NATIONAL EXPENDITURE.

HC Deb 07 August 1925 vol 187 cc1761-803

Sir GODFREY COLLINS

It seems right to my colleagues and myself that on the closing day of the Session, we should devote some attention to the problem of national expenditure. My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) had intended to interrogate the Government this afternoon on the subject, but a long standing previous engagement in Wales prevents him being present here to-day. In his absence I am anxious in a very few minutes to direct the attention of the Government to this very important matter. In the first place, I may remind the Government of their policy on this question. On the opening day of the Session, as far back as 9th December last, in the Gracious Speech from the Throne I find the following words: The present heavy burdens of the taxpayers are a hindrance to the revival of enterprise and employment. Economy in every sphere is imperative. Rather striking words in view of the action of the Government during the last nine months if we are to regain our industrial and commercial supremacy. We are at the end of the Session, and, with that statement of policy what has happened during the intervening months? In March last we had estimates presented by the Chancellor of the Exchequer which made provision for some £5,000,000 or £7,000,000 for the fighting services of the Crown. The Chancellor of the Exchequer then explained to the House that he had not had sufficient time to analyse the expenditure, but in his Budget speech he expressed the hope that during the coming year he would be able to reduce the rate of national expenditure by some £10,000,000 each year. In the following month, I think, he announced to the House that the Government were about to set up a Standing Committee of the Cabinet, for the purpose, he said, of. overhauling blocks of recurrent expenditure in addition to the annual scrutiny-made by the Treasury. I think that I am right in stating that this Committee has not yet been constituted.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

It has.

Sir G. COLLINS

Then the Chancellor of the Exchequer finding the pressure of the spending departments being applied from day to day spoke in July last and expressed the fear that the reduction of £10,000,000 this year, and in the coming years, might not mature, and he told the country that he found great difficulty in curtailing the expenditure as he had anticipated. Then during the last few weeks the House has been told that the Government are going to set up an outside committee to overhaul national expenditure. I hope that, before the debate closes, that the Chancellor may announce the terms of references to this Committee and its personnel. What Has happened since the Chancellor took office in December last? He has increased the current expenditure of the nation. He has invited the country to find a sum of some £58,000,000 for cruisers.

Mr. CHURCHILL

Over five years.

Sir G. COLLINS

And the sum of £11,000,000 for Singapore over another period of years. He invited the House yesterday to find a sum varying from £10,000,000 to £20,000,000 towards subsidising not only the wages of miners but also the profits of the coal masters and the royalty owners over a period of nine months in this case. That is the record of the Chancellor of the Exchequer during the short nine months of his Office. These are the various services for which the House of Commons in its wisdom has made provision. When the right hon. Gentleman took office, I was hopeful that with his experience at the Admiralty and the War Office, with his knowledge of these great departments, and with his restless energy and driving force the public purse would benefit, but I am bound to say that up to the present moment he has been beaten by these Departments. He has lost the first round in the 6truggle, and our object this afternoon, if I may say so with sincerity, is to assist him during the coming months in the struggles which he will be forced to face with the spending Departments of the State. Let me direct the attention of the right hon. Gentleman where I think very large economy can be effected. I will submit my reasons, and I hope that they will convince him of their wisdom. Let me remind the House in the first place that the Estimates for the Fighting Forces of the Crown in the year 1914 amounted to £80,000,000, whereas the present estimated expenditure is some £120,000,000.

Mr. CHURCHILL

Are you making allowance for the difference in the value of money?

Sir G. COLLINS

I will come to that. The numbers of the Fighting Forces for the year 1914 were 320,000; this year the right hon. Gentleman is making provision for 282,000 men; in other words, for every 100 men in the Fighting Forces of the Crown that were thought necessary in the year 1914 the Chancellor of the Exchequer to-day thinks that 88 are required. Surely a 12 per cent, reduction in the Fighting Forces of the Crown, in view of the tragedy of the last 10 years, is utterly inadequate. It has been so often said in this House that one hardly dares to repeat that the German menace has disappeared, but the only people who appear to have forgotten that fact are the Admiralty themselves. They appear to have forgotten that the German menace has been removed. The Chancellor of the Exchequer, if he turne3 to the Navy Estimates, could make wide and radical and sweeping reductions without any grave loss of efficiency and without running the country into any danger whatsoever. I remember the Chancellor of the Exchequer presenting his Navy Estimates in 1914. Being a new Member of the House, I took part in that debate and supported him in the large expenditure which he invited the House of Commons of that date to pass. But surely, if you go through the Navy Estimates item by item, which I have no intention of doing, it would be quite easy to cut down large sums. Take, also, the Army Estimates. He appears to have forgotten that the main purpose of our Army before the War was to send an Expeditionary Force to the Continent. The Chancellor of the Exchequer may shake his head, but surely it is common ground in all parts of the House.

Mr. CHURCHILL

There has been no addition to the number of men in the Army.

Sir G. COLLINS

That is not my point. The main purpose of our Army before the war was to maintain an Expeditionary Force with the object, if necessary, of sending it to the Continent of Europe. That necessity no longer exists. Our Army to-day is needed to defend our Imperial position, and, if you have regard to our Imperial position, with the increased power per man, in view of the tanks, the machine guns, aeroplanes, and other scientific methods which the war has developed, surely it is quite unnecessary to have such a large Army, seeing that the necessity to send an expeditionary force to the Continent no longer exists. I submit that the Chancellor of the Exchequer could well reduce the sum set aside by the fighting services by at least £40,000,000. How do I arrive at that figure? I find that in 1875, when a Conservative Government was in power, and when this country was not in any danger of war, the Chancellor of the Exchequer at that date made provision equal to a sum of 2 per cent, of our national income; and in 1891, again under a Conservative Chancellor of the Exchequer, the provision granted by this House for defence amounted to a sum of 2 per cent, of our rational income.

I submit, in view of the fact that the European danger has been removed and in view of the increased striking force which modern science has brought into play, the present size of our Army and our Navy on its present basis are quite unnecessary, and, if the Chancellor of the Exchequer and his Government would pursue a policy of peace abroad they could reduce the Estimates by at least £40,000,000, thereby reducing the taxation of the country and relieving the rates which press so severely upon our people at home. I know that the Chancellor of the Exchequer, if he endeavoured to do that, would have great difficulty with his followers behind him, but I submit that a Liberal Chancellor of the Exchequer to-day, if he were in power and were supported by a Liberal majority, would have regard to the international situation and to the real and deep feeling for peace which exists in the minds of people throughout the world and would shape his policy in accordance with that desire and that ambition; and, without sacrificing our position in the world it would be possible in my judgment so to reduce the Estimates by the figure I have mentioned and thereby grant large relief to the taxpayers and to the industries of this country.

Let me turn for a few minutes to our Social Services. I was very much struck by a remark made by the late Financial Secretary to the Treasury the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) on the Third Reading of the Finance Bill on this point. The right hon. Gentleman, after having been in office and having come in close contact with the local authorities and the Treasury, came to this conclusion. I am reading his words on the 25th June this year: Strongly as we on this side will resist any attempt to interfere with the Social Services, we are just as keen, as any hon. Member to see that we get the best bargain for the money we are expending. Then he went on to say: I am not satisfied that we are getting the best return at the present day."— [OFFICIAL REPORT, 25th June, 1925: col. 1818, Vol. 185.] Surely, if the right hon. Gentleman, after his experience in office, gives expression to that view, the Chancellor of the Exchequer, holding his powers to-day, can secure in our Social Services more value for the money which the taxpayer is granting. We on these benches do not desire to see in any shape or form any reduction in the Social Services of the nation; we believe that money spent on education, health, and such services is well spent money, but we are anxious, when this House of Commons votes money, to secure that the taxpayers' money is well spent, and, if the Chancellor of the Exchequer would direct his attention to securing value for money in the Social Services of the State, he might be able in the coming months to lower taxation. Often in these Debates figures are quoted of the cost of the Government Departments. I have had prepared for me the cost of the salaries of the officials of Whitehall, excluding the War Office and the Admiralty, and I find, according to the figures supplied to me, that the cost of the officials—or rather I might describe it as the cost of Whitehall—is upwards of £16,500,000 this year. That is the cost of officials alone in Whitehall, excluding the three Fighting Services of the Crown. I am not speaking of the salaries of teachers and different officials throughout the country.

Mr. CHURCHILL

Does that include pensions and Employment Exchanges?

Sir G. COLLINS

I have the exact statement here. I will read it: Estimates in Class II Salaries and expenses of Civil Departments, £11,350,000; Pensions Administration, £2,100,000; Ministry of Health, Administration England and Wales, £1,440,000; Scottish Board of Health—perhaps I ought not to have included that—£181,000; Ministry of Labour, Administration, London, £1,232,000; National Insurance, Audit Department, £164,000; a total of £16,500,000. Is there no room for reductions in these figures? Business men throughout the country and people of all types on all hands and among all parties are feeling the pinch. Nothing annoys the public more than the high cost of officials. I quite agree that these figures are small relatively to our national expenditure, and I have no desire to stress them, but they create intense annoyance in the minds of people, and, if the Chancellor of the Exchequer, or rather his Committee which he is about to appoint, would investigate these matters and let the country realise that the officials in London are reduced to a minimum, the taxation of the people would be paid more willingly and readily because they would know that the Government of the day had a grip of the situation in Whitehall.

I have sketched out, very shortly, that the Fighting Services could be reduced by many millions of pounds. The Social Services in my judgment should not be reduced except on the basis of getting value for money. If the Chancellor of the Exchequer could reduce the Supply Services, he would be enabled directly and indirectly to reduce the burden of our National Debt. A frugal Government would be in a position to borrow more cheaply. The rate of interest on our National Debt absorbs many millions of pounds, and even a reduction of ½ per cent. on the rate would, I believe, reduce the sum by nearly £40,000,000. These are the items to which I desire to direct attention this afternoon. We know the right hon. Gentleman's energy, and we hope that he will succeed, but, as I have already said, he has lost in the first round of this fight. It might well be asked what can the House of Commons do in this matter?

Let me remind the Chancellor of the Exchequer that 100 years ago the House of Commons took this matter into its own hands, and refused to grant supplies to the Government of the day. The Government of the day brought forward large Estimates, and the House of Commons, in its wisdom as I believe, refused to pass the taxation which the Government invited it to pass. That is the only practical method of reducing the rate of our national expenditure. The House of Commons of that time, as I have said, refused to pass the taxation desired by the Government, but the Government of the day did not resign. They carried on, but smaller sums were placed at the disposal of Ministers, and within 18 months of that decision the Government of the day were forced to reduce their national expenditure and bring it into keeping with their revenue. I believe that, until the House of Commons decides to refuse any longer to grant the necessary supplies to the Government of the day, the present burden of national expenditure will continue.

It is thought in many quarters that if the Government Departments were rationed that might be successful, but I suggest that the best method would be for the House of Commons next year to cut down the money set aside for national expenditure, and thereby force—or rather, I would say, assist—the Chancellor of the Exchequer to curb the spending Departments of the State. If he did so, what would be the result? Many of my Friends above the Gangway are not so interested in national expenditure as some of us on these benches. [Interruption] If I have misrepresented them, I am sorry. I have no desire to join issue with my Friends on this side of the House, but I am in favour of a reduction of national expenditure, not only because it will relieve the burden upon the taxpayer, but because it will enable working people to have larger sums to buy more clothes and more food, and to have more of the simple pleasures of life. High taxation and high prices go together. A high national expenditure is the cause of high taxation. It rests with the Chancellor of the Exchequer in the coming months to reduce the rate of national expenditure, and thereby bring relief to the overburdened taxpayer, and enable the wage-earning classes to have a larger sum in their pockets with which to buy the necessities of life. We make no apology, as I have said, far raising this subject this afternoon. We invite the Chancellor of the Exchequer in the coming months to direct his attention to this all-important matter, so that, when he introduces his Budget next year, he may be enabled to grant further relief to the over-burdened taxpayer.

Mr. CHURCHILL

This is a very proper subject and a very proper note for the work of this part of the Session to close upon. I am not at all complaining of the speech of the hon. Member for Greenock (Sir G. Collins), or of the occasion he has taken for raising this subject. I welcome support in the cause of national economy from every quarter. The only difficulty in which I find myself is that, in endeavouring to show to the hon. Gentleman and to the country what are the limits within which this problem of economy lies, I may run the risk of being accused of offering some defence for the present rate of expenditure. That is not my intention. My intention is to do all in my power to effect a steady and searching diminution of our national burdens. But, although everyone preaches economy, few practise it. Every party, every group in the House, has its pet economies, and also its pet extravagances. Everyone adopts an attitude with regard to economy similar to that described in the saying that everyone wishes to go to Heaven, but not immediately; and it is the habit of everyone, in regard to expenditure, to Com pound for sins they are inclined to, By damning those they have no mind to. One set of critics direct all their attention to the social services, which are very often described as the Civil Services. Another set, like the hon. Member for Greenock, concentrate their gaze sternly upon the Defence Forces of the Crown. Most of my time is taken up, not in making reductions, but in resisting further demands for expenditure—and not resisting foolish demands or improper demands, but resisting demands for wise expenditure, for desirable expenditure, and sometimes for just expenditure. We do our best to resist them all. Wise, necessary, or just as they may be, the time has come to call a decided halt, but although I have no doubt been guilty of many shortcomings during the present Session, I would draw the attention of the House to the fact that those shortcomings have been made public while any successes which I may have achieved, are necessarily wrapped in the mists of official secrecy.

The hon. Gentleman asks why does the Chancellor of the Exchequer allow this or that or the other—why does he allow so many men for the fighting Services, and so on? The Chancellor of the Exchequer is not a dictator. I have not been invested with dictatorial powers; if I were, I should be quite ready to dictate. But nobody has really brought the matter to that point effectively at the present time, and I must say that, when I do approach any existing expenditure with a view to effecting some reduction, the resistance becomes most violent. The other day a rumour was set about that the Chancellor of the Exchequer contemplated a raid on the Road Fund, and immediately there was a mobilisation of all the motorists, all the agriculturists, every interest connected with the Road Fund. I think it ought to be considered, like everything else. Whether, in fact, we can afford to spend as much as £17,000,000 a year on the development of roads is, surely, a question which should from time to time be reviewed by the Government. Some of these great expensive roads may well be beyond what the present state of our finances entitles us to afford. At any rate, no item of expenditure ought to be sacrosanct, and not even allowed to be scrutinised because of the indignant resentment which its particular supporters display. We have heard disputes about naval expenditure, and, perhaps, one day, we shall hear disputes about expenditure on the Army or the Air Force, but certainly it is the intention of the Government to overhaul very strictly all these Departments and Services.

I will ask the House to follow me in a lightning survey of the whole field of our expenditure, so that we may see exactly what are the limits within which reductions may be hoped for. It is no good living in a fool's paradise, as some of our sprightly coadjutors in the Press appear to do. Our pre-War expenditure was £205,000,000, and it has now risen to £800,000,000. Of that £800,000,000, we must first take off £355,000,000 for the Debt charges, and £36,000,000 for the other Consolidated Fund charges—payments to the Road Fund, Northern Ireland, the salaries of Judges, etc. I do not say there is not room for scrutiny there, but I will put that on one side. That leaves £407,000,000 for the Supply Services. I leave out the fighting Services for the moment. They are £120,000,000. I will leave out also the Post Office, which is £52,000,000, because it would be absurd to count that in the total of our expenditure, since it produces revenue greater than the expenditure. I really think it may well be that the day will come when we shall have to simplify our accounting in that respect.

I will therefore leave that out, and I will leave out also the £11,000,000 for the collection of the taxes. It may be that economies are possible in the collection of the taxes, but economies in the collection of the taxes which left a large portion of the taxes uncollected would hardly be economies which a thrifty Chancellor of of the Exchequer would hasten to enforce. Leaving all that out, we find that we have about £344,000,000 of expenditure left, of which £120,000,000 is for the fighting Services and £223,000,000 for the Civil Service Estimates. This expression "Civil Service Estimates" is really much misunderstood, and is still more widely misrepresented in political discussions. People imagine that £223,000,000 is spent upon a horde of greedy civil servants in Whitehall, and they point to great increases in this respect since the days before the War.

This £223,000,000, however, requires considerable analysis. £93,000,000 is represented by pensions, old age and war. Is it suggested that we should reduce that? £47,000,000 is represented by education. Is it suggested that we should reduce that? £13,000,000 is represented by Unemployment Insurance. Is it suggested that we should reduce that? [An HON. MEMBER: ''You have done it!"] Is it suggested that we should reduce that further? £7,000,000 is represented by Health Insurance, and there is £9,000,000 to be paid on account of housing. That is statutory. That makes £169,000,000, subtracting which from £223,000,000 leaves £54,000,000 over for every other conceivable activity of the Government—public buildings, agriculture, Colonial Services, Foreign Office, and every other conceivable Service. I quite agree that the whole of these should be overhauled continuously. We have always to face an upward movement. An automatic growth is going on in many branches of expenditure and, unless there is a continuous pruning of the work, we shall, so far from making a reduction, see our expenditure in every branch steadily mounting.

1.0 P.M.

We cannot arrest the automatic growth of many Services. Pensions are growing, superannuation of teachers will grow substantially, other Services grow automatically under decisions of Parliament, and it is necessary that there should be countervailing cuts and economies if we are to maintain our existing position. If you leave out, as I think you should, from this immediate survey, the staffs engaged in the Employment Exchanges —though they should certainly be carefully surveyed—and the staffs engaged in the payment and administration of pensions throughout the country, the total cost is quite correctly stated by my hon. Friend at £11,000,000. I think that is certainly a field of expenditure which is capable of reduction and compression. It is very desirable to keep on reducing the number of officials engaged in any particular Service, and there is no doubt that a diminution in the number of Government officials makes for economy, apart altogether from the saving in their salaries. Officials undoubtedly tend to make expenditure. They cannot help suggesting improvements, and the more able they are the more seductive and reasonable are the improvements they suggest. They are, however—I must be just—very feeble allies of the politicians in this respect. Those who are most ready to suggest improvements are the politicians, and never are they so ready to suggest improvements which cost money as after or during a period when there have been three General Elections in quick succession, when three separate sets of Ministers have taken their seats on the Treasury Bench, all animated by a laudable desire to make a reputation for themselves at the public expense.

But the House and the country must not be deluded into supposing that large sweeping diminutions in our expenditure are to be obtained from that source. Even if we were to strike off 25 per cent. from the Civil Service of the State and to say that vacancies were to be filled up at a much slower rate until that reduction had been completed, the saving which would, of course, mature slowly, would not amount to more than £3,000,000 or £4,000,000 a year, an important sum but one which will not appreciably affect the scale of the problems of finance with which the Chancellor of the Exchequer has to deal. Unless you are prepared to tackle the legislative decisions that Parliament has taken in regard to the social services it will not be possible to make diminutions on the scale some people have in mind. If Parliament were prepared to contemplate an altogether cheaper way of living for the whole nation, with less good education, less generous pension Services and less scientific administration of health and other Departments, unless they are prepared to legislate to effect these reductions do not imagine that enormous contractions of expenditure are possible.

Mr. GROTRIAN

Why not?

Mr. CHURCHILL

These social services are intimately interwoven with the whole life of the people and intimately concerned with the advanced standard of culture of the whole people, and it is to my mind unthinkable that these Services should be drastically cut down and the whole way of the nation's living altered unless at least proportionate additional sacrifices were exacted from the direct taxpayers by means of large increases of direct taxation for the purpose of a more speedy amortisation of the National Debt, and consequent reduction of the annual debt charge. Unless Parliament were prepared to inflict, as it may have to do some day—the day may come when, if the nation does not prosper, its whole scale of living must be reduced, and if and when that day comes Parliament must impose its sacrifices equally and simultaneously and in just proportion upon all classes of the population.

Now I am going to say a word about the Fighting Services of the Crown. Here I make no apology for expenditure. The world was never so peaceful. At least I will not say that, but the world was never so free from the menace of highly organised war by great Powers, and it certainly should be the prime endeavour of His Majesty's Government to keep the expenditure on armaments at its lowest point. But let us see what the position is. Take the Army first. The Army was not increased on account of the German menace. Certain arrangements for organisation were made by that great War Minister, Lord Haldane, before the War to arrange for the equipment and organisation of the Expeditionary Force, but this did not entail a large expenditure nor any substantial addition to the forces. The Army we had before the War was proportioned, not to the German menace or to fighting a Continental War. It was utterly out of all relation to that. It was proportioned to what were considered to be the normal police duties of the British Empire during a period of peace, the maintenance of our large force in India and to the general service of the British Empire.

Sir G. COLLINS

The right hon. Gentleman has quoted India. Has the Government taken into account that the British Army in India has been reduced in numbers as the result of the Committee presided over by Lord Inchcape. Are they going to reduce the Army at home in keeping with our reduced commitments in India?

Mr. CHURCHILL

I am not going into the details of the Army Estimates for the coming year, but the Army has been reduced very substantially. What I say is that the fact of the removal of the German menace is not in itself a ground for a substantial reduction of the British Army, because that Army was not increased for the purpose of meeting that menace. It existed for the maintenance of peace and order throughout the British Empire. Since the War the British Empire has not got smaller. It has got larger, and it has not got in every respect more tranquil. We have additional responsibilities and it is impossible to argue that very large reductions in the scale of the British Army are possible. Still I agree that some reductions ought to be made, and will be made, and I know my right hon. Friend the Secretary of State for War, who is extremely effective in dealing with facts and figures, and who has a very thorough comprehension of financial problems of all kinds, is continuously at work in preparing proposals to reduce the total burden of Army expenditure. Then take the Air Force. The Air Force is at present expanding under a scheme approved in all parts of the House. What does my hon. and gallant Friend say to the Air Force? I do not know if that is an exception that he will make from his general attack on expenditure.

Captain BENN

May I ask whether, in negotiating with the French Government about their debt, the right hon. Gentleman raised the question of mutual aerial disarmament.

Mr. CHURCHILL

I should complicate the discussion if I raised that point, but the good relations between our country and France ought to be taken into consideration in deciding upon the rate at which the expansion of the Air Force should proceed. But anyhow, I am only saying, here is a proposal for an expansion, here is a proposal for increased expenditure on a scheme set on foot in the days of the Coalition, perpetuated in the days of the Conservative administration which followed it, and finally carried through without any diminution by the Labour Government. That is the position in which we stand at present as far as that is concerned. I certainly consider it is the duty of the House and the Government to re-examine and review all these items of expenditure.

Then there is the question of the Navy. We had a discussion about that the other day. I am not dissatisfied with the results of the very long Debates we have had inside the administration upon the new programme and the scale of naval expenditure, but I am quite clear of this, that the expense of rebuilding the Fleet has got to be met to a large extent by reductions in the administrative charges of the Admiralty and of the Navy generally. If there are cruisers that are considered to be of very low value, that may be a reason for not keeping them steaming around the world at very high cost. We may have to consider placing a portion of our Fleet in those reserve formations which we used so greatly before the War, and it may be that we shall have reason for relying to some extent upon reserve formations in regard to the manning of a portion of the Fleet during years in which no immediate naval menace threatens, and there may be many other methods of effecting a reduction. But we have the definite undertaking of the First Lord that he is going to do his best to effect reductions in expenditure in order to compensate, and I trust more than compensate, for the cost of rebuilding the Fleet.

We are going to help the fighting services in making these economies by reinforcing their efforts with a Committee of eminent persons of great experience, quite detached from public service.

Viscountess ASTOR

You say you are going to economise. Are you going to economise on the marriage allowance to officers, and would that come in now?

Mr. CHURCHILL

I understand that question is to be raised later in the discussion, and I should be forestalling it if I were drawn into a detail of that kind. We are setting up this Committee of three eminent public men, unconnected with the Government, whose first duty it will be to overhaul the administrative expenditure of the Army, the Navy and the Air Force. I am glad to say Lord Colwyn has undertaken to be the Chairman of this Committee, and he will be assisted by Lord Chalmers and Lord Bradbury. You could hardly have, from a Treasury point of view, a stronger group. The work of the Committee will be, in the first instance, to report to the Cabinet the specific reductions in Admiralty expendi- ture which will be necessary, if approved, in order to meet the extra cost of beginning the cruiser programme this year instead of next year. That is their first duty. Secondly, their duty will be to examine and overhaul the administration expenditure of the whole of the three fighting services, beginning with the Navy. They will find ready at their disposal a most valuable and confidential report which was made by Lord Weir at the end of 1922 or the beginning of 1923. I was in those days chairman of the Cabinet Committee which examined the Estimates of the three fighting services, and I was very much struck by the growth of the staff in the different fighting services, out of all proportion to the rank and file, and also by the fact that posts which were formerly held by officers of moderate rank were now held by officers of much higher rank, with all the extra expense that flows from that. I, therefore, asked Lord Weir, with the approval of the then Prime Minister, to undertake an inquiry. Many changes of government have taken place since then, and in the general turmoil and confusion into which our affairs have been plunged, action has not been taken on that report. That report will be placed before the new Committee and will, undoubtedly, give them an immediate provision of most valuable and pregnant material. That is what I would say in answer to the speech of my hon. Friend.

I will close by giving certain figures to the House, because I do not want the public or the House to be deluded by the idea that some great reduction of £100,000,000 or £150,000,000 in the expenditure of the country is possible at the present time. I do not think it is, and I am not going to indulge or encourage false and visionary hopes of that kind. If you take the expenditure before the War and the expenditure at the present time and compare them, like with like, I think the House will be surprised at the result. You have, first of all, to deduct from the £800,000,000 of to-day the increase in the debt charge of approximately £330,000,000. You have to deduct also the increased charge for War pensions and for old age pensions, £83,000,000. You have to deduct £14,000,000 for the growth of the pre-War social insurance scheme. That makes a total to be deducted of £427,000,000. Sub- tract that from £800,000,000 and it leaves £373,000,000, comparable with the pre-War expenditure. But that £373,000,000 must, if you are arguing the matter fairly, be scaled down in the ratio of 175 to 100 to allow for the decreased purchasing power of the pound sterling. Or, in other words, for the higher nominal value of the cost of the same service. It must be remembered also that our taxation like our expenditure is based on this devaluated pound. Applying the ratio of 175 to 100 to this figure of £373,000,000, we have a figure of £214,000,000, which is the comparable cost, making allowance for the alteration in the level of prices of the expenditure of the country. The pre-War expenditure was £205,000,000. Comparing like with like, that figure of £205,000,000 may be compared with the figure of £214,000,000. That is, I fancy, rather a surprising figure. But I do not at all rest content with the results of that calculation. We are a country in many ways poorer than we were before the War. We have suffered terrible losses, and we have this great burden of debt thrown upon us, and if we are to recover and to lift that burden of debt and gradually reduce it, it is necessary not merely to be content to keep at about the level of our administration expenditures in pre-war times, but that we should endeavour to reach a lower level of expenditure in so far as that can be done without weakening the essential minima, of national defence, or making an improper inroad upon the social requirements of the people.

Captain BENN

Has the right hon. Gentleman formed any plan as to how he is going to raise the additional £10,000,000? Can he indicate whether it will be by indirect or direct taxation?

Mr. CHURCHILL

By none of these means. I am not proposing to make any provision for this charge in the present year. I said so last night. We will see what the state of the national finances is when the balance on the year is completed It may be that not the whole of the charge will present itself in the form of a deficit. I do not know. I cannot forecast what the state of the finances will be nine months from now. Whatever it is, I shall bridge the gap by temporary borrowing, as has often been done on these occasions, remembering the many occasions on which a large surplus has gone to make provision for the payment of debt far beyond what the House of Commons has voted, under the well-known and salutary machinery and procedure of the Old Sinking Fund. If at the end of the year our finances show a deficit of £10,000,000, or whatever it may be, for this extra charge, that will be a matter which I shall be bound to take into consideration in preparing the proposals next year. It would not mean that new taxation would be imposed this year. I cannot imagine-that any definite additions to taxation will be required next year on this account but it would have the effect of retarding further remission of taxation which otherwise I might hope would be possible.

Mr. SNOWDEN

I quite agree with the Chancellor of the Exchequer as to the importance of this subject, but I do not think that on the last day of this part of the Parliamentary Session, when the holiday spirit has seized Members of Parliament, is the best occasion for a serious discussion of this matter. I think most hon. Members who have listened to the speech of the Chancellor of the Exchequer will have felt a somewhat depressing effect. The right hon. Gentleman has held out no hope whatever of any substantial reduction of national expenditure. It will be remembered that in his Budget speech he said he hoped that he might be able to effect a progressive reduction of £10,000,000 a year in national expenditure. That hope through various causes, some of which are perhaps beyond the power of the right hon. Gentleman, has been dissipated. Anyone who expects the right hon. Gentleman will be able to stand at that box at the end of the next financial year and present a Budget which does not show a considerable deficit, is very sanguine indeed.

May I, at this point, congratulate the Chancellor of the Exchequer upon having succeeded in getting such a strong Committee for the consideration of the items of national expenditure? I do not think it would have been possible for the Chancellor of the Exchequer to get the services of three men more competent to undertake such a task as Lord Colwyn, Lord Chalmers and Lord Bradbury. I have no doubt whatever that they will do their work thoroughly. Two of them at least bring a long and practical knowledge of public administration and public expenditure. The difficulties of the Chancellor of the Exchequer will begin when the labours of this Committee have concluded. He will then have to face what he himself described a few days ago as the vested interests in expenditure which exist in public departments. I must confess that I have very little hope that the outcome of this Committee will be to effect any considerable reduction in what we may call the detailed items of expenditure of our fighting services.

There are only two Departments or spheres of public expenditure upon which, I believe, it is possible to effect any considerable reduction of expenditure. The right hon. Gentleman expressed the view that it will be difficult, if not impossible, to bring about any reduction in expenditure upon what are called, I agree, with the right hon. Gentleman, somewhat erroneously, the Civil Service Departments. The hon. Member for South-West Hull (Mr. Grotrian), when the Chancellor of the Exchequer was referring to the increased expenditure of Social Services, said that we got along all right in the past when expenditure was not so high, or when there was no expenditure upon education, old age pensions, public health and the like.

Mr. GROTRIAN

That was not what I intended to convey. What I meant was that if you abolish some of the Ministries which administer these funds you would have more money for the funds. For instance, if you abolish the Ministry of Pensions you might be able to give more pensions to the pensioners.

Mr. SNOWDEN

What the hon. Gentleman really did say was that we got along very well in this respect without these social services, but how did we get along? Simply by three-quarters of the children of the working classes of this country not even being taught how to read or write. At that time there was no extension of our public health services, and we had a death rate of 300 per 1,000 amongst children under five years of age. The system then adopted also placed the aged people at the tender mercy of Poor Law relief. Whatever the hon. Member opposite may say, there certainly is no one who will suggest before the country that there should be a reduction in regard to social services such as education and Old Age Pension. Therefore, we must come to the conclusion that if we are to look for a reduction in natinal expenditure we cannot find it to any substantial extent in a reduction of our expenditure on our social services.

I agree with an observation which was quoted by the hon. Member who introduced this discussion, which attributed to my right hon. Friend the Member for Central Edinburgh (Mr. W. Graham) a statement that the Labour party is in favour of increased expenditure on social services, or rather of an extension of our social services. At the same time I would like to point out that the Labour party are anxious that we should get 20s. worth for every £ we expend even on the social services, and I think it would be a business proposition to make some moderate reductions on expenditure by overhauling the separate items of expenditure in connection with these services. Take for example education. I am sure none of us want to see a reduction in the total amount of our expenditure upon education. At the same time it might be possible to effect a few minor economies in regard to educational expenditure which might be devoted to increasing the educational efficiency of the system. On the other hand we should certainly offer the most strenuous opposition to any suggestion for a reduction of expenditure which meant the curtailing of any of these social services, and we should support any extension of the activities of the State in these directions. I should consider that any hon. Member would be living in a fool's paradise if he expected to see the total amount which is now spent on the social services substantially reduced. I do not care what party happens to be in power, they will, Session after Session, have to bring in social legislation for collective effort and organisation to improve the social conditions of the people.

There are only two items of national expenditure from which we can expect to get any substantial relief of taxation, and one is a reduction of our expenditure upon the Fighting Services. The hon. and gallant Member who introduced this discussion compared the expenditure upon the Navy this year with the year before the War, and the Chancellor of the Exchequer interrupted him and asked him to translate the expenditure of this year into the prices of 1914. That point has been made more than once. It was made during the recent Debates on the Navy, but I really do not think there is much in it. I do not think it is fair to compare even in equivalent terms the expenditure upon the Fighting Services of to-day with that of 1914, because there was a very abnormal expenditure in that year. In the previous seven years the naval expenditure had risen from £30,000,000 to £60,000,000, and therefore it would have been more appropriate to have made the comparison not with the year 1914 but with the year 1906. But, even after we have taken into account the increased price, we are spending more on the Navy to-day than we were in 1907. We are spending upon the Fighting Services this year £127,000,000, compared with £80,000,000 in the year before the War.

But things have happened since 1913 because in that year we had a European menace which has now disappeared. The Admiralty are perfectly well aware of this, but in order to justify their expenditure this year they must have a menace somewhere, and now that the European menace has been removed the Admiralty have found another menace in the Far East. We have voted this year £4,500,000 more for the Navy than the Estimate of the year before, and perhaps it will be £7,000,000 or £8,000,000 more next year than the inflated Estimates of this year. We must look forward to this with as much satisfaction as we can give to it, but the fact remains that for the next seven or eight years at any rate there is going to be no reduction in the expenditure upon the Navy, whatever minor economies may be effected upon the recommendation of the Committee which is about to inquire into the naval expenditure, if the present policy of the Government is maintained.

We have heard something about a world conference to discuss the question of disarmament, and its object is a reduction, not only of the naval expenditure, but also a reduction of the expenditure of every branch of the Fighting Services. We are under an obligation to do that, and it is not right to justify our present expenditure on the Fighting Services by a comparison with our expenditure before the War. Before the War there was a Euro- pean menace, and we were parties to the Covenant of the League of Nations which imposes a solemn obligation upon all the contracting parties to the Covenant to carry out a progressive reduction in armaments. Instead of doing that we are increasing our naval strength and making no substantial reduction in the Army. We have also got an Air Force programme which will involve an increase in the Air Estimates for the next five years. Therefore I say that there is only one way of reducing expenditure on the Fighting Services, and that is by a change of policy, by co-operation with other countries which are groaning under the intolerable burden of the cost of armaments. There is no hope of getting any substantial reduction of this large expenditure except in co-operation with the other great Powers of the world.

The second item upon which I think some reduction might be made is the burden of the Debt Services. The Chancellor of the Exchequer has spoken of the burdens which this country may be called upon to bear in the years immediately in front of us, and the great difficulty there will be in meeting national expenditure. I shall not be surprised, unless there is a radical improvement in the financial position of this country, if it is not found within the next few years that the burden of the National Debt is so great that extraordinary steps will have to be taken to reduce the amount of that debt, and correspondingly the annual charge for the service of that debt. But apart from that, if it were possible that the whole of the outstanding War Debt of £6,000,000,000, excluding the American Debt could be converted—at the present time it is 5 per cent.—say to 4 per cent. that would effect a reduction of £60,000,000 in the amount of interest which is annually required for Debt Services. That would be a very substantial reduction of taxation. But we shall not be able to effect conversion schemes on advantageous terms unless at the same time we are maintaining national credit and reducing the volume of national expenditure by curtailing expenditure which is not remunerative either directly or indirectly.

Therefore, it is most important that we should reverse our present policy of increasing expenditure which is not remunerative. As I have said, we are not opposed to a big national expenditure. My own view is—and I have expressed it often in this House in years gone by—that the most economical form of expenditure is social expenditure. We get a far better return for the money that we spend collectively, either through the State or through the local authorities, than we do if we leave that money in the pocket of the individual to be spent according to his own caprice or whim or desire. Therefore, instead of being opposed to an increase of national expenditure in that way, we welcome it. I tell the party opposite that if ever, as a result of a General Election, the Labour party should form a Government the country may look forward to very comprehensive schemes of this kind, far-reaching schemes, and we shall not hesitate to raise the funds for that purpose by the taxation of the surplus incomes of the wealthier classes of the community.

While that is our policy, at the same time we are the sworn foes of all uneconomical expenditure and all unnecessary expenditure, because uneconomical and unremunerative expenditure is undoubtedly a hindrance to the development of trade and is a burden on industry, while remunerative expenditure is never a burden on industry, but is an aid and a stimulus to industry. There is very little, if any, substance in the argument that a high Income Tax is a hindrance to trade.

Something like one-half of the expenditure mentioned by the Chancellor of the Exchequer this afternoon is for wholly unremunerative purposes. The amount that we have to raise for the service of the War Debt and the amount that we have to raise for the expenditure on the fighting forces represent nearly £500,000,000 out of a taxed revenue of between £600,000,000 and £700,000,000. That part of our national expenditure undoubtedly is a burden upon industry. If we continue to raise that money, and we spend it on purposes which, in their effect, improve the education of the people, improve the health of the people, and put more purchasing power into the pockets of the people, then undoubtedly that expenditure, high as it is, will have a beneficial influence on trade, whereas unremunerative and wasteful expenditure has the opposite effect.

There is not much hope in the statement of the Chancellor of the Exchequer that we can look forward in the years immediately before us to any substantial reduction of this unremunerative and wasteful form of national expenditure. So long as it continues it will be a burden upon industry, and to the extent that it takes money for these wasteful purposes out of industry, to that extent will the recovery of industry be retarded. During the Budget Debates the House of Commons is unanimous in demanding a reduction of taxation. We on these benches demand a reduction of the expenditure which presses heavily upon working people—the abolition of indirect taxation. Hon. Members opposite look after their special friends. They support the reduction of the Super-tax and of the Income Tax. That is what happens during the Debates on the Budget and the Finance Bill. All the rest of the time of the Parliamentary Session is given up either to conceding or resisting demands for increased expenditure in every part of the country. I quite agree with an observation that was made by the hon. Member for Greenock (Sir G. Collins), that the House of Commons will have to exercise a more drastic control over expenditure than it exercises at the present time. I know how difficult it is. As a matter of fact, the House of Commons to-day has no control whatever over national expenditure.

In this Bill, to which we are to give a Third Reading in the course of an hour, we are empowering the Treasury to spend nearly £700,000,000 of money. That total is composed of many thousands of individual items. The House of Commons has never discussed one of those items. When the Vote of a particular Department comes forward, for £2,000,000 or, it may be, for £50,000,000, we do not discuss a single item of the expenditure. The Debate is confined entirely to some matter of policy or of administration relating to the Department. I have ideas on the subject, but I have now no time to elaborate them. I have ideas and suggestions for putting an end to what is really a farcical proceeding. On two nights of this week, between 10 and 11 o'clock we tramped through the Division Lobbies voting hundreds of millions of money without knowing what we were voting, without having discussed at all whether the particular items of expendi- ture were necessary or not. Sooner or later the House of Commons will have seriously to face that question. We shall have to consider giving back to the House of Commons what was the original and chief function of the House, namely, the control of expenditure. It is no use talking about increased taxation unless we control expenditure. If this House sanctions expenditure it is in honour bound to vote for taxation to meet that expenditure.

Sir FREDRIC WISE

I quite agree with the right hon. Member for Colne Valley (Mr. Snowden) as to the importance of this Debate. I quite agree, too, with his statement that the country should receive 20s. for a pound. I was, indeed, disappointed with the speech of the Chancellor of the Exchequer, for I felt that he did not offer us very much hope of reduction of expenditure in the future. None the less, the reduction of expenditure is the most vital question before the country at the present time, and I congratulate the Liberal party and the hon. Member for Greenock (Sir G. Collins) on having brought this important subject before the House. The right hon. Member for Colne Valley stated that most Members wish for additional expenditure. That is true. On Monday of this week we had a Debate on agriculture. I sat through nearly the whole of the Debate, and every Member who spoke while I was in the House asked for additional expenditure on agriculture, from research to the improvement of oysters. On Tuesday we had the Scottish Estimates. I need not refer to them, for we know what Scotland always gets when it puts forward its claims. The Chancellor of the Exchequer compared the figures of 1914 with those of 1925. In 1914 we were spending £200,000,000, and this year we are spending about £800,000,000. The right hon. Member for Colne Valley expressed the opinion that £800,000,000 was possibly too great a, burden for the country to bear. I agree with him. If he will compare £800,000,000—I sincerely hope that the Chancellor of the Exchequer will do so also—with the German expenditure of only £325,000,000, he will see the competition with Germany, and how Germany has an advantage in that competition.

I often think that the country does not realise what we can afford and the importance of this expenditure. I feel that the country is thinking more of when Jack Hobbs will make his next 100 than of matters which are vital to everyone, not only in this House but throughout the country. In the last two years the Government expenditure has increased by £10,500,000. The hon. Member for Greenock referred to the King's Speech. The Government have not kept their pledge in regard to this economy, as it was stated in the King's Speech. The King's Speech said that economy was essential for the trade of the country, but even the Government increased expenditure in the last Budget. The economic situation is worse to-day than it was when the King's Speech was read. We are spending millions upon millions. I put a question the other day as to the Bills which had been passed this Session involving increased expenditure. There were 16 such Bills, representing millions and millions. Some of them, possibly, were necessary, but they mean millions of pounds, and until we get a sense of proportion and realise what a million is, I feel confident that this country will not reap the benefit of the increased prosperity which is so essential for us all. The Chancellor at the end of his speech last night suggested the possibility of raiding the sinking fund. He said: We have often in the past paid enormous sums, not intended by Parliament to be voted for the payment of debt through the salutary medium of the old sinking fund. And in this case if there should be a balance on the wrong side, and very likely there will be, that is a matter which we must take into consideration in deciding what remissions or additions are possible in regard to taxation next year." [OFFICIAL REPORT, 6th August, 1925, cols. 1692, 1693, Vol. 187.] 2 P.M

To-day the right hon. Gentleman said he would probably meet that by a temporary loan, such as on the floating debt. May I remind the House that the floating debt has increased by £40,000,000 since 31st March this year. The revenue to date from the 31st March is £8,000,000 down, and the expenditure is £6,000,000 up. These are important and vital figures. I wonder what we may look forward to when the next Budget is introduced? I am very pleased that the Chancellor has appointed three strong men on the Economy Committee. I felt that a Cabinet Committee was only playing with possible reduction of expenditure, but I feel that these three men will understand the intricacies of national finance, and I sincerely hope that in due course they will be able to reduce national expenditure. I am confident it can be reduced. As the right hon. Gentleman who has just spoken pointed out, you have two special classes of services, the Consolidated Fund services and the Supply services.

The Consolidated Fund services I feel sure can in due course be considerably reduced by a funding loan if we look after our credit. I would not be surprised if a voluntary funding loan were possible so as to reduce the capital expenditure incurred by interest on the Consolidated Fund service. We have maturities next year of £113,000,000, but we want to look in advance of next year. We want to look forward four or five years. We have to look forward in the next four or five years when big maturities take place, to an amount of £1,000,000,000, and a possible further £2,000,000,000 of five per cent. National War Loan which can be redeemed by the Government in 1929. It is necessary to look well ahead with regard to these maturities and then we will be able to convert at a lower interest rate. With regard to the supply service, there are the fighting services and the civil services. Take the fighting services. The cost of the defence of this country is enormous. In 1914 it was £81,000,000, and in 1925 it is £127,000,000. Canada, Australia, New Zealand and South Africa only spend just over £9,000,000 on defence. Comparing 1914 with 1925, Canada has only increased her cost of defence by £200,000, and South Africa has actually reduced her cost of defence. Australia and New Zealand have increased theirs. But I feel confident that the expenditure on our fighting services can be reduced.

The hon. and gallant Member for Hertford (Rear-Admiral Sueter) said the other day that we had spent £550,000,000 since the War on our Fleet. What have we got for it? The Chancellor of the Exchequer said recently that we have to renew our Fleet. What has happened to the £550,000,000? What about the Royal Dockyards? Are we to continue the present expenditure on Royal Dockyards which is more than double what it was in 1913–14? Take another item, the naval staff. In 1913–14 it cost £19,000; to-day it costs £101,000. If there is one Service more than another which wants drastic consideration, it is the Navy. The Geddes Committee made certain recommendations, and I think the House may remember the reply which the Cabinet received to the suggestions of the Geddes Committee. Take the Army. Undoubtedly, reductions could be made. I put a question down recently in regard to the Army of Occupation in Egypt, and I find that the cost in 1913–14, including Air Force, was £634,000, and in 1925–26 the cost was £1,170,000. Although these may be relatively small items, they all add up, and they would make possible a general reduction such as I believe to be absolutely necessary.

Take the case of the Ministry of Labour. The Committee on estimates recently made certain suggestions with regard to the offices of the Labour Ministry which I do not think have been carried out. The Foreign Office staff, which was formerly 180, is now 780. The Cairo Residency in 1913 cost £15,000, and there were six officials. In the estimates of 1925–26, including maintenance of the house, the cost was £42,300 for 20 officials. Why are there 20 officials? All these matters should be thoroughly examined. I would ask the Financial Secretary to the Treasury to realise that the nation is paying too much. The problem is gigantic. I have here a speech made by the President of the United States, in which he says: Economy in the cost of Government is inseparable from reduction in taxes. We cannot have the latter without the former. From some sources the statement has been made that this continuing drive for economy in federal expenditure is hurting business. I have been unable to determine how reduction in taxes is injurious to business. Each tax reduction has been followed by a revival of business. If there is one thing above all others that will stimulate business it is tax reduction. If the Government takes less, private business will have more. If constructive economy in Federal expenditure can be assured, it will be a stimulation to enterprise and investment. These are important words, and show what the President of the United States thinks about a reduction of taxes. What does it mean? We are living beyond our means, and the House and the country ought to realise it. The Chancellor of the Exchequer on the Third Reading of the Finance Bill said: It is fixed 'bayonets' on every quarter." —[OFFICIAL REPORT, 25th June, 1925, Col. 1832, Vol. 185.] I think his bayonets must be rather blunt after his speech to-day, and I feel, now that we are adjourning until 16th November, the right hon. Gentleman ought to explore every department to see what reduction can be made. We have no margin of safety at the present time, and I implore the Government, with all the force that I can put into words, to search every avenue of retrenchment for possibilities of reduction in Government expenditure.

Mr. STEPHEN

I think every member of the House agrees that in national expenditure there should be the utmost economy. That is a proposition which any Member of the House or any individual would be prepared to accept. We all agree that we should get the most for what we expend, whether in the case of the nation, or in the case of the individual. But I regard with a great deal of suspicion many statements made with regard to the possibilities of economy in national expenditure. It has been pointed out that in 1914 we had a Budget of £200,000,000, and that to-day we have reached the figure of £800,000,000. The impression is always conveyed that this is an extraordinary increase. I notice however that the people who are keen on economy in national spending pay no attention to the fact that a great part of this burden of £800,000,000 is interest on the National Debt. Again and again economists in this House examine expenditure on oyster fishing, or something like that, and point to the possibilities of saving in this or that Department. But with regard to the big item in our national bill, there is a closing of eyes to the problem involved in the National Debt, and the interest which the country has to bear in connection with it.

I am very much perturbed about the situation which is developing. When the Coalition Government was in office a similar propaganda was started in the country as to the need for national economy because of the country's position, and, at the critical moment, we had the Geddes Committee, whose business it was to go over the whole national expenditure and find out the possibilities of retrenchment. I believe that the worst thing that has happened to this country since the War was the activity of the Geddes Committee. They suggested economies, but, just as is always done in this House in these discussions, they shut their eyes to the one great drain upon the country and discovered ways of saving at the expense of education and at the expense of working class folk in this country.

I am in thorough agreement, and I think most Members of these Benches are in agreement, with what has been said regarding the fighting services, and we wish God speed to the Chancellor in every he makes with regard to reduced spending upon the defensive forces, but I want to enter a caveat against any reduction in these social services, which are of so great an importance to the ordinary working class people in the country. The hon. Member for Ilford (Sir F. Wise), speaking in regard to the terrible position in which we find ourselves, used the example of Germany, and because of my respect for him and for his contributions to the Debates in this House, I did not make the interruption that was in my mind, but because of what happened in Germany with regard to the exchange and the mark, Germany is not burdened with this great burden of National Debt that we have to bear. Suppose you take the £350,000,000 annually for interest on this Debt, and cancel it, and deduct those figures from our national expenditure, then we are not so very far removed from the expenditure of Germany on Government services. One of the things that is keeping us back is this sort of suggestion that all the Government Departments are so spendthrift with their money. I know that the Treasury, while our Government was in office was not spending on the various Services what I think it should have been spending, and I do not think the present Treasury is anywhere near being so sympathetic to expenditure that should be undertaken as it ought to be.

Take the Ministry of Pensions and the Ministry of Labour. I believe that the Treasury would be acting wisely if they were not nearly so restrictive in their attitude to those two Departments as they evidently are. There are hundreds of thousands of people in this country, the great mass of the working class, who would benefit greatly if the Treasury were not so harshly economical as they are in connection with those Departments. I noticed in the newspaper yesterday a statement about the sensation that had occurred in the reduction of the Bank rate, and I take it, therefore, that there is plenty of money to be had when the Bank is reducing the rate. I do not think that all those warnings and Cassandra-like utterances of so many hon. Members in this House are justified, and I want definitely to-day to say that if any of those reductions are going to be imposed in connection with the social services, we will fight them to the utmost of our power. We believe that there is the need for increasing and ever-increasing expenditure in connection with these matters.

Suppose you took £70,000,000 or, say, £50,000,000 out of the £350,000,000 that is paid in interest on the National Debt, and, instead of that £50,000,000 going to the people that it is going to at the present time, it were distributed in increased wages among the workers of the country, I believe that you would do far more in that way to bring this country to a period of prosperity than by any other means. It would be putting a purchasing power into the hands of the people of the country that would be expended on commodities. It would not go to capital expenditure, expenditure on plant, so much as to expenditure on commodities for immediate consumption, and the result of that would be that it would produce an improvement in the trade of the country, because we always tend to forget that the big market is not the foreign market. It is not the trade with other countries that forms the big market, but the home market, the market in providing for the needs of our own people; but we set our eyes towards the ends of the earth, and we forget the home market because it is always there, and the people at home cannot get away from the profiteers in the way that the traders in other countries can do. Because they cannot get away from them, they have to take their goods, and we take the home purchaser for granted, so that that part of our market does not get anything like the consideration that it ought to get. If the working classes of this country got £50,000,000 out of that £350,000,000, I believe that it would produce a bigger step towards the prosperity of our country again than any of the suggested economies that various hon. Members have been putting forward in this House.

With regard to social services, I want to say that, in my opinion, a policy that has been suggested—and, I am afraid, a policy that may be carried out—is one that is suicidal, and that is the idea that the Treasury should say to each of the Departments, "That is your figure; you are going to get that amount of money, and you can spend it to the best advantage. We hope you will, but that is all that the country can afford for you at the present time." That means a rationing of the various Departments. It is all very well for a journalist to put that into the newspapers for a tag to be taken up, but it will not bear any real, critical examination as a way out of our difficulties at all, because a Department should get the money that is going to produce effectively the comfort and well-being of our people, and one Department might quite well be able to save £7,000,000 or £8,000,000, whereas another Department, instead of having a reduction of £1,000,000 or £2,000,000, might legitimately be given a good deal more money to spend than it has at the present time.

Take the Ministry of Labour, the Ministry of Pensions, and the Board of Education. I believe that, if we spent more money in those three Departments, that money would bring in a very good return to the country, and it would bring it in to-day, when we are told that we are so hard pressed as a community. I am not blind to the fact that the burden of taxation or of high rates may interfere with the carrying on of the industries of the country. I am quite well aware of that, and I am quite well prepared to accept it, but at the same time that burden is felt all the more keenly, and acts as a deterrent to the carrying on of the industry of the country, just because of the fact that so many of our economies and retrenchments in the past have begun with the working classes and have been imposed upon them. When you think of it, the economies that have to be practised by ordinary working-class families are in quite a different category from those which have been imposed upon the rentier class of the community. In the one case it is giving up something that practically does not matter, a luxury here or there, but in the case of the working classes it is giving up something that is vital to the well-being of working class life, and because this House, to my mind, has never paid full consideration to retrenchment in connection with its distribution among the working classes and its distribution among the rentier and the better-off classes in the community, I believe that our industry is in its present parlous condition.

I want to say to the Financial Secretary to the Treasury that I hope we will not have any taking up of this sort of "Daily Mail," office-boy sort of figures of expenditure. There are some of these people, like Rothermere and Beaverbrook, who seem to think that they were born with a double dose of wisdom, that because they have exploited Sunday journalism in the way that they have done, they are able at once, just while you wait, to hand out a satisfactory financial policy for the country. My hon. Friend the Member for Gorbals (Mr. Buchanan) suggests to me that this is a different matter from reporting a divorce case, at which they may be quite skilled, or getting a Captain Gee or a Captain Coe to give good tips as to the one race.

Mr. MAXTON

The losers!

Mr. STEPHEN

Yes, the losers, but I hope the Financial Secretary to the Treasury and the Chancellor of the Exchequer are not going to embark upon, any such scheme. Finally, I want to say, in connection with this Committee of three that is going to perform wonders, that we had a Cabinet Committee dealing with the matter, but evidently they could not make anything of it, because they had their own Departments to think of, and, while they were willing to cut down the other fellow's expenditure, they were not willing that their own should suffer any diminution. Now, however, we are going to have this Committee of three super-men, who are going, to make a, general survey of the position. In this House we have a Committee on Estimates and a Committee of Public Accounts, and while we cannot possibly go into each of the minutiae of the Vote that we are passing, we have got in those Committees an examination of the various accounts, and there has never been any- thing suggested of a very drastic nature, so far as I am aware, by those Committees. I believe the Treasury are trying to cut down all the time, and are, really exercising economy in the expenditure of the country, as any hon. Member will agree who has gone to a Minister and tried to persuade him of the advantage that would come to the country from a certain expenditure. If he has persuaded him that it is a good idea he has probably been told afterwards that the Minister has had a most terrible bout with the Treasury officials, and that the Financial Secretary and the Chancellor of the Exchequer have put on a very stiff blockade against the suggested expenditure.

Hon. Members get up in this House and talk about the possibilities of economy in connection with the Departments, because it reads well in the Press and appeals to weak minds in the community, and also allows them an opportunity of an attack upon the expenditure on social services afterwards. We have got those three super-men who are going to overlook the Departments. I hope that they will not be led astray in the same way that their predecessors were, and I would suggest to the Government that they should put it to these three very wise, distinguished individuals, this Holy Trinity, that they should make the main item in their scrutiny how to reduce this £350,000,000 interest on the National Debt, because you may talk about economy, and carve here and there, but until a Government in this country faces this burden of £7,000,000,000 or £8,000,000,000, which is imposed upon this country to-day, I do not believe you will ever get anything effective done with regard to a reduction of the burdens upon the community.

Mr. GROTRIAN

I cannot help feeling that it might be considered somewhat impertinent for a new Member to get up at this stage of the Session, and at this hour of the day, to intervene in a Debate of this character, but, at the same time, I am grateful to you, Sir, and to the House, for giving me an opportunity of saying a few words. In my humble opinion, next to peace in industry, what we want in this country is economy in administration, and I should not seek that economy by cutting down what are described as social services. Owing to an unfortunate interjection when the Chancellor of the Exchequer was speaking, opinions have been attributed to me which I do not hold for one moment. Of course, it is my own fault, I agree, but it is not always so easy to convey all you mean within the limits of an interjection while another person is speaking. I quite agree that I brought the rebuke upon myself, but I would like to say that, so far from wishing to cut down those social services, if I could not obtain them in any other way, I would attain them by increasing the Income Tax. I think when I have said that, I have said enough to show that, at any rate, I do not hold the opinion which the late Chancellor of the Exchequer attributed to me.

I would not continue all the Departments created in the War, nor would I continue all the extravagance now going on in Whitehall in connection with these social services. I draw a great distinction between the money spent on the social services themselves, and the money spent upon the administration which is attached to them. Of course, we are all in theory in favour of economy, but I am afraid we are all a bit weak when it comes to practising it in any way in which we are ourselves interested. But I would suggest that one way in which an economy might be made, although I admit it would be quite a small one, would be by discontinuing the salaries of Members of Parliament—not all of them, but what sense is there in giving £400 a year to a man who has already perhaps £4,000 or £5,000 a year? You may say that if you cut off salaries of Members of Parliament, you will make it impossible for some people to come to this House. I would not do anything so foolish. What I would suggest is that no one should have this salary given to him as a matter of course, but if he liked to apply for it on the ground that his means were insufficient, or that it was necessary for him to have it, he should have it, but nobody else should know who applied, and who were the persons who were drawing the salary and who were not. That might not be a big economy in the way of money, but it would be a very great moral gesture to the rest of the country if we started economies upon ourselves before we tried to impose them upon other people.

I would suggest that there are other ways in which economy might be effected, and I realise that I am going to say what may be considered a somewhat unpleasant thing. It is not meant in any unpleasant way personally. I am simply speaking of the Department, and not of the man who occupies the post. After all, we are not sent here to say either pleasant or unpleasant things, but we are sent here to say what we believe to be the truth. For instance, I ask the House, what do we get for the expenditure on, say, the Department of Mines? Can the head of the Department of Mines, find one single miner a day's work at any time? Can he stop any mine being closed down? We got on perfectly well before the War without a Department of Mines, and I suggest we could get on perfectly well again. What is it that the head of the Department of Mines can do that could not be done by the President of the Board of Trade, and so on all through? Could we not abolish the Secretary of State for Air? Could we not let the Army and Navy have their own Air Force, and look after it? Could we not go further, and abolish the Minister of Pensions, and let us have a little more money to pay to the pensioners? If you were to put most of your pensions on a permanent basis, there would be very little administrative work to be done in the office, and in that way we might save money.

And do not forget that nearly all these Departments, and a great many more I have not mentioned, were created during the War by the Coalition Government to find jobs—to put it vulgarly—for people who had been in former Administrations, and I see no reason whatever why a good many of these Departments should be continued now. I do not want to detain the House by going through all the Departments, but I am perfectly certain that as soon as you create a Department you have to have a staff, you have to have a house, and the expense is high enough in one way or another until you get these enormous figures which have been discussed in this House to-day. I must say I was disappointed with the speech of the Chancellor of the Exchequer. He holds out very little hope of really substantial economy, but I should like to warn him, so far as I am concerned, that, in my opinion, the country will never trust him again, unless he carries out the promise he has made on the Treasury Bench to secure, not cheese- paring and fiddling little economies here and there, but really substantial economies in the administration of the country. In conclusion, I wish to thank the House for giving me this opportunity, and for listening to me.

Mr. JOHNSTON

I only want to intervene in this discussion for a moment or two, in order to call attention to an economy which might have been effected within the past week. I refer to the mines agreement. It is described as a subvention of £10,000,000 in relief of wages. I hope to show it is not a subvention of £10,000,000 in relief of wages, and when the Chancellor of the Exchequer and the Government so describe it in the Government papers, they are applying a misdescription of an expenditure of public money which I hope to show is absolutely unjustified. I listened to the Chancellor of the Exchequer this afternoon explaining where it might be possible, in the dim and distant future, to secure an economy in this service, in that service, and in the other service. Every economy immediately meant the displacement of labour, and, possibly, a further dose of unemployment. But I do not want to discuss that for the moment. What I did not hear from him was one word of explanation as to why it was that he had agreed, that he had permitted him6elf to be coerced into agreeing, to hand over £8,000,000 in profits to a coal-owning class which had undeniably, during the past decade, made extraordinary profits out of the other industries of this country. What are the facts? In Scotland, in the month of June, there was a loss per ton of 1s. 7¾d., but the Chancellor of the Exchequer did not say to the coalowners, "During the nine months in which we are considering how the coal industry can be efficiently conducted, we are going to guarantee that you shall suffer no loss." He did not say, "We will make up this 1s. 7¾ d."—not at all. He said, "We will give you Is. 7¾d. on your loss, plus 1s. 2½ d. which we will guarantee in the way of profits for the next nine months."

Then he said to the coalowners in the Northumberland area, "You lost during the month of June, say, 2s. 7½ d. per ton. We are not only going to make up that 2s. 7½d., and so guarantee that you shall have no loss during the next nine months, but, in addition, we are going to hand you, out of the public funds, a sum of money amounting to 1s. l¼d. a ton." The coalowners in the Eastern Division, in the month of June last, made £957,000. Now there is to be a profit of £3,077,000—a profit guaranteed to the coalowners, and an hon. Friend on these benches, a member of the Miners' Federation, estimates from figures supplied to the coalminers that of the £10,000,000 subvention voted by this House yesterday, no less than £8,000,000 of it was a subvention to coalowners' profits, and the Chancellor of the Exchequer this morning never said one word in justification of that £8,000,000. He never mentioned it; it did not appear in his picture at all. £8,000,000 of this £10,000,000, or thereabouts—I am not quarrelling as to a thousand pounds— is admittedly handed over, not to wipe out losses, not to prevent the coalowners suffering losses during the next nine months, but actually to guarantee that they shall have a better rate of profit than they had in the five years before the War. If we are going to talk about economy, there is £8,000,000. I understand it is too late now to do anything, but I think it is adding insult to injury to describe this £10,000,000 as a subvention in relief of wages. Only £2,000,000 out of the £10,000,000 is going to the collieries and £8,000,000 is going to the coalowners. What about royalties? There is no subvention for them. Why not? Is it not the fact that the coal pits have got to provide the means, and the coalowners have to contribute rather more than £6,000,000 to royalties? Is that not, therefore, a subvention to the royalty owners? The royalty owner will not suffer a penny reduction. There is to be no economising on his expenditure.

The Chancellor of the Exchequer never said a word about the fortunate investor who had invested his money in war loan when the £ was worth 11s. Now it has gone up by one expedient and another, by gold standards and the like, and has been driven up on the American exchanges to almost 20s. That has now put up the purchasing value of the British pound, it ceases to be 11s. and becomes something in the neighbourhood of 20s. There is no proposal that this fortunate shareholder in British war-loan should suffer pari passu a reduction because of the increased purchasing power of his £: there is no proposal of that kind what- ever. All the economies that are to take place, according to the Chancellor of the Exchequer and according to the hon. Gentleman who spoke from the Liberal benches in initiating this discussion, are to take place at the expense of one kind of Civil Servant or another. I am not arguing against some of these proposals. There must inevitably be action taken in these Government Departments. Anybody in his senses would be desirous of cutting out all waste, and the preventing of inefficiency. It is however, a great broad avenue along which this House is going to travel that has been expounded from the various benches this afternoon, and that some of us, at any rate on these benches propose to do our utmost to prevent.

Further to cut down wages is further to cut down the purchasing power of the people, and the worse the conditions of affairs will be in this country. There is absolutely no escape in that way. If you were to cut off parasitic bodies—well and good. Let us go for the landowner. Let us go for the interest drawer. Let us go for the people who do nothing to help production. Let us do that, and not cut and sap away, as we have been doing during some period or other of this Session, the purchasing power of the poorest section of the community. I do not want to take up any further time. I simply want to repeat again my protest against the use of any State paper or in any State document of the information that £10,000,000 voted yesterday was a subvention in aid of wages. It is no such subvention. I trust that no hon. Member of this House, speaking during the Recess, will not attempt to mislead the public in the way that this House has been misled by the paper issued by His Majesty's Government.

Sir HARRY FOSTER

Am I right, Mr. Speaker, in assuming that this Debate automatically comes to an end at three o'clock?

Mr. SPEAKER

Yes.

Sir H. FOSTER

I only desired—perhaps I may be able on the Adjournment Motion—to ask for some explanation from the Secretary of State for the Colonies in connection with our administration of affairs in Palestine. I content myself at the moment—I do not think it has been done yet in this Debate—of entering a protest, and expressing my very great regret, and I am sure the regret of Members on both sides of the House, regarding the announcement made by the Prime Minister two days ago with respect to the marriage allowance of naval officers. This House voted a substantial sum early in the Session to enable that marriage allowance to be made to the naval officers. We understood that the matter was still being discussed until two days ago the Prime Minister in answer to questions from various parts of the House made the announcement of the Government as follows: The Government have made a most careful and prolonged inquiry into the relative position in pay and allowances of all kinds of officers of the three fighting services. They have reached the conclusion that the position of naval officers, whether married or single, taken as a whole, is not inferior to that of officers in the other two services. In these circumstances they consider that no case has been made out for granting the additional allowance.—[OFFICIAL REPORT, 5th August, 1925; col. 1345, Vol. 187.] The Prime Minister was challenged on the subject by various Members, and asked whether it was not a fact that the naval officers alone amongst the services, either men or officers, do not draw marriage allowances. The reply of the Prime Minister to that was this: To answer that question fully would be entering into Debate. That is a fact; and it is also a fact that at the time when the pay was settled a few years ago all these considerations were taken into account. Anyone can raise it on the Adjournment or, if there is time, on the Appropriation Bill.—[OFFICIAL REPORT, 5th August, 1925; col. 1345, Vol. 187.] There was no time, however, on the Appropriation Bill, to discuss the matter at all adequately, or, indeed, at all, but I do wish—and in this I think I am voicing the feelings of a great many people both inside and outside this House—to say that the decision of the Government has not only caused great disappointment, but that it is much to be regretted that if the Government had not already made up their minds on the subject, that false hopes should have been allowed to have been fostered. That this House should have been led to vote the money, and then afterwards, and after months of discussion, private discussion amongst the members of the Government, suddenly, when there is no time to discuss the matter in this House, that an announce- ment should be made, and that these hopes have been raised only to be dashed to the ground. Personally I have had more than one letter expressing the grave disappointment, and indicating the difficult financial position in which some of the officers have been placed by reason of having had their hopes raised, and then dashed to the ground. There will be, doubtless, either on the Motion for Adjournment, or at some other more convenient time, an opportunity of discussing the matter fully in this House. All I can do at the moment is to express the very deep regret and sense of disappointment that the hopes of these officers having been raised so unnecessarily, with every indication that those hopes should be fulfilled, should now be dashed to the ground as they have been.

Mr. TINKER

I desire to ask the Financial Secretary to the Treasury for some explanation on the White Paper dealing with the coal industry. So far as I can see the thing, it seems to be some system of pooling which is to take place. If a district makes more than 1s. 3d. profit on the ton, they have to hand over the surplus to the Treasury. The point of difficulty that I want to understand is this: Does that apply to collieries, firms, or districts? For instance, if a district is able to show that it has made more than 1s. 3d. profit, I take it that it has got to hand over the surplus to the Treasury. Let me take a district that is able to make more than 1s. 3d. Take, for instance, a district that we have with 30 collieries. Five of those collieries may make a surplus of 2s. 6d. per ton. The other 25 may have a deficit. But, taking the whole of the district together, that will show a loss; yet, at the same time, five of those firms have the 2s. 6d. per ton surplus. Do I take it that the Treasury will claim from the five colliery firms the excess of 1s. 3d. per ton? There is in the district a number of collieries which have not been able to pay their way and have not got anything to hand over. If that be the case, there is no equity at all in the matter.

The district that is able to pay its way may make 1s. 4d. per ton, and must hand back to the Treasury 1d. per ton, yet in a poorer district where some of the better of the collieries have made a profit they are not called upon to pay anything back. I claim that in a matter like this, seeing that the Government is called in to help the mining industry—I do not say a word about that, I am entirely with the Government in coming forward at a time like this—but I do say that in a matter of this kind, that any colliery that can make a profit whether the district can pay or not, ought to hand the surplus over to the Government. If pooling is to take place let it be uniform all the way round. I am drawing the attention of the Treasury to this point because I think it has been overlooked. We who attend here at the House of Commons shall be expected to be able to give some lucid explanation to our people when we explain what has happened here. That is the point, and the only point that I want explained. If the right hon. Gentleman has the time I should like him to clear the matter up, the point as to whether it is the districts or the individual firms that have got to hand over the surplus.

The FINANCIAL SECRETARY to the TREASURY (Mr. Guinness)

The details of this matter are somewhat complicated. They affect many mines and therefore, the Secretary for Mines is more closely concerned with them than is the Treasury. I think, therefore, it would be undesirable for me to enter into any interpretation upon these technical points. If, however, the hon. Gentleman will be so good as to put on paper exactly the points which he wishes to have answered, I will see that they are handed to the Mines Department, who, I doubt not, will give him all possible reasonable details.

Mr. JOHNSTON

Is it not the case that it was explicitly stated from the Treasury Bench yesterday that the new agreement in no way whatever affected the Exchequer in this sense: that it means that the owner of the pit making 2s. l0d. per ton in no way pays in one copper; he is allowed to make whatever he can?

Captain BENN

I trust that the taxpayer, so far as he takes any interest in our proceedings here, will note the speech of the right hon. Gentleman the Financial Secretary, He represents a Department which is asked to grant £10,000,000, and he cannot explain, and cannot tell us—or he will not tell us—as to the application of this £10,000,000. As my hon. Friend the Member for Leigh (Mr. Tinker) pointed out, it is going to be given to collieries which are making a profit, and in addition to the profit. The Financial Secretary's speech is of quite an illuminating character, and I would ask hon. Members to note that there is no guarantee of control, or any guarantee that this money will not go into the hands of those it ought not to go into.

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

Bill read the Third time, and passed.