FINANCE BILL.

HC Deb 23 July 1924 vol 176 cc1343-419

Order for Third Reading read.

Motion made, and Question proposed, "That the Bill be now read the Third time."

Mr. J. HOPE

When any Budget comes before this House there are two questions, one of which it is usual to ask the Chancellor of the Exchequer. One is "How will he get it?" and the other is " What will he do with it?" Happy is the Chancellor of the Exchequer who has only the latter question to answer—what will he do with the surplus? I think this House will recognise that both the Chancellor of the Exchequer and the Financial Secretary to the Treasury are men of great ability, but I cannot say that in this Budget their ability has been very hardly tried. There is nothing easier than to spend a legacy which the wisdom of others has bequeathed; and there is nothing pleasanter than to distribute lawfully money which you have not earned. However, I do not grudge the Chancellor of the Exchequer and the Financial Secretary to the Treasury the satisfaction which they must have felt during the last two or three months. I know that it must have been very pleasant for them to have realised that at the gatherings of the faithful throughout the country their followers were told to open their mouths and enjoy the extra sweets which a good Chancellor and a kind Financial Secretary to the Treasury had given them. I do not grudge them that satisfaction, hut I would ask them what of the immediate future? There is a fog which lies in the future that no question to the Chancellor or to the Financial Secretary to the Treasury has yet dispersed. According to the statement of the Chancellor of the Exchequer, he budgeted for a surplus on the working of the present year, on the present basis, of £4,000,000, and I observe to-day that Supplementary Estimates have been presented to the amount of some £3,000,000. I think that I must ask the Financial Secretary to the Treasury to say whether he regards that as the limit of extra commitments of the Government during the present financial year, or whether he has revised the estimate which the Chancellor submitted at the end of April?

Further, I would ask him with regard to the next financial year. The Chancellor estimated, on the present basis of yield, that when the effect of his reductions was fully apparent there would be a loss of revenue of not merely the £4,000,000, but of some, I think it was, £12,000,000 or £13,000,000 more next year. I would ask him there again whether, in view of the further commitments of the Government, that figure can be adhered to, or whether, as many have thought, allowing for the present yield of taxes and making such an estimate as we can of the commitments which the Government are entering into in this year's programme, there would be a deficit in the year 1025–26 of something nearer £40,000,000 than £17,000,000. Incidentally I would ask this question: In the revenue up to now there has been a considerable item from the German Export Duties. They have been reduced from 26 per cent. to 5 per cent. Does the Financial Secretary to the Treasury consider that that 5 per cent, will be a permanent source of revenue or does he hope for more, because it must he remembered that a miscellaneous revenue, which is largely the result of the sale of War stores, will probably come to an end this financial year, or that a very small remnant is likely to be realised in the following year?

In view of the doubtful character of next year's Balance-sheet, some sinister surmises have been cast about as to the intentions of the Chancellor of the Exchequer. Some think he is prudently discounting the estimates of his advisers, and is really counting on a larger surplus in order to present to the House a more popular Budget next year. Others think he is deliberately working for a deficit in order to justify some new and drastic plan of taxation. I thank it is true that most men prefer to he thought more wicked and more clever than they really are—I am sorry the Chancellor of the Exchequer is not here to listen to the kind things I wish to say about him, but I know he is engaged elsewhere—and I have no doubt the right hon. Gentleman would be glad if we were to consider him as a sort of blend of Macchiavel and Bobespierre. I, personally, do not regard him in that light, because I have seen in the Chancellor of the Exchequer symptoms of a latent humour which, as a rule, is alien to real malice, and I suspect his design is simply this: he has seen his way, owing to what we have left him, to produce a popular Budget this year and he is letting next year take care of itself. But as long as the answers of the Treasury are so vague as to the probable course of events next year, he need not be surprised if these rumours go forth, and should they continue, I am afraid they are likely to shake that confidence the maintenance of which I am sure the Chancellor has quite sincerely at heart. A good deal has been said in the course of the Budget discussions as to the proportion between direct and indirect taxation. I do not propose to elaborate that point at length; I am rather disposed to agree with the right hon. Gentleman the Member for Paisley (Mr. Asquith) that its importance has been exaggerated, and that for two reasons. [HON. MEMBERS: "Speak up!"]

Mr. FERGUSON

We cannot hear a word.

Mr. HOPE

I would ask the hon. Gentleman to come nearer to me, The first reason is because it is difficult sometimes to distinguish between the two and the second is because direct taxation percolates just as much to others, besides those on whom it is first levied, as does indirect taxation. There is a current fallacy that while indirect taxation percolates to the consumer, direct taxation affects only those who are subject to the immediate assessment. I hardly think that view can be very widely held within this House, and, in a sense, I am almost ashamed of arguing the point, but it is very widely held outside. Many think that when they have put taxation on the rich direct taxpayer they have done something which is good in itself by relieving him of some of his superfluous wealth and that they have hurt nobody else. Nothing could be more fallacious. Direct taxation must and does pass on, so long as men do not hoard their wealth. If they spend it, those who are the subjects of direct taxation reduce their expenditure and that reduced expenditure is passed on to some producer, somehow.

Let me give an example of how this works. I do not know whether hon. Members realise what the position was immediately after the War, and to illustrate it I will take the instance of a man with a large nominal income, which we will call £20,000 a year. That man before the War had something over £18,000 year to spend. During the last years of the War and in the two years immediately afterwards he had not £18,000 but £10,000 to spend, and that £10,000 had only the same purchasing power as £4,000 had before the War. So that this man, who was accounted rich, suddenly found his purchasing power reduced to less than a quarter of what it had been before. The result was that somebody besides himself suffered. He was inconvenienced, but others suffered. It may have been his charities which suffered; it may have been that he reduced his outside staff or the number of his indoor servants; it may have been that he ceased to buy the car which he was accustomed to buy before, but in each of these cases, while he may have been inconvenienced, somebody else suffered. Can hon. Members who think about it dispassionately deny that the high taxation which is at present prevailing is responsible, at any rate in some degree, for the unemployment from which we now suffer so seriously?

There is another class of rich men. I need not say I am very far from that class myself—I wish I belonged to it—but I know for instance a man with a very large nominal income, an income of well over £50,000. That man was accustomed to put a very considerable sum, £10,000 or £15,000, into new speculative enterprises. If he lost he shrugged his shoulders: if in the end the money fructified, naturally, he was pleased, but in any case employment was created. That man—and there were many like him—is able to do so no longer and therefore I would beg of hon. Members to realise that even the idlest and most selfish rich do involuntarily give employment and if they are hit by direct taxation, as I say they may be inconvenienced, but it often means taking away the livelihood of others. I say, "Tax, if you will, those superfluities which give profit outside this country." Probably it is impracticable, but I should like to see an absentee or passport tax, to catch some of the wealth which goes annually to the Riviera and Egypt. Probably it would not work can see great difficulties in the way, but I should he glad to see such a plan carried out if it were possible. If it be not possible, then I say, "Tax those luxuries and superfluities which come in from abroad."

4.0 P.M.

I know the argument that it matters not whether money is spent within a country or not. Economists argue that it all comes back in some form or another against exports or services. It may come back, but when it comes back, how it comes back and who benefits by it if it does comes back, nobody can say. If a man loses £1,000 at a gaming table abroad, that £1,000 presumably goes to the management of that gaming table. They do something with it, and in the end some debt due in England may be paid with it, but, whatever economists may say, I am quite certain no man of common sense would say it is the same thing to lose £1,000 at Monte Carlo as to spend £1,000 in Coventry or in Glasgow. What is certain is that the money does not fructify in this country in the meantime. Therefore I would say, "Tax luxury imports." I think the sparkling wines tax is a very good case in point. That is a perfectly just tax, and if money is to be raised I prefer that Epernay and Coblenz should feel the burden of the tax rather than Burton or Glenlivet. I would go further; I would say that there should be a tax upon such things as imported lace and silks, because if money is to be raised it is better the effect of the tax should be felt at Lyons than at. Nottingham would say the same as to ladies' ready-made clothes. I am no authority on this subject, but I would rather, if such a tax were put on, that the Rue de la Paix suffered than Bond Street. So would I go through the whole list of luxury taxes. I think they are defensible on revenue grounds and on sumptuary grounds, and, if they have incidentally a protective effect, I do not think that they are in any way the worse for that. I would, therefore, by this indirect taxation, rather than by direct taxation, as far as opportunity and practicability allow, make the luxuries of the rich subserve the employment of the poor of this country. What does this Bill do for unemployment? As far as the remission of the Tea Duty is concerned, nothing in this country. The remission of the Sugar Duty, I suppose, does something with regard to confectionery, and, perhaps, some manufactured mineral waters. The remission of the Corporation Profits Tax may, perhaps, do a little.

But there are two serious matters in which the working of this Finance Bill will be dead against employment. First of all, it imperils our Dominion markets. I do not know whether hon. Members realise how important they are in the present condition of the world. This is the kind of thing that I hear in my own constituency: "Trade is bad. Some of our old customers cannot buy, because their money is so depreciated that it is impossible for them to pay in English sterling. Others will not buy. There are tariffs in America against us. But we have always hitherto been able to depend upon our Dominions and especially on the Australian preference. That has saved us up till now, and that we look to in the future whatever the condition of Europe may be." But are we to take always and give nothing? Can we rely on these markets if we make no overtures to our own people beyond the seas? I cannot conceive a more calamitous thing for the trade and the revenue of this country than that any of our Dominions should be tempted to enter into fiscal agreements with ether parts of the world, and yet, if we persistently slam the door and refuse to give them anything in return for what they give us, sooner or later, in spite or all patriotic sentiment, that must be the natural effect of what we are now doing.

Then with regard to the New Import Duties. It is very difficult to understand the mentality of those who have so lightly struck them off it is not as if we get anything in return. When Cobden negotiated his treaty of 1860, it is true that he dealt a deadly blow to the silk industry, but, looked at from a purely materialistic point of view of the whole of the trade of the country, undoubtedly for several years afterwards he did obtain a valuable entrance into French markets as a consequence. But here you are sacrificing revenue and industry without gaining anything whatever. In the same way, it has sometimes been held that the result of protective duties was to force up prices and admit of the creation of rings Nothing of the kind can be alleged here. Competition has gone on freely, production has increased and prices diminished, and a valuable industry has not only been saved, but benefited through the worst of times. Yet, for no business reason, the whole tax and all the profit which it brought to the industry are swept away simply for the sake of theory and nothing else.

I can only explain it on this theory. It has not been done as a matter of business, but in consequence of what I can only desribe as a, perverted religious dogma. The time was when, in this country and you may say throughout the world, religious uniformity was enforced by the most terrible sanctions, and in the 16th century in this country all who did not conform were liable either to combustion or vivisection according to the Government that was in power. If a heresy appeared harmless in its fruits, that was no reason whatever why it should be spared, because the more harmless it appeared, the greater mischief might be thought to be latent within it. Those times have changed, but the spirit has not changed, and it found new embodiments in the. 19th century. In the 19th century many men got somewhat indefinite about their religious dogma, but, as dogma is a necessity to most men, they embrace the new creed of economic dogma instead. Personally, my religion supplies me with dogma enough not to have to run to economists for more. But that was not so with many men in the 19th century, and is not so now, and they embrace the new faith with keeness and fanaticism. All the characteristics of their predecessors in the religious field have been repeated and are repeated now, and I think I can see such characters as Torquemada, Topcliffe and Praise-God Barebones all rolled up together under the genial personality of the right hon. Gentleman the Member for Paisley (Mr. Asquith) or the more austere embodiment of the Chancellor of the Exchequer. They rival, and, although their methods are not quite the same, they, if anything, exceed the enthusiasm and fanaticism of the past. No inquisitor, no zealot of the Synod of Dort, no supra-lapsarian Cameronian Minister has shown more fury in defence of orthodoxy, and, with regard to these particular taxes, they used a ruthless syllogism, "The Import Duties are heterodox; heterodoxy has to be put down; therefore these taxes must be put down." And considerations of trade, considerations of revenue, and considerations of the men they displaced are nothing, because this dogma bears them down.

Nay, I will go further, I think they act in the spirit of a privileged theocracy. Hon. Members may have heard of one test of religious orthodoxy being quod semper, quod ubique quod ab omnibus." That cannot apply to the dogma of free imports. It is not held everywhere; it is not held by all; it was not always held. According to its votaries, Britain is a land of promise, Britain alone has the true faith. All the outer world lies in the shadow of darkness, unless they admit Holland with its 5 per cent, tariff as a kind of Samaria. But, for the rest, we and we alone are the fortunate people. We and we alone are the Chosen Land. Manchester is the Holy City, and Deans-gate is a Via Sacra, and I suppose the Temple is to be found in St. Anne's Square. They copy ancient precedents in all but one thing, and that is this: Whereas the worship of the God of Israel did not demand human sacrifice, the worship of the god of Cobdcn does. Now I would ask the Government; how long; they are going to adhere to this theory? They are not bound to it by their own principles; they are not bound to it by the practice of their Labour friends overseas. There is nothing in Collectivism that lends itself to free imports, and, if we can imagine that the moans of production in whole or in part were taken into the bands of the State, I am certain that the. Government would have to see that the produce of the State had the same reasonable protection that we demand for it now. They are not justified by the practice, as I see it, of any of their Labour friends abroad. Is the Labour party in Australia in favour of free imports? Is the Labour party in any country abroad in favour of free imports? Here and here alone hon. Members who call themselves Socialists are traditionalists and bound by an antiquated tradition of the worst kind.

This dogma of free imports was allied to other dogmas—the dogma of free trade in labour, the dogma of laissez faire all round. Those dogmas have gone, and no party now denies that the interference of the State, wisely conducted to force specific objects, may be justified, even if it interferes with the unlimited liberty of the subject. Nobody now clings to the old theories that were rampant about the year 1835, and of which, perhaps, this is the sole survivor. This theory of free imports was born of Benthamism out of Whiggery, like the Poor Law. Hon. Members who profess modern Collectivist theories must realise the origin of that to which they still adhere. Not only are the theories of those times gone, but the illusions of those times have gone too. At the time when these principles were at their heyday, at the time of the Exhibition of 1850, men cherished the generous illusion that Free Trade would produce universal brotherhood and universal peace. They held, what seems to us now the strange view, that scientific progress meant moral improvement. What do we see now? Poison gas, tanks, machine guns, and bombing aeroplanes—these are the fruits of science, and no man can look on the twentieth century and think that any of those things on which our grandfathers built their theories have a place in the world as we see it now.

Hon. Members have dropped the other parts of these theories. How long will they remain wedded to this? Goods come into the country and take the living from our people's mouths and they do not intervene. Those goods may be the result of long hours of labour, and still they do not intervene. Those goods may be the result of sweated labour, and still they do not intervene. If they did intervene, I personally would go far with them on some items of their programme; and such intervention on their part would he not only not against their principles but would be in accordance with the logical sequence of the principles which they profess. I am inclined to think that I see some stirrings of conscience on their part, but I do not know how far conscience will prevail over tradition and party uniformity. But be that as it may, I am quite certain that the problem of our day, the problem of unemployment, is to be solved on these lines and on no other, and, if hon. Members cannot repudiate their present theories, the country will repudiate them.

Mr. G. LAMBERT

The right hon. Gentleman has dressed up the old Protectionist doctrine with a great deal of humour in a very effective speech. Personally, I hope he will forgive me if I do not follow him, because I thought the party opposite had given up the doctrine of Protection—that they were going to turn over a new leaf, and lead a better life. Apparently that expectation is to be disappointed, and the lesson which it was thought had been taught them has been forgotten.

Mr. HOPE

I said nothing about a general tariff.

Mr. LAMBERT

My right hon. Friend will excuse me if I decline to follow him into that question. I will simply say it is very difficult to impose import taxation without a tariff. I did not quite follow my right hon. Friend in his suggestion as to increased taxation. I am one who wants to take off taxes, and not put them on. That is the mainspring of my political dogma. I want to ask the Secretary to the Treasury, following on the lines of the right hon. Gentleman's speech, what effect taxation is having on employment. The Chancellor of the Exchequer, when he introduced his Budget, suggested that our trade, with all its fluctuations, showed hopeful signs of recovery. Is that so? I would like to ask the Financial Secretary how far the Treasury believe that heavy taxation—and I may say I do not want to increase the taxes—is impeding the recovery of the working man's productivity? I would like an answer to that question. Is the iron and steel trade in a flourishing condition? How far does taxation and local rating affect it? I extracted from the "Board of Trade Journal" just now the production of pig iron in this country. In 1913 our production was 1,550,000 tons monthly. In 1924 it was only 632,000 tons. [An HON. MEMBER: "What about the imports?"] Really the hon. Gentleman must let me proceed with my speech. I would deal with foreign imports if it were in order. I am asking what effect the present taxation has on the iron and steel trade, not what effect future taxation which may be imposed by hon. Gentlemen opposite may have on that important industry. Again, I observe in the current issue of the "Board of Trade Journal" that blast furnaces have decreased in number, there are 185 in operation—the lowest number since January, 1923. How far have heavy rates and taxes caused this reduction in the number of blast furnaces, thereby crippling a key industry like the iron and steel trade? I should like an answer to that. It must be apparent that a foreign trade is essential to this country. We must export manufactured goods if we are to import food and raw material, but if taxes and rates so increase the cost of our manufactured articles that the foreign consumer cannot buy them surely that must be a factor in unemployment.

The right hon. Gentleman talked about the Motor Car Duties. If hon. Members will again look at the Board of Trade returns they will find that the repeal of the Motor Car Duties has induced the motor-car industry to pull its weight in the national boat. Before the War we had a considerable export trade in motor cars. Since the announcement of the Chancellor of the Exchequer that the duties are to be repealed our export trade in motor cars has sprung up amazingly. The exports for 1922 represented a value of £1,204,000. In the first six months of this year that total has been more than reached. That shows that we are on the look-out for markets abroad. We must do that. One cannot argue that we can get goods from abroad for nothing. The motor-car industry is to-day creating an export trade which was lamentably wanting while the industry was protected by this 33⅓ per cent. duty. I would ask the hon. Gentleman if that is not the case We see great signs or apparently great signs of prosperity all around us. There is enormous expenditure and great consumption by all classes in the community on amusements, horse racing and cinema entertainments. Every place is crowded. Are we really prospering, or is all this fictitious? The largest fortunes to-day are apparently made from the sale of whisky and tobacco.

I want to ask the Government seriously whether our export trade is not affected to-day by our taxation. I do not think it is in a satisfactory condition, judging by the "Board of Trade Journal," a very admirable production, which gives as information, facts and not opinions. If we could get more facts and less opinions probably we should do much better than we do. It will be seen from this Journal that the volume of our export trade in 1920 was 29 per cent. less than in 1913. In 1921 it was 50 per cent. less. In 1922 it was 31 per cent. less, and last year it was 25 per cent. less than in 1913. What is the reason of that? Is it that our goods are too dear and that in consequence the foreign consumer cannot buy them? Are they made too dear by the present crushing burden of taxation levied in this country? An hon. Member opposite some time ago asked a question about this, and was informed that last year taxation in this country was £16 7s. 2d. per head, while rates represented another £3 14s. 7d. per head, making a total of £20 1s. 9d. per head for rates and taxes. Is not that a very serious handicap on industry? I am asking that question not to make any political point, but it really seems to me that all parties in the. House have forgotten the word "economy," and that almost every question now put asks for more Government expenditure. I really think it would be a very wise suggestion if questions suggesting additional expenditure of Government money were printed in red on the Order Paper as a danger signal. If we are to judge our prosperity by the amount of taxes we pay we should be the most prosperous people in the world, because there is no country taxed and rated so heavily as we are.

If you have Protection you will have more taxation. That cannot be denied, and I want to ask the Labour Ministry who have now been in power for something like six months what they are doing to increase the productivity of the country. I observe that following a rather bad example they propose to give employment again by spending more public money. I have read in the papers—I do not know how far it is accurate—that one of their schemes for providing employment is to build a great road from Inverness to Nairn at a cost of £500,000. Such a road would be very convenient for gentlemen who want to get to their grouse moors, but would it increase the productivity of the country? That is a question I would like to put to the Secretary to the Treasury. Every shopkeeper when he wants to sell his goods advertises a reduction in prices. I do not want to engage in any election cry, but I do want most earnestly to ask what is the Government's reasoned view at the present time, what is the view of their expert officials at the Treasury, as to how far taxation is causing unemployment., by adding such a burden to the cost of producing our goods that foreign consumers cannot buy them. So far as I am concerned, I have stood here for some years advocating a reduction of taxation. We can only have that reduction of taxation by securing a reduction of expenditure. The House of Commons is the most extravagant assembly in the world, and until we can change the present sentiment of the country, that hon. Members can win popularity by advocating expenditure of public money, we shall not have that economy without which no country can prosper.

The price of the loaf is going up. Will not this continued heavy taxation increase the cost of living? Can we go on with last year's exports, 25 per cent. less, as compared with 1913? We have a greater population. Our exports are falling in volume. How are we going to get the raw material which we require? I observe that our ships—and British shipbuilders are amongst the best in the world—are being sent to Holland for repairs because there the work can done cheaper. Is that because of our heavy public burdens? I had recently an interesting and very illuminating conversation with a great Australian importer of food, who said he had the greatest possible difficulty in getting remittances to Australia.

Sir F. WISE

That will be altered by the Commonwealth bank now.

Mr. LAMBERT

I do not believe that the banks can permanently make or mar prosperity.

Sir F. WISE

They can deal with this question of remittances.

Mr. LAMBERT

In the long run the remittances must depend on exports and imports, and unless our exports and services to Australia balance our imports from Australia the exchange is bound to go against us. This is the absolute fact, that this Australian importer of food is to-day paying over and above all the bank charges 3 per cent. extra to get his remittances forwarded. That must be changed. I want to say one other thing the Chancellor of the Exchequer told us in his opening speech—and I make no apology for referring to this as he referred essentially to the industry which I represent and in which I am concerned—that he proposed to strengthen the Land Valuation Department, and that he also proposed to bring in some Measure for the taxation of land values. Well, I warn him very earnestly to keep his taxing hand off agricultural land. The agriculturists to-day are not in a position of great prosperity, and I would point out that, though there seems to be such an enormous wealth of money being spent, especially around the City of London, in the agricultural districts the country houses are being shut up. There are no new farmhouses being built, no new farmsteadings, and no new farm cottages, and I say to the Treasury, let them be very careful, indeed, as to whether they destroy further confidence in the investment of capital in agricultural land

At the present moment, I assure the Treasury and the House, that we who are engaged in agriculture cannot do any building. We cannot do it because the building trade is a sheltered industry and is able to impose its terms upon us. We agriculturists are exposed to the full blast of the competition of the world. We are at a double disadvantage, because we have to employ in the maintenance of our buildings men engaged in a sheltered, and, therefore, a highly-paid industry, while we have to sell our products in competition in free markets. I would say, therefore, to my hon. Friend, that I hope he will impress upon the Chancellor of the Exchequer to be very careful, indeed, how he lays any fresh taxes on agricultural land. Urban land is an entirely different problem. That is a problem by itself, but I ask the hon. Gentleman and his colleagues earnestly to consider before increasing the burden on those of us who are engaged in the cultivation of land

Lieut.-Colonel HOWARD-BURY

I do not propose to follow the right hon. Gentleman who has just spoken into the merits or demerits of Free Trade or Protection, but there is one point which I tried to raise on the Committee stage and on the Report stage, and that is with regard to double taxation as far as it affects Income Tax and Super-tax in its relation to the Irish Free State, Northern Ireland, and this country. I find it almost more than difficult to raise any question in regard to the Irish Free State. It is easier almost, I may say, for a camel to go through the eye of a needle than to be able to bring forward in this House any question in regard to the Free State. I tried to get the Finan- cial Secretary interested in taking up the question of the Irish Land Stock, but that question has been put off, I may say almost to the Greek Kalends. I know, however, that he is anxious to go into the question, and I know the Irish Free State is also equally anxious to go into the question of double Income Tax as it affects us to-day. The Royal Commission on Income Tax sat in 1920, and at that time the Irish Free State was part of Great Britain and Ireland. Section 27 of the Finance Act, 1920, treated the Free State and Great Britain as one, and the recommendations that it made in regard to double Income Tax referred only to the Dominions over the seas. It had no idea at the time that the Free State was eventually going to become a Dominion. The rules and regulations that were laid down applicable to Dominions several thousands of miles away, would not have been applicable in the same way to a country that is our next-door neighbour, and that has a land frontier with us. I think if they had understood that that would be the case, those recommendations would have been very different from what they are to-day.

The present position is that Income Tax is deducted by both countries, with the result that people find themselves mulcted of 9s. 6d. in the £, and then it is up to the individual to recover this amount from the Irish Treasury and the English Treasury. With regard to the English Treasury, recovery is comparatively simple within two or three months, but in many cases in regard to the Irish Treasury, people who applied in April, 1923, have still not got the rebate that is due to them. I think it is unfair, and I am not altogether certain that the legal position is quite tenable by which more than the amount due can be taken by Governments from an individual. In this case you are taking 4s. 6d. from the individual, and then forcing him to reclaim the 4s. 6d. back from the two Governments. Let me read part of a letter from the chairman of a large Irish company. The company has a capital of, roughly, £1,500,000 ordinary stock and £500,000 debenture stock, and most of the shareholders are English people, resident on this side of the water. The letter proceeds:— We have some thousands of shareholders, many of them being women, who have not large holdings, the inferenee being, that this money has been invested for them in the past, as affording a secure, income. You are no doubt aware what the practice is as regards dividends did interest paid by my company. We ate compelled to deduct the Irish rate of tax, namely, 5s. in the £ at the source, and then, when the dividend warrant; is paid into the English bank, a further 4s. 6d. is deducted, making 9s. 6d. in all. I am, sure you will realise what a great hardship it is to the class of shareholder mentioned, to have practically half their gross income taken from them, especially as the procedure as regards recovery is very intricate, and I know of many instances where the tax deducted from dividends paid in April, 1923, has not yet been refunded. I have interviewed the Irish Revenue Commissioners, and they appear to be quite amenable to reason, and they gave me to understand the obstacle in arriving at an arrangement lies with the English Treasury. The suggestion that I have made to the Irish Commissioners is, that when we send out the dividend warrants, we shall deduct the 5s. at the source, and out of the 5s. hand the respective proportion to each Government, namely, 2s. 9d. to the Irish Free State and 2s. 3d. to the English Government. That is manifestly a very simple way to deal with it, and it would then be a question afterwards between the stockholder and each of the Governments concerned. I trust you will be successful in having your amendment carried. That is a suggestion, and that is one possible way of dealing with it. The letter continues: If the English Treasury can only be made to realise the fact, they are standing in their own light by not adopting some such arrangement as I have outlined. I find that many of our stockholders open an Irish banking account into which they pay their dividend warrants, which means that in those cases the Irish Government gets the whole of the 5s. and the English Government loses its proportion, and there is no liability on the tax holder, for ho has suffered the deduction of 5s. and there is no claim beyond it. Other stockholders send cheques across to Ireland in payment of accounts, and I was informed by one of the managers of a large. Irish hotel that the dividend warrants of the Alliance and Dublin Consumers' Gas Company were commonly offered in payment of an hotel bill. These are all matters of trying to avoid tax, because it is felt to be unjust. It would be to the advantage of the English Exchequer as well as to the advantage of the Irish Exchequer to prevent this. This company goes on to say that they are …so sick of the worry and bother that this double taxation question has caused, that when we send our next dividends to our English stockholders, I have decided to send the money over to an English paying agent, who will issue a plain cheque, which will not bear any indication that it is a dividend warrant, so that when the stockholder pays the said warrant into his bank in England, he will not suffer the penalty of a further 4s. 6d. as at present, but the voucher certifying the deduction of the 5s. tax will be a separate slip. These are all methods forced upon people because they cannot afford the deduction of 9s. 6d. in the £. In many cases it means that nearly half the income is taken away; it is even worse in the case of Super-tax. At the present time a man is assessed for the full amounts in both countries. A man had paid here Super-tax to the extent of several thousand pounds, but got an assessment again in Ireland for the same amount, and with a reminder that unless he paid this second amount of Super-tax—although he had already paid once—they were going to seize his cattle and land in part payment of that. They do that in the Free State now, because they have more drastic methods in the South than we have here. That man had already paid once here. He draws one-thirtieth part of his income from the Free State, and yet they have demanded the full amount. That is a position into which it was never intended that people should be put. I think it would be possible, either by the arrangement I suggested that the larger of the two amounts should only be paid once, or that all income derived from Ireland, from Irish securities or from Irish land, should be subject only to the Irish Free State tax, and all investments in English companies over here should only be liable to English Income Tax.

I am sure no legislation is necessary to pass this. It is purely a question of arrangement between the Irish Free State and the Treasury here. I know the Financial Secretary to the Treasury has been in consultation with the Irish Free State, and I know both sides are anxious to come to an agreement, because they realise that this hardship is driving a number of people out of the country to the Dominions. They are getting tired of the trouble of trying to get back this money which has been deducted unfairly. I know the Treasury is most anxious to guard against any loss. You are both of you so afraid of giving away, or allowing the other Treasury to gain some small advantage, that you to-day make the unfortunate taxpayer the scapegoat of both of you. But surely you can come, and I would ask you to try to come, to some arrangement by which this could be obviated—that a tax should only be paid once, that it should be a question of arrangement between the two Treasuries whether you would like to have two separate assessments and only the one assessment to be paid, and then a note from the Free State Government, or from this Government, to say that the amount had been paid. But there are so many different ways in which this could be easily worked by departmental arrangements and I think it would be to the advantage of people in this country and in Ireland if you could see your way to do something on these lines, and not make the unfortunate taxpayer the milch cow of both Treasuries.

Mr. REID

I speak from the point of view of the people in Northern Ireland. A great many people there have investments in Irish securities, made before the creation of the Free State. I wish to support what has been stated by the hon. and gallant Member for Bilston (Lieut.-Colonel Howard-Bury) in regard to double Income Tax. I speak more particularly for people in the North of Ireland who have investments in the Free State. The Secretary for the Treasury may say that their position is similar to that of people who have Colonial investments, but in the case of Colonial investments people have made them with a knowledge of the circumstances. In the case of the people for whom I speak, the greater part of the investments were made before the Irish Free State was set up, and the result has been to place them in a very much worse position than they were in when the investments were made, for not only have they the inconvenience of having a very large proportion of their income deducted owing to the 5s. Income Tax deducted in the Free State and the 4s. 6d. Income Tax deducted in this country, but they have seen considerable capital depreciation. When this Government first began to deduct the 4s. 6d., I have been told that the Great Northern Railway Company of Ireland ordinary stock fell about 8 points, and that is a very serious matter, which is having a very injurious effect. Some people are inclined to talk of us in Northern Ireland as if we were ill disposed towards the Free State, but we want to see the Free State prosper. We want to be able to do business with them. Southern Ireland has always been hampered in its development for want of capital, and the result of this arrangement is to prevent money being invested in Southern Ireland. The tendency is to sell any Southern Irish stock, and not to invest the money in other stock in the Free State, the result being that there is no investment of capital in the Free State from outside. I was talking the other day to a business man from Southern Ireland, and he told me it was having a serious effect on trade there.

I can justify what the hon. and gallant Member has said about the loss of revenue to the British Treasury, as I know myself cases of people who, after having the 4s. 6d. deducted, have not taken any more dividend warrants to their bankers. If they are large holders, they have opened a banking account in Dublin, and small holders have sent their dividend warrants to friends in Dublin, who cash the warrants and send on the money. In that way this Government are losing a considerable amount of revenue. I would ask the Financial Secretary to the Treasury to approach this question with an open mind, because it seems to me that it ought to be possible to come to some arrangement between the two Treasuries by which the proper amounts due to each could be obtained without, putting this heavy burden on the taxpayer. Take a case like the Great Northern of Ireland Railway Company, which operates both in Northern Ireland and the Free State. I believe that in that case it has been agreed what proportion of the earnings are earned in Northern Ireland and what proportion are earned in the Free State. Surely it would be possible in that case, instead of throwing the burden on the shareholders, for the two Governments to have some stakeholder who would hand over to the Imperial Government the amount due to them and to the Free State Government the amount clue to them.

It ought to be possible to make some arrangement which would suit the altered circumstances. To take practically half a person's income in order to secure the 2s. 9d. due to the Free State, with their 5s. tax, and the 2s. 3d. due to the British Government, with their 4s. 6d. tax, is rather like burning down a house to roast a pig. It seems unreasonable for the Imperial Government to deduct 4s. 6d., and after putting the taxpayer to the trouble of making a claim, to repay to him 2s. 3d. The Secretary to the Treasury will perhaps say that this is only part of a, larger question, and that it involves the reconsideration of double Income Tax and allowances with regard to the Colonies. After all, Ireland is in a somewhat different position from the ordinary Colony. I do not mean to say anything derogatory about the legal position of the Free State, but it is in fact close to England, and there are numerous transactions between the two countries. Negotiations could easily be carried on, for the course of post does not require weeks or months for an answer to be received. If any arrangement can be worked out, even if it were not applicable to a distant Colony, there is no reason why it should not be put in operation between this country and the Irish Free State. I have had some communication with the Financial Secretary to the Treasury on this matter, and I want to acknowledge that ho has taken a great interest in it, although we have not succeeded in coming to any arrangement, but I would ask him to look into this matter afresh, and not be guided too much by the opinion of people who have become so accustomed to working the existing machinery. People who are immersed in the working of an existing system occasionally seem to mistake the means for the end. They are unwilling to strike out a new line. The problem is a new one and the result of recent political changes, and an effort should be made to deal with it. Cannot he work out some system which would remove the very great hardship on the people for whom I speak?

Sir GODFREY COLLINS

As hon. Members know, the problem of double taxation, which has been referred to by the two previous speakers, has always been difficult of solution, and in addition the problems of finance which have gathered round the Irish Free State during recent months may make it more difficult for the Chancellor of the Exchequer in considering this particular question. Nevertheless, I feel sure that any unfairness which is brought forward by hon. Members will receive the careful consideration of the right hon. Gentleman. Having sat through all the stages of this Bill, I desire to congratulate the Chancellor of the Exchequer and the Financial Secretary to the Treasury on having piloted the Measure safely through the House of Commons. I think I am accurate when I say that no Finance Bill during recent years has undergone fewer changes. The Bill, which we all hope will receive its Third Reading to-night, remains in very much the same state as that in which it was introduced by the Chancellor of the Exchequer a few months ago, and I think it is largely due to the Chancellor and the Financial Secretary for their readiness to argue every case which has been put before them. In saying that, let me remind the Chancellor that many hon. Friends associated with me have refrained from placing Amendments on the Order Paper, not because we had weakened in any shape or form on certain questions of taxation, but because we were not anxious to jeopardise the passage of this Budget into law, and I am sure the right hon. Gentleman will readily admit that, without our consistent support, the Bill would not have received the Third Reading in the form in which it will receive it this evening. Let me say quite frankly, on that point, that it has not been easy on some occasions to invite hon. Members associated with me to support the Government on the Amendments which have been moved from the other side, but with that loyalty which has distinguished my colleagues, they have been prepared to face difficulties in the constituencies, and have, broadly speaking, given loyal and consistent support to the Finance Bill in all its stages.

A Budget, to my mind, always reflects the policy of a Government. A Government keen on social reform, keen on granting old age pensions, is bound to make provision in the Finance Bill for increased taxation. A Government pledged to make large provision for our fighting forces is bound also to ask the people of this country to make provision in their Finance Bill. This Bill, it seems to me, marks a distinct change in the policy of the Labour party. Instead of increasing taxation, or even maintaining taxation at the level which existed last year, the Chancellor of the Exchequer has chosen another course, namely, to lower taxation, and to give the benefit of a lower rate of taxation to the people of this country. The policy of the Labour Chancellor of the Exchequer, as revealed in the Finance Bill presently before the House, marks, to my mind, a distinct change, a distinct break, in the policy of the Labour party which they have advocated on hundreds of platforms during the last few years, the policy of old age pensions at 60, and large schemes of social reform involving the expenditure of many millions in future years. In one other aspect also the policy contained in this Bill cuts right across the policy of the Labour party which they have advocated in the constituencies. This Bill makes provision for a large increase in the expenditure on our fighting forces. On every platform during recent years the Labour party have stood for reduced expenditure on armaments, but in this Bill the Labour party, in their first year of office, are asking the taxpayer to make heavier sacrifices and to spend a larger sum of money than was spent last year on our fighting forces. Therefore, I think I am entitled to draw the attention of the House to the distinct change, the sharp break, in the policy of the Labour party outlined in this Bill, as compared with their policy which is so well known throughout the country.

5.0 P.M.

On the Third Reading of the Finance Bill last year, the late Prime Minister was asked what was his policy towards the Cunliffe Report, and I intend to address that question, which I think is one of some consequence and o which has not yet been answered, to this Government. What is their policy towards the Cunliffe Report? As hon. Members will know, there are three schools of thought regarding that Report. There are some who prefer the policy of inflation. Reading in the "Times" this morning, in the column written by the City Editor, in that able article which he so often writes, I find "No one disputes that the gold standard is the best." Is it the intention of the Government to revert to the gold standard at the very earliest possible moment? The Financial Secretary will remember that last year the late Prime Minister enunciated a new policy. He said be was neither an inflationist nor a deflationist, but he favoured stabilising trade. Let me remind the House of the ex-Prime Minister's exact words. On 4th July last year he said: I think that the right policy for this country at the present moment is to do all in our power to keep prices steady and on a level. Later in his speech he said: I should set myself strongly against any policy that would tend to disturb that feeling."—[OFFICIAL REPORT, 4th July, 1923; col. 576, Vol. 166.] He was anxious to keep prices steady. I can understand a policy of inflation, which tends to keep up prices, or a policy of deflation, but to my mind any policy which is not an inflationist policy must be a deflationist policy, and vice versa. The ex-Prime Minister argued in favour of keeping prices steady; in other words, in favour of prices not being allowed to fall. What is the policy of the present Government on this point? The House is entitled to know. Speaking for myself, I favour a policy of deflation, a steady policy directed towards deflation, towards restoring the gold standard. I know well that it is said, "Look at France, where a policy of deflation has not been followed." The argument is that to-day in France there are no unemployed, that there is an air of prosperity throughout the length and breadth of France, and that if we followed that policy here there would be a similar result and our people would not be unemployed. The advocates of that policy overlook a very vital fact, namely, that, to-day, France is spending millions of borrowed money on the repair of her devastated areas. I have heard it stated, on good authority, that there are to-day, and have been for years past, as many as 2,000,000 employed in repairing the damages of war in France. The total number of people who are able to work in France being about 12,000,000, these figures mean that from 16 to 20 per cent. of the total population of France is being employed in repairing the damages of war, and that they are being paid their weekly wages with money borrowed by the State. Such a policy must have an evil result, and it is bound to come to an end.

Although to-day we see in France apparent signs of prosperity, yet-the teaching of every country reveals a similar fact—a country which year by year maintains its people with the proceeds of borrowed money, is bound in the long run to pay heavily for that policy. I know also that it is said that the War has altered economic facts and changed economic laws. I am one of those who think that if you kick out an economic law from the front door it will jump in through the window and hit you in the back. You cannot, year by year, go against an economic law without producing evil results. Therefore, I not only plead that the Government should state their policy, but I would urge that the best policy for this country is to return to the gold standard at the earliest possible moment. Recall the experience after the Napoleonic War. The Bullion Report of 1818 advocated a return to the gold standard. Three years later, and six years after Waterloo, Great Britain returned to the gold standard. Has not the time arrived when Great Britain should follow the example of those who went before? This little island is dependent on purchasing from abroad, at the very lowest prices, the foodstuffs and raw materials for her industries. Any policy which will enable our manufacturers, say, of cotton, to buy raw cotton from America at a low price and to sell cotton goods in India and in China at a low price, any policy which would enable London to remain the financial centre of the world, should commend itself to the Government.

I, therefore, ask that the House and the country may know exactly whether the policy of the Government coincides with the policy of the late late Government. The late Government favoured a policy of stabilising prices and checking deflation. Is that the policy of the present Government? My hon. Friends around me are often twitted with being patient oxen. It is a gibe which we do not mind, because on this occasion, after having shown patience, we shall, through our support of this Bill in the Division Lobbies, bring to countless millions the benefit of a lower rate of taxation, and we hope that in the coming months the Government may so bend their energies as to curtail expenditure, and thus make a still lower rate of taxation possible in the future.

Major G. F. DAVIES

Since the Chancellor of the Exchequer opened his Budget we have listened to a series of speeches, many of them congratulating and many of them criticising the proposals in the Budget. It is not my intention to praise Ceasar, if I may allude disrespectfully to the Chancellor of the Exchequer, or at any rate at this moment to bury him, but, rather, I appeal unto Ceasar, and those for whom I appeal are those whose case has been eloquently put forward by two speakers from this side of the House to-day, namely, those who have to meet the incidence of double taxation. But I would like to make that appeal a little wider than to confine it merely to Ireland and the Irish Free State The right hon. Member for Rusholme (Mr. Masterman), in a speech immediately after the Chancellor of the Exchequer opened his Budget, brought forward so much butter in so lordly a dish and laid it on with so generous a trowel that I could not help feeling that it must have brought a blush even to so case hardened a cheek as that of the Chancellor of the Exchequer. In the course of that speech the right hon. Gentleman said that any criticism of the Budget would be merely the give-and-take of party politics I could not help thinking that the expression "give and take" very aptly summarised the attitude of those unfortunate taxpayers whose case I wish to present, who have to listen to the incessant voices of those daughters of the horse leech, the collectors and inspectors of taxes.

In the same Debate the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy), with that suave unction which is so characteristic of him, deplored the fact that the Chancellor of the Exchequer had not doubled the death duties and steepened the Super-tax, and at the same time he shed crocodiles' tears over the complete absence of birth-control exercised by millionaires. I was not quite clear whether he meant that millionaires should have no children or that the children of millionaires should have no parents. I suppose that some reople are born millionaires, some achieve millions, and some have millions thrust upon them, but I must express my regret that I have not been able to qualify for any of these three classes. Those whose claims I wish to present to the Chancellor of the Exchequer this afternoon are not by any means those who can be included in the class of millionaires or their children, but are a much humbler proportion of the taxpayers. I, of course, admit, like anyone else, that the broadest backs should, bear the heaviest burdens. That thought was not present to the Prime Minister when he was looking for suitable long-suffering draught animals to attach to his chariot of State. Be that as it may, I wish to put forward a case of very real difficulty and unfairness in the incidence of taxation.

Hon. Members opposite may possibly, and with some justification, say that if anyone is fortunate enough to be a payer of Income Tax and Super-tax he has nothing of which to complain. But a moment's reflection will make them realise that the question of the payment of direct taxation is very closely allied to having a tooth drawn by a dentist, and is the most trying personal experience that any form of taxation can give to the taxpayer. When a taxpayer finds that out of every pound of his income he is paying in direct taxation something like 15s. in many cases, it does become—to use a classical phrase—a bit thick. Whatever we may think of the question of a capitalist system, it is certain that under conditions as we have them to-day the payer of Income Tax and Super-tax is "a very present help in time of trouble" to any Chancellor of the Exchequer. From that point of view, if from no other, it is obviously desirable that measure should be taken to attract and to keep in this country possible contributors on a large or comparatively large scale to the revenue, rather than to drive them out. It may be said that people living here who have investments abroad, on which they have to pay taxation in the country of origin and then double taxation in this country, should sell out such investments and replace them with purchases in this country. It is quite obvious, however, that in very many cases it is not easy to do that; there are many conditions operating to make this impossible.

Again, it may be said that the Treasury here are not particularly interested in what other countries choose to levy by way of taxation on their citizens and on the incomes arising within their own boundaries, but that the principle of double taxation needs to be considered has been admitted by this and previous Governments in connection, for instance, with the rebates arising from investments in the Dominions, and in connection with the further consideration that has been foreshadowed with regard to shipping companies and State trading, and so forth. It will commend itself to the sense of equity of this House that if double taxation is an unfairness in the case of shipping companies and corporations, it applies in just the same way to the individual in his private capacity. This question bristles with difficulties, I know, but it is all part and parcel of the same point of view that has been brought forward in connection, for instance, with the curious situation that has arisen in connection with iron and international shipping.

I may for one moment speak in a little detail. Take the question, which is a very common one here, of the taxpayer who has an investment in the United States. The United States levies a very heavy, what they call a normal or Supertax, which corresponds to some extent with our Income and Super-taxes, although there is, as to Part 1, a sliding scale. Under present conditions, the taxpayer here is allowed to deduct from his total taxable income the amount which he has paid in the country of origin, that is the United. States, by way of Income and Super-tax. The difficulty arises here, that the American Treasury in their wisdom have decided that a realised capital appreciation is to be regarded as income. That is to say, if in the case of an investment which has cost £1,000 the investor is lucky enough to sell it for £1,100 the £100 is regarded in America as income, while if he has to sell the same investment for £900 he is allowed to deduct the £100 loss from his taxable income. When it comes to deduct the tax paid in the United States the Treasury authorities say that some of that tax was paid on capital in the United States, and that therefore, they cannot allow the deduction here.

Therefore, the taxpayer has to make a hypothetical American Income Tax return based on what the British Treasury chooses to think the American Income Tax law provision should be. It is possible to argue in favour of this procedure so far, but when the taxpayer makes loss on realised capital in the United States he pays a correspondingly smaller tax. But the Treasury here will not allow a man to readjust his American Income Tax when it would be in his favour, but only when it would go against him. That is an additional unfairness in this question of the incidence of double taxation, and I should like to know that that is one of the problems that the Financial Secretary will seek to look into, to see if some further adjustment cannot be made to meet what is a serious grievance. I feel in this matter a somewhat different attitude might be taken, and that the Chancellor of the Exchequer might show some of that quality of mercy to-day to which the double taxpayer is entirely unaccustomed, because not only, unlike Shakespeare's definition, is he considerably strained in paying these taxes, hut he is unable to admire the gentle dews that drop from Heaven, because he is so occupied with the earthly ones that he has to pay to the Treasury.

Finally, he is not twice blessed, he is twice cursed, once by the taxing authorities in the country of origin and secondly in the country of residence. If that could be adjusted by a wave of the wand of the Chancellor of the Exchequer, in his capacity of the Fairy Godmother of the country, it would be a step forward in the adjustment of what is a legitimate grievance and unfair incidence which was not contemplated when the great increase of Income and Super-tax took place both in this country, in the United. States, and in many other countries.

Mr. RATHBONE

I make no apology to the House for making some observations upon the speech of the right hon. Gentleman the Member for Sheffield (Mr. Hope), and which, I presume, was made for the benefit of hon. Members above the Gangway. I think I heard him distinctly, and, though I certainly cannot quote his words—for some of us at this end of the House found it rather difficult to follow all he did say—I did gather that he spoke either for himself, or possibly for Sheffield, or possibly for the Front Opposition Bench, when he suggested to the Labour party the terms he vas willing to make for what seemed to be come sort of bargain on a tariff. Was it nationalisation of the coal mines? Was that the offer to the gentlemen who come from the Clyde from the gentleman from Sheffield? I do not know, but clearly the Front Opposition Bench have a chance to discuss the subject as to whether or not this shall be the new programme of the Tory party. I think that many Liberals in the last election did think that such a thing might happen. Although the Labour party then remained, and I hope still, and I trust for the sake of England will always remain true to Free Trade as a whole, there were among certain members of the party some very doubtful supporters of Free Trade.

If that is to be the suggestion: "That if you will support us in a general tariff we will give you something that you want"—and I suggest it may be the Capital Levy or the nationalisation of the coal mines—well then I should like to suggest to the Labour party that they should be very careful how they accept such a suggestion. If they listened attentively to the speech of the hon. and gallant Gentleman the Member for the Yeovil Division of Somerset (Major G. Davies), who has just sat down, they will note that the cloven foot has appeared. True there is a suggestion that the Labour party should agree to a tax. True, there is the suggestion of certain terms from the Conservative party that will give them sonic measure of relief in some directions that they wish—

Mr. DEPUTY - SPEAKER (Mr. Entwistle)

I am afraid the hon. Gentleman is travelling rather wide of the subject of the Debate. We are discussing the Third Reading of the Finance Bill, and I cannot see that his remarks are relevant to anything in the Bill.

Mr. RATHBONE

I was traversing what had been said previously by a right hon. Gentleman opposite, and I thought that was in order.

Mr. VIVIAN

On a point of Order. In view of the speech made from the Front Opposition Bench, and which seemed absolutely to cover the ground, is not my hon. Friend in order in dealing with the points made by that previous speaker?

Mr. DEPUTY-SPEAKER

I was not here, and did not hear the speech to which the hon. Member refers. I can only judge the speech of the hon. Gentleman who is speaking.

Mr. RATHBONE

I will not go any further on the point, Mr. Deputy-Speaker, as I have already said all I wanted to say. Without traversing the ground which has already been traversed too much, may I just suggest, as I think I did on a previous occasion, that what has been referred to ought not to be the attitude of those who have the power? I do not want to labour the point, but surely we have got to raise taxes in some form or other, and I think it is generally admitted by, everyone—and they are quite sincere—that taxes must be levied to a large extent on those who have the best means to pay. But I want to ask my hon. Friend the Financial Secretary to the Treasury if he will hunt in the archives of the Treasury for documents which have been referred to on a previous occasion. I am all for postponing the evil day in some of these matters, and I am all against taxing wealth while in the making. I think, too, it is a very, very great mistake to tax people in such a way that they will not save, because I am old-fashioned enough to think that saving is absolutely necessary to the welfare of the nation.

Suggestions have been made by Lord Maclay which seem to be well worth looking into. The Financial Secretary when he replies will probably make some reference to the matter, but I would like to put it into a very concrete form, because I want to confine my remarks within a very few minutes. The House perhaps will pardon me if I go into rather more detail with respect to Lord Maclay's suggestions. He held that you must never tax wealth in the making, because by doing so you destroy the motive of saving which is what you want to encourage. Perhaps the Financial Secretary will kindly look into this question. If he cannot find a document I shall be happy to ask Lord Maclay to send another copy, for I think the suggestions are worthy of consideration. Lord Maclay put it, for example, that in the case of a man who, after all debts and expenses had been met, left the sum of £100.000, say, the procedure that should be followed should be this: It is assumed that there are two children, and that each get £50,000. The Somerset House authorities step in and say to one of them, "You are going to have the equity on £50,000," and it may be to the trustees of the other, "You are going to have the equity on £50,000, but," they add " We are going to make an exchange with you; we are going to leave you £25,000 each to dispose of as you wish, and in exchange for the balance we are going to give you annuities on the basis of that balance so that when you die the State will receive half of what has been left to you." Lord Maclay's view was that we should not mind about the third generation, particularly as nobody ever saved for the third generation. Of course time, reasonable time and notice should be given to carry this out. Care will have to be taken that unnecessary hardship is not caused to the child, or the trustees, who still have to make a considerable sacrifice, but the matter could be arranged.

Lord Maclay's contention as to the third generation was possibly to impose a heavy levy of 50 per cent. By this means the whole of the National Debt, which has been considerably reduced since the time he spoke, 1919, will be paid off in 37 years. I do not ask that we should do anything quite so drastic as that, but I should like the Financial Secretary to ask the Chancellor of the Exchequer to look into the matter, and see whether, in the next Budget, if he and his colleagues are still on the Front Bench, it would not be possible to alter the Estate Duties which now come down on the individual very, very heavily, in the way suggested. A good deal has been said to-night about the unsatisfactory state of trade. Very little reference has been made to one aspect of it, and I am going to make some. I think one hon. Member on this side of the House referred to the heavy taxation as impeding trade and commerce. Figures are very deceiving, I admit, but as a member of the Mersey Dock and Harbour Board, may I say that in our accounts, which are made up to the end of June, the figures are very much more satisfactory than any person could have imagined. We have known that there has been an improvement in trade going on for some considerable time. We know that the docks have been more occupied with steel and other goods, that imports have been very considerable, although the imports of cotton are still most unsatisfactory as well as the price. We did not think that the improvement had been so marked. After, however, taking the receipts for dock dues, etc. for the two years ending June, 1912/13—generally supposed to be the boom year in English trade—and comparing them with the figures for 1923/24, after bringing down the rates for 1923/24 to the same rates as we levied in 1912/13, the reduction in the imports and exports of the port is only 7 per cent. less than during the year 1912/13. I am hopeful that we are going to adopt a financial policy which will not be liable to chops and changes, alterations here and there, or reductions here and there, but that we are going to have steady progress, leaving the business world satisfied, and though taxes are high that they are not going to be altered and new programmes started; and though we should have as much reduction of taxation as possible, that no radical change in the incidence of taxation is anticipated. So we shall see a steady improvement in trade.

Mr. W. GREENWOOD

Is the hon. Gentleman aware that Liverpool has imported 1,600,000 less bales of cotton than in the year he mentioned?

Mr. RATHBONE

I have already stated that the imports of cotton are very much below the total imported in the year I mentioned, but the result in other respects is as I have stated.

Mr. W. GREENWOOD

Is the hon. Member also aware that other countries have imported considerably more cotton in proportion?

Sir F. WISE

I congratulate the hon. Member who has just sat down upon his speech, and I hope he will produce more schemes, which will be well worth looking into. The hon. Member for Greenock (Sir G. Collins) raised the question of the Cunliffe Committee Report. That is a most difficult financial Report to discuss across the Floor of the House, and I do not propose to follow the hon. Member very far except in regard to what he stated about the gold standard. The hon. Member referred to the gold standard and to what happened 100 years ago. He said that a report was made in 1819, and the gold standard came into existence in 1821. It is quite true, but he forgot to state the fact that in those days we had no external debt, and that makes all the difference as to whether a gold standard should come in at the present time or not.

As the House knows, we purchase gold and ship it abroad, which goes towards paying our debt to the United States of America, and the loan really becomes an internal instead of an external debt, which is met out of the sinking fund. I contend that unless we have this gold it would be almost impossible to continue our payments to the United States of America, especially on account of the Fordney Tariff. Here I would like to thank the Leader of the Opposition for the arrangement in regard to our debt that he made with the United States of America. I know there is a little controversy going on between my right hon. Friend the Member for Bewdley (Mr. Baldwin) and the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), but the latter does not seem to realise how this arrangement affected our trade and improved the credit of this country. The Member for Greenock also stated with regard to the gold standard that it would stabilise matters, and so it would. He also said that there were only two ways of doing this, and you had either to deflate or inflate. I contend stability at the moment is much more important. I contend that if you got back to the gold standard as in the old days you would get your currency varying to a very small degree.

To-day currency has run away from gold. Under gold the dollar in the old days only varied between 4.89 and 4.82, and if it went below or above this figure the Cambist shipped gold or took gold. The franc only varied between 25.33 and 25.12, and the same result occurred if you got a little increase or decrease in the price. I hope the Financial Secretary will seriously consider what is mentioned in the Cunliffe Report about the amalgamation of the currency. The Report recommends that when once the reserve of £150,000,000 has been reached—and it has already been reached—there might be considered the amalgamation of the currency notes and the Bank of England notes. I contend that will be the first move, and essentially the first move with regard to getting back to the gold standard. I feel, as I stated just now, that it is not quite time to consider the gold standard, especially with regard to the external debt, which we have to continue to pay.

As hon. Members know, if we lost control of the export of gold it might very seriously affect our payments to the United States. The nations who buy the gold at the present time are the United States and India. They are the only two countries who take it, and although I welcome the raising of this question by the hon. Member for Greenock, and the reply of the Financial Secretary, I do not think it is quite time, if we look at it from various points of view, to consider a, return to the gold standard. The right hon. Member for Central Sheffield (Mr. Hope) stated that Britain was a land of promise. So it is as far as finance is concerned. As hon. Members know, we have probably the cheapest money market in the world. The United States has a half per cent. less bank rate, but if you take the money market or the bills of exchange market or the acceptance market or the regular financial market, I think you will find throughout the world that our market is the cheapest. It is the cheapest in the world because we balance our Budget, and we reduce our debt by excess of revenue over expenditure, and as I stated just now, we are paying our debt to the United States of America. These are the reasons why we have this fine financial position. The right hon. Gentleman the Member for Carnarvon Boroughs, in a Debate on the 9th June, stated that he would like to have an inquiry into the effect of a free money market, and he went on to say: Whether it is desirable that we should have a free money market or whether we should do what every other country in the world does with the possible exception of America—and I believe to a certain extent America does it—have a certain amount of Government control or direction which will Prevent the surplus money of this country from going into quarters undesirable. As far as I know the money market, it will be fatal to have anything but a free market. Anyone who realises what the London money market is must admit that they can almost buy or sell anything from an elephant to a toothbrush, and I contend that it would be very dangerous to interfere with that free money market. For instance a short time ago the City of Amsterdam issued a loan here which was rather criticised, and it was said that the City of Amsterdam should not come to London for their loan. Two or three days after that the City of Rotterdam started negotiations for floating a loan in the City of London, and the issuing house which had the matter in hand refused the City of Rotterdam loan because they were not satisfied with the criticism that had been made about the City of Amsterdam loan, with the result that the Rotterdam loan was floated in New York. What happened? British investors invested in the City of Rotterdam loan in New York, and anyone who refers to this matter will find that there was a fall in the rate of exchange owing to the large investments made in the City of Rotterdam loan in America.

It would be quite fatal for a country like ourselves to have any interference with the free money market that we have at the present time. We have had various public issues lately—I mean the public subscription for loans or shares excluding Government or any conversion loans—and the amount was £106,000,000 for the half year, of which 37.4 went into British investments in Great Britain and 62.6 to overseas. What does that mean? It means trade. The more you can save the more you have for investment either in this country or overseas. I am sorry to say that the amount of £106,000,000 which has been invested for the half year is not so much as during the previous half year from January to June, 1923. In that year it was £123,000,000 or a difference of £17,000,000. Those who consider this question will find that this £17,000,000 is probably the amount we have to pay to the United States of America, and therefore our savings are taken in that way and handed to the United States instead of being invested and providing trade in this country. Undoubtedly last year we over-lent. A country like ours should be most careful that we do not over-lend, because if you do you get your currency against you, and your commodities will cost you more.

There is one point I would like to mention to the Financial Secretary to the Treasury with regard to the stamp duties. Last year I raised the question of the stamp duties on foreign loans. The stamp duty at the present time is 2 per cent., and it brings in about £1,150,000 a year in revenue. I contend that it might be reduced in the next Budget to what it was in pre-War days, that is 1 per cent. when it brought in about £800,000 a year. That will encourage flotations here, and I feel that the more we can encourage foreign issues the better it is for us as long as we do not over-invest. The only other competitor with us in these issues is the United States of America, and they do not understand international finance, or their investors do not understand international investments like we do. Therefore it is essential that we should keep the best issues in this country. In the United States of America there is no stamp duty at all.

There is one suggestion I would like to make to the Financial Secretary to the Treasury in reference to the financial statement leaflet issued just previous to the Budget. I suggest that there should be included in that statement all the liabilities of the Government. There should be in it the trade facilities, export credits, local loans and all the liabilities, so that anybody who looks at that financial statement realises the total liabilities of the British nation, imperially and otherwise. I would also like to refer to another matter which was raised by the right hon. Gentleman the Member for Paisley (Mr. Asquith) on the Second Reading of the Finance Bill. We are indebted to the right hon. Gentleman for what he has done in the past; he raised the question of a voluntary capital levy. That is a very important point. We all want to see our big National Debt reduced, but I cannot help thinking that there are many objections to a voluntary capital levy. In the first place, I do not think we shall obtain a considerable number of holders who will take up the attitude of paying to the Government voluntarily part of their taxation on a capital basis. They would receive, I suppose, a certificate for it, but the point is that, unless a considerable amount was raised and reduction on a large scale carried out with regard to the National Debt, it would not be worth while having a scheme of that sort. There is one other point in regard to it, and that is that it would have to be made very attractive. It would probably appeal to the young and not to the old, and to make it very attractive would probably be against any scheme at the present time, because it would be preferable to keep the Debt at its present figure.

I now want to bring specially to the notice of the Financial Secretary the conversion of loans. It is essential that the conversion of the 5 Per Cent. Debt into a longer- term Debt should be carried out on every possible occasion. I have criticised before in this House the matter of this conversion of old Debt into new Debt. I cannot quite congratulate the Treasury on what has happened in the past. I see my right hon. Friend the Member for Hillhead (Sir R. Horne) here. He started the conversion of 3½ Per Cent. Loan, and, if he will forgive me for saying so—I think he probably realises it now—he started too soon. He shakes his head, but I do not agree with him. I think it a good thing and a benefit to the investor, but I am looking at it from a national point of view, and I feel that the time when the conversion of that 3½ Per Cent. Loan was started, at about 64 or 66 for £100 stock, was not the time to attempt to start conversion. I think the money market has shown that it was the wrong time to carry that out.

I want to make one reference to the question of double taxation, which has been referred to by the hon. and gallant Member for Bilston (Lieut.-Colonel Howard-Bury) and by one or two other speakers. I expect that no one in this House knows more about that question than the Financial Secretary to the Treasury. He was a member of the Royal Commission, and, as he knows, the League of Nations recently took the matter up, but I want, specially to draw attention to the case of Ireland. I have here a letter signed by Lord Dunraven, which was published on 23rd May, 1924, in regard to the effect of double Income Tax on a holder of Free State securities. He says: It is scarcely reasonable to collect a tax of 9s. 6d. in the £, even though the excess deduction of 4s. 6d. will be refunded later. In order to obtain the refund, the taxpayer has to wrestle with complicated forms and procedure, and a considerable time is bound to elapse before he can hope to secure the repdyment, during which he is deprived of the use of his money. I question the justice of the State demanding from the taxpayer a sum of money to which they are not entitled, and repaying it at their convenience and without any interest. Some arrangement should be made to meet these people. I am sure, after the speeches that were made on the question of double Income Tax with regard to the Irish Free State, the Financial Secretary, difficult as it is, will look into it from the point of view of justice. In conclusion, I must just appeal again for the necessity for economy. It is essential, if we are going to exist, that we should have economy, and the only way in which we can obtain the reduction of taxation which has been referred to by the right hon. Gentleman the Member for South Molton (Mr. Lambert) is by economy. I feel certain the Financial Sceretaiy mill see to it that in the future it is one of the main foundations of our finance. If he will see to that and carry it out, I feel confident that, not only the country, but the taxpayer, will be pleased.

Mr. KEENS

The last speaker referred to the fact that in this country, in spite of everything, we have been able to balance our Budget and show a surplus. That must be a matter of the greatest possible satisfaction; and the Chancellor of the Exchequer is also to be complimented upon the manlier in which his estimated surplus is being dealt with, subject to the condition that he is satisfied that the small surplus which he anticipates will be sufficient to cover his demands in other directions. I think that he is particularly to be congratulated upon his stroke of genius in abolishing the Inhabited House Duty, such abolition being undoubtedly equivalent to a considerable remission of Income Tax to that class of salaried man living in an urban district who has to take a larger house than he actually requires and probably to let apartments.

The points, however, to which I particularly want to call attention are not the strong points of the Budget. I consider that an otherwise excellent Budget is vitiated by two rather important things, to which I have called attention before in this House. One of them is that Clause 28 of the Bill introduces in a very special and vicious manner the principle of retrospective taxation, to which I have previously called attention. There is, however, another matter which is not actually in the Budget, but which has arisen by the refusal of an Amendment. It is a matter of great seriousness, and I think, if I may say so, that it has arisen under a misapprehension. The hon. Member for Wavertree (Mr. Rathbone) called attention to the fact that the records of the Port of Liverpool show that there has been a very considerable improvement in the volume of trade coming into and going out of that port. The operation of the matter to which I propose to refer has undoubtedly had the effect of diverting a very large proportion of trade from these islands. I refer to the action of the Inland Revenue Department with regard to the taxation of agents.

The position is that the law on the subject has been tested, and the Crown have not succeeded. They are appealing, but for the moment the Crown are proceeding as though they had succeeded in their case in the lower Court. The Financial Secretary to the Treasury, in the course of these Debates, has stated very distinctly that general commission agents and brokers were protected by Rule 10 of the General Income Tax Rules, 1918. I appeal to him to carry his investigations further, when he will find that, notwithstanding what has taken place in the Courts, assessments have been and are being made upon general commission agents and brokers in the various ports of this country. In one particular case an assessment of estimated profit of £50,000 per annum has been made upon a firm of general brokers who act for hundreds of firms abroad, and similar assessments of various amounts have also been made upon those brokers in respect of other firms with whom they have to deal.

I ought, perhaps, to say that, in the course of Debate in this House, the Attorney-General laid it down that a general agent was not to be liable to taxation, but that, if there were any special arrangements by way of retainer or commission, then the men or the firms ceased to be general agents and became a kind of special agents, and were, therefore, liable to assessment in this country for an assumed amount of profits made by their principals. What are the facts? In the course of the action in the case of Pinto, which was decided against the Crown and is now the subject of appeal, Mr. Justice Rowlatt laid it down that the whole question was where the contract was signed. If the contract was signed in this country, then there was profit within this country and they were assessable to tax. I have the authority of important firms to state that, since that intimation was given during that action, a large volume of trade, which was pre- viously conducted in this country, has erased to be conducted in this country at all. Not a single contract for the material or merchandise concerned has been signed in this country, and the loss to the City of London and to the trade of this country has been enormous.

I believe it is the desire and intention of the Financial Secretary that this should not operate harshly, but in the meantime his Department is conducting these proceedings, and is harassing men who are in this position, although the correspondence distinctly states that his Department admits that these particular firms are general commission agents and brokers, and that there are no special conditions attaching to them which make them special agents and bring them within the Section. I may be told that the Courts are open, and, in fact, the correspondence says, "If you object to the assessment, then appeal against it and take it into the Courts"; but that is the things to which we object. It means that 150,000 people within the City of London alone do not know whether they are or are not liable for an assessment of six years' Income Tax on the assumed profit of foreign principals in respect of trade which may be held to be done within this country. I do appeal to the Financial Secretary to go further into this matter and to give an assurance that there is no intention to tax these people in these circumstances.

Take, for instance, the case of sugar, The sugar crop of Java is sold through this country, by firms in this country, to all parts of the world. Hardly one fraction of that sugar crop actually comes into this country, but the transactions are conducted from this country. That means an enormous amount of revenue to this country, and the attraction to this country of an enormous volume of business. All of that is in jeopardy. It is not, and never was, the intention of the framers of the Section in 1915 to endeavour to attack the vast entrepot trade which is carried on in this country, but the fact is that that entrepot trade is being attacked, and trade is being diverted from this country, which must inevitably mean loss of revenue.

One is, of course, aware that when this was introduced we were attempting, very properly, to get at the operation of international trusts which were carrying on business abroad, with branches in this country, and so arranging the prices for purchases and sales that they avoided taxation. That, we admit, is a thing which must be done, but Rule 10 was undouhteclly put into the Act of 1918, carrying on the Act of 1915, with the intention of letting alone and saving from any possibility of attack the very well defined agency and commission business carried on in the City of London and in the great ports of this country. Now, by the action—and this is what I want to repeat and insist upon seriously—by the action of the Inland Revenue Department, these men are being assessed in cases where it is admitted that there are no special conditions, but that they are general brokers. The whole point is whether or not a contract signed within this country shall bring them within the assessment to Income Tax in this country, and on that they are proceeding, in spite of any litigation which has been decided otherwise.

6.0 P.M.

I would also remind the hon. Gentleman that, in the course of this particular action, it was laid down by Mr. Justice Rowlatt that, if the Treasury were right in their reading of the law, there was not a single transaction in Covent Garden which could not be included day by day, and every salesman in Covent Garden would be liable to the Crown for Income Tax on the profits of the growers who sent their stuff to that market. In this case, knowing, as I do, that it is having the most disturbing effect on the City of London and in the other ports where this trade has been carried on for many years, and where it has meant an enormous accession of wealth to this country, which means binding trade to this country, and which has meant an enormous amount of revenue to the country, the greatest care should be exercised that it is not damaged. Surely we, as the largest exporting nation in the world, are the most vulnerable in this point. When we were discussing this in Committee the Financial Secretary to the Treasury seemed to imagine it a very simple thing to quote Rule 10 and say it disposed of the question. It does not. As the largest exporting nation in the world we are the most vulnerable. We are going to call for reprisals in this matter. If we do, we are likely to suffer more than any other nation. I therefore appeal to the right hon. Gentleman to give such assurance as he can that it is not the intention of the Department to go on harrying these unfortunate individuals who, it is admitted, are carrying on a bona fide agency and commission business, but that the attentions of the Department will be devoted to those cases, which are very well known, where in the past evasion has been attempted, and I am afraid in some cases successfully carried out. I am sure in doing that he will ease the mind of a number of men of importance in the City of London and elsewhere who are now carrying on their business under the greatest possible difficulties, who are afraid to make a contract in the United Kingdom, and I know that a large volume of business previously done by and with this country has been diverted from this country to the permanent loss of the country.

Mr. REMER

I should like to associate myself with the remarks of the hon. Member in both the minor but nevertheless important points he has raised, as regards retrospective legislation, which I think is one of the most distasteful portions of the Budget, and also the question of the taxation of agents in respect of the profits made by their principals. I am a member of the timber trade and friends of mine in the City of London are being put into a very serious positition by the assessment which has been placed upon them for profits made by principals who are hardly known to them and whom they have only casually met, and the Treasury say these people have to pay Income Tax on the profits of their principals. It is doing considerable injury to our trade. Several of these brokers are personal friends of mine and transact this kind of business where they buy timber in Constantinople and sell it in New York. They shin timber of a different kind from New York and send it back to Constantinople, and of course they sell timber between this country and the United States. I am sure the attitude of the Government on this subject can have only one effect, that the profits of this entrepot trade, which are most valuable in bringing revenue to the country, will be driven away and these firms will be driven to the state of having their offices outside the United Kingdom altogether, which is one of the ways in which this taxation will be evaded.

I wish next to deal with a great major defect of the Budget, namely the discontinuance of the New Import Duties. I want to raise a point which I think has not been raised before, but which ought to be raised, because the right hon. Gentleman the Member for South Molton (Mr. Lambert) said we on this side seemed to think that goods from abroad came here for nothing. I suppose he was going to develop that old argument which has so often been used, that if motor cars or gramophones or any articles under the McKenna Duties come into this country we perforce have to send goods over to America. Anyone who knows anything about purchasing goods from America under present conditions knows that that does not happen. What happens is that the rate of our exchange falls, with the result that every commodity that we buy, whether it is timber, which I buy, or cotton, which my hon. Friend the Member for Stockport (Mr. W. Greenwood) buys, or necessary foodstuffs, increases the cost of living to every man and woman in this country. I want to show how this works. During the last 12 months the rate of exchange on New York has varied between $4.10 and $4.60. If the price of timber was 100 dollars per 1,000 feet, at $4.10 it would be 5s. 10d. per cubic foot, and if it is $4.60 the price would be only 5s. 2½d. There is a saving during the 12 months on the rate of exchange alone of as much as 7½d. per cubic foot. We are in this position, that if we import motor cars or any other luxuries, under the position in which we are placed, we tend to depreciate our own exchange and therefore make the cost of our essential raw materials and foodstuffs high. I could not help thinking, when the right hon. Gentleman the Member for South Molton spoke about the export trade in motor ears, that he had overlooked that the taxes on motor cars and other goods have not yet been removed. They are not removed until next week, and therefore the great increase of motor cars during the present six months to which he referred was made during the period when the McKenna Duties were still being retained. Why is it that Henry Ford, in a protected market, can pay the highest wages in the world and sell his motor cars at the lowest price? For exactly the same reason why our export of motor cars has been increasing during these six months, because by getting certain protection in their own market they have been able to increase their turnover and to reduce their standing charges to a minimum, and to sell their goods at the lowest price. I am convinced that, in the case of all manufactured articles, if the market is protected it means not higher but lower prices. I am sure it is possible for the manufacturer to pay higher wages and to sell his goods at a lower price.

Mr. DARBISHIRE

Why have you dropped Protection?

Mr. REMER

I have not dropped it. I support the policy which is, I understand, the official policy of my party.

Mr. DEPUTY-SPEAKER

I do not think we can go into that.

Mr. REMER

I should like to have done so, but I am sure I should have been out of Order. I feel that in the two major matters, the turning down of the Economic Conference proposals of last year, and the repeal of the McKenna Duties, taking a long view, there will be a condemnation of the Budget which I am sure will be proved by experience after it has been passed into law.

Mr. HINDLE

In view of your ruling earlier on, I shall not attempt to bring in the question of Protection in the skilful manner adopted by hon. Members opposite. I want simply to raise the point of the extension of the retrospective legislation contained in Clause 28. I agree that is an obnoxious excrescence on an otherwise fair body, and as there seems to be a perfect orgy of retrospective legislation it becomes all the more necessary, seeing that the appetite grows with what it feeds on, that a strong protest should be made at each stage of the Bill against this growing tendency, even though our protest may be futile. One can quite understand that the Executive welcomes and encourages retrospective legislation. It enables a Minister or a Law Officer for hide up his mistakes, and encourages also careless draftsmanship. Therefore, in these days of hurry and scurry, retrospective legislation has no terrors to the type of mind which governs the Executive. It has been con tended that this is not retrospective legislation because—the argument is an extraordinary one to my mind—it is said the subjects of the Crown who were affected did not know of their rights when those rights accrued. Few laymen do know their rights. They do not always know them after they have consulted their lawyers, and they certainly very rarely know them before. It is also used as an argument that if this legislation be not passed the Crown will be asked to pay an enormous sum of money. I think that sum—I believe it is £8,000,000—is enormously exaggerated. Even if that be true, it is right to say that the greater the amount that has to be paid the greater the injustice that the subject is suffering. Surely we are entitled to ask from the Crown almost a higher standard of ordinary equity and morality than we demand from other people, and especially when the Crown is dealing with its own servants. I hold no brief for the particular class of men concerned, but I am anxious that the Crown should be in such a position that no one can cast any stones at it.

I am sorry that the Chancellor of the Exchequer is prevented by other important duties from being present, because I would have liked to appeal to him to put himself in the position of these men. In years long gone by, the right hon. Gentleman, before he attained to the distinguished position he now holds, was, I believe, a civil servant, and I would like him to ask himself what his own feelings would have been if, believing that he had a right, or having a right, the Legislature came over his head and said, "Whether you have a right or not we will not even allow you to go to the Courts to test it. We will take it away at once." The rafters of this Chamber would have rung with indignation and eloquence from the right hon. Gentleman Apparently, the chains of office have tamed down that enthusiasm of which we had so many eloquent examples in years gone by. This seems to me to be a very important point, which cuts at the root and sanctity of legislation and at the root of the influence which this House holds, because if it once becomes the practice of this House to say that if a man has a right that right is to be taken away, there will be an end to trust and confidence in the Measures passed by this House from time to time.

Sir ROBERT HORNE

I should like to take this opportunity of congratulating the Financial Secretary to the Treasury on reaching the last stage of the Finance Bill. As one who has had the arduous duty of piloting a Finance Bill through the House of Commons I cannot help having a fellow feeling for one who has had that duty to perform in this Session, although I agree that the task has not been made unduly difficult by the criticism which has been levelled at the provisions of the Finance Bill. I am sure the whole House is very conscious of the admirable qualities which have been displayed by the Financial Secretary to the Treasury in getting his Bill through.

In this afternoon's Debate many interesting points have been raised. One of the most important is the question of the taxation of the profits of foreign firms who have agents in this country. I am perfectly certain that this is a question which it behoves the Treasury to look at with much greater scrutiny than in the past. From personal knowledge of a considerable number of transactions which are struck at, I am sure that in future the country will tend to lose in revenue rather than gain if it keeps up the rigid attitude which has been adopted towards this class of business. I am closely acquainted with businesses in which I know that a large volume of trade will be lost to this country if that principle is to be acted upon. There are many people who, at the present time, are looking for a change of policy on the part of the Government of this country, and I fear very greatly that if that change of policy does not come about a considerable proportion of very lucrative business, which brings in its train an immensity of other contracts, will disappear from the City of London. Accordingly, I will net do more at the present time than urge upon the Financial Secretary and his advisers carefully to review the whole position which has been disclosed by the very admirable speeches which have been made on this subject.

Other interesting topics were raised by the hon. Member foe Ilford (Sir F. Wise). His speeches upon financial problems are always very interesting. There was a personal reference to myself in connection with the 3½ per cent. Conversion Loan, to which I entirely dissent. I am sure that when this matter is looked at carefully by those who study the finance of this country, they will agree that a start had to be made in regard to converting the obligations of this country, and that, having done it at that time, it acted with enormous benefit to our financial position. The hon. Member well knows how, immediately following upon that conversion scheme, we were able at successive stages to get our conversion at a cheap rate. We had to make a start, and if it had not been made at that time we should have lost rather than have gained by the delay. That is my personal conviction. The hon. Member also raised the question of the gold standard. I entirely agree with what I understood to be the general drift of his speech on that subject. I do not wish on this occasion to enter into any discussion as to whether a policy of deflation or inflation was better or worse for this country, or whether the policy which we actively pursued has enured to our benefit, because there are, as the House knows, considerations at the present time, especially in connection with the Commission which has been appointed, which make it inexpedient that the Financial Secretary, for example, should be called upon to express an official opinion upon that subject.

I should only like to say this, as a person who has been connected with the finances of this country and who also knows something about the effect of our financial policy upon business, that you could not have any policy which would be more adverse to industries in this country than one which would depreciate our financial stability. The confidence which the world feels in our financial position and the trust which induces them to leave large sums of money lying in the City of London—we do not let the money lie; we turn it over and invest it and make commissions upon it, and from it we derive large revenue—is a priceless asset, and anything which shook that confidence and which depreciated the value of the pound sterling would inevitably react upon every industry in the country. If I were asked what is the most important factor in our industrial prosperity, I should not hesitate to announce it to be the preeminence which the country enjoys in finance.

Among other subjects raised this afternoon there was an interesting aside in the speech of the right hon. Member for South Molton (Mr. Lambert), to which I should like to draw attention. He dealt with the decline in one of our most important industries, namely, the iron and steel industry, and ascribed it to the burden of taxation which at present rests upon the industries of this country. That leads me to say that the Budget which we have had in the present year cannot be described as anything other than a normal Budget. It is the kind of Budget that you would have put through the House in normal times. The Chancellor of the Exchequer had a surplus to deal with, and he dealt with it, in the main, by the remission of duties upon sugar and tea. A remark made by the right hon. Member for South Molton brings vividly before the House the fact that while this is a normal Budget, it has been passed in very abnormal times. I would venture to follow up the line which the right hon. Gentleman took and direct the attention of the House to the very serious conditions of the industry of this country at the present time.

Many people are deceived by the outward appearance of spending and the display of wealth, but, my conviction is that there are a great many people spending to-day because they think it is hardly worth while saving. The State takes so much of their savings when they are alive, and still more when they are dead, that they are induced to embark upon a course of expenditure which wise and reasonable people would not otherwise adopt. That certainly also greatly checks investments. We can readily understand that when a business man is asked to make a large expenditure upon some new venture he says to himself, "If I succeed I shall only he allowed 10s. of each pound that I earn, and if I fail I shall lose the whole pound." Anybody can see that that has a very remarkable deterrent effect upon enterprise, and accordingly, on broad grounds, I think it will be acknowledged that high taxation is one of the greatest burdens from which we suffer at the present time, and that it really tends to create the very unemployment which we are endeavouring to cure.

Let me point out some ways in which business is affected. If you take the local rates which are paid by the employers, it is quite obvious that those go straight on to the cost of every article that is produced. If you may take what I may describe as industrial charges, what the employer has to pay in the way of Workmen's Compensation, Health Insurance and Unemployment Insurance, all these things go straight on to the cost of the article. With regard to Income Tax, the position is not so clear, because you only pay Income Tax upon your profits. Nevertheless, Income Tax vitally affects business and leads to an increase in the cost of the article, in that it takes away a proportion of everything which the employer saves and puts to reserve. It takes away 4s. 6d. out of every pound. That has two effects. In the first place, it tempts people to distribute more than they ought, because they say that the State is taking such a large proportion of what they make. In the secondary aspect it deprives the employer of those very funds which he sets aside for the purpose of purchasing new equipment, of reorganising his business and of cheapening his production, and leaves him in a situation in which he is not able to compete with those people who are enabled to spend larger sums upon these activities. In all these ways, rates and taxes affect the cost of the articles and, therefore, affect our ability to compete with people from other countries in the external markets of the world.

Everyone realises that unless we can sell our goods outside these shores we cannot possibly live. Therefore, everything that tends to increase the cost of our products and puts us in a disadvantageous position in relation to our competitors is harmful and hurtful to our industries and our employment. To-day we are the most highly taxed and most highly rated country in the world. We are under a perpetual handicap in every market in which we seek to find an entrance. You will find the results of it in many concrete examples. Take one of our greatest industries—shipbuilding. One knows of course that the shipbuilding industry is in a state of great depression at the present time, because for one reason there are more ships than there ever were before. But still people are building ships, yet not half of the berths in this country are full, though we are the greatest shipbuilders in the world, and, I think it will be acknowledged, the most efficient shipbuilders.

Only the other day a Rotterdam firm received nine order for ships, four of them from shipowners in Glasgow, four from shipowners in Newcastle and one from a large British line. Just imagine the situation. People on the two greatest shipbuilding rivers in the world actually buying their ships in Holland! Why? Because the cost of these ships to-day is 20 per cent. less in Holland than it is here. Take another instance. There are the repairs which have constantly to be done to ships. The President of the Board of Trade in answer to a question the other day admitted that in the course of four months last year there were 12 British ships under repair in Amsterdam and 42 under repair in Rotterdam. He qualified that last statement by pointing out that nine probably were taking advantage of their being there but with regard to the other 33 they had deliberately gone to Botterham for repairs because they found it cheaper to do that than to have the repairs made in British yards. That is a very serious situation to which I direct the attention of the House, because I am sure that if we are to come through our difficulties we shall do it not by evading the facts but by facing the facts.

I ask the attention of the House also to another great trade of this country, the iron and steel trade. I ask it not merely because, as it happens, I have got a very intimate knowledge of its conditions, which, on the whole, I think makes me more qualified to speak about it, but also because the House will recognise that the iron and steel trade is one of the basic trades of this country, and no great industrial country can really survive if it be deprived of its position in iron and steel production. Our experience there frankly is that in competition with Belgium and Germany at present they can always undersell us by something like 30s. to £2 a ton. We got a large number of orders from the railway companies last year in this country for steel rails, but we got those orders at something like 30s. a ton dearer than the price at which the same rails could have been purchasrd abroad. We got them through the urgency of His Majesty's Government, who begged the railway companies to help employment of the country by placing these orders in Britain, but I have also to acknowledge that, in the main, these orders, at the price at which they were taken, did not yield a penny of profit to the steel makers of this country.

If you look at the figures you will find that the imports of iron and steel into this country during the first five months of this year are greater by 20,000 tons per month than they were before the War. Contrasting that with the export figures you will find that our export now is not within 75,000 tons a month of what it was before the War. That is our position even now when Germany has not yet begun to make her new effort. At present Germany is only exporting one-fifth of the steel which she exported before the War, but when Germany begins to give to the world the full extent of the exports which she is capable of producing, in the great new works which she has contrived since the Armistice, what is going to be the position of this country especially in relation to the prices competition which we shall have to endure? I beg the House to think of these facts. Of course, there are many factors in these prices. There is the question of hours of labour, for example. They are working longer hours on the Continent. They are Working for lower wages on the Continent.

Mr. MARCH

Not much!

Sir R. HORNE

I have gone into these figures carefully. I do not wish to detain the House at present in giving meticulous examples, but anybody who has gone into the figures knows that the wages there are less and that the hours are longer. Another factor is that our railway rates are much higher. Again that comes back to the question of wages to a considerable extent. Then there is the cost of transport, not inland but by sea, and in that connection, by reason of the number of shifts which are worked at ports abroad, ships get a much quicker discharge than at our ports. I may give a personal illustration. Only the other day I was dealing with the representative of a very large French firm in connection with some contracts, and he told me frankly that he could not make terms with me unless I could expedite the discharge of the ships in our ports. He gave me some examples of the same ship carrying goods of the same character to Rotterdam and to South Wales ports, and the disparity of the rate of discharge was quite appalling. That accounts for a very large addition to the cost of everything which we import or export.

These are all factors which enter into the matter, but I do not suppose that any one of them is such as the Financial Secretary to the Treasury would be able to deal at the present time. The question of taxation, however, is particularly within his charge, and there is no doubt that high taxation and high rating are responsible for a very considerable portion of the increase in the cost in this country. I figured it out in one particular case, and I found that, leaving aside Income Tax altogether, the difference between the cost of rates and taxes before the War and now on the ton of finished steel was this: Whereas before the War, 2s. 9d. represented rates and taxes, to-day something like 21s. 4d. represents the rates and taxes on a finished ton of steel. I have figures for some of the Sheffield firms and the amount of difference in some cases is actually as much as £2 per ton.

I ask the House as a body of business men how they think it possible for us to compete in conditions so difficult as these? That is the problem which we have got to face. The burden of rates and taxes in Germany to-day represents only something like one-third of what is borne by similar products in this country. I had hoped that in the present year the Chancellor of the Exchequer, or the Financial Secretary to the Treasury, would have been prepared to accept an Amendment to the Finance Bill doing something to mitigate the heavy taxation that is now put upon the reserves which firms put away for the purpose of new adventures or re-equipment or re-organisation. I have no doubt he will say that it will cost a great deal of money. It is my firm conviction that this money would come back greatly increased in the future. Something must be done. If the cost cannot be reduced with regard to any of the factors to which I have referred something has got to be done in regard to rates and taxes. I ask the House to consider seriously what is to be our future policy on this matter because I cannot disguise the fact that in my view the situation is very grave. This makes me all the more surprised that it should have been thought necessary to disturb simple things like the McKenna Duties, which did nobody any harm, and of which no person who was a consumer ever complained, and that the Government should have been willing to risk the possible unfriendliness of our Dominions in regard to their relation to Imperial Preference.

Every industrialist in this country at present realises the immense benefits he gets from being secured by preference in the markets of our Dominions and Colonies. I do not believe that any Government could face the storm of protest both from employers and employee] in this country which would arise if the Dominions were to say, as a result of our policy, "We propose to withdraw all our preference," and I do not know what my hon. Friend's answer would be if a Dominion Prime Minister said, "We will take off that preference unless you give us some return." I regret that my hon. Friend and the Chancellor of the Exchequer have signalised their advent to the Treasury by two such great blots on their Budget as the two to which I have referred. If they were followed, as their natural sequence, by a change of policy on the part of our Dominions, then this Budget would come to be known as the most disastrous ever presented to this House, and would overwhelm in obloquy the memories of the men who produced it, but their reputations are saved only by the generous sentiment towards the Mother Country of those people whom they have never understood, and by the devotion to the Empire of men whose loyalty they have never appreciated.

Mr. BLACK

I listened with great interest to the speech which has just been delivered, though I cannot follow the arguments to their logical conclusion. I cannot agree with the statement that the people in this country are not as well off as they were before the War. Have we not this year an estimate of £265,000,000 as the amount of the Income Tax that is going to he paid on an income of £1,400,000,000 by Income Tax payers? These figures are largely in excess of any figures returned prior to the War. At the same time a question put to the Chancellor of the Exchequer a few weeks ago was answered to the effect that the gross income of the whole nation stood at about the figure of £4,000,000,000, which I understand to be about £1,800,000,000 more than the pre-War estimate of the national income. Under these conditions it seems to be straining the position to state to the House that the general condition of the people of the country is not as satisfactory as it was before the War. I know there are about 1,000,000 people unemployed, but with regard to the other 13,000,000 of the working classes who are employed, apart from the agricultural industry, they are not earning unsatisfactory wages at the present time—[HON. MEMBERS: "Oh"]—with the exception perhaps of the engineers and the miners in some districts. I am speaking of the general incomes of the larger portion of those in employment at the present time.

The right hon. Gentleman has just brought forward a point with regard to ships being built at Rotterdam and ship repairs being carried out more cheaply abroad than at home. What solution has the right hon. Gentleman to offer? If we were to put protective duties upon steel, would it prevent the shipbuilders of Rotterdam from continuing to produce ships at their present prices? Would it prevent the ship repairers in Rotterdam from continuing to repair at the prices they are now charging? Unless you pass a law in this country that people are not to be allowed to buy ships outside this country, I do not see that you can do anything to prevent the shipbuilders and ship repairers of Rotterdam from serving those people in this country who are inclined to deal with them, at the lowest possible price. Supposing you put a duty upon steel and iron produced abroad, it comes in here at a higher price and you thereby increase the cost of production of the goods made here. I have it on the best authority that the Coventry motor-car makers at the present time do not scruple to buy the Belgian steel of which the right hon. Gentleman has just been complaining. Here you have the peculiar position that the motor-car makers in Coventry, Birmingham and elsewhere, who protest against the removal of the MeKenna Duties are, at the same time, taking advantage of the Free Trade situation to buy their materials and accessories abroad, wherever they can buy them cheaper than at home What is sauce for the goose should be sauce for the gander, and if those manufacturers desire to buy raw materials and accessories at the lowest possible price they ought to allow the consumers in this country to buy the produced article also at the lowest possible price. Their position seems to be inconsistent.

I should like to refer to the arguments put forward by the right hon. Gentleman (Mr. Hope) who initiated this Debate and also by the hon. Member for Macclesfield (Mr. Remer) regarding the influence of the McKenna Duties upon employment. It is a remarkable fact that the hon. Member for Macclesfield did not call attention to the fact that in America under the Fordney Tariff, which is a very much enlarged tariff, they have been compelled to take 50 per cent. more imports than they took before the operation of that tariff. I have attended throughout the Debates on the McKenna Duties, and I wish to put some points in relation to them which I think have not been put before as showing the bearing of these duties upon the subject of unemployment. We are all desirous of seeing the finances of his country so administered and manipulated that employment shall be as large as possible, and with that object in mind I ask how is it that in this country there is only one motor car to every 110 people whereas in America there is one motor car to every 11 people?

Mr. ERSKINE

Protection. [HON. MEMBERS: "Higher wages."]

Mr. BLACK

Protection has nothing to do with it. As far as the importation of motor cars into America is concerned, there are no cars going in except the Rolls-Royce, a very expensive car. They have a huge number of cars in operation and, owing to the huge number and the organisation of mass production, no doubt the price has been very much reduced, and that is the reason why such a large number is being sold. Now I ask hon. Members to consider the fact that, in spite of unemployment last year in this country, 383,000 licences for motor cars were taken out, and this figure does not inclue lorries or motor omnibuses but represents ordinary pleasure motor cars. At least one out of five of the owners of these 383,000 cars employs a chauffeur, and that would be 75,000 chauffeurs. I am told by experts that the figure would more likely be one in four, but, for the sake of argument, I am taking it at one in five. In the garages of this country at least 50,000 man are engaged in cleaning, repairing and keeping in running order these motor cars, which makes a total of 127,000 men employed in dealing with these motor cars after they are built and put upon the road. The figures given in these Debates up to the present show that in the actual construction of these cars not mere than 90,000 to 100,000 men are employed, and, therefore, there are to-day employed in keeping up the condition of motor cars throughout the country 27,000 men more than are employed in the actual production of the cars. If you double the use of motor cars in this country, whether they come from abroad or whether they are made at, home, you thereby double the number of chauffeurs employed and double the number of men engaged in garages. [Interruption.] Well, I shall be very pleased to hear what answer hon. Members have to make to that argument.

Mr. ERSKINE

The only answer to it is that the moon is made of green cheese.

Mr. BLACK

That may be satisfactory to the intelligence of the hon. Gentleman opposite, but I do not think it will satisfy the House. I submit that, with a population of 45,000,000 in this country, if the cars were reduced to a cost which would enable a larger number of people to purchase them, it would be easy to double the number of cars on the road. Are we for ever to take it for granted that only one person in 100 in this country can own a car as against one person in 10 in America? The Ford Company are starting big works in the East of London in spite of the removal of the McKenna Duties.

Mr. W. GREENWOOD

And leaving Manchester.

Mr. BLACK

That may be so, but I understand they are acquiring a tremendous acreage in the East of London where they propose to employ 10,000 men, and to manufacture an all-British car. If cars at a cheap price were put upon the market, we might have cars available for the ordinary workers of this country. Why should not the workers have them? I should like to see every hon. Member above the Gangway, and every man who is a worker having his own little motor- car. It could be done if cars were available as they are in America. The only point is that the Ford car is 23 horsepower, but, if you could buy a small car here of 10 or 12 horse-power for £70 or £80, you would find that the utilisation of motor-cars in this country would increase by leaps and bounds, and from that circumstance many benefits would accrue. First, every one of those cars would pay £1 per horse-power to the taxation of the country, and instead of £15,000,000 coming into the Exchequer from motor licences, you would bring in £30,000,000. We should get the rural roads attended to, and we should have work for the unemployed—in fact, one might say the financial millennium would be in sight. Take the case of a doctor or a surveyor, or any man who requires a small car in his profession or business. If he were enabled to buy at a lower price, the number of professional men using cars would be multiplied enormously, and the people of this country would be supplied with the cars which they require.

7.0 P.M.

If you can give the motor car industry by competition an incentive to put themselves in a position to increase production you will have done something which will very much benefit the trade and the public at large. I am not speaking without the book, because I have investigated this matter, and I have some acquaintance with the trade. If the industry of this country could institute a system of mass production such as they have in America, I think we have as good engineers as any in America, and under the system of Free Trade we should be able to purchase materials at the lowest price. I believe the finances of this country would be put upon a better basis altogether if we could increase the utilisation of cars, and the revenue certainly would be enhanced to a large extent. I should like to compliment the Chancellor of the Exchequer and the Financial Secretary to the Treasury upon the Budget, but, before concluding, I wish to call attention to one other subject. I was very surprised, and I am sure the whole country has viewed with astonishment, the position in which the Labour Government, which has always stood for peace and international brotherhood among the nations, in the first years of its ex- perience has come forward and proposed to this House to spend £9,500,000 more upon armaments than the Tory Government did last year. Cannot I go on discussing that, Sir? I thought it was included in the Finance Bill?

Mr. SPEAKER

We are not in Committee of Supply.

Mr. BLACK

If the Chancellor of the Exchequer, instead of spending money in that way, could spend it on reducing the postage to one penny, he would have done a very fine work indeed in the interests of the business of this country. Chambers of Commerce throughout the country, business associations, and the Federation of British Industries—[HON. MEMBERS: "Oh!"]—they know something about business—and all those large associations know very well that if the penny post were once more in operation it would tend very largely to the benefit of trade throughout the country and the Empire. I thank the House for the opportunity that I have had, and I hope that the remarks I have made will receive some attention from the other side.

Sir JOHN MARRIOTT

I do not want to follow the hon. Member in his very ingenious and flattering anticipations of the financial and social millennium. I, like him, look forward to that millennium, but I do not propose to reach it by the same route. I want to say one word with regard to a point raised by my hon. Friend with regard to the speech of the right hon. Gentleman the Member for Hillhead (Sir R. Horne). The hon. Member opposite put a question to the House, how we are to retrieve the position which was revealed by my right hon. Friend the Member for Hillhead in regard to shipbuilding in this country. I want to say just one word with regard to that point One of the main points I wish to deal with was raised by the hon. Member for Wavertrce (Mr. Rathbone). The whole burden of the speech of the right hon. Member for Hillhead was that the trade of this country was being absolutely strangled by the weight and burden of taxation which is laid upon it. When my hon. Friend opposite, the Member for Harborough (Mr. Black), asks how we are going to retrieve the position, I say there is one way of doing it, and that in by relieving-the burden of taxation which rests on British industry. My hon. Friend the Member for Waver-tree said taxation had to be raised. That surely depends on the expenditure which we are proposing. I am very well aware that I should be out of order if I were to discuss the question of estimates or of expenditure but it has been my duty as Chairman of the Estimates Committee to scrutinise carefully the pre-suppositions of expenditure which underlie this Finance Bill. I know I should not be permitted to discuss that here and now, but may I say to the President of the Board of Trade, if he will be good enough to communicate with the Leader of the House on this matter, that, although I should not be permitted to raise that question now, it will be my duty at a later stage of the Session to ask His Majesty's Government, and particularly the Leader of the House, to give us time according to the unbroken practice of recent years for the discussion of reports which as an Estimates Committee we have to make to the House of Commons.

For the moment, I desire to make only one or two observations on the Finance Bill. It seems to me that the first outstanding feature of the Bill is that it does possess certain virtues, but those virtues, I venture to suggest, are inherited virtues. I am very glad indeed that the Labour Government in the first Budget they introduce should have the advantage of inherited virtues. The main lines of the Budget, so far as the revenue side is concerned, are due, I respectfully submit, to the financial wisdom and the fiscal virtues of the immediate predecessors of the present Government. Virtues it possesses, but in the main—I do not want to be offensive, and I shall not be deemed offensive when I say—this is a cowardly Budget. I am not imputing any blame at all on this point to the immediate authors of the Budget. They are cowards, like Falstaff, under compulsion, and the compulsion to cowardice has come from those who, with some apparent inconsistency, are alternately described as tyrannical masters and patient beasts of burden. But whatever the source, the result is as I suggested. The Budget is conceived on cowardly lines. What I mean is this. It is cowardly, in the first place, in its refusal to face the facts of the industrial situation. Those facts haw; been admirably brought out in the Debate this afternoon by my right hon. Friend the Member for Hillhead. The facts of the industrial situation are far more disquieting than most people in this House are prepared to admit.

Then I suggest that this Budget is cowardly in another sense—in its failure to provide for the financial responsibilities which are implicit in the legislative programme of the Government themselves. For example, we have already had published yesterday a very substantial volume of Supplementary Estimates. I know that that is a point which I am not entitled to pursue in this Debate, but I may remind the House that those Supplementary Estimates already reach a total of over £3,000,000, including, as they do, two token Votes as against an estimated surplus in the Budget of £4,000,000. That reveals a very serious financial state of affairs. That brings me to the main point on which I want to say a word or two. I cannot help feeling that this Budget, whatever its virtues, and whatever its vices, is in the main a doctrinaire Budget. I am not going to embark on those larger issues of the fiscal problem, some discussion of which has nevertheless been permitted this afternoon. I want to put this question to the Chancellor of the Exchequer or to the Financial Secretary as a Scot. Does the Financial Secretary really desire to be a better Free Trader than the father of Free Trade himself? Does the Financial Secretary want to be a better Free Trader than the greatest of his compatriots in economic science? Does he want to be a better Free Trader than Adam Smith? I suggest to the Financial Secretary, whose knowledge of these matters is far greater than my own, that with that great master of economic science the question of Free Trade and Protection was in no sense at all a matter of principle; it was wholly a matter of expediency. I respectfully suggest to the Financial Secretary that he will find in that great master of economic science, his own compatriot, ample justification for those two sets of fiscal imposts which have been deliberately omitted from the present Measure. I refer, of course, to the preferential rates on Imperial produce and to the new duties which are associated with the name of Mr. McKenna.

In regard to Imperial Preference, does the Financial Secretary suggest that on that matter he can shelter himself or the Government or their proposals behind the great authority of Adam Smith. I suggest that he will find it exceedingly difficult to do so. As a matter of fact, Adam Smith was always prepared to admit that in the last resort an economic consideration must give way to a political consideration. If these preferential duties are to be condemned—and I am not prepared to condemn them—from the economic point of view, is there behind them any large political issue which, as my right hon. Friend the Member for Hillhead said this afternoon, is of supereminent importance to the future prosperity in the large sense of This country and the Empire? In regard to the justification for dropping the McKenna Duties, again I appeal to the great authority of the hon. Gentleman's compatriot and master—I am sure I may so describe him—and he will find there a maxim which completely cover the case of those duties. Great emphasis has been laid in the Debate this afternoon on the terrible burden of taxation in this country. My right hon. Friend the Member for Hillhead gave to the House some exceedingly interesting figures in regard to the extent to which rates and taxes enter into the cost of our manufactured products to-day, more particularly in the steel industry, and make it exceedingly difficult for those products to compete in neutral or, indeed, any markets of the world. It has always been an aphorism that where you are laying a heavy burden on the products of native industry you are entitled to lay by every rule of fiscal science a corresponding duty on similar products in competition with them which come to this country from abroad.

I referred just now to the terrible burden which we are laying upon production in this country. The hon. Member for Wavertree laid great stress on the necessity for encouraging accumulations of capital. My right hon. Friend the Member for the Central Division of Sheffield (Mr. Hope) laid great stress also upon the restriction of personal expenditure necessitated by taxation. Well, I am concerned with the burden of taxation far less from the point of view of the individual taxpayer than from the point of view of national production. This burden, to-day, arises not only from the aggregate amount of taxation, which is very heavy, but from the disproportion between the direct and indirect taxpayers. My right hon. Friend the Member for Sheffield made some allusion to that point—to the percolation, as he called it, of the incidence of direct taxation, which is not to be- measured only by the assessment of the individual taxpayer. I entirely agree with those remarks. I associate myself, if I may respectfully say so, with them, but I think I look at the matter from a slightly different angle. He was, as I understood him, laying special stress upon the restriction of personal expenditure in consequence of the burden of direct taxation.

I am not so greatly concerned about that. I do not very much mind about the reduction of personal expenditure. I am far more concerned with the effect of direct taxation on the depletion of our national capital. The whole future trade of this country very largely depends on the ability of individuals in this country to accumulate capital for the replenish ment of industry, and so long as this heavy burden rests on industry, such, replenishment of capital is rendered impossible. I am obliged to the House for listening to these few remarks. I take leave of the Budget of this year with this remark. I think it might be worse. I think it would have been worse but for the very rich legacy which the Government inherited from their prudent predecessor. I think if might have been worse but for the peculiar disposition of political forces in this House. I ventured to say once before that the virtue of this Budget approximates to the virtue of the plain woman, who is not exposed to overwhelming temptation. I think it would be ungracious if, as I have taken some part in Budget Debates for many years in this House, I did not say one word of great appreciation of the courtesy with which all parties in the Trouse have been treated by the Financial Secretary to the Treasury and by the Chancellor of the Exchequer. The passage of this Budget has, I am certain, been greatly facilitated by the courtesy of my hon. Friend opposite, and I desire, on behalf of those who sit on these benches, to thank him for it.

The FINANCIAL SECRETARY to the TREASURY (Mr. Graham)

I ought, in the first instance, to apologise to the House for the absence of the Chancellor of the Exchequer for a reason which I am sure every hon. Member will appreciate. If he had been present on this occasion he himself would be the first to have thanked hon. Members in all parts of the House for the spirit in which those Debates have been conducted. I am grateful to the right hon. Gentleman the Member for Central Sheffield (Mr. Hope), who introduced the Debate, and to the hon. Gentleman who has just spoken and to other hon. Members for the tribute which they have paid to some of the efforts put forward from these benches. I do not intend to-night to try to cover all the points raised in the Debate, but I propose, with the permission of the House, to deal with two or three of the larger issues on which some reply may be expected from the Government on this occasion. The right hon. Gentleman, when he introduced the discussion in a speech in which, if I may respectfully say so, religion, ecclesiasticism and finance were happily blended, asked whether we would be able to overtake the commitments that were already in view. No Government can ever expect to be quite clear of the difficulties of Supplementary Estimates.

In these times we are not back, although we are getting back to the exact estimating of the pre-War period, and hon. Members must know there are variable factors to be encountered. There may, for instance, be a large unexpected increase of revenue which eases the position of the Chancellor of Exchequer. As far as the commitments in question are concerned, I remind the House of the heavy arrears of Supertax, Excess Profits Duty and Income Tax which on a recent occasion I estimated at over £200,000,000. No doubt, in making our estimates, we calculated that a certain proportion of the £160,000,000 arrears of Excess Profits Duty might be recovered. We also estimated recovery of part of the £26,000,000 arrears of Super-tax, and of the £60,000,000 arrears of Income Tax. If I were asked to-day what the effect is likely to be of the collection of those arrears in the year which lies ahead, I should say that in a time of partial recovery of trade, and making all allowances for the difficulties of the situation, we should recover a very fair amount, and to that extent the position will be eased. The right hon. Gentleman also raised the problem of direct and indirect taxation—

Mr. HOPE

There was one question I asked. It was how far the existing commitments of the Government when they matured next year will affect the Budget?

Mr. GRAHAM

I am afraid I cannot tell the right hon. Gentleman off-hand. As regards old age pensions expenditure, we have indicated that it will increase by an amount rising from £4,000,000 to £7,000,000, but all the rest is in the realm of speculation. On the question of direct and indirect taxation, I indicated in an earlier Debate that the theory was very widely held a year or two ago that there should be some kind of allocation, it might be on a fifty-fifty basis, as between direct and indirect taxation. In any event, whatever view we take of the allocation of taxation of that kind, I think the House will agree that the situation was bound to be very largely altered by the changed social conditions brought about by the War and more particularly by the strain of recent years, and it would be the business of any Government to try to give as much relief as possible in the sphere of indirect taxation, even if it departed from the fifty-fifty theory.

The underlying difficulty is the people of ability to pay. There is not the least doubt that, in the case of direct taxation we are nearer to that principle of ability to pay than we could ever be with taxation on the necessaries of life, because ability to pay largely disappears in the consumption of articles on which every member of the community depends. The right hon. Gentleman also raised what has been for many years an interesting problem—the problem of the taxation of luxuries. The House is familiar with the great difficulty of defining what is a luxury article. I have always felt that especially in times of financial stringency luxury articles are a legitimate sphere not merely for ordinary but even for very heavy taxation, because we do not want to discourage expenditure on admittedly luxury articles and to encourage expenditure on necessaries and on articles the production of which provides work for our people and adds to our financial strength.

So much by way of general argument in reply to the points put by my right hon. Friend.

I come now to some of the more concrete issues of the Budget discussion, and I propose to say a word or two regarding the taxation of agents, more particularly from the standpoint adopted by several hon. Members to-night. While the Bill was in Committee, we resisted Clauses which were calculated, as we thought, to interfere unduly with the collection of taxation on business done by agents for foreign principals. Hon. Members agreed that we had no jurisdiction as regards the non-resident principal, but they said at the same time it was rather hard that the agents in this country should become liable for taxation on the trade done, although they themselves admitted that the trade should be taxed. In the long run a proposal for giving notice to the agent and only taxing him after that notice had been served was discussed. At the time I pointed out the obvious difficulty of such a proposal. A very large volume of trade might have been transacted before the notice was served, and, in the terms of the last Amendment before the House, the authorities were only to have recourse against the agent for the purposes of taxation of such trade as was done after the serving of the notice. That would mean giving a preference to an amount of trade conducted in this country in direct competition with British traders who were paying taxation. It would in fact be a preference to the foreign principal. This, I think, on any analysis of taxation, would not be justified. Accordingly, we felt bound to resist the proposals which were made. At the same time there is a feeling in regard to those exceptions which I quoted from the rules of the Act of 1918—namely, the exemption of entrepot trade which does not touch these shores, and also the exemption of the occasional and general agents—there is some criticism that the Inland Revenue authorities are proceeding against these people. The probable explanation is this, that many of the people who might be regarded as occasional, or casual, or general agents, may at the same time be engaged in a more binding agency, and become more or less permanent agents, and it must be in practice very difficult to disentangle that permanent branch of business on the one hand from the temporary, casual, or general business on the other. I am advised that every effort is being made to draw that distinction, which is clearly a distinction intended by the rules in the Act of 1918. No one could stand at this Box and take steps designed to penalise agency business in this country, or to expose these agents to an unfair hardship in taxation. That would be a method of destroying an important branch of British trade, on which a great number of people depend for employment. At the same time, we must protect the Exchequer on the one hand, and we have to protect the masses of other British taxpayers engaged in corresponding trade on the other. Subject to that very definite rule, I undertake to-night to watch that during the coming year, as we undertook during the Committee stage of the Bill, and if hardships are revealed, no doubt they will be duly considered when another Finance Bill comes round.

I come, in the second place, to a rather intricate problem of double taxation, raised by the hon. and gallant Member the Member for Bilston (Lieut.-Colonel C. Howard-Bury), and supported from a rather wider point of view by the hon. and gallant Member for Yeovil (Major G. F. Davies). As regards the Irish arrangement intimated to this House some years ago, that is largely an arrangement by which the taxpayer is liable at the, higher of the two rates imposed, but no more. Hon. Members have suggested that in the case of Ireland there is very great delay in getting repayment, and that the present system amounts to double taxation over a considerable period. Let me say at once that the remedies which hon. Member:, have suggested would not meet these cases, because it is a perfectly fair argument on our part to say that now that Southern Ireland has the status of a Dominion, it must be treated for the purpose of Income Tax on a Dominion basis. The Royal Commission which investigated the general problem in 1919 was very clear and definite on the point that there should be no mingling of funds and that there could be no system of interpayments, and that the fullest autonomy, as between the Dominions and this country, must be observed. If any other view were adopted, there would be an invasion, from the point of view of fiscal autonomy, of the Irish Free State, and any adjustment of the balances would involve intricate legislation in the. Parliament of the Irish Free State, and corresponding legislation here. At the moment, with the very brief experience at our disposal, the House would hardly expect legislation of that kind. If I were able to suggest some administrative method by which the difficulty might be either partly or, at all events, largely removed—

Sir F. WISE

I understand that Australia and South Africa have come to terms with the Irish Free State—I do not know whether it is true—in regard to double taxation.

Mr. GRAHAM

I have no information on that point, but even if it were true, I do not think it would modify, in any way, what I am about to say, because all these arrangements are the subject of rather long negotiations, and, in any case, as regards Ireland, I am rather hopeful that some administrative device will overcome the difficulty. There are three classes of taxpayers who are really affected—people who are directly assessed in both countries; people directly assessed in one, but by way of deduction in the other, and the third class consists of people who pay by way of deduction in both countries. Where the taxpayer is directly assessed, the allowance of relief against the assessment largely meets the case. As regards the third class, I think that a system of paying agents would go a long way to meet the difficulty. At the moment there is a very definite effort to that end. The hon. Member for Down (Mr. D. D. Reid) referred to steps taken by a railway company in the North of Ireland. That is an illustration, of course, but I am advised that there are many legal and other difficulties which, as far as I am aware, have not, been completely overcome. The second administrative proposal is that we might make immediate repayment to the taxpayer, without waiting for that full statement of his income on which the final adjustment of a tax is made. As hon. Members have been kind enough to say, I am very anxious, indeed, to try to arrive at an arrangement, because there is not the least doubt, at the moment, that there is hardship up to a point, although I cannot help feeling that some difficulty has arisen from the fact that Ireland is a new State, and it always takes time for taxpayers to become accustomed to new proposals. The House will recognise also, that any proposal which sought to weaken the deduction of the tax at the source would require legislation, and a matter of that kind would be reviewed, I have no doubt, with very great care by this Assembly, because it is one of the great safeguards of our Income Tax collection in Great Britain that such a large proportion, amounting, I believe, to more than 70 per cent., is obtained at the source.

On the general question I undertake to keep in consultation with hon. Members, to see whether, along the two lines I have mentioned, we could remove the difficulty; but if we cannot remove these difficulties in that way, then this Government, or some other Government, would no doubt have to consider other and larger steps. The hon. and gallant Member for Somerset (Major G. F. Davies) went beyond that, into the sphere of double taxation. Certain preliminary steps have been taken by our predecessors in office. For example, in the Finance Bill a year or two ago, a proposal was introduced in the case of shipping, as applied to foreign countries. I recall what I now regard as a somewhat unguarded speech of mine which suggested that there were certain dangers in beginning in one sphere, like shipping, in that it might confer a benefit on one class of industry to the detriment of others. I am not now so sure that that difficulty is real, but in any case, we had to get experience, and in this Bill we make an extension to the Colonies, and we are pursuing investigations regarding other countries. I am hopeful that in due course we will arrive at some kind of international programme in the matter of double taxation. Quite clearly we cannot embark on a one-sided arrangement which would involve the sacrifice of revenue here, unless we come to corresponding arrangements with the other countries of the world. It must proceed largely, if not wholly, upon a basis of reciprocal arrangements, and that accounts for the delay in dealing with this problem.

I come now, in conclusion, to two points which hon. Members raise—my hon. Friend the Member for Ilford (Sir F. Wise), and my hon. Friend the Member for Greenock (Sir Godfrey Collin), and others. The first point is in regard to our attitude towards the problem of deflation and kindred issues. I ought to say at once to the House, that it is very difficult to make any statement on this question at the present time. The whole issue, directly or indirectly, is under the consideration of influential bodies. But speaking quite for myself, I cannot believe that this country will ever embark on a policy of inflation, or if I may put it otherwise, would seek to do other than move steadily towards the gold standard by means of healthy and sound deflation. I am well aware of the controversy which this question has raised, but weighing up the disadvantages and advantages of the situation, I think clearly, the duty of this country is to work gradually and safely along the lines of deflation, and to make the best contribution we can towards the re-establishment of the gold standard. That would seem to be a sound and healthy monetary policy, but the House will recall that the Cunliffe Committee, in one of its reports, outlined a programme of a more general character, to which I dare say the majority of hon. Members would subscribe. In most of these Debates on currency, I cannot help thinking that, almost in spite of ourselves, we get the cart in front of the horse. We are apt to think that currency is the dominating and ruling consideration. I agree that when currency becomes more or less diseased it may, to a corresponding degree, exercise a profound influence upon industry and commerce, and it may, for the time being, become a kind of dominating factor, but, of course, in the last resort, our currency, credit, and everything else are really the servants of the trade we are doing, or can do, and they ought to minister, as we all know, to the free interchange of commodities. The Cunliffe Committee recommended a policy of free interchange, they advised all countries to get back to a sound system of currency at the earliest possible moment, they recommended the cessation of Government borrowing, and they further pointed out the advantages of economy and of the increase of productive capacity. In short, they laid clown an economic programme, which, I think, would be supported by every sane and reasonable individual at the present day, and it is one of our hoped that the outcome of the Conference which is now pro- ceeding will be to give us a Europe in which that kind of policy can once again become practical politics.

Sir F. WISE

What about the amalgamation of currency and bank notes which I contend is one of the first steps?

Mr. GRAHAM

It was just on that point, to be perfectly candid with the House, that I proposed to say nothing at all. I wonder if the hon. Member will excuse me to-night. because it is under consideration elsewhere, and I am afraid that any statement would be liable to misconstruction.

Sir F. WISE

I am sorry, I did not know.

Mr. GRAHAM

The last point with which I ask leave to deal, but only very briefly, was raised by the right hon. Member for South Molton (Mr. Lambert), supported by the right hon. Member for Hillhead (Sir H. Horne). What both of them asked was, in effect, what view we took of heavy taxation in this country and of its effect on British industry and commerce. There can only be one view of heavy taxation, that is, that it is a hindrance to trade and progress, and my right hon. Friend made it perfectly plain that, while this high rate of Income Tax and Super-tax is necessary at the present time, he himself did not take the view that a 4s. 6d. rate could always be justified in this country. But may I remind the House that, whether we like it or not, a very large part of our Budget is more or less automatically fixed from year to year. If we take it that we have to raise rather more than £800,000,000 by taxation, the House will remember that £330,000,000 or thereabouts are earmarked for the service of the National Debt, and then we can add to that.£70,000,000 or £80,000,000 to which we are committed for war pensions and allowances, so that under two heads we have £400,000,000 of money to raise right off, and that sum, of course, is equal to two times the whole of our pre-War revenue, that is, before August, 1914. To that extent we are committed, and then, quite clearly, I am afraid, we are bound also to certain classes of other expenditure in the interests of economic and social reconstruction. For my part, I should like to see that expenditure as far as possible such as would minister to an increase in the productive capacity of Great Britain, and I should include under that head provision which we are making for roads and improved communications, in fact, everything that would minister within this country to better facilities for our trade.

The right hon. Gentleman, on that subject, made a suggestion that we should give some preferential treatment to the reserves of public companies, by way, I take it, of an Income Tax concession. There are very great practical difficulties in a proposal of that kind. When it was put forward in the course of the Committee stage of the Bill the right hon. Member did not make it plain whether he wanted exemption at the full or standard rate or something lower. If it were confined to public companies and at the full rate, it would involve this country in a sacrifice of anything between £25,000,000 and £50,000,000 a year, but hon. Members have since made it clear that they do not make any proposal of that kind. What they have in mind is a reduced rate of tax upon those funds put to reserve by public companies for the purpose, very largely, of development. There again the concession could not be confined to a public company. We should, in ordinary logic and common sense, have to extend it to all forms of business which made any provision at all in reserves for development, and I think we should also have to extend the concession to large numbers of individual people, who could quite easily show that, by saving, they were making a provision in the interests of future social or economic progress, so that even on a restricted basis as regards rate of tax we should be committed to a sacrifice of revenue of many millions per annum. In this Budget we could not contemplate a step of that kind, and I am not sure that it could ever be contemplated in this country without very careful consideration, because the House will realise at once that in a departure of that kind from Income Tax custom, we should then look not to the income which would come from any business or commercial or industrial undertaking, but to its destination, and we should give a concession from that point of view. That is a principle which can only be admitted with the very greatest caution and under very definite safeguards, because if we once go out into the sphere of what I might call here beneficial destination, we should speedily have a case for exempting practically every member of the community, up to a point, who is subject to income Tax at the present time. Perhaps the House will not expect a longer reply on this occasion.

May I add one or two general words in conclusion? In common with every Member of the House, I was impressed by the rather gloomy picture which was drawn by the right hon. Member for Hillhead regarding our trade prospects. On that point, let me say that no one can be at the Treasury for even a very few months without recognising the enormous difficulties under which much of our trade and commerce is being conducted. I feel that our best contribution is to proceed on lines of sound finance, which is not necessarily undemocratic finance, to maintain our credit at home and abroad, and, by doing so, to make a substantial contribution to international recovery.

Mr DENNIS HERBERT

I want to ask the attention of the Financial Secretary to the Treasury to one or two observations on the question of the taxation of foreign firms through agents in this country. I realise, of course, from what the hon. Gentleman said, that he is only too anxious that the policy of the Inland Revenue shall not be such as unnecessarily to drive business away from this country, but I am very sorry to say that the reply of the Financial Secretary will not by any means allay those fears, which are already working and causing a tremendous disappearance of trade from the City of London, and I rise particularly to ask him—I realise that this is a very complicated subject, on which he could hardly have been expected to make such a declaration this evening as might have been satisfactory to us—whether he will meet a few of us before the House rises, and consider whether ho cannot produce some kind of statement which may assist to allay these fears. He has referred in his reply, and I would refer to one passage which he used also in the Debate before, to the necessity or advisability of taking care not to give a preference to foreign traders, but what I want to point out to him is that the business which is rapidly being driven away from the City at the present time is business which does not compete in the very slightest degree with home trade.

A particular kind of concern that I am more than ever anxious about is that business, such as the Mincing Lane and Baltic business, of making contracts for the sale of enormous quantities of foreign products, a great deal of which is contracted for sale for a destination outside this country, so that it is not only not produced here, but it never comes to us. It is only that market operation of a contract for sale which is carried out here. That is the enormous and valuable business which is really going away at the present time under the fear of the action which the Inland Revenue is taking. I should like to read to the House a few lines of a letter which was written by a big firm of merchants, only the other day, to myself and their legal adviser in this connection. I should explain that this firm sells to a broker on the Mincing Lane market the entire crop of a number of very large foreign or colonial producing concerns, and the particular words of the letter that I want to quote are these: As regards such business as we do which the Government might wish to bring in under the term of agency, I should personally like your opinion as to whether one ought to take action to seek such business. A foreign firm gains no advantage by using Us as sellers of their material and can very easily put their business elsewhere. That question was raised by this firm as the result of a direct communication from the Inland Revenue, stating that they were going into the question of making them o liable to pay, and in my own view, as I think I said on the Report stage, is that in law these particular foreign producing companies are not chargeable to tax. I am perfectly sure that, if they are, it is a wrong principle, because it is making chargeable to tax something which you will immediately drive away, from this country, and you will lessen the profits made in other directions, and you will lessen the tax which comes from those profits.

8.0 P.M.

Therefore, in the interests of the revenue of this country and of the very large trade in the City from which that revenue is derived, I hope that the Chancellor of the Exchequer or the Financial Secretary to the Treasury may be able, in consultation with some of us, to arrive at some method of allaying this fear which, from my own personal knowledge and experience, I, can assure the Government is at the present moment driving this business away from the City of London. Since the Debate on the Committee and Report stages, several of us have gone into this matter rather more fully. We have met a number of merchants and business men in the City, who have been concerned in the matter, and we have realised—I can speak for several hon. Members opposite—to a greater extent than ever before the disastrous effect of the recent action of the Inland Revenue in regard to this matter. But we also realise the great difficulty which the Government will have in dealing with it. There will be great difficulty in discriminating between those cases which are both properly and profitably chargeable with tax, and those which are not properly chargeable with tax, and those to try to tax whom would be suicidal from the revenue point of view. If the Chancellor of the Exchequer or the Financial Secretary will be so good as to meet some of us and have a slight discussion on the subject. I hope that we nine arrive together at the object which we both have in view—trying to prevent the disappearance of some of these businesses from the City of London.

The CHANCELLOF of the EXCHEQUER (Mr. Snowden)

Without going into the general question, I can assure the hon. Member that we shall be very pleased indeed to meet him and other of his friends who are interested in this matter.

Mr. H. H. SPENCER

I want to protest as strongly as I can against the speech of the right hon. Gentleman the Member for Hillhead (Sir R. Home), in which he brought up the stale insinuation that the loyalty of our Dominions depends in any way on Colonial Preference. I would not have intervened in the Debate but for his statement, his assumption that no Government in this country could stand the wave of popular indignation if the Colonies were to take away Preference. Probably he does not know what taking away Preference would mean. He is probably quite unaware that already, with preference, the Australian people are charged 30 per cent tariff en their woollen clothing. If Australia were to abolish the preference which we now enjoy, the Australian people would have to pay 45 per cent. on their woollen clothing, and the Australian Government would be swept out of existence by the indignation of the consumer in Australia. I want to speak shortly on the weight of taxation for which the ex-Chancellor of the Exchequer, the right hon. Member for Hillhead, was responsible. I agree with every word that he said as to the damage which excessive taxation does to business. But it ill befits the right hon. Gentleman to make his complaint. Of all the men in this country, without at all intending it, the right hon. Gentleman, as Chancellor of the Exchequer, caused more unemployment than any other Chancellor of the Exchequer who has existed in this country. He was the Chancellor of the Exchequer who under-estimated his revenue to such an extent that he had a surplus of something like £140,000,000. It is bad enough for employment to take £800,000,000 or £900,000,000 from the taxpayer and from the production of the country, but it is much worse for employment if you take in taxation a huge amount more than you spend.

Mr. A. M. SAMUEL

Half of that surplus was due to the fact that we did not expend as much as we thought would he expended.

Mr. SPENCER

To spend less was an extremely good thing, but it was extremely foolish to make so low an estimate of the revenue. Take the case of the collier. We know that in 1921, in a time of bad trade, it was impossible materially to increase the wages of the collier; until trade improved and the price of coal went up the collier could not be paid much more in money wages. We all know that he had a wretchedly small wage, hardly lifting him above the bare necessities of existence. The right hon. Member for Hillhead was the Chancellor who took on the average 12s. from every cottage and family in taxing food, milk and tobacco. Of that money, £140,000,000 did not come back into circulation. There is often a great deal of talk about want of capital. I never had any capital worth talking about, but I had a little credit. What you want is customers, customers, customers. You can get the capital you want if you have a profitable trade and customers. I can remember the time when the colliery fields in England were the best markets for the goods which I make. The wives of the colliers had money to buy in sufficient quantity clothes for their children and their husbands, and, if the collier had an extra good week, perhaps a new dress for themselves. Was the burden of taxation on the necessaries of life which the right hon. Member for Hillhead levied on these colliers that converted the coalfields from the best into almost the worst market for textiles in the country. Therefore, it ill lies in the mouth of the right hon. Member for Hillhead to reproach the present Chancellor for his Budget. On the question Protection let me give the candid opinion of a Prime Minister of Victoria who was a friend of mine 32 years ago. He was engaged in increasing the protective taxation of Victoria. He said to me in conversation: I know that Protection is a rotten bad thing, but it is the only way in which von can make those damned working, Men pay taxes. That is as true to-day as it was 30 years ago. I congratulate the Chancellor of the Exchequer on having swept away those taxes which are intended to transfer a greater share of the nation's production into the pockets of the rich and a lesser share into the pockets of the poor.

Mr. SAMUEL

Is it not the fact that in Australia at the present time they have Labour Governments? Have they taken off the protective duties?

Mr. SPENCER

I do not think that they have done so, and on another occasion I will discuss the matter at greater length with the hon. Gentleman opposite. I want now to say a word of criticism of this Budget. It is an excellent Budget and I am proud to be an enthusiastic supporter of it. I think, however, that the Chancellor of the Exchequer could have reduced taxation still further. The fault of our finance during the last few years has been the underestimating of revenue. It is one of the greatest evils of all to leave the burden of taxation so high. I am going to be a prophet for once. I have calculated the arrears of Income Tax, Super Tax and Excess Profits Duty, and I believe that the Chancellor of the Exchequer is going to have a pretty big surplus this year, if he does not let the Minister of Health make holes in it. I am very sorry to make that prophecy. I do not like Chancellors of the Exchequer to have surpluses. What the country wants financially is a Chancellor of the Exchequer who goes very near the bone. We shall never see the trade revival that we want unless taxation goes down, and taxation will not go down unless expenditure goes down. I regret that with all the great energy that the Chancellor of the Exchequer has shown, he has not put the knife sufficiently deep to make the country's expenditure, this year at any rate, lower than it was last year. That is the one blot on his Budget. I hope that if he is still in office next year he will resist gallantly all the raids on the hen-roost which his colleagues wish to make.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.