditure. Austria and Germany, of course, are not; while India, which is our principal purchaser of goods, has a deficit of 34 crores in place of an estimated surplus of 21 lakhs. Taking the rupee at Is. 4d., it means a deficit in their last Budget of over£22,000,000, as compared with an estimated surplus of£140,000. Again, countries like the Argentine are not balancing their Budgets, and in the United States of America, which is so often spoken of here, the Budget for the year ending July, 1923, shows a deficit of 167,000,000 dollars. They gambled on Washington. They hoped that Washington would be successful, and, according to their statement, as I read it, if Washington were successful, they would probably balance their Budget. It must be realised that we as a country are, perhaps, the only country in the world which, to use a nautical expression, has gained its sea legs.

In the case of the Budget for the year 1921–22 it was a difficult matter, with the coal stoppage and so on, to make correct estimates, and I think the Chancellor of the Exchequer is to be congratulated on his nearness to his estimates. Last year he provided£113,000,000 for his Depreciation Fund, Sinking Fund, and War Stocks and Bonds tendered in payment of Death Duties and Excess Profits Duty. He is estimating for a decrease of£10,000,000, but I cannot help thinking that that estimate is very small. We all know what the bankers have said about trade, and the necessity for this reduction of taxation in order to stimulate trade, and we have to realise that nearly£400,000,000 for 1921–22 has been collected from the Income Tax payers. A reduction of 1s. should afford a great stimulus to trade. Indeed, I have only recently been told by an hon. Member that he is already anticipating giving orders, so that he may be in the forefront when trade does improve. We want to assist people like those ex-Service men referred to by the hon. Member who spoke last. If we want to assist the labouring classes and to do the maximum of good, it is not enough to operate on the articles consumed by them; we should operate on the articles that will give them a maximum of employment, and I feel that this reduction of Income Tax will give them that maximum of employment which we all desire. I know that certain hon. Members think that the Chancellor should not have taken this risk of borrowing, but I think he has done quite rightly. I feel that in these times we all want courage, whether business men or the Chancellor of the Exchequer, so that we may get back to national prosperity.

Mr. A. M. SAMUEL

I should like just to touch upon one or two questions. Firstly, I want to refer to this inhuman 6s. in the£ Income Tax, which has proved so terrible a burden to the middle classes; and then, if I may, I will say a word upon the suspension, if it may be so called, of repayment out of revenue of the Sinking Funds. Before, however, leaving the question of this inhuman 6s. in the£—and I am glad the Chancellor of the Exchequer has seen his way to reduce it by 1s.—I should like to ask the Financial Secretary if he will explain what this 1s. reduction means in the case of those whose incomes are below the limit which enables them to have relief for the first few hundred pounds. At present they pay nothing on, I think, the exempted portion of income and then 3s. on the next portion and 6s. on the rest. Are we to understand that this 5s. is to be divided into 2s. 6d. and the balance at 5s.? I have no doubt that the Financial Secretary will be able, in due course, to explain exactly where the 1s. relief comes in in these taxable income calculations after the£225 allowance. If I know him well, I think he must be laughing up his sleeve at us who, as traders, have had control of the finances of our firms, if he thinks that we are passing this Budget as a sound Budget. It is not a sound Budget so far as the remissions are concerned. It is not justifiable on the figures to give the remissions. I welcome it, and shall support it, none the less. I do not call it a psychological Budget, as the hon. Member for Oxford (Mr. Marriott) calls it. I call it a tide-over Budget. Its only claim to being passed while we are in a state of transition from the trouble of the first two or three years following the War to normal conditions, is simply because it assists the middle classes to face the burdens of life without that terrible 6s.

in the£ Income Tax. When I come to think that 6s. in the£ to these people means that for four months of the year they are working for the Government, it almost reminds me of the corvée in Egypt.

The Budget's remission of taxes, however, is not justifiable on the figures. There is not a possible remission of 1s. or, indeed, of anything, as shown by what the revenue will bring in for 1922–23. It seems to me that we might paraphrase the expression used by Sir Fleetwood Wilson a good many years ago with regard to the Indian Budget, when he said it was a gamble in rain. This Budget is a gamble in the revenue of the year after next, and in what can be realised through the Disposals Board. I do not know what still remains of that widow's cruse of the Disposal Board, but we who have worked in the Ministry of Munitions have had some experience of it. In the previous Budget and this it was and is possible to include what would be realised through the Disposals Board, but one does not know how long that stream of realisations will be able to go on. The House, however, must have a great deal of faith if it thinks it will go on for any great length of time longer. I do not think it will, and, in any case, it has always been unsound to apply these realisations to current revenue. No financial jugglery in the form of Is., or even 2s. or 3s., off the Income Tax, will rehabilitate trade. British trade will rehabilitate itself by its own soundness; it will not be helped to prosperity by 1s. or 2s. off the Income Tax. My hon. Friend the Member for Limehouse (Sir W. Pearce) seems to think that this 1s. relief will bring about a recrudescence of trade. But what does that mean? Let us bring it down to a concrete instance. There are many firms with a couple of thousand men which make£20,000 a year. Suppose you get this 1s. in the£ off, it will put£1,000 more into the pockets of the firm, but does the Chancellor of the Exchequer really think that that 1s. in the£, remitted to them and giving them£1,000 more profit, is going to help them in the slightest degree to extend their business? I do not believe it for a moment. It is too small to help. But if even the money is saved by an investor who receives by this exemption of 1s.£1,000 a year more that he can invest, I very much doubt whether he will spend that money in a form which can help industry. He may spend it on pleasure. Most people who get this shilling off will, I think, spend it in some restored comfort. I am one of those hard, stony economists who do not believe that unreproductive expenditure in industry is of much use to the nation in the long run. Suppose a man is lucky enough to save and invest£1,000 on this remission of a shilling, what good is this income on£1,000 to him when taxation is 5s. in the£ and there is Super-tax, we will say, and then other burdens on his savings at death, which have been referred to by my right hon. Friend the Member for Chelmsford (Mr. Pretyman). The£1,000 will bring him in£50 a year. Take 5s. off for Income Tax, and perhaps there is Super-tax. That brings it down to£30 or£40. Men nowadays will not save if they have to grind and screw to save£1,000 and only get at the end of the year£30 or£40. They will say, "Let us blue the£1,000 now and enjoy£1,000 rather than save up and get£30." It is not worth while denying one's self for£30 only. There is a fallacy going through the minds of the people that a reduction of 1s. is going to do much good to industry or to induce men to save money to put it in investments to assist industry. They will do no such thing. The return in income is not enough to induce them to save. They will spend their savings and enjoy them while taxation now and at death is so high.

The suspension of payment of the Sinking Fund out of revenue I do not like at all. I do not like the suspension of any repayment of debt. The best way to make a fortune is to get out of debt. No man or country was ever ruined by repaying debts. We are now face to face with the same discussion about the Sinking Fund which sprang up at the time of Pitt. It is not a later and Napoleonic period discussion, I believe, although my right hon. Friend the Member for the City (Sir F. Banbury) referred to it as a question which sprang up after the Battle of Waterloo. I think it was earlier than that. Illustrious speakers on economics, Ricardo, Baring, Grenfell and others, pointed out the fallacy of borrowing money to repay debt. It was merely taking money out of one pocket and putting it into another and losing something in the meantime in the costs of administration. I do not like the non-performance of contracts about Sinking Fund payments out of revenue. They ought to be paid out of revenue, but in this case the hon. Member for Harrow (Mr. Mosley) is wrong in saying we are adding to our debt. As a matter of fact, if we now borrow from Peter to pay Paul we shall not add to our debt but, curiously, in suspending this Sinking Fund in the particular cases of the Conversion 3½ per cent. Loan, the 4 per cent. Funding Loan and the Victory Bonds, which were the three loans referred to by the Chancellor of the Exchequer, if he leaves the money in those loans and does not pay them off he pays something like 3½ to 4 per cent., while if he borrows the money to pay them off he will be now able to borrow by Treasury Bills and very short-dated Bonds at 2½ or 3 per cent., which of course will put a saving into the Exchequer. He will thus be able to borrow and pay off at a less rate than he is paying for the money if left unpaid off. I think the Financial Secretary will agree that that is a fair statement of what is going on at present rates of money. There are some who think money will get dearer when trade revives. I do not attach as much importance to that argument as some do. There is a large body of people who have lots of money coming forward for investments. I believe, notwithstanding the fact that trade when it revives will require more capital, that the demand by investors, and by the banks on behalf of investors, for Treasury Bills and for investments will keep the capital value of those investments up so high as to make money much cheaper than it would have been in similar circumstances before the War. I therefore think on the whole we are not likely to have money much dearer even if trade, as I hope, revives, and the result will be that notwithstanding that we have committed what I call an economic sin in not paying off our Sinking Fund out of revenue, the paradox will spring up that we have temporarily financially benefited the Treasury by so doing.

The remissions of this Budget, although I support them in the interest of the middle-class taxpayer with his terrible burden of 6s., and in the interest of the working man's wife, are utterly unjustifiable on the figures. The only thing to justify the remissions would have been a larger revenue or a smaller expenditure and repayments out of revenue. The Budget, therefore, is not a sound Budget. It is due to one's self-respect to put that on record. The way, with present revenue, to justify such a remission of taxation as we have been promised is to cut down expenditure. Where it can be cut down is shown in this Blue Paper under the heading of Supply Services. Here we have a gross total of£546,000,000. I take away from it, of course, the Post Office services, and Customs and Excise and Inland Revenue Departments, which bring their money back again, and, consequently, refund the outlay, and really are not expenditure. These supply services are the key to the whole position. The Government has got to make up its mind in the next few months to withstand continual demands for public assistance on the part of a Socialistic and Communistic Labour party. It has to cut down expenditure and be prepared to go to the country and say, "We will stand or fall by cutting down expenditure." I am certain if the Government makes up its mind to cut down expenditure, after the lesson the country has seen in the last two years of what high expenditure means in Socialistic and Communistic experiments, with the resultant high taxation, the country will support them against any outcry made by those who say we ought to go on with paralysingly costly social reform of the kind which to my mind is nothing other than political bribery.

Mr. RAWLINSON

I will not follow the last speaker in his able attack upon the Budget. I rather take the brighter side and congratulate the Chancellor of the Exchequer upon this point at all events, that he has not yielded to popular clamour in such a matter as the reduction of the Entertainments Duty. That, after all, is a very great point. One is apprehensive in a Budget of this kind as to whether or not the temptation to play up to public feeling is too great. The lack of imagination in inventing new taxes I always think is very much gainst the Treasury. The Entertainments Duty was a new tax and a good tax, and I am glad it has not been tampered with. I should imagine there are certain ways of extending it. Of course, the benefit of it is that it is purely on a luxury. A person who can afford to go to an entertainment can quite well afford to pay tax, or it will do no harm if he stays away. There are many other luxuries to which the principle can be applied in the same way. There are such matters as the large amount of travelling which takes place on Sunday—purely pleasure traffic—which could very well be brought within the range of the revenue authorities. Again, there are advertisements, which are subject to taxation in other countries and which are here certainly a proper subject of taxation, and I should imagine a public nuisance in many cases, more especially when they take the form of flickering electric lights. These are points to which the Treasury might well turn their minds.

I congratulate the Chancellor of the Exchequer upon the fact that he is determined to find out some means of dealing with people who evade Income Tax at the present time. Income Tax, bad or good, should be paid by everybody with taxable income. At one end, we have the case which was brought before the Committee to-night of somebody who had Apparently done well as a workman, but had never paid his Income Tax. The hon. Member who mentioned the case said that he had persuaded the Government not to take any steps to recover the money. Every effort ought to be made to see that people who are earning a taxable income pay at the time. The mere fact that their case is taken up by an hon. Member who has influence with the Government ought not to alter the case. It reminds me of what occurred in connection with my own Sessions. A lady juror could not attend. There were very good reasons for her non-attendance, but she wrote to my clerk saying: "Tell Mr. Recorder that he cannot possibly report me because he is a personal friend of my husband." That does not make things much easier for one dealing with these matters. I do not want the idea to get abroad that a person need not pay Income Tax because there may be a powerful member of the Labour party, or any other party, who can use influence with the Government.

At the other end of the scale there are very large evasions of Income Tax. There used to be a story, which I believe was absolutely untrue, of a certain gentleman assigning practically the whole of his very large fortune to his sons, and the sons very kindly made him a compassionate allowance to live upon in order to eke out his remaining days. They granted him£40,000 a year which, being a gratuitous sum, was not liable to Income Tax. I do not say that that actually occurred, but it is a thing that might occur. I should have thought that by now a tax could have been levied upon all allowances, certainly on£1,000 a year. Anything which the Treasury can do towards stopping the evasion of Income Tax ought to be done. I know that many people spend large portions of their life in advising people upon methods by which they can drive a coach and four through the Income Tax Act, and they do it with considerable success. It is right that they should do that, and on the other hand the Treasury ought to have equally able people on their side to prevent these evasions from occurring.

There was applause when the Chancellor of the Exchequer said that we intend to pay the whole of our interest to America, without any sort of cavil. I cannot see why that should be any subject for boasting. The bulk of our debt to America at the present time represents money borrowed, not for our own purposes, but handed over direct to our Allies, and it was borrowed at the time when America was in the War. Before the War America lent us money on security, which has been mostly repaid.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hilton Young)

The hon. and learned Member's way of putting it is not quite correct. I should like to put it in this way. We were borrowing from the United States, and at the same time we were lending independently to our Allies. If we had not had to lend to our Allies we should not have had to borrow from the United States, but there is no necessary relation between the two transactions.

9.0 p.m.

Mr. RAWLINSON

The amounts coincide. The amount that we borrowed from America is the amount that we lent, contemporaneously, to our Allies, which is the same thing, though I accept the correction from the Financial Secretary to the Treasury. Previous to America entering the War she would only lend money to us on security. I believe that was without precedent between civilised countries. We lent money to Japan during the Russo-Japanese War without security, and one neutral country has lent to another neutral country in the past without security. When America came into the War, it was only because we were financing the War that we had to borrow money from America, and I cannot understand why America should not be asked to bear her fair share of the burden in financing the Allies, as we have done. Without any loss of dignity to this country we might ask America to do that. We cannot help bearing in mind that the American view in connection with the Treaty of Versailles had a considerable effect in preventing the carrying out of the policy, of which some people made a great deal at the last General Election in this country, that this Government was returned to carry out This Government was returned for the purpose of making Germany pay the cost of the War. It was largely owing to the influence of America that that policy was not carried out in its entirety. Somebody ought to say, once and for all, that in this matter America does not seem to be bearing her fair share of the burden of the War.

The reduction of 1s. in the Income Tax is very welcome, whether we spend it in riotous living or however we spend it. The Corporation Profits Tax, which does not hit mc at all personally, is probably the most vicious form of Income Tax at the present time. It is the most unscientific form of taxation. It was brought in in a great hurry, when the Luxury Tax failed to be carried through, and was more or less brought in in substitution for that tax. It is a tax upon the profits of any incorporated company. The profits are gross profits, and no deduction is allowed for interest on permanent mortgages or permanent loans. There are two evils involved in this. It is an Income Tax upon everybody who holds ordinary shares in a company, and is not created like the Income Tax. By not allowing any deduction to be made from the gross profits in respect of interest on permanent mortgages or permanent loans you have this absurd position, which is revealed in a company with which I am connected, although I have no shares in it. It is a case where school buildings were put up on borrowed money. The old members of the school lent the money willingly. Every year that school is run, not at a profit but at a slight loss, which is made up by the old members of the school, who are very willing to do it. The absurdity this year is that although there has been a slight loss upon the trading of the school during the year we have to pay£500 Corporation Tax, because we were not allowed to deduct the interest upon our original borrowed money, which is really the rent we pay for the school houses, the college, and the land upon which it stands.

But that is not all. This Corporation Profits Tax is applied to those companies which by law are not entitled to make any profit at all. I have brought the matter forward constantly by question and answer. There is a very large number of philanthropic companies in England which were asked by the Government for the time being to incorporate themselves, and they did so, as they got a certain convenience from it. Profits cannot be made out of these institutions. This applies to a very large number of ladies' colleges, including, I think I am right in saying, Girton in Cambridge, and a large number in Oxford, and to many high schools throughout the land. There is a large number of important public schools, and, though by law they cannot make a profit as philanthropic institutions, yet they have to pay this Corporation Profits Tax. It is a very severe tax on educational establishments which it is for the advantage of the country to keep going, because if they were shut up the State would have to build schools to replace them.

I would press the Government to deal with this matter as soon as they can. The whole policy of the Government has been to encourage limited companies. To begin with, they get a very large sum paid in stamps on the formation of the company and the issue of the shares, and private trading companies have been encouraged by the Government, and this tax is a distinct block in the way of private trading companies. Some time ago friends of mine who were partners in a printing company were thinking of turning it into a limited liability company, but in view of this Corporation Tax I advised them to do nothing of the kind. They were living upon loans, and they would have to pay the extra Income Tax not only upon their profits but upon borrowed capital as well. Therefore they remained in a private partnership. In the long run the Government have not gained, because they would have got a lump sum down by way of capital if the company had been turned into a limited company. I would ask the Government to give their attention to the Corporation Profits Tax. It will not give them so much popularity as a reduction of 1s. in the Income Tax, but it is a matter which should be dealt with without delay.

Lieut.-Colonel GUINNESS

I am very glad that the hon. Member for Cambridge University (Mr. Rawlinson) has pointed out the iniquitous incidence of the Corporation Tax. I will not follow the matter further, except to refer to another class of philanthropic bodies who are very hard hit, bodies like the Lister Institute, which, because they are technically companies, though they are not allowed to distribute a penny of their money in dividends, are yet deprived of money which would go for research on behalf of the community, and have to meet this liability that falls on all corporations. I trust that the Financial Secretary will give favourable consideration to the claims of these bodies, which are doing public work of great importance, and that they should be given at least the benefit which is extended to statutory companies which do not exist for any philanthropic work.

Coming to the Budget generally, in spite of the few criticisms that have been heard, the Committee and the country generally will, I think, recognise that, in the deplorable condition of industry and employment, the Chancellor of the Exchequer was justified in departing from strict canons of financial orthodoxy and relieving the taxpayer even by the extreme resource of suspending the Sinking Fund. My own feeling is that we have done far too much in the way of paying off debt since the War. If we had not laid aside these enormous sums, over£100,000,000 a year, for the repayment of debt, I believe that our present difficulties would have been considerably less. Our first object should be to bring industry into its stride. When that happens and wealth begins again to increase, the burden of the Debt which now is so crushing could be borne with ease. The postponement of the payment of debt after the first year or two took place in the case of the Napoleonic War, and was then fully justified, because the repayment of debt, which at first would be an enormous proportion of the national wealth, was, when it was finally taken in hand, so small a proportion that it was not a serious burden on industry. I am glad that the Government have at last decided to apply the teaching of experience to this matter.

A great blemish on the Budget is that of inadequate recognition which has been given to the claims of the indirect taxpayer. Direct taxation is graduated to vary in proportion to income. But indirect taxation is far more arbitrary in its operation, and can only be made to vary in proportion to income if an individual foregoes some of the necessities or little luxuries to which he was formerly accustomed. We know that commodity prices have come down, and that, in view of that, deflation has in many cases left real wages very nearly as high as they were when industrial wages were at the top of their curve just after the War. But if that be so, the real taxation of the working classes has actually been increased steadily during the last year, unless they cut down their standard of living, a bigger proportion of their earnings now goes on indirect taxation. Take the case of the agricultural labourer. His wages have dropped by at least one-third in comparison with what they were a few months ago, and if he is not to pay an undue proportion of indirect taxation that too must be reduced. I do not suggest that it is possible for the Chancellor of the Exchequer to relieve this class by the full proportion which the fall in their wages requires, but he should do what he can. On last year's basis of taxation, applied to this year, customs and excise stood at£278,000,000. On this very large sum the Chancellor of the Exchequer is only making a remission of£5,000,000. That is to say, about one-fifty-fifth is being remitted from this indirect taxation to meet a wage fall of not one-fifty-fifth, but of one-third. I believe a further reduction would be practicable on the figures disclosed this afternoon, and without any risk of a deficit.

The Beer and Tobacco Duties have passed the point of diminishing returns. We do not know what revenue the Chancellor of the Exchequer expects to receive from those duties, but it is well known that since wages have had their enormous drop the consumption of beer has decreased in a very sudden way, and I understand that the present tax on tobacco is also having a strong deterrent effect on consumption. The same thing has happened in our recent Budgets. In 1920 the late Chancellor of the Exchequer proposed such a duty on sparkling wine as practically to extinguish their import and consumption. When events proved the justice of the innumerable prophecies the Chancellor of the Exchequer had the wisdom last year to reverse his decision and take off the duty. In the same way in 1920 the late Chancellor of the Exchequer reduced the Tea Duty by 2d. The previous year the duty had brought in£16,054,000. The result of the reduction by 2d. a lb. on 90 per cent, of our imports was that the revenue grew to£17,750,000. If the Chancellor had the courage to apply the same principle to the Beer and Tobacco Duties, where the yields in the last few months have been vastly decreased, he would get the same result. If he is nervous about it he could insure against loss in the way which I am going to suggest, and he could readjust matters in the next Budget if the decrease of tax did not stimulate consumption in the way that I expect.

I suggest that he should sell those speculative commercial investments which have been acquired during the last ten years. I do not suggest that the Suez Canal shares should be sold, because they give control over a vital communication of the Empire. But there is no such justification for the more recent purchases. I will mention only one. By our sale of our holdings in the Anglo-Persian Oil Company we could raise about£20,000,000. It may have been right to have acquired control of this company in the development stage, when the backing of the Government was necessary for negotiation with the Persian Government, and for making necessary arrangements with the Navy and so forth; but that stage has long passed, the company is in a strong position, and in private hands it will develop just as quickly and sell oil at exactly the same price as it does now when controlled by the Government. In war it is not the ownership of shares in a company, but the possession of sea power, which secures our supplies from Persia or any other foreign field, and if we had lost our sea power, or ever lose it, no amount of financial control in war would enable us to retain these foreign supplies of oil. Naturally I do not want to see the control of this company go from British hands. When this matter was raised before it was suggested that the Standard Oil Company would probably benefit if the Government were to sell their shares. I believe that that could be quite easily avoided. The Government on selling their holdings have merely to allocate stock to British holders only and to spread their allotments over so large a number as to make control by foreign interests virtually impossible. The Government holds 4,000,000 ordinary shares of a value of about£4 15s. each, and they also hold debenture and preference shares. On a conservative estimate we could get£20,000,000 by selling these shares.

There would be ample security against any possible deficiency if we were to take the risk of reducing indirect taxation to a less prohibitive scale with a view of lightening the burden of a class which is now earning small incomes, and, at the same time, we might hope to increase consumption. A better insurance against next year is to devote more energy to economy. The Chancellor of the Exchequer referred with some indignation to the small credit which the Government have so far received for their efforts to cut down expenditure. I cannot help feeling, however, that they are themselves responsible for their troubles in this respect. Until the hard times came they were following the primrose path of easy expenditure, and it is not surprising that the country has been rather slow to recognise the Government's tardy efforts to cut down expenditure. I hope the Government will not be discouraged in their well doing, for I am sure that if they will persist and not be content to leave the cutting down where it has been left by the Geddes Report, but will go on along the thorny path, they will in the end reap the greatest reward for our national finance.

Mr. W. GREENWOOD

About two years ago I had the pleasure of addressing the House for the first time, and then it was with very great regret, after having listened to the introduction of a Budget which, to my mind, was destined to be the forerunner of a great deal of unemployment. To-night I feel very differently from what I did on that occasion. I have had great pleasure in listening to the outline of a Budget which, I think, will have just the opposite effect on employment. I believe the Budget of to-day will act as a reviver of our trade and industry and will be a tonic which has been long overdue. To introduce a Budget such as this requires the special characteristic of courage, and I must congratulate the Chancellor of the. Exchequer that he has shown that characteristic. I do not think I shall be drawing too much on my imagination if I include in my congratulations the Financial Secretary to the Treasury, who, I am sure, must have been of very great assistance to the Chancellor of the Exchequer in the preparation of the Budget.

I listened very carefully to the two criticisms of the Budget, first from the right hon. Member for Paisley (Mr. Asquith), and secondly from the right hon. Member for Platting (Mr. Clynes). In the first case, the soundness of the Budget was palpable. We were told by the right hon. Gentleman the Member for Paisley (Mr. Asquith) that it was such a sound canon of finance that there should be no remission of taxation unless there was a surplus that it was becoming quite a commonplace. I venture to say it is possible that a people may accept through generations certain axioms of policy with regard to finance which yet may not be altogether proved to be correct or sound views. I should like to read to the Committee the views of a man who lived a long time ago—this was in 1851. The man was Mr. Milner Gibson, and it is with regard to the criticism that this Budget is an unsound one that his remarks may be found to be appropriate. He said: And now I trust we are going to reap the fruits of that reduction of the expenditure and increase of income arising from a more sound commercial and financial policy, in the removal of some of those taxes which oppress the industry and prevent the employment of the capital of the country. I will say this, that I do not advocate the dealing with taxation entirely upon what I may he permitted to call the narrow grounds of whether there is a surplus or a deficiency. It may he said that it is more easy to make an experiment in our finance when we have a surplus than at a time when the income augments the expenditure. But the late Sir Robert Pool set an example which, I think, the present Government would do well to follow, of not basing our financial changes upon the mere fact of whether there is a surplus of money in the Exchequer, but upon a well-considered scheme of financial policy, to repeal those taxes that are the most oppressive to the industry of the country, and which in the greatest degree contract the enjoyments of the people. I want to see our taxation based upon something like well-considered principles, and even if there should be a deficit at any particular time, I see no reason why a Ministry should not persevere in endeavouring to carry out those financial arrangements which would enable them to remove oppressive taxes without injury to the revenue, and with great benefit to the people. The experiments which Sir Robert Peel made upon taxation are pregnant with valuable lessons to statesmen. I wish them to profit by those lessons, to see that you may reduce a tax without losing revenue. The hon. Member who has just sat down gave us a very clear illustration of where the law of diminishing returns has applied with regard to one or two taxes. I think he would agree with me that it would apply to very many more taxes which are imposed at the present time. The right hon. Member for Paisley said it was unsound in finance and that the Chancellor of the Exchequer was entering on a great task. It appears to me that since 1914 this country has been engaged all the time in taking very grave and great risks. You are bound to take risks in time of peace just as we were bound to take them in time of war. I remember a good many years ago that a man fell from a scaffold. He hurt himself very badly, so badly that he was becoming very black in the face. I knew nothing about medicine nor injured necks, but it looked to me that something required to be done and to be done quickly, so I got hold of his neck and pulled it very hard. Afterward his face began to assume a more normal expression, and the doctor said I had done just the right thing. I took the risk, and I am glad to see that the Chancellor of the Exchequer is doing the same thing with regard to this system of taxation.

The other criticism was from the right hon. Member for Platting (Mr. Clynes). His criticism was somewhat in the opposite direction, and he suggested that the financial policy of the Chancellor of the Exchequer was rather too sound. His suggestion would rather have been to make a levy on capital. He would raise the money in that way. I can never quite understand why people who talk about taking money from other people who have saved and earned it always call it "raising." It would be much better to call it by its proper name of "taking," because that is really what it is. At any rate, I imagine it would be much more unsound finance than any- thing that has been suggested by the Government in this Budget. I am very glad that the Chancellor of the Exchequer, along with his advisers, has come to the opinion that the policy of excessive deflation pursued by the Government in the last two years has proved to be wrong and that they have now decided that the best thing is to take the middle view. They have already decided to do that by refraining from paying off, for the next year at any rate, any part of the National Debt. I do not regret that for one moment. It is a very sound policy indeed, and those who claim that we in this country are not doing as much as we ought to do should at any rate remember what has been done already. Surely if it is very good business and sound policy to pay off a fair amount of debt, as we have done at times when our business and industry have been prosperous, it is only sound reasoning to say that we ought to delay that payment when our industries are m the bad position they are to-day.

I am sorry the Chancellor of the Exchequer has not seen his way to make an end of the Corporation Profits Tax. That tax is almost as bad in its incidence and iniquity as the Excess Profits Duty was. I hope before very long that the right hon. Gentleman will see his way to do away with it, I agree that the soundest policy is the Income Tax. I have always said, and I say again to-night, that to tax people on the profits they make is quite a sound policy. As has been explained by a previous speaker, the Corporation Profits Tax does not do that, and is not fair in any sense in its incidence. The Chancellor of the Exchequer referred to the exchange with America, and I rather gathered that he wished to impress us with the fact that, owing to the exchange being now 4 dollars 40 cents, as against 3 dollars 20 cents 18 months ago, we were able to do business much better with America. If that were so it would imply that those countries on the Continent of Europe which had adopted a different policy to ours would not be in so good a position. It is, however, rather singular in regard to the cotton trade that our purchases from America in 1921–22 show that the takings of cotton so far as this country was concerned were only 57 per cent, of what they were in 1913–1914. Those on the Continent of Europe were 67 per cent., the United States of America 97 per cent., and in regard to Japan they were 212 per cent. It will show you must not infer, because you have impoverished yourself by your policy of deflation, that you have put yourself in a better position for doing business than other countries of the world. They are doing just as well and just as much as we are. We have kept up our credit, and I am glad we have done so. No one more than I likes to see this old country standing, as it always has stood, on a very high pinnacle, but I am afraid we have overrated the importance of that particular point. I believe that in the policy the Chancellor of the Exchequer has adopted in his Budget, he is going perhaps as far as he is justified under all the circumstances of the case. I congratulate him on giving what will be a real help and filip to industry, and I hope very sincerely that it will tend to increase our employment.

Mr. REMER

I do not think the Chancellor of the Exchequer can complain of the chorus of congratulations which have poured on him from almost every portion of the Committee. When I come to analyse the criticisms which have been made—which were voiced in the first instance by the right hon. Member for Paisley, and those of the same kind which were made by the right hon. Member for the City of London (Sir F. Banbury)— that he was not this year paying anything off the National Debt, I cannot follow the argument which those two right hon. Gentlemen brought forward. In my opinion, and I have expressed it on previous Budgets, earlier Chancellors of the Exchequer have attempted to pay off far too much of the National Debt and more than the country could stand. Several reasons, sound in finance, could be advanced why the Government should not this year attempt to pay anything off the National Debt, but should be content with merely balancing the Budget. First, there is the statement made by the Chancellor of the Exchequer in his Budget speech, that in the last two years we have actually paid off£323,000,000 of the National Debt. If we pay off nothing this year we shall be adopting a measure of sound national finance. There are other reasons. There is the fact mentioned in the Budget speech that there are arrears of Excess Profits Duty which can be regarded as a sort of national reserve amounting to nearly£300,000,000, and we know that there are also large arrears of Income Tax, amounting to£100,000,000. These two added together seem to me to provide something in the nature of a national reserve amounting to£400,000,000. That is an argument why we should not this year attempt to pay off anything of the National Debt. There is a large amount of Allied debt upon which we are not receiving any payment either for interest or for capital, whereas we ourselves are allowing payments in regard to our external debt.

There is also the very material point that trade is starting to improve. There is a distinct improvement in the state of commerce, and the reduction in the Income Tax will just give the necessary impetus to trade to start not what is called a boom, but that steady flow of trade which is necessary for the full employment of the people of the country. The right hon. Gentleman the Member for Platting (Mr. Clynes) told us what the Labour party would do were they to come into power, and he indicated that if the Labour party plan were adopted, it would work speedily in dealing with the finances of the country. If I read his plan correctly, it would work very speedily indeed, because it would very quickly end the commerce of the country altogether. The most amusing criticism to which we have listened in this Debate came from the hon. Member for Harrow (Mr. Mosley). If I judge his speech aright, he is looking forward to that time when the Noble Lord the Member for Hitchin (Lord K. Cecil) takes his place on the Treasury Bench and appoints the hon. Member for Harrow Chancellor of the Exchequer. In those days, when we have honest politicians, the hon. Member will doubtless safeguard the Budget secrets in such a way that no newspaper, not even the "Daily News" or the "Daily Chronicle," will be able to secure them, One surprising thing about this Debate which must be commented upon is the entire absence of Members of the Anti-Waste party from those who have intervened. After the numerous letters and clippings out of the "Daily Mail" and the "Times" which Members of Parliament have been receiving, I think we ought to have had an explanation from some Member of that party as to their attitude on this particular problem. We ought to have had some explanation of why every morning we have been treated to charges of extravagance in expenditure which cannot be justified when we are told by the Chancellor of the Exchequer to-day that in this Budget he has actually reduced expenditure to a sum of£218,000,000. I have received something like 500 or 600 letters to every one of which I have sent a reply. I am told very few Members of the House have taken the opportunity of replying to those letters, but I have replied to mine, and I should like to read one passage out of the reply which I have sent to every one of my constituents who forwarded me this newspaper paragraph. I have written: I should like to make it quite clear that I am in complete disagreement with the Northcliffe Press. Their papers are stuffed full of dishonest misrepresentations and wicked lies. In every issue of their papers I could point out to you, both in the 'Daily Mail' and the 'Times,' statements which are contrary to the facts.

Lieut. - Commander KENWORTHY

What has that got to do with the Debate?

Mr. REMER

I am mentioning this because I have been asked by the "Times" and the "Daily Mail" to take some action with regard to this petition, which is, I want to say, quite dishonest and quite inaccurate, and I feel we are entitled to some explanation from those Members of the Anti-Waste party who may be in the House at the present moment. They should state their facts on the Floor of the House instead of using newspapers for purposes of propaganda. I feel very deeply that Members of the House of Commons should be subjected morning after morning to statements in the Press which are most abominable and of a serious kind, and I do say that the place to make such statements is on the Floor of the House instead of in the columns of certain newspapers. There is only one point in regard to which I am disappointed in the Budget. The Chancellor of the Exchequer said there was depression in trade and unemployment, and he referred to the privations of the middle classes, but he did not announce, as I had hoped he would, that he was going to put a tax on that£100,000,000 of imported manufactured goods which come in from foreign countries. He did not announce that there were many of those articles in regard to which, under the Safeguarding of Industries Act, impartial tribunals have decided that a good case has been made out. I had hoped that in the Budget Statement we should have seen an extension of the list to articles such as motor-cars, clocks, and musical instruments, which have done so much to provide Income Tax and employment and which have been so beneficial to our people as a whole. I had hoped that list would have been very materially extended, and would have enabled the people of this country to restore their trade much quicker than they would be able to do by any other method.

Mr. KILEY

Put down an Amendment.

Mr. REMER

I should like to add my voice to those of Members who have already pleaded with the Chancellor of the Exchequer and expressed their willingness to give him the full weight of their support in any means he can devise to further cut down the expenditure of this country and to maintain economy. It is necessary for all Members of the House who think in that way to give their support to the Chancellor in this respect, and I assure the right hon. Gentleman that any measure he takes in that direction will have the support of all Members who hold those particular views.

Sir HARRY HOPE

The concessions which the Chancellor is giving to the agricultural industry will be welcomed by all farmers and landowners throughout the country and their appreciation of the Chancellor's action will not be solely on account of the concessions themselves, but also because they will recognise that these concessions mean that the Government realise the hard circumstances in which the industry has been placed. Before the War, occupiers of land paid Income Tax upon one-third of their rent. During the War that assessment was raised to the amount of the rent, and then in 1918 the assessment was again raised to double the rent. In the change which has been made to-day I think the Chancellor of the Exchequer is only recognising the difficult state of affairs which exists. No doubt the profits of agriculture were high during the War, but since then a complete change has come about, and now the profits of farmers are much nearer what they were before the War, namely, one-third of the rent, than double the rent. The Chancellor of the Exchequer did not say that farmers were still to have the option of coming under Schedule D. I only hope the Financial Secretary to the Treasury will be able to announce that that option, which occupiers of land have always had, will still be open to them, and that if they prefer to pay Income Tax under Schedule D they will be allowed to do so. I do not think the concession which the Chancellor of the Exchequer has announced to-day will result in much financial loss to the country. The right hon. Gentleman said that in a few years it might amount to 2½ million pounds, but I know very well that certainly in Scotland there are many farmers who, instead of showing their books, will prefer to pay upon the rent, even if they have not made that amount of profit. That arises because the farmers do not want to show their books. There is a natural reticence against divulging what they are doing, and I am quite sure that in very many cases, where profit has not been earned equivalent to the rent, the farmers would rather pay Income Tax on that sum.

In the estimate of figures which is before us to-day, I see the money to be spent on the Road Fund is increased. There is no burden which presses harder on our country districts than the enormous cost of maintenance of country roads. Every year increased damage is being done to our roads by traffic from outside the country areas, and yet the residents in those country areas have got to bear the expense. I hope this Road Fund may be kept up to such a height as to compensate the ratepayers for the extra damage which this new motor traffic is doing to our roads. I think it is only fair to lay down the general principle that the people who use the roads and cause the damage ought to pay an equivalent sum for it. Criticism has been made to the effect that this Budget is an unsound Budget, but I think at a time like this it is essential to keep the Income Tax as low as possible. I think that enormous Income Tax of 6s. in the£ is a very great deterrent to any man investing capital in industrial concerns, and therefore, if the Income Tax is reduced, it is a good thing. Then again, in regard to 4d. in the pound off tea, I am sure the women voters of this country, who bulk so largely on our electoral roll, will welcome this change. Altogether I very heartily support this Budget, and think the Chancellor of the Exchequer is to be heartily congratulated upon it.

Sir J. D. REES

It was my hope, if not altogether my expectation, that when the Chancellor of the Exchequer had made his statement he would be hailed as the statesman who had destroyed the Departments, reduced the Income Tax, and diminished the duty upon beer, but the Departments have as many heads as the Hydra, and it takes someone of super-herculean strength to encompass their destruction The Chancellor of the Exchequer has, I think, done all that a Chancellor may for, the present, but I confess I hope his efforts in that direction are only an instalment and that he will not lay aside his club until he has reduced the dragon's heads by a large number. As to the Income Tax, he has reduced it, and he has taken 4d. off tea, if he has not diminished the beer duty. I do not impute it to him for doing that, that he has shown any improper preference, as I should think it, for the teetotaller as against the other interests, because 4d. off a lb. of tea is a very sensible reduction, whereas diluted with 36 gallons of beer it would be a positively negligible quantity.

The right hon. Gentleman has done with the surplus at his disposal the very best he possibly could, and I for my part congratulate him heartily in that, having a small surplus to dispose of, instead of attempting to palter with the subject in giving 2d. to tea and 2d. to sugar—and tea and sugar are intimately connected, although we do not all take them together —he did the right thing and made such a reduction in one article of universal consumption as is really of sufficient magnitude to be distributed over the price put on the article by those who distribute it as shopkeepers amongst the public. I was in the Committee when the right hon. Member for Paisley (Mr. Asquith), who criticises very readily, was Chancellor of the Exchequer and took one penny off tea, and nobody thanked him. Tea is made up in quarter-pounds, worth so many pennies, and you cannot spread a reduction of a penny in such a manner as to be felt over a quarter of a pound. Then mark the difference. The present Leader of the House, when he was Chancellor of the Exchequer, took off 2d. Now 2d. was an amount you could make felt even upon a quarter of a pound of tea, and now we have another Chancellor who, disregarding the penny of the right hon. Member for Paisley, and improving upon the 2d. of the right hon. Gentleman, the Leader of the House, has made it 4d., for which not only the tea producer and the tea distributor, but also that far more important individual the tea consumer, may, whenever he sips his tea, thank the Chancellor of the Exchequer, and the Government of which he is a member.

The right hon. Member for Paisley laid it down as a canon of taxation that you must not remit taxation unless you do it out of an excess of revenue, and he accused the Chancellor of the Exchequer of not taking long views. I am heartily glad the Chancellor of the Exchequer did not take long views, seeing that a generation lasts, I think, for about 25 years, and that we have for a decade, or for the greater part of it, borne the burden of war and its aftermath. Is it not time that this generation should have a little relief, and that something should be left to the next-generation to meet—they who are going to be the heirs of all that we have preserved for them. I heartily congratulate the Chancellor of the Exchequer on not having taken a view so long that it would overlook the whole of the generation to which he belongs. I think it becomes him to have regard to the empty pockets of the suffering people of his own day and generation, and I would point out that if larger reductions in expenditure were required—as I think they are with all my heart—it was hon. Gentlemen who sit behind the right hon. Member for Paisley and the right hon. Member for Peebles (Sir D. Maclean) who protested against the reductions of the Geddes Report, and succeeded in destroying recommendations which, had they been accepted in their entirety, would have allowed for the most magnificent reductions in taxation.

10.0 P.M.

Then the right hon. Member for Platting (Mr. Clynes) spoke, it seemed to me, in a most ungrateful vein. He had no regard for what was done for the agricultural or the urban interests. I speak for the urban interests, and I feel for the agricultural, and I believe the Chancellor of the Exchequer did his best for both. The right hon. Member for Platting said that if his party had the financial control of the country, they could right everything. I thank my stars they have not got it Always their finance consists in taking everything off the defences of the country, and piling all the results on to social reform. It was owing to that method of finance that this country and Europe became involved in war. The Prussians would never have challenged the world if they had thought we would have taken a hand. It was because we were reduced to so small an army that they thought we were a negligible quantity, that we are saddled with the loss of a million lives and a debt of£8,000,000,000. I do believe that it will be absolutely impossible for this country to carry on with an expenditure even to the amount which is provided by the Chancellor of the Exchequer. It will not be possible to go on with Budgets of£800,000,000 and£900,000,000, and, although I am supporting this with all my heart, and congratulating the right hon. Gentleman, believing he has done all that a man could under the difficult circumstances, I hope he will not be satisfied until he has laid a train for very far greater reductions in expenditure than any he has been able to accomplish to-day. Of course, it should be realised, I think, especially when criticism comes from the opposite Benches, that although the War may have been the chief factor in bringing about our present financial plight, nevertheless the War expenditure is a waning item. Every year it gets less. It will shortly disappear, except in the form of pensions, and in the form of pensions it will disappear within the lifetime of this generation. But there is an ever waxing and increasing expenditure which clutches upon every bit of taxation which might be remitted, which never rests until it has added to the burdens of the country, and that is the expenditure upon social services. If hon. Members opposite want to reduce taxation, it is there that they will look for savings, and I see no indication on their part so far to act upon what is an obvious axiom.

Then it is suggested that a reduction in the Income Tax is of assistance to the rich—if there be any rich left—and not a help to the poor. If the 97½ per cent, of the 20,000,000 of wage-earners in this country be considered for the moment to be the comparatively poor, all I can say is that that 97½ per cent, of the wage-earners of this country are benefited far, far more by a reduction of 1s. in the Income Tax than is the actual payer of that impost. The Income Tax payer— there are 2¼ million Income Tax payers out of all the people of this country, numbering 45,000,000—is bled to death, and it is because he has no savings to invest, and because he has no money to use for employment, that unemployment is rampant amongst us. I see the hon. Member for Bodmin (Mr. Foot) who has lately joined us. I think I detect upon his features a smile of incredulity at my statement. When the hon. Gentleman has been here as long as I have, in spite of the creed with which he starts, I think he will come to the same belief, the obvious truth to which I have now ventured to give expression. He represents an agricultural industry. There is no one representing an industrial constituency who can possibly doubt the truth of what I say. The manufacturer is bled white. He has not money to renew his machinery, or re-convert it after the War. None of the class which can put their investments into businesses in the country have any money left to invest. With an Income Tax of 6s., and a Super-tax running up possibly to 5s., no one has any money to invest.

The consequence is that unemployment is rampant; misery is rife and increasing amongst us. I welcome this 1s. reduction with all my heart, not only for what it does, not chiefly for the rich, but for the sake of the wage earners of this country, and because it is an earnest of further reductions which I feel sure my right hon. Friend contemplates. It is a proof, if proof were needed—and I am sure it is not—that he does not accept that poisonous fallacy, that shallow folly and falsest doctrine, that by making the rich poor you can do anything but make the poor poorer. One thing I regret in the Budget, I am sorry that justice has not been done to a taxpayer whom I must apologise for mentioning to hon. Gentlemen opposite—I refer to the Super-tax payer. He really is almost the keystone of the financial arch. He is the man who had the money to make investments and keep industries going, but nowadays it has been taken from him. First of all it went in Death Duties, which were most valuable to the State—that is the money that paid them. That money it was that kept the wheels of industry going. Next to the money of the Super- tax payer, who put his savings into business, comes the money of the Income Tax payer. He has some relief, but he is still treated as if he were idle rich and should be deprived of his last shilling. He and the Super-tax payer were the very keystone of the financial arch. While they are bled and treated as fair game for plunder, industry will never lift up its drooping head, and we shall never revert to that prosperity that we had before taxation was of a confiscatory character and was then spread fairly, or with moderate fairness, over the 45,000.000 inhabitants of this country. I am not going to apologise for what I am saying, for I am only stating a few very simple, evident, economical, and financial facts, and I believe a knowledge of them, in spite of everything said and done by the misleaders, called leaders opposite, is spreading among the intelligent and patriotic workmen of our country.

On the point of the reduction of expenditure in the Departments, I wonder whether hon. Members—I am sure they did, most of them—read a very interesting letter by Sir Fleetwood Wilson, who has had a long experience in the public service. He pointed out the other day in that letter to the papers, and we know it is true—I spent a quarter of a century in the public service, and therefore ought to know something about it—Sir Fleet-wood Wilson says: So long as you have offices, rooms, chairs and desks, you will never lack officials to occupy them. You require far more drastic treatment of this problem than has ever been applied to it. If I may venture to give a personal experience, may I say that during the War I had charge of a Department, with about 525 subordinates, mostly women, who worked exceedingly well. It went out that this Department was suitable for abolition, but my subordinates showed the most excellent reasons why this should not be so, and these reasons I was totally unable to answer. I remember one clerk who had a talent for research pointing out that in the United States at the present moment there are clerks liquidating the claims of the civil war. I arrived at the conclusion that absolutely the only thing to be done in such a matter as this was to fix a date on which the Department came to an end, and after that let the business somehow settle itself, as it would do. Although I cannot compare my small experience with that of the great statesmen on the Treasury Bench, I do recommend that method as being the proper spirit in which the Geddes Report should be read and its recommendations carried out. The expenditure of the millions involved here does not seem to me to be necessary. If you had less offices and less officials, I honestly believe—and I am anxious to speak impartially, being a bit of an official myself—the Chancellor would get his business brought to him just the same as now, and he would earn the gratitude of innumerable taxpayers of the country. I trust also he will abolish the Corporation Profits Tax. It is perhaps absurd to mention this and suggest further reductions at this moment. Nevertheless, I do venture to urge upon the right hon. Gentleman that this is a tax upon investing enterprise, as probably all taxes are—but the peculiarity of this tax is that it hits that most valuable individual, the ordinary shareholder. He is a man who ought to be comforted and stayed. Anything that discourages him discourages the general provision of capital, and is, therefore, to be deprecated.

May I for a moment refer to the taxation on beer. I have said that it would be very difficult for the Chancellor to make any sensible reduction in a tax which is so overwhelming in its amount as the tax upon beer. Nevertheless it is an exceedingly serious matter, and conducive to a general, and, I think, a most justifiable discontent. For beer which you could get for an average of 2½d. per pint before the War, you now pay an average of 7d., rising, in the case of the tied houses of the Government at Carlisle, to something like 9d. per pint. The Government ought not to be in the beer business. I have always said they should give it up. The Home Secretary has fallen far short of the ideal that I have laid before him and the House in that respect, and he has declared the intention of the Government shortly to acquire further houses and to go deeper into the slough of the beer trade at Carlisle. Those who charge it against the brewers that they are profiteers forget that malt has gone up 82 per cent., hops 250 per cent., and other materials concerned in the production of beer something like 70 per cent., besides the increased cost of labour. With these facts before the House it must be remembered it is not the brewer who is to blame for the high price of beer, nor is it altogether the Government. It is the terribly heavy tax upon the top of all that has combined to raise the price of that staple and most wholesome drink of this country in a manner which I regard as most unfortunate. I hope my right hon. Friend will take this into account. I trust we shall receive from him, as an instalment of reform, that he will persuade his brother Minister, the Home Secretary, to get out of the business of Carlisle. The Chancellor of the Exchequer has displayed courage in the way he has dealt with this subject, but I would like him to go a little further, and fund the war pensions. Why not? It is the expense of the War, and it would be far easier for this generation if the charge was spread over a period of 50 years. It would be a perfectly fair and a most reasonable adjustment to put upon the next generation a fair proportion of the cost of the War, and I press that point upon the attention of my right hon. Friend. I thank the Chancellor of the Exchequer for what he has done in regard to postal charges, and I think both he and the Postmaster-General should be thanked for this concession.

There is one other subject I wish to refer to, and it is the Entertainments Duty. The right hon. Gentleman the Member for Gorbals (Mr. G. Barnes) said he had no sympathy with the plea for the reduction of the entertainments tax, but that is not quite conclusive. He might not sympathise, but he should remember that these entertainments are the amusement and the play of the poor. A tax of this discription has to be spread over very small entertainment charges, and that is on a totally different footing to a tax on a 15s. stall or a£2 2s. box. It is a totally different proposition, and it presents a difficulty which is very hard to face. I think the cinema proprietors would be quite willing to pass this tax on, but the difficulty is that they cannot. It is like taking a 1d. per 1b. off tea because you cannot spread it over the smaller packets. In the same way you cannot spread the Entertainments Tax over the small charges made for these cheap entertain- ments. Therefore I urge the Chancellor of the Exchequer to take into account the fact that this tax is not upon the same footing as other taxes, and it cannot be passed on, and I hope he will take that fact into consideration when he prepares the next Budget.

The only other word I wish to say is this: On innumerable occasions in this House we have had before us the cases of those who are, afflicted, the halt, the lame and the blind, the consumptive, and everybody suffering from disease and trouble, and we are all very sorry for them. The House always takes a sympathetic interest in such cases, and they have received all the attention and the help that it is possible to give them. My last plea is for the man with two legs and two arms, who works, and who is healthy, and who has everything on his back. He is the man who has no comforter, and who is reduced to poverty in order to provide these things for everybody else. My plea is for him, and on his behalf I thank the Chancellor of the Exchequer for the reductions he has been able to make in taxation, and I urge the right hon. Gentleman to continue those efforts and to make even more next year, when I hope I shall see him in his present position.

Mr. HILTON YOUNG

It is not my intention to intervene for more than a very brief time. It is far from my intention to try to reply to this Debate at large. Mine is the humbler task of seeking to give such information as I can to the best of my ability in reply to the various questions that have been asked the Treasury in the course of the Debate, and also to clear away one or two misconceptions that may have arisen as to the nature of the Budget proposals. The hon. Baronet the Member for East Nottingham (Sir J. D. Recs) has covered the whole range of the Budget, and has regaled the Committee with his accustomed humour. The point on which he was most forceful was in the region of the Beer Duty and, it must be said, that the source from which so much revenue was raised in the course of last year has proved, whatever may be said of other sources, undefeated. The Estimate put before the House last year was for a eon-sumption of 4,000,000 barrels. In spite of the prolonged bad condition throughout the year, the output was a little under I 24.7 million barrels more than the Esti- mate and the actual consumption was only a little below 24.4 million barrels, so that, in spite of the shocks of adversity, this admirable contributor to the revenue has always maintained its own. Under these circumstances, I am sure the Committee will not think we are overestimating our prospects for the ensuing year when we reduce the consumption below that of last year to the smaller figure of 20,000,000 barrels. I think our experience in the past year shows we may rely on it that that estimate will be realised and we may continue to depend on this excellent source of revenue.

Questions have been asked by several lion. Members, and very naturally so, as to the effect of the proposed reduction of the basic rate of Income Tax by 1s. on both the lower and higher ranges of the tax—a question put last, I think, by the hon. Member for Farnham (Mr. A. M. Samuel). When the basic rate is reduced by 1s., it does not, unfortunately, follow that the Income Tax of all of us will be reduced by 1s. in the£. That would be too good to be true. I think the simplest way of expressing the general effect of reducing the basic rate of Income Tax by 1s. is by saying that it results in the reduction of all our Income Taxes by one-sixth. If our assessments are on the same basis as in the preceding year, our Income Tax is reduced by one-sixth. That is the general effect of the reduction throughout the range of the tax In order to make this effect more clear to hon. Members, I think it would be useful that a table of effective rates at the new basic rates should be prepared, and should be available for hon. Members, and that will be done in the course of a very short time.

A question has been raised by one or two hon. Members, and in particular by the hon. and learned Member for Cambridge University (Mr. Rawlinson) and by the hon. and gallant Member for Bury St. Edmunds (Lieut.-Colonel Guinness), who pressed with great force and most persuasive reasoning the hardship inflicted by the Corporation Profits Tax upon various corporations instituted for philanthropic or other beneficial purposes, not for the purpose of making profits. The Committee will not, I know, expect any definite pronouncement from me upon that topic on the spur of the moment and without consideration, but I have had an opportunity of considering this matter and of bringing it to the attention of the Chancellor of the Exchequer, and I think I can say at the present time that sympathetic consideration will be given to it for the reasons which have been advanced. It will occur to hon. Members who approach this topic that, primô facie, one distinction suggests itself as a means by which companies which it is thus desired to relieve may be distinguished from other companies, namely, that it appears, at any rate on first consideration, that the class of companies which it is desired to relieve is that class which is exempted from the use of the word "limited" in their title, and I would only suggest that that may prove to be the region within which any relief which it is desired to give might be extended.

A question was asked by the hon. Member for Stirlingshire (Sir H. Hope) as to the precise effect of the proposed relief to farmers in their assessments under Schedule B. While it is proposed to grant relief by reducing the artificial valuation of profits on the annual value, it is no part of that proposal to withdraw from the farmer the option to come in, if he pleases, under Schedule D. So far from that being the case, I think it will be agreed, by all those who have the fair taxation of agricultural interests at heart, that the direction of reform on this region should rather be by way of abolishing these artificial assessments, and of including all agricultural interests under the practical and reasonable assessment of Schedule D. That was the recommendation of the Royal Commission. The difficulty that lies in the way, of course, is the difficulty experienced by small farmers in grappling with the intricacies of accounts; but, on the other hand, it is undoubtedly in the interest of farmers themselves that they should be encouraged to keep accounts, and therefore I say that, if we are to look in the future for any development in this direction, it would rather be by way of extending Schedule D as applied to agricultural interests, and not by any means limiting it.

There are two points which I can mention which cover a rather more general and possibly a little more controversial field. The provision for Supplementary Estimates has been, I might almost say, strongly criticised by the right hon. Gentleman the Member for Paisley (Mr. Asquith) as inadequate. I will certainly no more than any other reasonable man, stand at this box and say it is absolutely certain that any supplementary provision that we fix now should under no conceivable circumstances be exceeded, but I am prepared to say that owing to the changing circumstances of the times, owing to circumstances which it is possible to specify, a greatly reduced provision of Supplementary Estimates this year is by no means unreasonable. In the first place the great size of the Supplementary Estimates in the year's closely succeeding the War was due principally to the difficulty of estimating under circumstances which were novel and of which there was no previous experience. In the course of time we have gained experience and we can estimate more closely. In the second place, the reason why the Supplementaries were so big in the post-War years was that financial control had been relaxed during the War. We financed on Votes by Credit. It is only by degrees that we have got back from loose finance by Votes of Credit to more accurate finance by Estimates, and we are still enjoying the benefits of that increasing financial control. That is another reason why it may be expected that Supplementary Estimates will be less.

Finally, disturbed as the circumstances of the world still are, great and often calamitous as the unforeseen and unforseeable circumstances still are, which may occur to upset the Budget of the year, still year by year the extreme instability of War conditions is lessoned. Less catastrophic contingencies we may reasonably hope to be expected in the course of the years as they pass, an influence which, of course, tends towards the certainty of the Budget Estimate, and a reduction of the scale of supplementaries. The Committee will no doubt remember that it is an old and almost unbroken procedure that the bulk of the Resolutions, and particularly all the essential Resolutions, should be obtained at the end of the first day, in order to prevent confusion in the trading system of the country and in order that you may begin sharply the new taxes and the changes in the old taxes. The last Resolution, a sweeping Resolution, that it is expedient to amend the law, is kept till the second day. That Resolution is so wide in its phrasing that it allows a general discussion of all subjects in the course of to-morrow's Debate. I would therefore represent to the Committee that it is desirable that we should get these Resolutions to-night at a reasonable hour. There will be full opportunity to-morrow to continue the discussion, and each Resolution can be discussed in detail on Report, and, of course, the substance of all that we are doing is discussed again on the Finance Bill.

Sir CHARLES OMAN

I do not propose to address the Committee on generalities or epigrams, or in wonderful mixed metaphor such as that which foil from the hon. Member for East Nottingham (Sir J. D. Rees), who talked about bleeding corner stones to death—a phrase which perhaps will be remembered in the archives of this honourable House. I have only one small point to bring before the Chancellor of the Exchequer and that is to appeal to him to see whether he could not spend a very small sum of money on a matter upon which he did not touch, namely, the reform of the British coinage. Three years ago his predecessor debased the coinage to 50 per cent, purity from 95 per cent, purity. That was done because silver was then 88d. to the ounce. It has now gone down to 34d. to the ounce, and has remained stationary for more than two years. The great outflow of coinage which was going on has stopped. Now that the demand, except for colonial purposes, is very largely at a standstill, could not the right hon. Gentleman do something towards resuming the old purity of the standard and prevent us from receiving those horrible pieces of coinage of which I have sent the right hon. Gentleman a collection? Some of the collection had turned brown, some green, and some black. The King's head had flaked off, while the rim had taken its departure from another set. These collections were a disgrace to any coinage. Since the time of Henry I the British coinage never presented such an unlovely appearance. It is entirely caused by the bad mixture of silver and nickel alloy. With silver at 34d. to the ounce, and only small coinage going on, it would be quite possible to resume, if not our complete ancient standard, at any rate, a standard more approaching that which our Colonies have recently adopted. The South African coinage is now 80 per cent, pure, and the Canadian coinage 90 per cent. pure. The amount of silver which is being issued at present is comparatively small, and it is for the sake of the old historical British coinage that I make this appeal.

Sir COURTENAY WARNER

I do not wish to detain the Committee, but only to find fault with the statement that it is a custom to pass these Resolutions at once. It is only a custom in this way, that usually they come into force at once. This Resolution is to come into force in 15 days; therefore, I do not know that it applies to to-night.

Question put, and agreed to.