HC Deb 29 April 1925 vol 183 cc171-92

Question again proposed,

" That it is expedient. to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with Finance."

Before examining in detail the proposals put forward yesterday by the Chancellor of Exchequer perhaps I may be pardoned if I make a few remarks upon the financial situation as it existed at the end of the last financial year, a matter in which the Committee will agree I have a special interest and had a special responsibility. The past financial year closed with the smallest surplus which had been accumulated in any year since the days before the War. I estimated for a surplus of about £4,000,000, and the actual realised surplus was within £500,000 of that figure. That is estimating, out of a total of £800,000,000 of revenue and of expenditure, to the fine degree of one-sixteenth per cent. I much appreciated the kind and generous references the Chancellor of Exchequer made yesterday to this financial achievement. He was kind enough to attribute it to some extent to my good fortune. It is true that although on balance the figures were remarkably close, there were certain discrepancies between the estimated revenue and the realised revenue under certain heads. But that is in no sense a discredit to those who made the estimates. When the business of estimating is understood, I think it will be agreed that such discrepancies are rather creditable than otherwise. The business of estimating is largely one of weighing possibilities and probabilities. Every Chancellor of the Exchequer knows that he cannot possibly hope to realise the exact estimate under each of the respective heads. Therefore, he makes allowances. He says, "I may lose on this, and I may gain on that." When the result proves that these possibilities and probabilities have worked out, roughly, according to computation, the real purpose of estimating has been achieved.

I was criticised last year—and to this the Chancellor of the Exchequer referred yesterday—for having over-estimated the revenue and under-estimated the expenditure. It was repeatedly said in the course of last year's Budget Debates that the amount I proposed to keep in hand would be quite insufficient to meet the demands which would be made upon the Exchequer during the financial year. I deliberately estimated to cut things fine, if I may so put it, because, above all things, I wanted to avoid the huge surpluses which had prevailed for three or four years. It has been said, and I have a great deal of sympathy with it, that any Chancellor of the Exchequer who has a surplus of more than half a crown, ought to be put in prison for obtaining money from the taxpayer by false pretences.

A criticism has been repeated throughout the whole of the year, and I see that it has been repeated in some of the newspapers this morning, that I gave away, unreasonably, revenue last year which might have been devoted to a more useful purpose from the point of view of public need. [HoN. MEMBERS: "Hear, hear ! "] We hear those cheers to-day, but there were no such cheers when I sat down 12 months ago. The right hon. Gentleman the Member for Hillhead (Sir R. Horne), who was the official spokesman for the Opposition 12 months ago, said that the proposals which I had made for the reduction of taxation were just the proposals which the Conservative party had been yearning for years to carry into effect, and that. if they had had my opportunity last year they certainly would have done just what I did. Suppose I had not used the surplus last year. It would have meant that I should have kept on last year taxes to the extent of £40,000,000 which were not needed. That would have been in violation of every canon of sound finance and sound taxation. It is quite true that if I had not. done what I did there would have been a huge surplus at the end of this financial year of probably £40,000,000. That surplus would have gone to the Sinking Fund, and the taxes would have been there for the' Chancellor of the Exchequer to dispose of is this year's Budget. I was criticised because I disposed of that surplus in one way and did not leave it to other parties to dispose of in some other way. We had an illustration in the proposals submitted yesterday, to use one of the Chancellor of the Exchequer's expressions, as to who would have been the objects of his compassion if he had had the disposal of the surplus which I had in hand last year. The Chancellor of the Exchequer was kind enough to say in his opening sentences yesterday, that those critics of mine a year ago who anticipated a huge deficit had been rebuked by the event. That is true. I remember one speech that was made from the Front Opposition Bench on the second day of the Budget Debate last year, when a right hon. Gentleman, who claims to be a great financial authority he is now a member of the Government, holding the responsible position of Secretary of State for War was almost prepared to tolerate the continuance in office of the Labour Government for 12 months in order to have the satisfaction of seeing my discomfiture when I stood at the Box to introduce the Budget this year. He estimated that I should have a deficit of £103,000,000. I believe that that right hon. Gentleman has ambitions and aspirations to occupy the position which the present Chancellor of the Exchequer honours and adorns to day. If ever the Prime Minister should think of appointing that right hon. Gentleman to that position, I hope he will not forget the speech he made in reply to my Budget 12 months ago.

It has been repeatedly stated, and is stated again in some of the newspapers this morning, that the concessions I made last year have not gone to the benefit of the consumer. Nothing could be wider of the mark than that statement. Remissions have never been made which more fully attained their purpose than the tax reductions which were made last year. Two years ago the present Prime Minister, who was then Chancellor of the Exchequer, refused to apply part of the surplus which he had to a reduction of the Sugar Duty, as he doubted whether, if that were done, the reduction would reach the consumer. I took the risk a year ago with this result, that when I made the reduction a year ago the price of sugar was 7d. a pound and I am quoting the figures supplied by the Minister of Labour today the price is 3¾. We took off l¾d. and the reduction is 3½d. Take now other things. [HON. MEMBERS: "What about tea?"]


That was not the fault of the tax. It has nothing to do with it.


I am very glad to hear the interjection by the hon. Member, in answer to the interjections by hon. Members behind him who asked, "What about tea1!" The variation in the price of tea has nothing whatever to do with the tax. The price of currants last year was from 7d. to lOd. a pound. It is now from 6d. to 9d. The price of raisins was from 9d. to lid. a pound; it is now from 5d. to 9d. Sultanas were from Td. to Is.; they are now 6d. Take tea. The wholesale price of the commodity, as the hon. Member below the Gangway appears to know, is not a fixed thing. It is regulated by a thousand considerations and influences, apart from the question of any Excise or Customs duty. For a few months the actual price of tea reflected the reduction of duty. Then there was trade dislocation. There was an attempt to make a corner in tea. Fortunately, through the powerful influence of the cooperative wholesale societies, that was broken. [Laughter.] I suppose that that is the loud laugh which denotes the vacant mind. But, altogether apart from price, if the duty on tea had remained at 8d.. instead of being reduced to 4d., whatever the price of tea may be to-day it would have been 4d. more than it is if the duty had not been taken off.

Now I turn to the interesting statement submitted by the Chancellor of Exchequer yesterday. First of all, I will deal very briefly with his estimates for the coming year. Unlike myself a year ago, he said that ho was not prepared to take an optimistic view of the yield of revenue for the coming year. He estimated a slight increase in Customs duties. I think that he is doing the right thing, because the examination of receipts of Customs duties over a number of years seems to lead to this conclusion, that the demand of the people for articles like tea, sugar and other articles that are subject to Customs duty has been satisfied, and that there is very little possibility of increased demand. Even if the price were reduced to a ridiculously low figure I do not think that the demand would be increased very much. I do not think that any Chancellor of Exchequer can reasonably look forward in future to any considerable increase, except in so far as it may come from an increase in population, in the yield from Customs and Excise duties.

The Chancellor of the Exchequer was justified when he referred yesterday to the remarkable increase in the yield of Estate Duties, Income Tax and Supertax. I believe that the right hon. Gentleman is estimating this year, on the basis of previous taxation, for an increased yield of about £25,000,000 from these taxes, Income Tax, Estate Duties and Super-tax. I think that my friends behind me will draw certain conclusions from this remarkable increase in the yield of Income Tax, Super-tax and Death Duties during a period of unparalleled depression. These figures, at any rate, show that the depression has not extended universally, and that there are still in the country very considerable numbers of people who are better off year by year.

The Chancellor of the Exchequer has stated—this was to me the most surprising of the estimates he submitted yesterday—that he estimates for a sum of £30,000,000 from Special Receipts, that is, from War Disposal Stocks, etc. I do not know what has happened during the last six months, but I was advised last year by the Disposal Board that the stocks had practically all gone, and they advised me that last year was the last year in which any Chancellor of the Exchequer could hope to get any substantial sum from the sale of War Disposal Stocks. There must have been a discovery. Some hidden and forgotten dumps must have been found somewhere. The Chancellor of the Exchequer is estimating on this Paper for, in the present year, a larger sum than was actually realised during last year. hope that he may succeed. The balancing of his Budget depends very largely upon whether he is justified in making this estimate or not.

I wonder to what extent the right hon. Gentleman, in estimating such a large increase in Income Tax and Super-tax, is expecting this year to recover a larger proportion of arrears? If he is going to put on the screw, I do not envy him. After all, there is very little in this question except this: Every taxpayer ought to be compelled to pay his Income Tax and other taxes as soon as those taxes become due. If the Chancellor of the Exchequer gets in a large proportion of arrears this year, they will affect this year's Budget, but he cannot. have them twice over. The more he gets this year, thereby at the end of this year he is lessening or altering the normal outstanding arrears at the end of the year, and the more he is bound to dislocate his next Budget. He is hoping, as I hoped a year ago, that the possibility of getting something from the Excess Profits Duty need not altogether be abandoned. For that, perhaps, there is some justification, for I suppose that the Inland Revenue have now dealt with a great many claims for rebate. These claims have been weeded out, and, therefore, there may be in the arrears still outstanding a larger proportion of fairly substantial claims than was the case a year ago. But balancing the Budget this year depends almost wholly, I think, upon the extent to which his estimates of receipts from special war store sales and the arrears of Excess Profits Duty are realised. I do not for a moment criticise the very large. increase in the estimated yield of the Income Tax, the Super-tax and the Estate Duties. That, I think, the Chancellor of the Exchequer will realise.

I turn for a moment to the question of expenditure. The Chancellor of the Exchequer yesterday regretted the increased expenditure. Indeed, I believe that in speaking of that increased expenditure he used the word "unsatisfactory." It is, indeed, most unsatisfactory that we should this year be estimating for an expenditure which is nearly £10,000,000 more than the estimated expenditure a year ago and nearly more than £4,000.000 more than the actual expenditure last year. There is no justification for it. If the Chancellor of the Exchequer regards the facts as unsatisfactory, I think that we are justified in regarding his explanation as being much more unsatisfactory. The right hon. Gentleman excused himself on the ground that he had not been in office very long. Yesterday he had been in office more than twice as long as I had been when I had to go through the ordeal through which lie emerged so triumphantly yesterday. The Estimates for last year had actually been submitted to the Government, many of them had been settled by the Government, and in one of the largest of them, the Navy Vote, I made a reduction of between £6,000,000 and £7,000,000 from the figure at which it had been agreed when the Government which preceded the Labour Government left office. There is no reason why the present Chancellor of the Exchequer, with much longer time at his disposal. should not have been able to get some reduction of the Navy Vote. But instead of that he surrendered to the Department and agreed to submit to the House of Commons a Navy Vote showing an increase of about £5,000,000.

But that is not all. The Prime Minister gave a reply yesterday to a question about some Cabinet Committee which is considering the question of a new Naval Construction Vote. That will cost money. I am quite sure that I do not do either the Chancellor of the Exchequer or the Prime Minister any injustice when I say that they will not be in the least objecting however long this Cabinet Committee takes to consider these matters, because the longer they take the less will be the call upon the Exchequer ',his year. But the Chancellor of the Exchequer told us yesterday that he was budgeting, not for a year nut for years. When this Cabinet Committee upon new Naval construction reports, and the Cabinet reviews the Report, the money will have to be found. There is no possibility in the Navy Vote, as now before this House, of any reduction for years. The Government are committed to an increase. It is the same thing with regard to the Air. "We shall have a Supplementary Estimate for the Navy probably, if the Cabinet Committee reports in time. It is practically stated in the Memorandum of the. Secretary of State for Air that we are to have a Supplementary Estimate for £500,000 for his Department during the current year.

What has the Chancellor of the Exchequer done to curb this extravagance on the part of the fighting services? He has apparently done nothing. It is all very well for the right hon. Gentleman to come down to the House and to deplore increasing expenditure, to regret that the Government are not able to bring down the expenditure more rapidly. But we want to know what he is doing to bring about a reduction of expenditure. During the six months that. he has held office he has, in my opinion, been more subservient to the extravagant demands which have been made upon him than any Chancellor of the Exchequer in my experience. The Government got through the House a few weeks ago a grant for Northern Ireland of £1,250,000. Northern Ireland asked for £1,000,000. The Government gave them £1,250,000. I could mention half a dozen other more or less—many of them more—heavy items of expenditure which had been resisted by the Chancellor of the Exchequer up to the time of the present Chancellor taking office, all of which he has conceded.

4.0 P.M.

What is to be the position next year? The Chancellor of the Exchequer hoped that we might be able, with the help of this Cabinet Committee which is going to overhaul national expenditure, to effect a progressive annual reduction of expenditure to the extent of £10,000,000. I doubt very much whether during the next four years the Chancellor of the Exchequer will be able to do that. There is one way in which he might be able to do it. It would not be so much a reduction of expenditure as a reduction of the calls upin the revenue—I mean by debt conversion.

May I say with what pleasure and gratification I heard the Chancellor's impeccable and unimpeachable reference yesterday to the importance of maintaining the national credit? The Chancellor of the Exchequer has not been under Treasury influence for six months for nothing. It has been an education to him. His remarks were couched in the most orthodox Treasury phraseology. He has set at rest the fears that some of us had that he might not be quite orthodox on this important question. He has set our fears at rest. for the time being, but you never can be quite assured that you will remain in a restful condition where the Chancellor of the Exchequer is able to influence your state of mind.

But I believe it is in this direction mainly, and in the expenditure on the fighting forces that there is any possibility of reduction, because I do not believe it is possible to effect much, if any, indeed, I do not believe it is possible to effect any reduction at all in the aggregate of the Civil Service expenditure. If the Chancellor of the Exchequer will remain the financial purist he appeared to be yesterday, there is a possibility that within the next four years he may be able to effect debt con version schemes which will reduce his expenditure or the calls upon him by a very considerable amount. There is more than £2,000,000,000 of debt that has to be converted before 1929. if the Chancellor of the Exchequer succeeds in converting that debt at an average reduction of only 1 per cent. of interest, he will save -£20,000,000 per year, but I think, by pursuing a sound financial policy during the next two years, he could be able to convert the bulk of that debt by 1929 at a saving of more than 1 per cent.

I now come to the actual proposals for the current year made by the right hon. Gentleman. I had intended to say something about the unexpected and rather sensational announcement which he made in the earlier part of his speech yesterday, namely, the announcement of the Government that from the moment he spoke this country had returned to a gold standard, but I gathered from the reply made by the Prime Minister to the Leader of the Opposition this afternoon that this matter is to be discussed on Monday and discussed on the Bill which the Chancellor of the Exchequer has introduced. In that ease, I think it would be unwise and hardly fair to waste the time of the Committee this afternoon by making any observations about it. I will therefore pass away from that question and reserve any observations which I have to make on it until the discussion on the Second Reading of that Bill.

I now turn to the Chancellor's taxation proposals. From a quarter to one-third of the time that the right hon. Gentleman was on his feet yesterday he was dealing, not with financial proposals, not with the question of revenue and expenditure, but with a great scheme of social reform. I hope I shall not be regarded as offensive if I say that I do not know why the Chancellor of the Exchequer yesterday did more than make a passing reference to this question. I could suggest a reason, and the reason, if I were compelled to suggest it, would be this. The right hon. Gentleman's Budget, shorn of the scheme for widows' pensions, would have lost all its glamour, and it would have appeared to everybody what it really is, the worst rich man's Budget that was ever proposed. Why should the Chancellor of the Exchequer have spoken three-quarters of an hour yesterday making a speech which the Minister of Health by all rights ought to have made to this House' If the Chancellor of the Exchequer, in order to finance such a scheme, had been called upon to levy taxation, he would have been justified in dealing with it, but this scheme is going to cost the Chancellor of the Exchequer nothing. Indeed, he took great credit to himself that it was going to cost him nothing. [Hon. MEMBERS:" This year! "] No. it is never going to cost him anything, except just a temporary grant which he may give for two or three years. The whole point of the right hon. Gentleman's speech yesterday was that just as the cost for War pensions fell, so the cost of the scheme for widows' pensions would increase. The House of Commons will never forget the wonderful rhetorical passage. I cannot repeat it; it would be sacrilege to spoil it. But the Committee will remember it. No, it is the saving in War pensions which is to finance his scheme for widows' pensions. That is why, under compulsion I suggest, the Chancellor of the Exchequer devoted one-third of his speech yesterday in dealing with a matter which had no relation whatever to his Budget.

This Bill for widows' pensions has been introduced to-day. The Prime Minister says that he hopes to provide an opportunity for discussing it within the next fort night. I think it is well that the House of Commons should have fairly considerable time in which to discuss it. Although the Chancellor of the Exchequer yesterday was as lucid as anybody could he in explaining such a. complicated matter, I doubt if there is any Member of the Committee this afternoon who would like to get up and be subjected to an examination upon the details of this question. Therefore, I am not going to say much about it. The Chancellor of the Exchequer said that I had had submitted to me a Report by a certain Committee which had been considering this question. He did not say it, but the implication might have been that before I left office I had approved in general terms of this scheme. That is not the case. Moreover, the scheme which the right hon. Gentleman adumbrated yesterday is in many material and in most important points not the scheme recommended by that Committee.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

Hear, hear!


It does not give benefits which the scheme of that Committee recommended. The position of the Labour party on this question has often been stated—stated by Resolutions in this House, and by resolutions at its annual conferences. There are very few Members of the present House of Parliament who went through the long Debates upon the first Health Insurance Bill introduced by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), but those who are still here may perhaps remember—I am quite sure that the right hon. Gentleman himself would remember—that I was one of a very small number who opposed that Bill on account of its contributory character. I am vain enough to think that the arguments that I advanced against demanding contributions for such a purpose from the workpeople and from the employers were sound, and I think they apply with quite as much force to the proposal which is shortly to he put before the House -of Commons as they did to that Bill. That has always been the position of the Labour party.

But, having said that, I will say no more than this now, that there are certain matters which will have to be very seriously considered when the proposal of the Government is under consideration, not merely the amounts of the contributions, but whether, when we have an unparalleled industrial depression, and our greatest industries are languishing and all complaining that it is the heavy burdens upon industry which are in the main responsible for the lack of employment, this is the time when an additional heavy burden of this character should be placed upon industry. The right hon. Gentleman admitted yesterday that this would be a very heavy burden upon industry, "But,"he said, "before I sit down I am going to give the employers compensation for this additional burden I am placing upon them." His Budget will put upon the industries of this country, in employers' contributions,a sum which I estimate at not less than £14,000,000 a year. "I am going to give them compensation," said the Chancellor of the Exchequer, and when the compensation was announced it took the form of a reduction of Income Tax. But we had been given to understand that trade wanted a reduction of Income Tax in order that it might be stimulated and that the wheels of industry might be pushed along faster. What is the right hon. Gentleman doing? He is reducing Income Tax by £20,000,000 a year to stimulate industry, and he is going to take £14,000,000 of it back in contributions to this pensions scheme. These are matters which will have to be very carefully considered, therefore I express no further opinion upon them, but when the Bill is under discussion I am quite sure my hon. Friends behind me will give it their careful, their serious and, in view of the object of the Bill, their sympathetic consideration.

If you eliminate this scheme of pensions from the Budget, what is there left? I repeat that the scheme for widows pensions has nothing to do with the Budget, and the Budget must be considered apart from its association with the question of widows pensions. The Chancellor has a surplus of £20,000,000. I think he will get that surplus, unless he fails upon the two items which I have mentioned. What could he have done with that surplus'? It was just sufficient to reduce the Income Tax by 6d. in the £. But that would not satisfy the Chancellor of the Exchequer. Why, even he could not have expanded an announcement of a reduction of 6d. in the Income Tax beyond ten minutes or a quarter of an hour. lie must do something much more spectacular and dramatic than reduce the Income Tax by 6d. The Chancellor of the Exchequer, as he told us yesterday, has objects of compassion and one of the objects of his compassion is the poor, overburdened, starving, unemployed Super-tax payer. At a time when 1,500,000 men are out of work existing upon a miserable dole, the Chancellor of the Exchequer selects this opportunity to relieve the Super-tax payers to the extent of £10,000,000 a year. He has adopted a novel procedure. He had an amount only sufficient to reduce Income Tax by 6d. in the £, but he was determined to do something for the Super-tax payer, therefore it was necessary that he should increase taxation. He has adopted a procedure which I believe is unique in financial matters associated with the Budget, that of taking out of one pocket in order to put into another, or, to use another simile, that of robbing Peter to pay Paul—Peter in this case being the dead and Paul the living Super-tax payer.

He has increased the Death Duties. I confess that I had a bad few minutes during the Chancellor's speech yesterday. When he was announcing this increase in the Death Duties I thought, "Well, this is rather bad. The Chancellor of the Exchequer is stealing our thunder with a vengeance." But I had not to wait very long to see that, after all, an increase in the Death Duties might be made with very different objects and for very different purposes from ours. The Chancellor of the Exchequer is increasing the Death Duties in order to reduce the Super-tax. What earthly need was there for the Chancellor of the Exchequer to interfere? Has there been any public expectation of a reduction in the rates of Super-tax? None. The Chancellor of the Exchequer will admit it. Nobody expected it. Why then could not the right hon. Gentleman have been content to keep that £10,000,000 in his pocket? I can assure him he will need it if he remains in office for the next two or three years. In increasing the rates of Estate Duties the Chancellor has still shown us where his sympathies lie, because it is the poorer of the rich people he has taxed most heavily and the millionaires he has left totally alone. He went. on—I suppose this was a sort of indication of what he may do in future Budgets—to express his view that the millionaire is already far too heavily taxed, and that if any alteration he made in the rates of duties applicable to millionaires it must be a. reduction, and not an increase.

What is this revised scale which the Chancellor of the Exchequer proposes I The rates of increase are higher upon the estates of comparatively small amount. I use the word "comparatively" in relation to the comparison with millionaires' estates. An estate of about £50,000 is to be increased by about 4 per cent. There is to be a descending scale of increases on larger estates, and the more money a man leaves to his descendants or heirs—not the same thing—the less is the rate of duty to be paid upon it, and there is to be no increase at all in reference to the estates of the millionaires. They are taxed enough already according to the Chancellor of the Exchequer. What is the amount of tax they pay?They pay 30 per cent. There may be other duties, such as Legacy and Succession Duties, which are increased to a small amount, but these duties apply to estates of smaller amount as well, and do not apply merely to millionaires' estates. Yet there is to be an increased duty of 3 per cent. on an estate of £40,000, but nothing more on the estate of a millionaire. Thus the. Chancellor of the Exchequer shows his sympathy with those who inherited only a paltry £700,000 more, after paying only £300,000 duty. While increasing the duty upon estates of the smaller amount, he says these millionaires' estates are too sacred to be touched by the hand of the Chancellor.

I agree whole-heartedly with what the right hon. Gentleman the Member for Carnarvon Boroughs said yesterday, that there is a vast amount of unappropriated revenue still in these Estate Duties, and it is one of the most legitimate and socially beneficial forms of taxation. I am, unfortunately, old enough to remember the Debates which took place upon Sir William Harcourt's Death Duties proposal, and those who remember that period will recall with what bitterness the proposal was assailed. The right hon. Gentleman the Member for Carnarvon Boroughs raised the Death Duties during his tenure of office as Chancellor of the Exchequer, but the opposition on that occasion was much less. The present Foreign Secretary raised them very considerably three or four years ago and the opposition then was stilled. What is the explanation I think there is a very sensible, reasonable and satisfactory explanation and it is that the public conscience is increasingly being outraged by the enormous sums of money which are being left to people who have done nothing whatever to earn that money and who, by these inheritances, are made parasites upon Society, living really, not upon an inheritance, but living by being able to extort an annual tribute from contemporary labour. This view is not confined to poor men and Socialists. I constantly meet with rich men—enormously rich men—who are horrified at the prospect of leaving to their sons enormous wealth which they know may not be to the good either of the sons or of the nation. Furthermore, apart from the financial assistance which increased Estate Duties would give to the Revenue, they could be used as a very potent instru ment for effecting the most desirable and advantageous social reforms. Therefore, while I am all in favour of an increase in the Estate Duties, I criticise the right hon. Gentleman's scale, and I criticise still more the purposes to which he proposes to apply the increased duties.

There is one other important proposal made by the Chancellor of the Exchequer to which I ventured yesterday:to give my hearty support. That is the concession which the Chancellor of the Exchequer is making to the small Income Tax payer. Last year I gave what practically amounted to a pledge that I would deal with that matter if I remained in office. I know that it is the practice of every Chancellor of the Exchequer to look up the pledges of his predecessors, and very probably the right hon. Gentleman has discovered this pledge that I gave, and I am quite sure that then he would say: "This will be a very popular thing to do." When the Finance Bill comes to be discussed, I can say that he will receive no opposition to this proposal from my hon. Friends behind me, but I wish that he had done something more I wish that he had increased the allowances for children. I think that there are few purposes to which he could have devoted any money he could spare more beneficially.

Now I turn to the Customs duties—the Protectionist duties, as I see even certain Conservative newspapers describe them this morning. There is something—and I hope the right hon. Gentleman will excuse me using the word—really cynical in the right hon. Gentleman, with his political record on Free Trade, using the first opportunity he has in the House of Commons to institute a considerable measure of Protection. Of course, hon. Members on the benches opposite had not the advantage of seeing the right hon. Gentleman yesterday face to face, but I am quite sure that all the Members on this side will agree with me when I say that there was no part of the right hon. Gentleman's speech in which he was so hilariously and gleefully cynical as when he was proposing these duties, and in particular he directed his gleeful cynicism to his old Free Trade colleagues. The right hon. Gentleman stated yesterday that his proposals for a duty upon silk had only a very small protective value. I was unable to find in the OFFICIAL REPORT this morning, what I was under the impression the right hon. Gentleman had said, that the amount of the protective duty was only one-eighth. I cannot find that in the OFFICIAL REPORT, but it is in the "Morning Post." The revision of the OFFICIAL REPORT after a speech has been made is not altogether without precedent. If I understand this Paper, there is a very high protective duty in favour of the home producer.

"Artificial silk yarn, thread, straw, and waste, 3s. a lb."

But the Excise Duty is only 2s. ed. Then there is a duty of 3s. 6d. upon tissue containing artificial silk, and no countervailing Excise duty at all. That may be capable of some explanation, but it certainly does riot appear upon the Paper.

If anybody has any doubt about the protective character of these silk duties,. let him go into the Lobby and look at the tape there, and he will find, under the Stock Exchange news, "that textiles are strong on imported raw silk duty, and motors have been similarly affected by the reimposition of the McKenna Duties.". [HON. MEMBERS: "Hear, hear "] I have no doubt at all that this is a matter of very great interest to a number of hon. Members opposite. "Courtaulds opened strong at 105." They were 99 at closing time last night. [An HON. MEMBER: "Why not help British trade? "] Ah, why not help these struggling and starving industries—Courtaulds, which made £4,000,000 of profit last year? Why do not they come and apply for protection under the Safeguarding of Industries Act? There, again, the Chancellor of the Exchequer is living up to the reputation he established yesterday as the friend of the rich at the expense of the poor. He talks about imposing this as a luxury tax. If it be a luxury tax, why did he select silk? Artificial silk is no longer a luxury. Artificial silk has taken the place of cotton, common woollens, and the like, and I see in the newspapers this morning that the head of one of the great fashionable dressmaking establishments in London says that on the dresses they produce it will make practically no difference. [An HON. MEMBER: "Then why worry? "] I will tell the hon. Member why. It is because it is exempting the rich people again and putting a tax upon the poor. It is bound to be a tax upon a necessity so long as women must wear stockings and blouses. When much of the glamour of the Chancellor's statement yesterday has passed away, I think he will be remembered in the future as the Chancellor who taxed women's stockings. I have spoken often in this House on the McKenna Duties, but may I add that I said yesterday, and I thought it necessary that I should make the announcement at the earliest possible moment, that if we come into office again shall at the first opportunity repeal these duties. It is not good for trade that you should have changes of this character with every change of Government. [An HON. MEMBER: "Why did you take them off? "]I Hon. Members are quite inquisitive this afternoon, and I am quite prepared to supply their lack of knowledge on these questions. I will tell the hon. Member why they came off. It was because Mr. Bonar Law and others had pledged themselves in the matter, and Mr. Bonny Law—and this for the satisfaction of the right hon. Gentleman—said once, in speaking upon these questions, that no Chancellor of the Exchequer would ever be so silly as to impose duties of this sort after the War. Evidently he had forgotten the possibility of the right hon. Gentleman becoming Chancellor of the Exchequer.


I only want to say that if the right hon. Gentleman would read the quotation from Mr. Bonar Law to which he has referred, he would see that it is very different in character from what the Committee would imagine.


I am quite sure that there is no Member of the Committee who thought I was giving the exact words, but Mr. Bonar Law said in substance exactly what I stated. He said that duties upon this scale would not he -imposed after the War. The right hon. Gentleman spoke of these taxes as luxury taxes. If that be the case, and he has not imposed them, as we know he has, purely for protective purposes, why did he not put a countervailing Excise Duty on motor-cars?[Interruption.]Impracticable? That is a very easy way of getting out of it. It is by no means impracticable to put an Excise duty upon motor-cars. "A luxury tax," he says, and yet these duties are not going to affect the luxury cars at all. Your Rolls-Boyce, your Lanchester, and your Daimler are quite independent of all foreign competition, and they are not affected in the least by these taxes. I will tell you whom they are going to affect. These duties are going to be paid by people of very moderate means, because it is the cheap car, the two-seater car, the light-powered four-seater car, almost wholly, that are affected by these duties. [An HON. MEMBER: "They are all made on this side' "] The repeal of these taxes has been of immense benefit to the motor industry. It has increased the volume of employment, it has increased the export trade of British-made motor cars, it has increased the number of people employed, and it has brought down the price of cars. We all remember Mr. Morris, who figured ingloriously in the campaign last year. After the duties had been repealed, he paid for space in all the leading newspapers, and announced that he had brought down the price of his ears by what practically amounted to 25 per cent. So much for this example of Protection pure and simple by the greatest apostle and protagonist of Free Trade, now a Tory, Protectionist, Chancellor of the Exchequer.

Now I come to the last item, and that is the 6d. off the Income Tax. Of course, the right hon. Gentleman had to do it. He had been told that to reduce the Income Tax would bring back prosperity to trade. I believe he said something of that sort in his peroration yesterday afternoon, but. of course, perorations are places where speakers say things they cannot prove. I have never heard more ridiculous nonsense talked about anything than about the effect of high taxation upon industry. The Chancellor of the Exchequer gave the best and the most conclusive answer yesterday, and what was that answer? During these years of heavy taxation incomes have been expanding at an unparalleled rate, savings have been bigger than ever, and the yield of your Estate Duties has been going up by millions a year, at a time when, according to those who are clamouring for a reduction of the Income Tax, industry and savings are being destroyed by this heavy taxation. Sixpence in the 2! Let us suppose that a reduction of taxation will benefit trade. What is 6d. going to do? It reminds me of a saying of Abraham Lincoln. Some ridiculously absurd proposal had been made for deal ing with a great scheme, and Abraham Lincoln said: You might just as well try to manure a ten-acre field with a spadeful of muck. That is just the effect a reduction of 6d. in the Income Tax will have in stimulating trade. Then, again, where is it going? £4,000,000 will go to three-quarters of the taxpayers, and £26,000,000 to the other quarter. You can find plenty of illustrations in the White Paper. You will find that the amount of relief given to people with small incomes is comparatively small, but to the richest Income Tax payers the proposal gives thousands a year. That is not the way to stimulate trade. There is only one way to stimulate trade, that is toj, increase the purchasing power of the^ working people, who are the main sup-: porters of the staple industries of the country.

Let me give an illustration. We reduced the Sugar Duty last year. That put £20,000,000 more spending power into the pockets of the working people. I have some figures of the Co-operative Wholesale Society in regard to their sugar and jam sales. In nine months last year, after the repeal of the Duty, they increased their sales of sugar by 280,900 cwt.or1111 per cent. In jam,they increased their average for that period by 21-9 per cent. The average number of workpeople employed during that period over the corresponding period of the previous year was 219, and in the busy jam-making months 519 more. That is the way to stimulate trade. With the amount that the Chancellor of the f Exchequer is frittering away, to be spent I in frivolity and in luxury, he could have I abolished the Sugar Tax altogether, and I that would have been a far more beneficial thing.

What is this Budget? The right hon. Gentleman has himself established a certain record. For the first time for many years he has imposed additional taxation. This is the first Budget for many years where the relief of taxation has gone entirely to the direct taxpayers. There is not a penny of relief for the wage-earning classes. The Chancellor of the Exchequer puts additional taxation upon them. Why? When the right hon. Member for Hillhead reduced the Income Tax by twice as much as the Chancellor of the Exchequer is doing this year, he could not, for very shame, leave the in direct taxpayer out altogether. Therefore, he reduced the Tea Duty by 4d. a pound. When the present Prime Minister as Chancellor of the Exchequer, he reduced the Income Tax by 6d., but he did not leave the indirect taxpayer out. It is quite true he selected an article which I do not' patronise, but which, I regret to say, a good many of my friends both in the House of Commons and outside imbide very moderately.


Very moderately


But, still, it was indirect taxation. Now the right hon. Gentleman is not taking off a single penny this year. Therefore, he can claim credit for having established a record in his Budget in regard to taxation. I have only one word more. The right hon. Gentleman has chosen to reduce the amount of taxation paid mainly by rich people by a very considerable sum, with the result that the Income Tax payers and Super-tax payers do not contribute a single penny to the cost of the SuppLy services and the general administration of the country. [HON. MEMBEES: Oh! "] Not one penny. He is expecting this year £325,000,000 from Income Tax and Super-tax. The National Debt services are £355,000,000, and £305,000,000of that is interest upon War Debt, and, very approximately, the people who receive that income from the State on War Debt are the same people who pay the Income Taxes and whom the right hon. Gentleman is assisting. Shorn of all the glamour of the right hon. Gentleman's eloquence, this is his Budget. No more of a rich man's Budget has ever been presented. I congratulated (he right hon. Gentleman yesterday upon the great success of his speech. I congratulate the right hon. Gentleman to-day upon his Budget. He has provided my friends here in the House of Commons and in the country—


Is this a peroration?


This is a peroration. It creates a precedent in perorations by introducing into a peroration a statement of fact about which there can be no dispute. I congratulate the right hon. Gentleman. It will not take long for the glamour to disappear, and then the great toiling masses of this country will realise the true character of this Budget, and will realise, too, that the Tory party is still more than what Lord George Hamilton declared many years ago: A party that looks after its own friends whether it be in office or out of office.


I have only had the privilege of hearing the last part of the speech that the right hon. Gentleman has just made. I gather from him that the general merit or demerit of the Budget is that it will once more supply his party, who are, apparently, very short. of material and finding their meetings very flat, with some more oratory of the character he has been using in Opposition (very different from what he used when he was in office) in order to obtain once, more, he thinks, some votes at a General Election a long time after. It is interesting always to hear rival experts. No doubt, the right hon. Gentleman's anger was somewhat stimulated by the fact that schemes which his party had adumbrated and he had not the financial skill to carry out, are now being introduced by the party on the other side. In spite of widows' pensions and old age pensions at 65, he will go about shouting, "The rich man's Budget!" Unfortunately for him and his poor man's Budget last year, when he came to the General Election, he and his party did not seem to have obtained that amount of recognition they expected. [Interruptionand an HON. MEMBER: "A Daniel come to judgment' "] The right hon. Gentleman with his Budget met the fate common to Chancellors of the Exchequer, that remissions of duties are never very good vote-getters. I daresay, the right hon. Gentleman opposite will some day have the same experience.

5.0 P.M.

I would rather deal with what I may call the more serious aspect of the effect of the Budget on the financial situation. I understand that the question of the return to the gold standard, which the right hon. Gentleman elaborated at some length yesterday, is to be discussed at greater length on another occasion. I would, therefore, to-day only make a few preliminary observations on a subject of vital importance, the future of the trade of this country. The right hon. Gentleman and his colleagues have come to a decision, and so far as it is possible to judge, that decision is not unaccompanied by criticism. There is opposed to that decision a considerable amount of informed opinion as to what the consequence of the decision will be—a reduction of money prices, and a consequent reduction of money for actual revenue. Whether it is wise, in the present difficult industrial position in which we are placed, to introduce into the field of industry, I will not call it a problem, but this argument, I beg leave to doubt. Personally I cannot see what are the real advantages which. we gain by this step compared with the great risk and difficulty which seems to me to be involved in the decision. We are tying to a much greater extent our monetary system to the monetary system of America. You are making your Bank Rate much more subservient to Wall Street than it has been in the past. You are doing all this in order to create what, to my mind, is a purely sentimental result.

Already under licence, and by permission of the Government, the Bank of England can export gold if necessary. A licence, surely, would never have been refused under any reasonable condition, and we should have had control in case of exceptional circumstances. That control we are now giving up, at a time when it may be thought it can safely be done. But it is very difficult. to control the fluctuations of prices in this country, and still more the fluctuations of prices in a country everyone knows suffers such violent changes as the United States of America. If prices rise in America and the dollar depreciates, you may he able to maintain your gold position. If prices fall in America and the dollar appreciates, you may find it very difficult to do so, unless you take extreme steps which may be harmful to the trade and industry of this country, and so take a course which, once adopted, cannot possibly be again reversed. The fact that the right hon. Gentleman himself has had to create a kind of reserve, the character of which I dislike intensely, by further credits in America shows that his own mind is not altogether easy on the subject.

Whereupon the Gentleman Usher of the Black Rod being come with a Message, the Chairman left the Chair.


resumed the Chair.

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