HC Deb 25 June 1925 vol 185 cc1755-830

Order for Third Reading read.

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


I beg to move to leave out the word "now," and, at the end of the Question, to add the words "upon this day three months."

4.0 P.M.

The time has arrived when this Bill is to be hustled off the Parliamentary stage into the comparative obscurity of the Statute Book, and I and my hon. Friends on these benches desire, therefore, to take this last opportunity of expressing our uncompromising hostility to, and disapproval of, the principles underlying this Measure. This is an amazing Bill, amazing both in its effrontery and in its unwisdom. If I may, I would first of all say a word on its unwisdom. This Bill, which confers enormous grants of money-I understand that it gives pain to refer to them as doles-upon wealthy men in this country, is being put forward at a time when the Question Paper is thick with queries concerning the increase of unemployment, the crushing burden of rates upon communities like West Ham, and the impending difficulty which may arise in some of our main industries. From the psychological point of view, I cannot imagine any Measure more designed than this Finance Bill, when examined in its details, to exasperate class feeling and to arouse increased discontent. When the Budget was first introduced, a commentator in the Press observed that it was the kind of finance which might have been concocted by a junior Treasury clerk who had temporarily become insane. As the discussions on it have proceeded, we have begun to discover some method underlying the apparent madness of the creator of the Budget.

We have discovered in this Bill a naked surrender to the clamour of sectional and class interests. We have discovered, in the first place, the re-introduction of Protection upon a considerable scale. It is quite true that at the last Election pledges were given by the Prime Minister, and by many, though not by all, of his followers, against the re-introduction of Protection in this country, but the Prime Minister and some of his followers appear to wear elastic-sided consciences in this matter. Seven different commodities and groups of articles are afforded protection in this Budget which were not afforded protection in the Finance Bill of last year. That is a very considerable start. The Chancellor of the Exchequer and the House will know what these groups of articles are. I will briefly enumerate them: Motor cars and accessories, clocks and watches, musical instruments, cinema films, lace and embroidery, artificial silk, and, finally, hops. All these interests have their supporters on the benches opposite, and a considerable wedge has already been driven into the Prime Minister's pledge that Protection would not be re-introduced in this Parliament. [An HON. MEMBER: "Have you read his Election address?"] I have read his Election address, and I have noted his votes and the votes of hon. Members opposite, and we are beginning to recognise some discrepancy between them. I do not know what number of trades have to secure protection before that pledge is broken, but up to the moment the number is seven, and I am justified in saying that already the conscience of the Prime Minister and of those who gave similar pledges has been strained, I will not say to breaking point, but to a very considerable extent and has manifested a little elasticity.

I wish to say one further word about silk, although, largely owing to the indefatigable efforts of hon. Members below the Gangway, who seem to regard the Silk Duties as the most important thing in the Budget-I do not agree-they have been already fully discussed. It remains to point out, however, that although the Chancellor of the Exchequer is protecting artificial silk with one hand, he is with the other stabbing in the back one of the few promising new industries growing up in this country. It may be true that, following the precedent of Mr. Gladstone is 1862, he is giving a slight protective turn to the scheme of these duties, but even the slight protective turn, although it may be an element in the violation of an Election pledge, is not enough to countervail the extreme damage that may be done to a young industry of this kind by placing upon it a new tax burden. We are, I submit, in danger, industrially, at this moment, through a tendency to live too much on the momentum of the past. Our textile industry can only continue to live and prosper if it is continually developing new ideas leading to new methods, new processes, and new substances, and the development of the artificial silk industry has been a wonderful example of the way in which our textile people are rising superior to the difficulties of the time, the ravages of the boll weevil and other handicaps. Yet this is the time of all others, when these gallant attempts are being made, that an additional burden is being placed on an industry which holds out the prospect of making an increasing contribution to employment and economic progress of the country.

I turn, however, from these comparatively unimportant subjects and come back to the much more fundamental question of the enormous distortion of the tax system and of the distribution of wealth which has been brought about by this Budget. The Super-tax reduction is a land mark in our financial history. Never since 1909, when the first timid beginning was made in this direction, have the rates of Super-tax been reduced.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

It is high time!


I shall take note of that for future reference. This is the first time that a reduction has been made in the taxation of the super-wealthy section of the community, and I shall be interested to know whether any hon. Member on the other side of the House informed his constituents during the General Election that he would vote for a reduction of the Super-tax. I challenge any hon. Member, in reply to my query, to state that he told his electors he would vote for a reduction of the Super-tax. None of them did. In other words, this matter was not mentioned at the Election when the Red Letter formed the main theme of their orations and the cure for unemployment which they claimed they had, although we had it not, was being advertised. No reference was then made to this proposal to reduce the Super-tax.

It is always interesting to see the working out of theories which men have put forward in the past, and this Budget is one of the most complete justifications of the theory of Karl Marx on the materialist interpretation of history- the Chancellor of the Exchequer, no doubt, has read the book and knows what I mean-the theory, in short, that men are directed exclusively in their actions by economic motives. I do not myself wholly subscribe to the doctrine, but the Chancellor of the Exchequer has given it an exceedingly good advertisement and made it appear plausible as applied to a party containing considerable section of wealthy men in their ranks. As soon as they are returned to power with an overwhelming majority obtained on other issues, they use that power in order to benefit the economic position of that section of society to which most of them belong.

This Super-tax reduction is not to be regarded in a watertight compartment; it must be taken in conjunction with the reduction in the Income Tax which also figures in the Budget. As I mentioned on a previous occasion when the Chancellor of the Exchequer was not here, as a result of the Budget the millionaire is left with £40 a week to the good. It is quite true that a pretence has been put up from the other side that this diminution in the Super-tax is balanced by an increase in the Death Duties, but that pretence, I submit, is exceedingly hollow; I ventured the other night to put a question to the Chancellor's under-study. He told us that the increased Death Duties were designed exactly to balance the reduction in the Super-tax to the same grades of wealth, and so forth. I put a simple question to him. I said, "Is it not the case that the millionaire does not pay the increased Death Duty, while he does receive considerable advantage from the reduction in the Super-tax?" The Financial Secretary to the Treasury had to admit that was so. In other words, the very wealthiest section of the community do not pay the additional Death Duties, but do receive considerable benefit from the reduction in the Supertax.


There are no alterations in the rates of Super-tax or of Death Duties for estates of over £1,000,000, but, following the universal principle, they receive any rebates or remissions which are given on smaller incomes, whether in discrimination between earned and unearned income, or in allowances for children and so on.


The result of that arrangement is as I have stated. The result is that millionaires are not made to pay the increased Death Duties while they get the advantage of the reduction in the Super-tax. Therefore, it remains true that the super-wealthy section of the community score heavily. The increased Estate Duties are only charged upon Estates of £12,500 upwards, and £12,500 invested at 5 per cent. brings in between £600 and £700 a year. The increased Death Duties are being levied on persons with incomes of £600 and upwards, whereas the Super-tax reduction benefit begins to accrue to people with incomes of over £2,000. Therefore, there is a certain section of poorer people who suffer in the contrary direction, and this so-called balance between the Death Duties and the Super-tax is not a proper balance at all. It is a very inaccurate and rough balance which favours the richer sections of the community as against the poorer sections who are merely relieved of some part of their taxes at the expense of having to pay more in another direction. I have maintained the view elsewhere, and I shall be prepared to maintain it here, that a reduction in the Income Tax standard rate is only permissible as a matter of financial principle at the present time if the Super-tax is increased and not diminished. For that proposition, there is something to be said, but, when both the standard rate of the Income Tax and the Super-tax are reduced, then, I think, we are in the presence of exceedingly unsound and unjustifiable finance.

We are familiar with the excuse put forward in defence of this proposal. It is said that the money is going to be reinvested for the benefit of industry, and all the rest of it. On that I wish simply to raise two points, though I think that argument has been pretty well exploded in our previous Debates. As a matter of fact, it cannot be denied that a very large part of these various remissions to wealthy people will not be re-invested in industry at all. A great deal of it has been spent in advance at Ascot, and much of it will be spent later on in ways that will give no benefit to the industry of this country. Secondly, even if it be re-invested, we want to know more closely where and how it is to be reinvested before we can be satisfied with that defence. Is it to be invested in the sweat shops of Shanghai, not indeed in bringing Chinese sweated labour into this country to compete with our people here, but in financing the mills in China which employ these sweated people in order that the competition may take place on the soil of China rather than in Lancashire. Is that the kind of re-investment that is going to do any good to Lancashire?

There is an old-fashioned view, to which I do not expect the Chancellor of the Exchequer who is always modern in his views, and who is always ready to change will subscribe that a mere investment of capital anywhere and anyhow is going to benefit the country. If we were dealing with this matter on the merits and aiming at securing a considerable additional investment of capital in ways beneficial to the country, we should not simply give away large sums of money to wealthy people which will not be invested or which, if invested, will be invested unwisely. What we should be more inclined to do would be deliberately to direct the resources set free by the Chancellor of the Exchequer, and which might be increased by further taxation of the rich, into channels of development which we think are socially desirable from the point of view of the community, whether it be land, or transport or power or electricity, or coal or anything of that kind. That would be a constructive and businesslike way of securing an increased investment of capital in channels which would be beneficial to the nations. Ah! But that would be Socialism, which lies outside the hypotheses of the Chancellor of the Exchequer!

We are told that in the party opposite-in the young Tory party- there are many modern reincarnations of Disraeli, said to have come to life again, and I hope they are pleased with this Budget. No doubt they have all read "Sybil" and all about the "Two Nations"—the nation of the rich and the nation of the poor, whom Disraeli sought to bring together. The effect of this Budget is the exact opposite of that, because it widens the gap between those two Englands. In the economic sense it makes the rich richer and the poor poorer.

In the psychological sense it also widens the gap, and the most astounding thing of all is that this is the moment which is chosen by the Chancellor of the Exchequer to push through a Measure of this kind, a moment when unemployment is heaping up week by week, when the Government stand powerless and impotent to deal with it, and when in some of our great industries there are impending troubles of no small magnitude, and in the mining industry and on the railways there are threats of lock-outs and demands being made by employers for a reduction of wages and the working of longer hours. How is the passing of this Bill going to affect that situation and the prospects of peace in our time? We are told that we want sacrifices all round. I suppose the reduction of wages and the increase of hours which are being demanded are to be a balance against the reduction of Super-tax and the Income Tax. I would like to ask what sacrifices are being made by those best in a position to make sacrifices and who have been handling the greater part of the rare and refreshing fruit provided for them by this Finance Bill? It would appear that, although peace in our time is a prayer to which many in the abstract can give lip service, the friends of the Chancellor of the Exchequer consider that a dole in the hand is worth two prayers in the bush. How will these doles in the Finance Bill and those prayers affect our industries and the strikes and lock-outs which may take place during the next few weeks? I cannot imagine anything more calculated to stir up strife.

If we take the Clauses of this Finance Bill one by one and state their meaning plainly, without any rhetoric and without any appeal to sentiment, is it likely that that will incline any large bodies of miners or railwaymen to accept a reduction in wages or a lengthening of their hours of work? I feel the most important point is that, whatever might be said for this Bill at any other time—and very little could be said—there is still less to be said for it at this particular moment in view of the dangerous situation which is developing in our industries. If the Chancellor of the Exchequer persists in driving this Bill through in its present form, I think we may say that he will contribute fuel to the fire which many of us fear may blaze up in the industrial districts, although we hope that our fears will be mistaken. Nevertheless, I think we should be clearly wanting in our duty if we did not take this last opportunity of expressing our deep concern in regard to this Budget, and we shall divide the House against this Measure on the Third Reading.


We have just seen an example of the new light of the economic sun which is shed upon the counsels of Members above the Gangway and which has led them into strange paths. If I understand aright the new doctrine enunciated in the speech of the hon. Member who has just resumed his seat, it is that we can afford in this country to be quite indifferent to the prosperity of our foreign trade. That is a startling proposition when you hear it put forward with the hon. Member's admirable rhetoric, and when we recollect what he said about the investment of money in China and other foreign countries. I understand that the hon. Member and his Friends, if they had the direction of the system of capital, would direct fresh investments into other channels. The hon. Member gave us an indication of the channels into which capital is to be directed. It is to be directed to the improvement of the transport of this country. What a picture that is for the development of Great Britain! All our railways are to be developed, and for what purpose? Is it in order that we should be able to visit each other more conveniently on Bank Holidays? What is the good of developing your transport system unless you have goods to carry backwards and forwards on your railways? Where are the goods to go? I would like to ask how long can this country exist with its present population if you close the doors of your foreign trade? Does the transport system consist of railways only? What about our shipping? Is that a form of transport which is going to be neglected? What is the good of pouring fresh capital into the shipping industry at the present time? What is the good of further developing our shipping industry if there is to be no foreign trade? I sincerely hope that we shall have a more balanced doctrine than that which seems to have emanated from the secret economic counsels of the party above the Gangway.


The lack of balance is not to be found in my observations, but in the right hon. Gentleman's distortion of them.


I regret that the hon. Member thinks there is anything distorting in my representation of what he said, but I do not think the majority of the Members of this House will agree that I have in any way put a false interpretation on what the hon. Member said. We must remember that we do not often quite like our arguments when they are carried through the bitter mill of the reduction ad absurdum. But it was not for that purpose that I rose to address the House. Primarily, I rose to lead the discussion to another point, and I do so at the risk of being tedious and for the chief reason that it is my most profound conviction that the weight of argument and discussion in our deliberations on the Budget has not fallen in the right place. I believe we have given too much attention to the actual question of machinery. We have criticized—no doubt with absolute justice —too many of the minor details, and I do not think that the batteries of public attention have been sufficiently turned upon the principal ground of criticism, namely, that this Budget is based upon a scheme which makes no allowance whatever for a reduction of expenditure.

I know I shall run the risk of being tedious, but I shall try to avoid vain repetition. When speaking upon the Second Reading of this Bill, I called attention to the position of our national finance, and I stated that we had in recent years been making heavy reductions in our permanent revenue. In the last four years we have reduced our permanent revenue by £200,000,000 a year; I think £120,000,000 of that reduction was quite safe. I think, however, that the £80,000,000 in the last two years has cut so near to the bone as to cause a position of real anxiety. The position is that the Budget is not now what can be called in a stable position, for this reason: the Budget balance this year is based, in principle, upon receipts which are not recurrent. It is based upon an item of £30,000,000 for Special Receipts which is not recurrent. They are receipts which we cannot expect to realise in future years. We are consequently faced with a further fall in revenue and we have no margin left to cover that fall. It is a very difficult thing to increase your permanent taxation. Every hon. Member knows the strength of the opposition against any increase of taxation, and we know the psychological effect of an increase in taxation and how it gives a hint to the country that things are not going well and how it produces depression and dismay in the minds of men. That is the last thing we ought to do. We are now confronted with a fresh drop in our revenue, and there is no alternative but a further increase in taxation or a substantial reduction in our national expenditure.

I want to amplify that in one particular, and I wish to point out the important effect of that upon one of our vital national interests, that is, our national credit. Supposing we come up against that; supposing there are no further reductions in expenditure. Something must be done if the revenue continues to fall. I suppose there is not a single hon. Member in this House who takes an interest in these matters who does not know that under these conditions, when you come up against them, when your revenue has fallen and you have not reduced expenditure, you have to cover the gap somehow. What happens is only one thing, and it is that you have to raid the Sinking Fund. Unless the Chancellor of the Exchequer is prepared to push through those schemes of economy which he has sketched out, and to bring down to hard facts the rather vague hopes of economy in the years to come, he is up against a position in which he will be chased from pillar to post by the spending Departments for money from the Sinking Fund in order to cover their expenditure. That will be a most serious thing. Two years ago in this House I criticised the establishment of the permanent Baldwin Sinking Fund. At that time, I believe, my criticism was right; I believe that, in view of the great windfalls which had come to the old Sinking Fund, the provision then made was too big. But to-day I stand here to say this, that, hav- ing established a permanent fixed Sinking Fund upon a regular basis according to a programme, the most dangerous thing in the world that you can do is to depart from it.

Once you have got your Sinking Fund programme established, you must stick to it, you are committed to it, and it is gravely injurious to your credit if you depart from it. It must be maintained, and let me point out to the House the importance of its maintenance during the few years that are immediately to come. A great financial interest of this country, which is not often mentioned on the Floor of this House, but is there in the background—which is in the background of the mind of the Chancellor of the Exchequer, as I am well aware, as a great anxiety, and which is in the background of our national interest in financial matters—is the great question of conversion. The four years, including this year, of the immediate future—that is to say, three years to come—are the Chancellor of the Exchequer's nightmare years from the point of view of conversion. There is £1,000,000,000 to convert in those years, and then there will be 17 years of comparative peace and ease, when he will have time to get ahead with the sort of year and a day of judgment to come in the shape of conversion in 1947, which is the last year for the conversion of the £2,000,000,000 of 5 per rent. War Loan.

But now, in the years of the immediate future, there are conversions which must be carried out. There is no alternative; they have to be carried out; and they have to be carried out on the best basis of credit that the country can support at the time. Otherwise, there will be great and increasing expenditure. And let the House, of course, observe this, that they have to be carried out upon terms regularly increasing the standard of national credit. In your conversion offers you have to make every offer to the public less favourable than the one that went before, because the bargain is always voluntary, and, if you once make an offer that is more favourable than its predecessor, people will always say they will wait for a more favourable one still, and you will never get your conversion effected. During the three years to come, we have to keep our national credit up to its highest point; we have to keep con- stantly improving in carrying out conversion. There is another very serious fact, and that is that we have just re-accepted the gold standard. What does that mean? It means that the ease of conversion at any given moment is going to be a very speculative matter. If the moment of conversion happens to clash with the moment of a falling dollar exchange and a rising bank rate, the conversion is going to be a very grave matter. We have at every point, in the course of the next three years, to keep a wide margin in the excellence of our national credit in order to be sure that we are going to carry off these conversions.

How can it be done? I believe there is only one way, or, at least, there is one most important way, in which you can keep the national credit high and improving, to float you over the rocks of these coming years, and that is by enforcing a steady and appreciable reduction in national expenditure. If you do not do so, you must deplete your Sinking Fund, and, therefore, directly injure credit. If you do do so, then, in the eyes of the whole world, as well as of the people of this country, you are steadily improving your credit and making your operations more easy and successful. There are so many aspects of the matter. When you look at a great question in finance, or any other matter, and when you see many and various points of view all combining and beginning to point one way, then you know that that way is the way in which you have got to go. If we look at our national position, I am firmly convinced that, whether we take it from the point of view of industry and the interests of capital, whether we take it from the point of view of the wage-earner and the interests of labour, or whether we take it from the more abstract point of view of the credit of our country, which is really the legacy of prosperity that we are leaving to those who are to come after us—whichever of those points of view we take, we see all fingers pointing down the path of reduction of the burdens of the country in the Budget, which can only be done by reduction in expenditure, and that is what convinces us that that is the path of wisdom. The Chancellor of the Exchequer held out the hope of a reduction of £10,000,000 on the Supply Services. Where is he going to get it?


I do not think I held out a hope; I said it was an absolutely essential object of endeavour.


I am obliged to the Chancellor of the Exchequer for the correction. I will try to appreciate the rather subtle distinction at leisure; at the moment I think, perhaps, in the stress of time, the single word might be used instead of the sentence. But, in this object of endeavour, where is he going to obtain this £10,000,000?


What would you propose?


This is an occasion on which we are here to question the Chancellor of the Exchequer, and not he to question us. It is his plan that is being passed. Is it going to be done from the Civil Service? That is an area of only 27 per cent of the national expenditure. I am confident that the Chancellor is aware, as all Members of this House are probably aware, that if you are to obtain a reduction of expenditure on national services on the seals which he has described, you can only do it in one of two ways—by reducing the pay of the servants of the State, or by reducing the services rendered to the State. The necessary economies are not to be obtained upon an adequate scale by cheeseparing; there must be either a reduction of services or a reduction of salaries. I should not have used that questionable word "hope" as regards the prospects of a reduction of expenditure there. The other sphere is in military expenditure. That, again, is only 15 per cent. of the whole, which is a very small proportion to which to look for a substantial reduction, but, nevertheless, I believe that it is the region in which you can find where reductions are to be made.

The Chancellor of the Exchequer has just asked me a question, and I had the answer in my mind, though I had not intended to delay the House by dealing with the matter. I believe it is in the sphere of military expenditure that you must look for a reduction if you are to reduce national expenditure, and for this reason. I certainly would never advocate the reduction of our national forces by one man or one ship or one gun below what is necessary to guarantee the absolute safety of the country, but I do think at the present time, as a humble student of these questions, as I look at the military policy of this country and others, that our military advisers are letting a great opportunity slip—the opportunity to avoid spending money upon large forces, to rest the country for a period of 10 years, and, meanwhile, to concentrate efforts upon research and progress in method. There is a great deal left to be worked out from the results of the great War. There is science to be developed, there are methods to be developed, there are experiments to be made, particularly in naval matters. If you saved expenditure in gross upon military forces at this time, during the safer period of rest, and spent one-tenth of that sum upon experiments, upon scientific advance and progress, you would be making the country more strong militarily than at present, and would be solving the difficulties of our national Budget. As my last word, I would say that the greatest work that has been done for the finances of this country in the course of the period since the War was done by Lord Balfour at the Washington Conference.


We have now reached the last stage of a Bill that has been very much contested, and, like my right hon. Friend the Member for Norwich (Mr. H. Young), I do not desire to enter very deeply into the proposals of the Bill, which have been very carefully discussed during its progress through its various stages. I want, however, to support what has fallen from my right hon. Friend as to the general effect of the burden of taxation, and the danger that we shall, in the discussions about how the revenues of this country are best to be levied, forget the elementary fiscal truth that all taxation is profoundly mischievous, and that, in whatever particular way the incidence of a tax first strikes, sooner or later it affects everyone, or almost everyone, in the community.

The hon. Member who moved the rejection of the Bill dwelt with indignation on the relief that is given to certain taxpayers, whom he regarded as being too rich to be relieved. He may be sure that, in whatever way you take off taxation, the benefit will sooner or later be felt by all the members of the community who are engaged in industrial matters. The spending power and the saving power of the members of the community are enhanced by every reduction of taxation, and diminished by every increase of taxation. Taxation, therefore, sits as an awful incubus upon the chest of industry, while it groans uneasily in a sleep that is much disturbed. Where, for example, does unemployment come from? How can we cure it? The hon. Member denounced the Government for not having a scheme ready to cure unemployment. Let me say, in passing, that I greatly deplore the absence of that old-fashioned spirit, which told both Capital and Labour that they must find their own way out of their own difficulties.


What about the land?


Yes, the land as well.


Who has got it?


That does not seem to me to add to the discussion of these considerations. Both Capital and Labour ought, I think, to find their own way, and not look to the Government so much as it has been their custom to do in the past. The plain truth is that you cannot cure unemployment except in one of two ways —by increasing the demand for labour or by making labour cheaper. It is as simple a proposition as can be made, and as incontestible. If you put on taxes, you diminish the spending power and the demanding power of the community, and you tend to enhance the great evil that is called under-consumption, which is certainly one of the principal causes of unemployment at the present time. If you can diminish taxes—anybody's taxes—you increase the spending power and increase also the saving power of the community, and, therefore, you help both the demand for labour and the resources of capital, and in that way you are certain to help industry.

I do not want to say a word in disrespect about the discussions that have taken place on the subject of the particular way in which you are to get the money out of the taxpayer, but a much more important question at the present moment is how you can reduce the total sum which you propose to make the taxpayer pay. My right hon. Friend the Member for Norwich said admirably on that point, and I can only second and support what has fallen from him, that there is, beyond all doubt at the present moment, a need of economy which cannot be arrested, and we do, indeed, look to the Chancellor of the Exchequer, as the guardian of the public purse, to press upon his colleagues the supreme importance of economy. He asks in a friendly way how we propose to do it. One way is by setting your face against improvement. Let us recognise the bitter truth that you cannot have a great economy in the public services without some diminution of efficiency. It is not true, in the main, that there is waste in the public service. In the true sense of the word it is not the case that you do not get value for your money in some way or another. What does happen is that we are spending money on things that in various ways are worth having, but are not worth having at this moment when economy is the first and greatest need. I observe, for instance, that the Government are introducing a reorganisation of the Colonial Office. I dare say it is a very good thing; I have little doubt that it is a very good thing—but it is almost certainly going to cost money, not only directly for the salaries of staffs, which probably, as compared with the total national expenditure, is a small matter, but indirectly. It is one of the great tragedies that lie at the root of the task of public economy, that every person you make a public servant becomes a fountain of expenditure, and the great art of economy would be to reduce the public service—to diminish the number of persons in the public employ.

I quite agree with my hon. and gallant Friend that something might be done to cut down armaments at this time. The whole world being exhausted, even the most pessimistic person cannot anticipate the outbreak of another war. Therefore, I should have thought this was a specially favourable moment for keeping armaments as low as they can be kept. Ardently devoted as I am to the Air Force, I have never concealed my disapproval of the expansion of the Air Force which has been undertaken; not because I do not believe it to be wisely conducted for the purpose in view, but because we cannot afford to spend money at present on anything. We must cut every form of expenditure down to the bone. I do not quite agree that there is no room for reduction in the Civil Service Estimates, but then let us face the fact that we shall give up things which various bodies of opinion will tell you, and tell you quite truly, are of value. That is what we have to face.

We are all familiar with the private individual who is extravagant and whose friends come round him and try to persuade him to economise, and he says, "But can I give up this?" and, "Can I give up that?" and he has always rather a good case to make for each branch of his expenditure. The nation is exactly in that position. The particular parts of the expenditure can all be defended in themselves. They are all improvements. They all make for the efficient conduct of the public life of the country, but we cannot afford them just now. What we want to do is to go back to the standard of public efficiency that prevailed 20 or 30 years ago and try to cut down expenditure to that scale. How can that be done? The only way it can be done is a way which I am sure will not be adopted because the House itself, though it is kind enough to applaud when we speak in favour of economy, is unwilling to carry through the Measures by which alone it can be achieved.

The way to do it would be by passing a short Statute giving the Prime Minister, the Chancellor of the Exchequer, and one other person, who might be some trusted retired civil servant familiar with the machinery of government, the power over the heads of their colleagues, without the consent of the Cabinet, to alter policy and to dismiss or retire, on the most generous terms you like, any person they please from public employment. If they had such power, if they could both suspend the operation of Acts of Parliament which involve expenditure, and retire from the public service any number of public servants on generous terms, you really would have some prospect of cutting down expenditure. But unless you have some power of that kind, you will always be defeated in detail, because I have no doubt you would have all the heads of the Department acting in a friendly spirit, but arguing with great ability in favour of their Departments and standing loyally by their subordinates, those subordinates, very able men, all perfectly versed in the machinery of government and the arguments that weigh with Governments, all showing in turn that their particular expenditure is indispensable to the life of the nation. Therefore I feel almost certain that, though the Chancellor of the Exchequer will try honestly to economise, he will fail. He will be beaten in detail by the active exertions of the Civil Service as a body, led by his own colleagues, who are loyal chiefs of their respective very able Departments. Nevertheless, I am sure economy is of the utmost importance and that we ought to try to connect the idea of economy with the sufferings of the unemployed and the depression of trade and all the other things which move kindly and also prudent persons to sympathy and anxiety. If we could see it all at one glance, if we could see that the expenditure that seems so reasonable in some chamber in Whitehall really means so much more unemployment and so much more poverty and poor homes, so much more depression of trade all over the world-if we could see it in all its consequences, perhaps economy might be achieved.

There are one or two other things in this Bill I should like to refer to. I will say nothing of the Silk Duties, but, apart from that, the attack of the Opposition has been concentrated on Imperial Preference and on the proposal for the safeguarding of the lace industry, and I feel that at this time it is for those of us who are Unionist Free Traders, as we used to call ourselves, to explain what our feelings are in respect to Measures of that kind. If the House will indulge me, let me say one word which seems to be a digression, but I think they will see before I have finished that it is really not a digression at all. I should like to ask a very simple question. What do we mean by wealth? What, fundamentally, is the idea of wealth? It is, I suppose, matter made available for human welfare, and the whole of the economic process with which we are concerned in industry and trade and commerce is a process of extracting from nature various things and making them available for human use. That is the process over which we are watching and about which we are concerned, and which goes well or badly according as we speak of trade and industry being prosperous or not prosperous.

That economic process can be seen in a very simple instance, the instance of coal, because in the case of coal the material does not go through any manufacture. You merely move it about. Coal lies in a seam and, while there, is only wealth as measured by the royalty that is paid for it, which is a very small part of its ultimate value. It is hewn out of that seam, dragged to the surface and transported by various organisations and it ultimately, through the agency of the coal merchant and the rest, is brought to the hands of the persons who are actually going to use it, the stokers who are going to put it on the furnace of a factory or the householder who is going to cook his dinner or warm his room. In that period it is only moved about, and it is not wealth until it is actually on the fire. That is a point that is constantly overlooked. Until it is actually burning it does not really do anything for the human welfare, and if you could suppose that by some means it is prevented from getting on the fire the whole coal industry would come to an end. If there was anything that could take the place of it and induce people to prefer putting that substance in their furnaces, there would be no more coal, and the whole thing would come to an end. The last stage is as indispensable as all the other stages. The stage of consumption is as necessary for the creation of wealth as everything else. It is a pleasing theory that the householder, when he takes a pair of tongs and puts a lump of coal on his fire, is increasing wealth as much as the coal-miner who has hewn that same piece of coal out of the seam, but it is true. Until it gets on the fire it is not wealth, because it does not minister to the human welfare. Take, for example, a case which has been noticeable in the last few years—the luxurious carriages of the rich. There must have been at one time plenty of these carriages, which are now wholly without any use whatever and wholly valueless, merely because they are no longer in use. They are as good carriages as ever they were. They are perfectly good, but they do not come into use, and therefore they are no longer part of the wealth of the country and will not be unless they are broken up again into something else.

If all that is true, what you really have to test all your fiscal proposals by is do they minister to the ultimate amount of things which people have in use and consumption in the country. For example, do the Imperial Preference and the safeguarding of industries really increase the wealth of the country in that sense? Imperial Preference, as proposed in this Bill, may pass the test because this Imperial Preference is achieved by reducing duties, and therefore by increasing the flow of wealth into the country and increasing the number of things that people have in use and consumption. But when I come to the safeguarding of industries I feel considerable misgiving. How can this possibly increase the wealth of the country? It is said you are going to preserve the Nottingham lace industry, but you are going to do that at someone's cost. Someone is to go without something, or else you are diminishing their demanding power. That means that, supposing they go without the lace, you do not do any good to your Nottingham lace people and you impoverish them, because poverty is essentially privation, and if they cannot have it they are so much the worse off. If on the other hand you are diminishing their demanding power you are only making unemployment worse somewhere else in proportion to the good you are doing to the Nottingham people, because as far as I can see, by restriction you cannot possibly be increasing the amount of goods, the amount of property, and the amount that is actually in use and consumption among the people. I should not have thought the lace matter worth detaining the House over if it were quite clear that the Government were not going further on the same dangerous path. I am sure, unless you can bring all your fiscal proposals to that test, unless you can show in respect to them that they actually increase the wealth of the country, they ought not to be entertained.

All restrictive proposals are mischievous. They already prey on the wealth of the country and therefore must in the end make everyone within the country worse off. It is the same whether you restrict by excluding imports of cheap labour or whether you break machinery as the old frameworkers did. The industrial result is the same. The safeguarding of industry is only another form of frame-breaking. If you diminish the cheaper supply you diminish the general wealth of the community, and therefore you diminish the general spending and saving power of an industry and produce unemployment and all the evils we suffer from. It is the same, of course, with all the restrictive regulations of the trade unions of which we so often hear complaint. They all operate in the same way. They are all a diminution of wealth. They are all hostile to the creation of wealth, and therefore to the prosperity of industry. I hope the Government will try to add to what they have already done for industry and commerce the important service of making abundance the test of what they propose in respect to it. I know that many very abe men believe they can achieve abundance by stabilising it and if that can be shown there is no doubt a defence for interfering with the course of trade — if you can really show that in the long run and on the whole you increase the production of wealth and increase the quantity of goods in consumption. But mere restriction, mere restraint, mere limiting of imports, mere regarding imports as something that comes in in a flood and disturbs the course of industry in a country, is madness. What we want to do is to gather together all the wealth that can be obtained, all the wealth we can produce, all the wealth that the free imports of the whole world can pour in. I hear with impatience talk of an adverse balance, talk of imports exceeding exports, and the like, as though finally, somehow or another we existed by selling to people and not by consuming, as if the ultimate end of wealth was to find a market, and not to find goods which you can use and enjoy. All these ways of thinking of the industrial process are to put the cart before the horse.

5.0 P.M.

I want to say a word of warning that, in two respects, the financial arrangements of this year seem open to criticism. They are open to criticism, first of all because the burden of taxation is too heavy, and the task of economy has not been sufficiently zealously undertaken. They are also open to criticism because a beginning has been made with the Safeguarding of Industries, which, though trifling in the present case, might easily be a precedent for a very dangerous proposal by which the flow of wealth which comes to this country might be impeded and hindered. I honour and respect all that the Prime Minister has done in bringing various classes of labour together. He has put "Co-operation and mutual help" as the first watchword of his policy. Let him add the twin watchword of "Abundance," and the belief that to make people rich is to make people happy. Let him welcome, therefore, all the goods that may come from wherever they come.

The hon. Member who moved the Amendment said we set up mills in China by cheap labour, and he deprecated that. I say nothing about grounds of humanity. There may or may not be good ground for criticising the conditions of Chinese labour from the point of view of humanity, but, from the point of view of our own economic wealth, there can be no doubt at all that the great produce of cheap labour from China is just as beneficial as the discovery of a new machine which pours wealth into our country at a cheap rate. Do let us make that the great standard of our fiscal policy—shall we have abundance, shall we have wealth? May the Prime Minister, who has tried to be the artificer of peace, also be the harbinger of plenty.


I do not often take part in Debate here, but I feel I should be wanting in my duty as an old Free Trade advocate if I did not endeavour to state the position as I see it. The Noble Lord has re-stated the position of the Unionist Free Trader. I will re-state the position, as I see it, of the Radical Free Trader. And may I say one word of criticism with regard to the very able speech the Noble Lord has just made? I was glad to hear what he said about the question of free imports, but I did not quite understand how he makes a distinction in regard to the preferential tariff. The point which the Noble Lord did not touch, I think, was that when this reduction in the tax on raisins was made in regard to our Colonies, there was no such reduction on the raisins from the other parts of the world. I call that Protection, and I call it Protection in its worst form. The worst form of Protection is the Protection that touches the food of the poor. I have heard that the Prime Minister has made the pledge, and fulfilled the pledge, of not putting any tax on food, but is not this tax on raisins a tax on food?


The tax has been lowered.


I know it has been reduced, but reduced for the purpose of making the raisins from the Colonies more saleable to the people of this country than the raisins of other countries, and that is Protection. I cannot possibly see any more argument in favour of a preferential tariff for raisins because they come from the Colonies, than for one on wheat because it comes from the Colonies. I can imagine my right hon. Friend the Chancellor of the Exchequer drawing this picture. We have in Canada, as I have seen, boundless land reaching uninterruptedly to the horizon, able to produce the best wheat in the world, and all these vast regions are in the possession of men of our own kith and kin. On the other side, there is the Argentine, from which we get a large quantity of wheat, and it is intolerable that a true British citizen can allow the wheat of these foreign countries to compete successfully with that grown by our own kith and kin. That is the straight road to dear food. So long as I have a voice, I shall raise it against anything by any Government or by any party which is going to bring back the wolf of hunger within the doors of our people. I see my right hon. Friend jeers.


Not jeers!


What shall I call it?—makes grimaces! I regret very much that, having to make a speech in a hurry, I did not supply myself with what has been for years my guide and testament on Free Trade, the collection of the great series of speeches made by my right hon. Friend when he was careering Manchester and its environs—speeches which I compared at the time, and still compare, with some of the utterances of my great countryman Edmund Burke; speeches which I mournfully contrast with the present attitude and grimaces of the right hon. Gentleman. In defence of what I consider the entirely untenable proposition, that you can begin by taxing one kind of food and calling it Colonial Preference, and can prevent yourself from going down the slippery slope of taxing all kinds of food, including the food of labour—that, I am told, is the pledge of the present Prime Minister. He has pledged himself that he will never consent to the taxation of food.

The Prime Minister is an honourable man. They are all honourable men. But the Prime Minister is not eternal, and he is not without colleagues. There are two or three of his most powerful colleagues who still adhere to the slogan of the prophet of this new dispensation, the late Mr. Joseph Chamberlain. [HON. MEMBERS: "Hear, hear!"] My hon. Friend the Member for the Moseley Division of Birmingham (Mr. Hannon) would not be true to that eager zeal which an Irishman always brings to his party if he did not cheer that. There they are! Where does the Foreign Secretary stand on the question? On the same ground as his father. Where does his brother and colleague stand on the question? On the same ground as his father. Where does that very subtle, very able and tireless little man—I mean no disrespect—little, I mean, in stature, and not in intelligence— the Colonial Secretary stand? He nailed his colour to the full Protectionist mast, even in the last Parliament when his party had been beaten on it, and had given it over. They are colleagues of the Prime Minister. I have seen one Liberal Prime Minister replaced by another, and one Tory Prime Minister replaced by another. Have I any guarantee that the present Prime Minister will not be replaced by one of his colleagues? If there is to be a Tory party in power he is a perfectly straight man, but he is not superior to conditions, and I do not take the pledge of the Prime Minister or any man, Prime Minister or otherwise, as any guarantee against a change of politics, of political fortunes, of political convictions.

Therefore, I must treat this policy on its logical merits, which are, that if you begin with the taxation of one kind of food, you are threatened with the taxation of another. I hear a great deal about the position of Canada on this subject. I wonder if many people know what the position of Canada is. In the Conference, to which so many references have been made, it is implied, if not stated, that Canada demanded this preference. Canada did not demand this preference. Canada declared—and it adheres to the declaration—"We demand absolute freedom with regard to our own fiscal policy, and we must give the same to you. We ask nothing from you except what appears to your own good sense and statesmanship good for your country." And is all Canada Protectionist? Most of the Liberals are Free Traders. Sir Wilfrid Laurier, the greatest Liberal they ever had, received the gold medal of the Cobden Club.


He maintained a high protective tariff.


The hon. Member for the Scotland Division of Liverpool (Mr. O'Connor) forgets that Sir Wilfrid Laurier received that gold medal for inaugurating a system of Preference by a reduction of taxation.


I know all about the career of Sir Wilfrid Laurier. I quite accept what the Noble Lord has said. Many a, Canadian ardent Free Trader deplores the fact that Sir Wilfrid Laurier came under the influence of their only large Protectionist party in Canada, namely, the manufacturers of Ontario, and of those people who use the words "Imperial Unity," and the rest to mask and cover the desire of getting rich by a tariff, at the expense of their countrymen. What almost makes me see red— well, some of my friends have done something lately to keep me from feeling anything but a very mild form of violet rather than red—is when I hear Labour Members talking rank Protection. I only speak to-day that I may make my position as an unconverted and unconvertible Free Trader clear to all parties. I would sooner vote for a Conservative Free Trader than a Protectionist of any other party

I read a speech the other day by Mr. Meighen, Leader of the Opposition in Canada. There is a duty of, say, 35 per cent. against Germany and 25 per cent. against us. They made it 25 per cent. against us because they were assured that 25 per cent. would keep out most of our goods. Mr. Meighen, the other day, made a loud, eloquent wail about the lowness of the preferential tariff in our favour as interfering with the interests of the Canadian manufacturers. Protection always means the selfish man trying to get rich at the expense of the community. Take Australia. There they have a very able man as Prime Minister, one of our countrymen, Mr. Bruce. He is one of the best-groomed and one of the best-spoken and most genteel young men I have ever met. He is a very charming man, just the kind of man who makes a bad case look respectable.


Speak up! Turn this way!


May I suggest that the right hon. Gentleman should turn this way and speak to the unconverted? We cannot hear him.


I apologise, my voice is not quite as strong as it was. It was by inadvertence that I had turned my back on hon. Members opposite. I think they stand more in need of my arguments than do my hon. Friends behind me. What did Mr. Bruce say? I do not know whether this is a case of the hors d'œuvres. I have seen in Scandinavian countries people eating as much of the hors d'œuvres as would supply a Britisher's full appetite. Perhaps that is how Mr. Bruce regards the proposals of the Government. What they really want is full Protection, a preferential tariff on wool, a preferential tariff on meat, and a preferential tariff on wheat. It is a great world-wide conspiracy for the rich to get richer at the expense of the poor.

Take another point of view. Take Protection in its political sense. What hon. Members above the Gangway on this side want, and what I want, is that we shall have the masses of the people in greater comfort and in greater power, because it is power in politics that produces the result. Will Protection help in this respect? I have seen Protection working. I do not want to name any country in particular, lest I should rouse any of the susceptibilities of countries where I have nothing but friends. What is the working of Protection, politically? The working of Protection, politically, is that it creates millionaires, multi-millionaires, billionaires. When you have the multi-millionaire in politics, you have the political boss. What can these millions of workpeople in these countries do against the gigantic power of wealth on the railroads and in the banks, when it is coupled with threats of dismissal and with influences which corrupt and deceive the workmen?

Talk about Protection as being consistent with the existence or the growth of the Labour party! I say to every Labour man in this country and every Liberal and every broad-minded Tory— many of whom are as thoroughly desirous of elevating the masses of the people as we are; their hearts are all right, but their minds are wrong—how can you hope to promote the growth of the political power of the masses, and through the growth of that power to improve their conditions, if you put the weapon of Protection into the hands of a small, wealthy, selfish minority of the nation? Using words without, I hope, any conscious rhetoric or exaggeration, I say that Protection is a collar of steel which wealth will put around the neck of labour, and it will squeeze and squeeze until it makes labour paralysed. I want to save the masses of the people from the wolf of hunger, which Free Trade drove from their doors in the hungry forties. It is because I want to see the masses of the people no longer under the heel of selfish passions, because I want our political struggles to be conflicts of ideals and not a struggle of sordid and selfish appetite, that I have felt it to be my duty to speak against this Budget, and to give expression to my views as an old Free Trader in the cause of freedom and of the masses of the people.

Lieut.-Colonel ACLAND-TROYTE

It is with very great diffidence that I rise to address the House for the first time, and I beg for a very full measure of that indulgence which the House always shows to a Member on such an occasion. I feel it to be a great honour to speak after the "Father of the House." I should not dare to criticise anything that he has said, and I shall, therefore, content myself with saying that I completely disagree with nearly everything that he has said. If I did attempt to criticise him, as a very young Member, I might be called to order for not keeping within the terms of the Bill.

This Bill has been debated very thoroughly, and I have listened carefully and with great interest to what has been said. I will do my best not to indulge in repetition of the arguments already used. The main points on which the Bill has been attacked by the Opposition are those which most directly affect industry—the Silk Duties, the McKenna Duties, the duty on lace, and Imperial Preference in a lesser degree. With reference to these duties, more especially the first three, we on this side have been accused of breaking our pledges, and attempting "to bring in Protection by the back door." I deny that, and it is for this reason I am speaking. Imperial Preference has nothing to do with Protection. The mistake that many people make in opposing Imperial Preference is that they are unable to understand that Imperial Preference means taking taxes off goods coming into this country from the Empire, and not putting them on. Imperial Preference brings us one step nearer to real Free Trade within the Empire, which is a very desirable thing. At the present time we have Free Trade with nobody. We have free imports, but we have not Free Trade.

The McKenna Duties were put on for revenue purposes, and they have been re-imposed for that object. I do not deny that they are protective in operation. It would be foolish to deny that. They have been part of our fiscal system for many years, and they are re-imposed as an old duty. In my election address—to show that I have not broken faith with my constituents—I referred to the foolishness of the Socialist party in doing away with these duties. On the back of my address I put ten points of Conservative policy. The second of these points was the re-imposition of the McKenna Duties and the Safeguarding of Industries. That makes it quite clear that, as far as I was concerned, that was part of the Conservative policy.

The Silk Duties are not protective. If they are Protection, they are Protection gone mad, because they are taxes on raw material, on articles which are not produced in this country. In the case of artificial silk, which we do produce, the import tax is cancelled by a countervailing duty. One hon. Member called the Silk Duties protection of the foreigner. You cannot have it both ways. You cannot have it as protection for our own people and protection for the foreigner at the same time. It is necessary to find new methods of taxation, and that necessity is met, to a great extent, by the Budget. As that is necessary, I believe the Silk Duty to be quite a good tax, as far as any new tax can be good. There is no doubt that silk is a luxury. No one can make out that either silk or artificial silk are necessities. Anything in which silk is employed is a luxury. Therefore, this is not a bad tax.

I am convinced that the Silk Tax will not damage our trade. There is a factory in my constituency which uses a very large amount of silk. Therefore, when this tax was first broached I made close inquiries as to what would happen in regard to that factory. As far as I can make out this tax will not damage them in any way. It may even confer some slight benefits on them. There will be some difficulty over the drawbacks. We may expect that; but if the Customs officials administer them sympathetically, I believe they will work out quite easily in practice. It is suggested that a drawback should be given on the certificate of the manufacturer that tax has been paid on the silk coming into this country. That will be almost impossible. If the Chancellor of the Exchequer would name a definite date after which drawback will be given on all silk goods exported, it would simplify things to a considerable extent and make it much easier for the manufacturer.

I have made inquiries as to whether this duty will mean a large amount of extra clerical work, and I find that it will not cause extra clerical work, because the particulars that will be required are already required by the foreigner in the case of goods that are exported at the present time. If I thought that this Silk Duty would injure the factory in my constituency which uses silk, I should not be able to vote for it. It is because I am convinced that it will not damage that factory that I shall vote for it. This factory uses silk in the making of lace. It is a thoroughly efficient factory and is thoroughly up-to-date. The articles which it makes are very good. This factory will get benefit from the safeguarding of lace. I am very glad of that, because it is a factory which deserves all the help it can get at the present time. It is only working about one week in four. I am glad that one of the first effects of the safeguarding of industries under this Budget will be that this factory will be safeguarded in regard to the lace which is made there. Of course, I grant that the duties on articles under the Safeguarding of Industries provisions are protective, but no one can deny that it was made clear at the Election that safeguarding would be granted to certain industries provided that they fulfilled certain conditions. In the main this industry fulfils those conditions.

There is one other point to which I wish to refer.

This Budget has been referred to as the "rich man's Budget," but it is worth noticing that not a single newspaper described it as a "rich man's Budget on the morning after the Budget speech, and it took the right hon. Gentleman opposite (Mr. MacDonald) about 24 hours before he discovered it and produced it in his speech the next afternoon. The only thing which lends any colour to the suggestion is the reduction in the Super-tax. But the critics of this do not say anything about the reduction of the Super-tax being counterbalanced by the increase in the Death Duties, and I am sure that the great majority of Super-tax payers do not like this alteration. I wish myself that the Chancellor had left both Death Duties and Super-tax as they were, because I do not believe that the increase in the Death Duties is sound. We all know what happens when a private individual spends capital, and the Death Duties are a form of capital levy.

I am sorry that the Chancellor thought it necessary to make this alteration. The only thing that can justify it is the importance of getting more money into circulation to assist industry, but I am afraid that in the end it will not be obtained by an increase in the Death Duties and decrease in Super-tax, for the simple reason that a large amount of the money received by this decrease will go into the pockets of the insurance companies. With this one exception, I believe this to be a thoroughly good Bill and I give it my most hearty support. I agree with all that has been said by the two hon. Members opposite on the subject of economy. It is necessary to exercise every possible economy in future. I hope that in the next Budget there will be a considerable reduction of expenditure, and I should very much like to see a reduction in the tax on the poor man's luxuries—I mean his beer and his tobacco.


As one of the new Members of this House, I wish to congratulate, on behalf of the whole House, the hon. and gallant Member for Tiverton (Lieut.-Colonel Acland-Troyte) who has addressed the House for the first time. I have been wondering, as a new Member, what would be the collective effect of the wisdom of some 200 odd people sitting on the opposite benches when it was brought to bear upon the details of this Bill. It is quite clear that all our arguments and suggestions, which were advanced during the late sittings in the course of the last few weeks, have availed very little towards altering the fundamental structure of this Bill. There has been a number of minor alterations. From time to time in the course of the Debate the Chancellor of the Exchequer has admitted here and there that suggestions put forward were of constructive value and they have been incorporated in the Bill. That was done particularly in the case of the schedules in reference to silk and artificial silk. Perhaps the chief alteration has come as the result of suggestions made from hon. Members on his own side—that which modifies the operation of the proposed increase of Death Duties affecting the landed estates of the country, but in the main the Bill goes on the Statute Book in the form in which it was originally introduced.

We have tried to secure important modifications in respect of practically all the important parts of the Bill. We have tried to get the Tea Duty further reduced. We have offered unqualified opposition to the re-imposition of the McKenna duties. We have in the main opposed, on the ground of national interest, the introduction of the new Silk Duties and offered substantial opposition and criticism to the proposed Imperial Preference, but in respect of these particular features of this Bill, the indirect taxation, we have been in the main able to secure little or no alteration. The question which we have asked again and again, in various forms, was, Would the Chancellor of the Exchequer in this Bill be prepared to admit any modification which would really go to the relief of the great mass of the workers? Would he be prepared to reduce any of the indirect taxes on commodities in general use by the workers of the country? The answer to that question again and again was a direct negative. The Bill makes it clear that in this year, by the present administration, nothing is to be done in the way of reducing the burdens of taxation on the great mass of the workers of the country so far as the policy of the Government is concerned.

With regard to the second great part of the Bill, the direct taxation, we have seen important modifications relieving the burden upon the well-to-do section of the community, and no analysis from the Socialist or Labour point of view has availed to alter the attitude of the Chancellor in this respect. We have put forward again and again proposals both from the point of view of improving the productive wealth of the country and enlarging the consuming power of the citizens of the country. In our judgment this policy of relieving the well-to-do through the process of direct taxation as proposed is most disadvantageous. We have not only brought economic analysis to bear from time to time, but we have sought to apply definite ethical principles as a test of indirect taxation. There has been considerable expression of indignation in regard to this particular group of taxes, but all this has availed nothing. The only substantial result of all the criticism in the House was a change in the Death Duties, the change which will exempt owners of agricultural estates from the operation of the increases laid down in this Bill.

I would like to work out in my mind what might have been the fortunes of this Bill if, instead of having a Conservative Government, the Labour Government of last year had this opportunity. I am clear that we should not have been discussing the revival of the McKenna Duties, and the special form of taxation on silk. I am clear that we should have had some very definite further reduction in respect of indirect taxation which affects the great mass of consumers throughout the country, and if inadvertently a Labour and Socialist Chancellor had gone out of his way in a Budget speech to make reference to the matter of widows' pensions, I am certain that he would have made that reference in terms of much more fundamental generosity than anything included in this Bill. The fundamental factor which stands out in his Bill in any survey is, as a whole, that the Chancellor has deliberately made it the policy of this Bill to increase the purchasing powers of the well-to-do.

It is agreed on all sides that the economic result of this Bill on the com- munity of British citizens will be to increase the purchasing power of a small group of wealthy people, and at the very best to leave the purchasing power of the great mass of the people as it is, though very probably it will be diminished as a consequence of this Bill. Hon. Members on this side are bound to oppose the general tendency of the Bill. Analysing the industrial system, and the system of land ownership, built up during the last 200 years in this country, we are bound to draw the conclusion that that system in operation, without any great interference by Government processes, is bound logically to lead to very great inequality in the distribution of the nation's wealth. When you have concentrated ownership of capital, with something like a couple of thousand people owning in perpetuity under the law of the land one-half of the land, it is as clear as that night follows day that under that system, working itself out in terms of wealth, producing profit interest and wages, it must logically lead to very grave inequality in wealth distribution. That in itself is a social evil, and one of the primary considerations of any Government should be to check this tendency to inequality in distribution, and any Government should be judged by its efforts in this particular direction.

Therefore, we offer a fundamental criticism of this Bill, because at a time when the wealth of the country has been shown, in the terms of the Income Tax returns, to be concentrated in comparatively few hands, we have a Bill brought forward to make rich people richer and to leave the great masses of working-class consumers as poor as, or even poorer than, they are now. With regard to the Death Duties, it seems extraordinary that the Chancellor of the Exchequer has again helped a section of well-to-do people. If the Death Duties had to be tampered with at all, we would have said that it would have been better to have exempted altogether, or to have reduced the amount of tax payable on, very small estates. We have tried to get a reduction of duty on estates under £1,000. To sum up, we feel very strongly that the benefits of this Budget are going definitely into the hands of well-to-do people, and that the burdens upon the great masses of the workers are being increased. The Chancellor of the Exchequer is entirely honest in working out the political philosophy which he has adopted. He believes that it would be well for England if the rich were made richer and if the poor people were made to bear these burdens. That is to say, he is sustaining the practice of the Conservative party as it has been developed during the last 200 years. He believes thoroughly in that kind of policy and he is giving it a thorough-going application in this Budget. The country will judge this Government, not by the speeches its Members make, but by the deeds that they do. For our part we definitely realise that nothing can do more to justify the presence of a Labour and Socialist party in this House than this Bill, and nothing will do so much to guarantee the future of our party than the passage of this Bill.


I do not propose to follow the last speaker, but to support the remarks of the right hon. Member for Norwich (Mr. H. Young). The right hon. Gentleman made a most excellent speech, showing that a reduction of expenditure is the most important problem that we have to face at the present time. We are still thinking in millions and millions. We cannot recover our national earning power unless we reduce expenditure. This is the second year of successive increases of expenditure. In 1923–24 the expenditure was £789,000,000. The Labour Government increased that expenditure, and I quite understand the reason. But there is no reason why a Conservative Government should increase expenditure still further to the amount of £799,500,000. The increase in the two years has been £10,500,000. It is a mountain of expenditure which we cannot bear at the present time. It appears to me that the increase of expenditure is almost becoming a habit. Practical economy is what I have in mind. In His Majesty's Gracious Speech from the Throne at the end of last year there was the following: Economy in every sphere is imperative if we are to regain our industrial and commercial prosperity. Those are, indeed, important words, and with the increase in our expenditure I can hardly congratulate even our Prime Minister on having carried into effect that passage in the Speech from the Throne. The Chancellor of the Exchequer suggests a Cabinet Committee. I have always understood that Cabinet Ministers were so busy in their own Departments that they had not time to look into the full details of the reduction of national expenditure and of economy in every Department. In my opinion, the Government can do more to remedy the economic ills of the people through a system of rigid economy in public expenditure. The Chancellor of the Exchequer stated in his Budget speech that he would be content with a reduction of £10,000,000 in the Supply expenditure. He also stated, in reply to a question by the hon. Member for Reading (Mr. H. Williams), who asked the Chancellor of the Exchequer whether he anticipated that the £10,000,000 of reduction in the Supply Services would take effect in respect of the Estimates for the current year that The answer is in the negative. I do not exclude the possibility of effecting some savings even on the current year's Estimates, but in the Budget speech I was speaking of an overhaul of the Estimates for next year. I am not, of course, giving any pledge that such a reduction will be effected. I only set it up as an object of extraordinary national importance towards which the Government in all Departments must earnestly strive. I cannot help thinking that the Chancellor's reply to that question is not very satisfactory, as far as the Conservative party is concerned. I feel that more should be done. The question is, bow to do it? In reply to the right hon. Member for Norwich the Chancellor of the Exchequer said: Where can we obtain it? I remember that two or three years ago my right hon. Friend the Member for Hillhead (Sir R. Home) stated in a Budget speech that we were getting near the bone. We are nearer the bone now than we were then. At the same time I contend that expenditure can be reduced. You have your two services—the Supply Services and the Consolidated Fund Service. Let me take the latter first. The right hon. Member for Norwich referred to the necessity for using our credit in the most advantageous way so as to carry out our conversion scheme. He mentioned that there were £1,000,000,000 in the next four or five years to be converted, and spoke of the necessity for converting that at lower interest rate6 than those of previous conversions. I go almost further than my right hon. Friend. We have to look at the necessity, during the next four or five years, for converting £3,000,000,000, not only the £1,000,000,000 that becomes actually due, but the £2,000,000,000 of the National Five per Cent. War Loan. I believe it can be done, especially when we remember that our forefathers 100 years ago carried out successful conversions; 10 years after Waterloo we were able to convert those loans and bring the credit of this country on a 3¼ per cent. basis. I fully realise that the gold standard may affect this to a certain extent, but we should be prepared to meet the conversions with the suggestions which have been so ably put forward by the right hon. Member for Norwich.

Now I come to the Supply Services. My hon. Friend the Member for Central Nottingham (Mr. Bennett) made an able speech on the Budget, which showed that there were many Departments in which there was a possibility of a reduction in expenditure. The Supply Services are fourfold up compared with pre-War days. I have had the honour of sitting on the Estimates Committee and the Public Accounts Committee for about four years, and I have missed only one or two of the Committee meetings during that period. [HON. MEMBERS: "Hear, hear!"] I do not want any cheers, for I have done it as a duty. I feel, in putting forward certain proposals to the Chancellor of the Exchequer, that I am putting forward something of which I have had a certain amount of experience. Take the Government Trading Departments. I do not know whether hon. Members watch the Government Trading Departments. I see no reason why farm settlements should be carried on. Why should we lose money on the purification of mussels? I know that the Financial Secretary fully realises these points, as we had the honour of serving under him as Chairman of the Public Accounts Committee last year. Then there are such things as the stud farm in the Irish Free State, which is losing money this year. Then there is seed potatoes. Why should the Chancellor have to face the cost of running such a Department. You have to watch all these things if you want a reduction of expenditure.

Let me come to other points. There was recently issued a White Paper which all hon. Members should study. I believe ft is called the "Pilditch White Paper," after the hon. Member for Spelthorne. Anybody who studied that Paper will see that expenditure can be reduced, whatever the Chancellor of the Exchequer may say. Take the Army. There are 22,800 fewer men in the Army to-day than there were before the War. But what is the position at the War Office? There are 1481 more staff at the War Office. Take the Navy. It is even worse than the Army. It has 45,400 fewer men than in pre-War days. But the Admiralty has 2,702 more staff. Those are small points, but I am confident that a reduction of expenditure can be made, and must be made, if we are to see the economic position of this country more satisfactory.

6.0 P.M.

There is one other point I wish to raise, and that is in connection with Part I of the Finance Bill. It deals with the Excise, the Customs, the McKenna Duties, Imperial Preference and, in fact, all the financial trade part of the Bill. Our total of imports over exports is £165,000,000 for the five months, and if you work that out for the year you find that the total of imports over exports in a full year would work out at £396,000,000. Last year our total imports over exports was £344,000,000, and comparing the first figure with the last figure I have given, there is an excess of £54,000,000 over 1924. These excessive imports are paid for by invisible exports. We used to have a credit balance. I believe that credit balance, if it has not disappeared, is disappearing. Our credit balance in 1913 was £181,000,000; in 1920 it was £252,000,000, in 1922 £155,000,000, in 1923 £97,000,000, and in 1924 £29,000,000. For 1925, if the figures I have given are more or less correct, they might show a debit balance. It is imperative that we should seriously consider these figures if we are going to survive. What do they mean? They mean that we have been living, or are living, on our past activities. We are living on our capital. A very important speech was made recently in New York by the British Ambassador to the United States, Sir Esmé Howard, and the House will forgive me if I read an extract from this speech, which illustrates the importance of the figures I have just given in relation to our whole life in this country. Speaking on 22nd May, Sir Esmé Howard said: Now if Great Britain cannot sell her products abroad, she cannot, of course, continue to buy raw materials and manufactured goods in the United States in the same heavy quantities as has been he custom. It is I am sure, fully realised that Great Britain could scarcely carry on an unfavourable trade balance with the United States for ever, and yet pay the £32,000,000 odd per annum required to meet her indebtedness to the United States Government. We intend to meet our just debts, but there may come a time when, unless the world situation changes for the better, unless we can return to something like pre-War conditions of credit and trade, it would be impossible both to make heavy purchases of raw material from the United States and to pay the interest on our debt. It does not require a high-class mathematician to see that. The purchases would obviously have to be cut down. Those are very important and impressive words from the British Ambassador to the United States, and they are words which every Member of this House ought to study. There was also a very important article in the "Times" recently, entitled "Export or Starve," which should be read by all Members of this House, and should be not only broadcast throughout the country, but explained to the people of the country. All this is wrapped up in the question of our expenditure. Our adverse trade is affected by the increased expenditure. It affects everything. It affects every investment. It affects our foreign investments and affects our foreign exchanges. Do not let us shrink from these important problems. Let us face them, and face them at once. Do not let us wait, as the Chancellor of the Exchequer says, for next year's Estimates to reduce by £10,000,000. Let us deal with them at once, and I feel confident if we deal with them in the right and proper spirit, we will be able to get expenditure down, and it will help to meet the ills of the people.

Captain BENN

I cordially agree with a great deal of what has been said by the hon. Member for Ilford (Sir F. Wise), and with all that has been said by the right hon. and gallant Member for Norwich (Mr. Hilton Young). We must reduce expenditure, but when we come to the consideration of the practical way in which large blocks of expenditure can be reduced, we get very little support from the hon. Member opposite or his friends. I do not think that it is in seed potatoes you are going to make a very signal reduction of expenditure.


I quite agree that such matters as seed potatoes are nothing, but there are other ways. The Chancellor must not use a pruning knife—he must use an axe.

Captain BENN

What I had in mind particularly was the building programme for the Navy. How many of the hon. Member's friends will support a reduction in that? I know he himself is a man of independent and courageous views. Would he say, when a great change for the better has been made by the Labour Prime Minister in Europe, and when the present Foreign Secretary claims that the atmosphere is improving under his schemes for agreement, that this is the time to produce a new programme of construction, in view of the fact that we have already a load to carry due to the wholly unnecessary laying down of five ships last year by the Labour Government.


The Navy provides security for trade. We cannot carry on trade unless we have security, and it is essential that the Navy should give that security.

Captain BENN

That is just the point. As soon as one suggests anything which will really reduce expenditure, the hon. Member is not there. If it is a question of a stud farm or of seed potatoes or mussel beds, he is absolutely hot upon it, but when we come to something which means a real reduction, unfortunately he is not willing to row in that galley I think when people have forgotten the eloquence and brilliance with which the Chancellor has conducted this Budget through the House —the effect of which quickly evaporates— the first thing they will ask is: Why are we spending so much money? Is it not possible to reduce expenditure? Are we at an end of expenditure for this year? We shall be very glad to hear that the Government is not only not proposing to produce a programme but is not going to make any commitments this year which will involve immense increases in the future. We are aware that it is possible to lay down an extensive programme of shipbuilding which in a particular financial year will cost but little, but will involve future costs. That is what happened last year. Then, a very small sum was involved, but this year we have a sum of nearly £2,000,000 in reference to that commitment, and we may have, if the Committee which is at present sitting reports shortly, a tiny commitment which will involve enormous commitments in future years.

Brigadier-General Sir HENRY CROFT

Did not the hon. and gallant Member's, party propose to make a reduction of the Navy in April, 1914, which might have had disastrous results?

Captain BENN

The hon. Baronet is incorrigible. Before the War he consistently advocated Tariff Reform for this country. As a matter of fact, the safety of the country was secured because it was a Free Trade country and had the ships and money which enabled us to carry on through the War, and to finance the poor Protectionist countries who found their resources at an end when they were under the stress of war. However, this is going even beyond the very wide limits of a Third Reading Debate.


Does the hon. and gallant Member include the United States among the poor Protectionist countries?

Captain BENN

The United States is the greatest Free Trade country in the world. It is a country which from ocean to ocean has no tariff whatever, and Free Trade in a country with its enormous natural resources, has produced great wealth. However these are merely the interchanges of a street corner meeting. The second question which will be asked in reference to the Budget is: Are we at the end of the taxation of the year? Never so far as I remember, except once during the War, has there been more than one Budget in a year. But the taxpayer is not sure if this is to be the last Finance Bill of this year, and many interests will be disappointed if it is the last Finance Bill. We had introduced in the middle of the Bill a New Clause, and a second meeting of the Committee of Ways and Means took place on that New Clause and we must ask the Financial Secretary to give us some forecast on this point. Is this the last Finance Bill of the year?

The Prime Minister told us that if any of these new duties which are being asked for were granted, they would be embodied in new Finance Bills. There are committees sitting on half-a-dozen trumpery inquiries. [HON. MEMBERS: "Steel!"] No, that is not trumpery, but we are told that people are preparing to make applications in other trades, such as hosiery and pottery. Some of the inquiries which are going on are nearly completed, and the taxpayer would like to know if more taxes are to be introduced as a result of decisions in favour of duties in these industries. It is a rather important question to the taxpayer because he does not know whether he is at the end of his payments even yet. As hon. Members have pointed out, there is the question of the steel industry, which is said to be asking for an inquiry. Is the taxpayer to be faced not only with the enormous demands in the present Budget, but later in the year with a new Budget including a duty upon steel involving in itself a considerable rise in the cost of various commodities.


What commodities?

Captain BENN

We must leave the Tariff Reform argument over to some other more suitable occasion. I have referred to the Budget that may yet be, and I turn to the Budget that is. There are three criticisms made against it. First, that it is a rich man's Budget, second that it is a Protective Budget, and third that it is a Budget which is apparently framed without any regard to the question of unemployment. I need not develop further what has been said with unanswerable force in support of the description of the Budget as a rich man's Budget. The people singled out for relief are people of means. It does not require rhetoric or special pleading to impress that fact upon us. There is the flat rate deduction in Income Tax which will undoubtedly help some people of moderate means. It will help me, but it is not graduated according to means, with the result that the relief on the higher incomes will be much greater in cash than the relief on the smaller incomes.


Then it is not a vote-catching Budget?

Captain BENN

That is a debating point. I cannot speak on behalf of a party which has been exceedingly success- ful in that respect, and I think the hon. Member for Finchley (Mr. Cadogan) will realise that his comment does not controvert what I am saying, namely, that it is a few people in the main who come in for the bounty of the Chancellor in the Budget. The only concession that has been made in the course of all these long Debates, although demands have been made for increased allowances to children and dependants and many other deserving classes, was that of £500,000 to the landlords, and that was made in a very re markable way. We were sitting here in the middle of the night—[An HON. MEMBER: "Serves you right!"]—and we suddenly observed that the benches opposite were beginning to fill up. A very distinguished ex-Cabinet Minister appeared, and took his place, with one or two of his colleagues, who are not known for their warm admiration and enthusiasm for the Chancellor of the Exchequer. A little Amendment was formally moved, and the Chancellor of the Exchequer, turning his back on us, mumbled out some words, and if it had not been that my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) was present, and was vigilant, we should have had, at two o'clock in the morning, the £500,000 handed over by the Chancellor of the Exchequer to the landed interests, and not another word said about it. Instead of that, the vigilance of my right hon. Friend at any rate forced the transaction into the light of day. That is the only concession, the only penny-piece, that was wrung from the Chancellor of the Exchequer from one end of the Budget discussions to the other.

As to the poorer classes, they have got nothing out of it. There is no reduction of any of the duties on the staple articles of food, but, as against that, there is a very considerable increase on articles of common consumption—I will talk of them later—lace, silk and some of the cheaper classes of things that come under the heading of the McKenna Duties. What is the defence? It is that the Labour Chancellor of the Exchequer last year gave remission of indirect taxation, and, therefore, that the Conservative Chancellor of the Exchequer this year must give remission of direct taxation. That was the defence, but what does it mean? It means, in other words, "Your Budget was a poor man's Budget, and, therefore, my Budget must be a rich man's Budget."

The second complaint that we have to make against this Budget is that it is Protectionist. We all know the recent history of the Protection issue in this country—the appeal in 1923 to the verdict of the electors, and the very decisive judgment that was given against the claim for Protection when it was very courageously and punctiliously put before them by the present Prime Minister. The verdict was an emphatic "No." In 1924 there was a second Election, and certainly the majority of people in this country understood that, although the old cumbersome procedure of safeguarding might be continued, there would be no such thing as general Protection if this Government was returned. Everybody believed that to be the case, but what is the fact? I observed—I have not the quotation in my hand—that the "Morning Post" yesterday, or the day before, said that there was no pledge that debarred the Government from putting any tax on anything except food. That is the interpretation of a letter sent by Professor Hewins.

I do not know at all, although I have pressed the Prime Minister and other Ministers to tell me, how far they are bound by the procedure of the famous White Paper, but how far they have got we do know. They have taxed hops, lace, and embroidery, common articles of clothing, and not only, under the new import duties, motor cars, musical instruments, and so on, but a vast number of accessories held to be connected with these things, such as lamps, cushions, engines, tools, leather, and so on. They have taxed musical instruments, not the most expensive sort, made in this country, but the poorer sort, the banjo, or the flute, or the dreadful things which form the joy of artisans in their leisure hours. I am not complaining of them at all; I am only saying that they are not always as welcome to their neighbours as are some other things. All these things, which are the ordinary common amusements of poor people, are taxed. Watches are taxed—not the rich man's watch, not the gold watch. The richer sort of watches are made in this country, the finest watches are made here, and they are not taxed, but the watch that the workman uses, the 3s. 6d., the 5s., or the 7s. cheap watch, is taxed, and we complain of that.

Then in the catalogue we come to the Silk Duties, which, of course, are not Silk Duties at all, but duties on hats, and coats, and clothing, and bags, and umbrellas, and a myriad other things which are imported having any trace of silk in them. In fact, if we could get a complete alphabetical catalogue of the articles which are to be subject, after the 1st July, to Customs Duty, it would be a formidable document, and it would show the people of this country that taxes are being levied on so long a list of things coming from any country as practically to constitute a general tariff, or something which is a long way towards being a general tariff.

If one might diverge for a moment from the examination of the Budget itself into the realm of conjecture, it would be interesting to conjecture what would happen if certain things had fallen out otherwise. In 1923 the Chancellor of the Exchequer was denouncing Protection up and down the country with the same gladiatorial skill which he shows in advocating it in this House to-day, and there was one of what might be classed among the decisive battles at Leicester, where he was defeated by my hon. Friend the present Member for West Leicester (Mr. Pethick-Lawrence), and after a number of vicissitudes the Free Trade advocate finally entered the House of Commons as the Tariff Reform Chancellor of the Exchequer. A small circumstance seems to have altered his career. There was another great painter, called Whistler, who was destined for the Army, and he entered at Sandhurst, but failed in chemistry, and he was wont to explain his change of career by saying to a friend: "Madam, if silicon had been a gas, I should have been a soldier."

Colonel APPLIN

Might I point out that that occurred at West Point, in the United States of America?

Captain BENN

I thank the hon. and gallant Member for that correction, but I do not think it really affects the point of my story. If Leicester had been for Free Trade, the Chancellor of the Exchequer would have been a Free Trader, and it is only by the grace of God and the assistance of the electors of Leicester that he is not standing here to-day denouncing the Budget and tearing the Silk Taxes to ribbons. The great failure of the Budget is in regard to unemployment. It is a Budget which appears to us not to be framed at all, having in view the greatest, and almost the only, question of real importance to-day, namely, the question of employment. It is the one Bill in the year that does and can touch employment. It is the Bill that deals with our standard of exchange, which deals with our import and export trade, which deals with the burdens on industry and with the consuming power of the people. No proposals are comparable in importance with the Budget in its effect upon employment in the country.

Tested by this test, it cannot be said that the Budget is likely to decrease by a thousand men the vast and swollen numbers of the unemployed to-day. I know perfectly well what the Colonial Secretary or the President of the Board of Trade would say about the Protectionist parts of the Budget. They would say that tariffs do produce employment, and no doubt the hon. and gallant baronet the Member for Bournemouth (Sir H. Croft) takes the same view. Indeed, I know he does. I do not think the Chancellor of the Exchequer himself would use that argument, but, in any case, he would not say it in connection with the tariffs that are imposed. When the late Chancellor of the Exchequer removed the McKenna Duties, it was proved in fact that the number of people employed in and about the trades from which the duty was removed was increased rather than reduced. As regards the Silk Duties, which are also Protective in character, as they emerge from the Finance Bill, the Chancellor of the Exchequer himself has budgetted for a reduction of consumption, so that we cannot suppose there is going to be an increase of employment in those trades. As regards the Lace Duties, it is not argued that they will produce anything more than a psychological effect on the lace industry, and I do not suppose that even the Financial Secretary to the Treasury himself would claim that they will have any material effect in putting men in work.

Then there is Preference, and there is the strange spectacle which is seen of some hon. Members above the Gangway on this side of the House going into the Lobby in support of Imperial Preference. Our argument against the Preference was that in itself it was a small thing, but that in fact it would be interpreted as turning the fiscal policy of this country in a direction which must inevitably lead, as the right hon. Member for the Scotland Division of Liverpool (Mr. T. P. O'Connor) said, to the taxation of food and raw material. I notice that the action of hon. Members who do support these Preferences in the Lobby has been noted by the Labour party in one part of Australia already. There was a telegram in the "Times" from Adelaide, which said that the leading members of the Labour party were gratified at the extension of the support given to Preference by British Labour, and that the local Press hoped that, as the movement grew, this support would be further extended. That means to say that the trifling Preferences upon raisins and currants, and so on, are not in the least what they mean. They want the support to be further extended, and they want it to be extended to the wheat, or the wool, or whatever it is which really forms the staple export from those countries. It is really either a mockery of their hopes, or else a very dangerous course for them to support a proposal of this kind, coming from the quarter from which it does.


What is wrong about helping the Empire?

Captain BENN

The hon. Member has not made one speech since he was lately returned, somewhat strangely, to this House, and I think he would be far better employed making a few coherent notes for the purpose of making a speech than in interrupting the speeches of other hon. Members.


Sir, I am somewhat discouraged from following that course, by having to listen to speeches like this.

Captain BENN

There is only one other point I wish to make in reference to this support for Preference which has come from some hon. Members above the Gangway. I believe that some of them suppose that you can, in some way, by tariffs, improve wages conditions or penalise bad conditions of labour. I do not know. That was the argument that I heard put forward, about better labour conditions, and of articles produced elsewhere under worse labour conditions. It was suggested that we were justified in putting on a tariff against the one, and in favour of the other.



Captain BENN

That is a totally different thing. If it be thought that you can help to adjust labour conditions by means of a tariff, I would remind hon. Gentlemen that the hon. Member for Dundee (Mr. Johnston) asked in reference to the Lace Duty whether the preference would only be given on lace which was produced under fair conditions of labour, and the Chancellor of the Exchequer brushed aside the demand almost with contempt. The hon. Member for Dundee thereupon abandoned the idea of trying to use Preference to enforce labour conditions and supported us. [HON. MEMBERS: "Oh!"] Yes, he went into the Lobby with us. The fact of the matter is that by tariffs you cannot possibly assist the great trades which are suffering to-day from unemployment. So far as the textile trade is concerned, everybody in the trade—some may say they will try it—knows that the Budget will do damage. Some think the damage will be little; some think it will be much. But there is nobody in the trade who is prepared to say that the imposing of a tax upon silk is going to help exports or the textile trade at all. As regards the coal trade, shipbuilding, engineering, or the other great export trades, everybody knows that they cannot be assisted by tariffs. Tariffs will only hinder them.

There are two ways in which trade might be affected by the Budget. There is the producer's side. There is the consumer's side. It might help the producer by reducing his costs, and the consumer by improving his consuming power. If you come to the producer, you will find that the Government by their proposal are not in any way assisting the producer to produce more cheaply. When we asked that the Income Tax payer should have preferential treatment, the Financial Secretary to the Treasury treated the idea with derision. He said it was a revolution to have regard to the destination of expenditure in deciding the rate of taxation, and what it should be. I would remind the right hon. Gentleman that some, perhaps many, of the great changes which have been made in our Income Tax law have been made in the face of determined expert opposition. I believe Mr. Gladstone once proved to the satisfaction of this House that it was impossible to differentiate between earned and unearned income for Income Tax purposes. But it was done by Lord Oxford. I believe Sir Henry Primrose produced a Report which showed that it was impossible to impose a Super-tax. But it was done! I do think, as regards Income Tax and the relative weight with which it falls upon income expended in different directions, that the Financial Secretary was going too far when he said that any such proposal as was put forward could not receive acceptance from the Treasury. So much for Income Tax.

Then as to pensions. A large part of the speech of the Chancellor of the Exchequer on the Budget was taken up with his description of the pensions scheme. As regards industry, however, what does the pension scheme do? It lays a charge for the benefit of the unfortunate upon industry which it ought not to lay. It takes a man who employs men and lays the heaviest charge upon him, and it exonerates altogether the rich man if he does not happen to employ anybody. It lays a charge upon industry whether industry makes profits or losses. The ultimate charge under this head may be £12,000,000, £15,000,000 or £20,000,000. In the third place, the Chancellor of the Exchequer has done nothing with his surplus to relieve the heavy burden of the rates which falls upon industry. Some of us think that, even if he had devoted the greater part of his surplus to relieving from the heavy burden of the rates some of the industries of this country, it would have done more direct good than all the distribution of £20,000,000 in the direction he has given it.

On the consumers' side, he has elected to relieve the rich. No doubt some of that relief may be reinvested. We do not know. A proposal that savings, whether in the form of reserves or general savings, should be taken into account, was put forward, but when we made that proposal for such a graduation of the tax it was rejected by the Treasury. Some of the money may go back into industry, but there is no evidence that all or the major part of it will go back into industry. There is no evidence that the major part of it will not be spent on luxuries. The necessaries of life have not been provided for, and the poor consumer is left with greater burdens than ever to carry. There is nothing for him. He has got to pay a new load of indirect taxation in the shape of extra cost for his clothing and other things. His spending power is positively diminished by this Budget. Yet the spending power of the poor consumer is a very valuable element in industry in two ways. First of all, the man now buys less and worse clothes, boots, and the ordinary commodities that industries produce, and, secondly, when he is able to spend his money in that way he is directly increasing his own earning power. There is nothing more striking in the reports made during and after the War than the increase of the efficiency of the workers when such matters as good clothing, and good boots, and especially good food were put within their reach.

Some of us on these Benches have fought the Budget to its last stage. We have had a great many discussions. We have had a great many Divisions. I myself think that discussion is everything, though the present result may be practically nothing. It is true that no Government was ever saved by its Whips. Some hon. Members profess to look upon our efforts to examine the Budget with a sort of lofty contempt. It is the purpose of Parliament to examine these matters line by line, word by word; to examine important proposals which are put before the House. Our business is to focus public opinion upon this Budget. I think the more people understand it the less they like it. Certainly, leaving aside certain differences which may exist on the one side or the other of the Gangway on this side of the House, we may say that in the recent by-elections no marked approval of the Budget has been shown. [HON. MEMBERS: "Oh!"] Well, let us take the votes cast. Take Ayr first. The votes cast in Ayr for the Government Budget were noticeably reduced from the last Election. Take the votes at East-bourne. The votes cast there for the Government Budget were notably reduced. Take the case of Oldham. It is even more striking. The number who voted against the Budget was 48,000; the number who voted for it was nil. [HON. MEMBERS: "No!"] There was no candi- date found who was prepared to take the field at Oldham on behalf of the Prime Minister and the Budget.

This Budget unduly favours the rich. Five years ago when the War was fresh in all our minds, if was agreed that many of the burdens of the War should be put upon the broad shoulders because the blood burden had been distributed throughout all classes. Everybody was agreed. Now an attempt is being made to shift the cash burden of the War on to the shoulders of those not strong enough to bear it. That is the first point. The second point is that the Budget is bringing into action the old engine of exploitation of the many by the few. The third point is that this Budget takes no material account of the great problem of the day, which is unemployment. It will make no serious contribution to the reduction of the large number of the unemployed. Of course, we shall be defeated to-night in the House, but when the people have examined the Budget and have seen its results in working then, when we get the effects, most certainly it will be disapproved of by the electorate of the country.


I should like, first of all, to congratulate the hon. and gallant Member for Leith (Captain Benn) on his last stand this evening after a long fight; though I do not know that I am prepared to accept his deductions as to the Oldham election. The right hon. Gentleman opposite, in a characteristic speech, has very properly brought to the notice of the House the rapid fall in our national revenue, but I think the Chancellor of the Exchequer has given conclusive proof that he has had this matter under consideration. In the earlier Debates we heard a good deal as to the policy pursued of adding to the Death Duties of those who pay Super-tax, but I suggest that that is unfair criticism. The man who pays the Death Duties is the man who pays the Super-tax, and the concession that is being given will allow him to make provision for the Death Duties. It is to be hoped the man who has had that relief from Super-tax, in addition to adding to the wealth of the country, may be able to have a margin over to form a redemption fund against the increased Death Duties which his estate may be called upon to bear. It may be argued against me that that is all very well for a man of middle age who is in actual business, but what about the man who is past that age? My answer is that, in addition to some redemption fund, that older man is more concerned than any other man in maintaining the capital value of his estate, and that capital value can in no way better be maintained than by having the prosperity of the country as a whole stimulated, as it will be, by the greater facility afforded to the successful young man to do yet more business. Therefore, the latter man gets that benefit from the stimulation of industry by the reduction of Super-tax. He has his capital values maintained at a point at which they would not have stood without this added prosperity in the country.

Again, the Chancellor of the Exchequer has sought to stimulate industry by his re-imposition of the McKenna Duties. I am not sure that the Chancellor will agree with my interpretation of his action, but I have always had the feeling that we have given far too wide a connotation to the term "Protection." I have always preferred to believe that, not casuistically, but quite soundly and economically, we could distinguish between Protection on the one hand and security to an infant industry on the other, that we could also distinguish between Protection on the one hand and Imperial Preference on the other. The Chancellor of the Exchequer, both in his re-imposition of the McKenna Duties and his Imperial Preference proposals, has done his best, not only to stimulate new industry, but to discover for us new markets. With regard to the favour which, as some say, he has shown to agricultural land, I have no wish to go over the arguments I used in the House the other evening in regard to that, but I think any man who has applied his mind to the question without prejudice will agree that we have too long confused an investment in land and an investment in industry as being one and the same thing. The owner of a factory is rated for his factory and machinery, which, it may be, bears a very small proportion to the profitability of his concern. He does not pay tax on the raw material taken into his mill. But the land owner and the farmer to-day are to all intents and purposes paying rates on what is to them raw material, what to the farmer is the equivalent of the bales of cotton to the mill owner. It is by failing to distinguish between the peculiar position of land in that respect and industry that we have caused agriculture to be so depressed in the past. We have depressed it to the point that we have very nearly lost to agriculture the facility of the landowner letting his land at the lowest possible rate of interest. Had the landowner not given his land at a very small rent, producing for him a very small return on his capital, balancing this small rent against the social prestige derived from land, then obviously agriculture would not have prospered even to the extent it has done. It may be said that agriculture is not prosperous to-day, but that is not the fault of the landowner. It is the fault of the legislature, the fault of Parliament in failing to distinguish the peculiar position of land, resting on a social basis, let to the farmer as a raw material on very cheap terms, from the factory and the mill, run on a basis simply of profit. It is due to that, and certainly not to any fault of the landowner, that agriculture is suffering to-day. Inasmuch as the Chancellor of the Exchequer has clearly shown by his Budget that the tendency will be to stimulate industry, to discover new markets and to give a very proper favour, if it be a favour, to the agricultural interest of the country, I think many Members, not only on this side of the House, but in every part, will warmly welcome the passing of this Bill.


At this stage in the Budget proceedings it is almost impossible for anyone from this side of the House, which has been active in debate, to put any new matter to hon. Members, and I do not suggest that the one or two points I shall put to the Chancellor of the Exchequer contain anything novel. Hon. Members behind me and on the Liberal Benches have emphasised the dangers of the Protectionist proposals which are operating in this Finance Bill. One of the great defects of the scheme upon which the Government are rapidly proceeding is that they are not building up what used to be called in other days a scientific tariff. I am not sure, if we take the statements of the Prime Minister, that we are even approaching a comprehensive tariff, but we are getting a great deal of tariffism in patches, as individual industries come forward and establish some kind of case, and sometimes, even, as we have seen, get protection without establishing a case at all. I will not detain the House by arguing the merits of that class of economic legislation; but there is one aspect of this growing tariffism of which this Budget is a very good illustration which hon. Members who are fiscal reformers and tariffists will agree, I think, ought to be considered now. Since this Government came into office we in Great Britain have taken a definite step in the direction in the return to the gold standard. It is not, of course, the definite and final proposal in that matter; it is much more accurate to say that at the moment we are in a transition period of about two years, during which we are going to study very closely the preliminary steps we are taking before going back definitely to a gold basis. We on this side of the House made it plain that while we did not object fundamentally to a return to the gold standard, we appreciated the dangers and the difficulties of the steps being taken at this time, and we were very much afraid that the policy upon which the Chancellor and the Government were embarking was one that would lead to increased unemployment, to a further fall in prices, and to the more tragic forms of that deflation with which we have been familiar in recent years. Some people have said already that the increased unemployment of the recent weeks has been due to the very declaration of that policy, but, speaking quite for myself, I do not take that view, because the test of the operation of the return to the gold standard in the sense of further deflation is the test of a further fall in prices, and I do not think any hon. Member can say there has been any fall in recent weeks. Nor do I attach very much importance to what we call the psychological element in that connection at the moment. By far the more important thing for this House is to safeguard those general industrial and economic foundations which are going best to pave the way for an easy and sound return to the gold standard when the time comes.

My objection to a great deal of the tariffism which we find within this Budget is that it militates directly against a true policy in that direction. In other words, instead of maintaining the greatest freedom in our commercial intercourse, instead of making our contribution to lowering the tariff barriers which are being raised up and down the world, we have taken the definite step of ourselves falling into that error. I believe hon. Members opposite to be absolutely wrong when they suggest that this is a means of retaliation on our part. That argument was employed over and over again in the old fiscal controversies, but the sound reply is that we are in a peculiar position, that as an island community we have very special considerations in our invisible services; and, further, it is important that while a great deal of the world goes towards tariffism, as undoubtedly it has done, this country should maintain the largest measure of fiscal freedom; and inasmuch as that is bound up with our financial policy in trying to return to the gold standard and to keep London the financial centre of the world, I believe the Government have taken unfortunate and dangerous steps in their Budget scheme.

The second point to which I wish to direct the attention of the House concerns the position of our expenditure. Strictly speaking, I have always understood that it was a little irrelevant to discuss expenditure on this occasion, but many hon. Members have done so, and in any case we can relate it very closely to the £801,000,000 of revenue which we are raising under this Budget scheme. What was the Very remarkable proposal made by the Noble Lord the Member for Oxford University (Lord H. Cecil)?. In an access of despair, apparently, he had come to the conclusion that it was no use trusting any Government, any Cabinet Committee, or any special Committee set up for the purpose of considering expenditure, and that what we ought to do was to appoint as a Committee, the Prime Minister, the Chancellor of the Exchequer and one civil servant, whom I will call at the moment, without offence, some distinguished bureaucrat, to whom should be entrusted the power of overriding the other Members of the Cabinet in their several Departments, laying down a policy in expenditure and in economy to which they were to conform. That is a very extraordinary proposal to come from the Noble Lord. If that had been suggested from this side of the House, I have no doubt the criticism would have been that it was a dictatorship by people who are supposed to be peculiarly partial to some of the steps taken in Russia within recent years. But this dictatorship of three people, which is apparently very largely to override the House of Commons, which is to dominate a majority of the Members of the Cabinet, which is to consist of the Chancellor of the Exchequer and the Prime Minister and one bureaucrat, comes not from the Labour and Socialist movement but from the very bosom of Oxford University. The plain truth is that a device of that kind is perfectly hopeless in existing conditions. We must preserve the authority of the House of Commons, and the anxious interest of the House of Commons, in all matters respecting expenditure and finance. We are not going to find a cure along the lines suggested by the Noble Lord. At the same time no Member, whether he is Unionist, Liberal, Labour or Socialist, can view without anxiety a state of affairs in which we are going on from year to year committed to having to find at least £800,000,000. As a national duty we must analyse that revenue and that expenditure, and without being in the least sympathetic to the present Government, and certainly not sympathetic to the financial proposals of the Chancellor of the Exchequer, I do say that it is our business to put any ideas we possess into the common pool and tell our fellow Members what we believe should be done.

7.0 P.M.

There is one great weakness in the attitude of the Chancellor of the Exchequer. I have noticed that when we approach technical and hard facts he entertains us by knocking our heads together and by reminding us of our financial past and other devices of that kind. In all this Budget controversy he has never said one word about the £360,000,000 which goes to the mere service of the debt. He has said nothing about the £120,000,000 which we are raising for armaments at the present day. Those two items give £460,000,000 or £470,000,000 out of his Budget of £801,000,000 which is passing from the review of the House of Commons to-night. Surely it is altogether weak on the part of the Chancellor of the Exchequer to say "I hope," or "It ought to be an ideal "—I think that is the accurate way of putting it—to secure some reduction of probably £10,000,000 in the Civil Services, or, as I will call them now, the social services of the State. I invite the Chancellor to tell us if he can anticipate at all any of the proposals of the Colwyn Committee. Can he tell us anything about what he intends to do in armament reduction, pressed upon him by representatives of three parties in the House of Commons this afternoon? What does he propose to do in those two directions which admittedly lend themselves to a good deal of reduction of expenditure at the present day?

I come now to the social services, f rather more than £200,000,000. It is, apparently, in that sphere that the Chancellor indicates that it ought to be our duty to try to secure some reduction of expenditure. We commonly recognise that the £200,000,000 a year of expenditure on social services is very largely regulated by the level of prices in Great Britain. If the Chancellor analyses that class of expenditure he will find that it consists mainly of remuneration, and that that remuneration is fixed in accordance with certain scales. The rise or fall in the cost of living for all practical purposes determines a very large part of the expenditure which he must cover year by year. Moreover, he will find himself confronted by this difficulty. The industrial depression of the last four years has rendered more acute the social misery and distress of many millions of our people. You cannot escape a great deal of expenditure on these social services, and more and more there will be pressure upon the right hon. Gentleman, because of the fact that many of our local authorities to-day are at the limit of their borrowing powers. They are up to the neck in overdrafts and debt. They are finding difficulty in getting more accommodation, and the pressure upon the taxpayers as a whole will be very considerable indeed.

I do not want to leave this without making at least one, as I regard it, constructive suggestion to the right hon. Gentleman. 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 value for the money we are expending. I am not satisfied that we are getting the best return at the present day. There is a great deal of weakness in the connection between the State and the local authorities. The percentage grant system, which is really the bridge which exists in this flow of money from the centre to the locality, was investigated for more than a year by a Committee representative of the Members of this House under able and, indeed, distinguished leadership elsewhere. No report has been presented, but the position comes to this, that we ought to do our very best to work out a unit of cost in those social services—by that I mean an analysis of what it takes to run some service compared with other districts of the country—and combine that with the percentage grant system. If you do that you will get a far better return for the expenditure of this money. You will save the lives of far more people, from tuberculosis, and you will embark upon a true form of economy which very largely is being neglected at the present time. That is the kind of line the Chancellor should pursue. It is no use making a broadside upon the social services and saying, "Here I am going to try to reduce expenditure." That excites a perfectly natural and intelligible animosity, because the backs of many of those people are literally to the wall, and we have to do all we can to protect them in their social conditions.

There is one point in conclusion. I want to ask the Chancellor whether he has any statement to make when he replies regarding our general financial policy viewed in a very wide and comprehensive sense, and I will try to make that request perfectly plain. I sometimes wonder if even hon. Members of this House, familiar with finance, and if more than a small percentage of the people outside, appreciate the extraordinary financial achievements of this country since 1914, and appreciate all that that means for the mass of our people in unemployment and distress and reduction of remuneration. It was a distinguished economist who reminded us that in the short period of six years between March, 1914, and March, 1920. we spent more in public expenditure in Great Britain than in the whole two and a quarter centuries back to the Revolution of 1688. If I had my way, I would print this on almost every document in circulation at the present time. That is the explanation of a great deal of our social and economic distress. I cannot help thinking that we have shouldered a very large part—and I sometimes think an unfair part—of the War obligations.

We have entered into an understanding to repay £900,000,000 to the United States over 60 years. We have no guarantee to-night of a comparable payment from our Allies. We have waived half of the £2,000,000,000 due by Allies to us. We have seen tariff barriers raised against us in almost every country in the world. We taxed ourselves admittedly very heavily but I still think not heavily enough during the War. We are carrying a Budget to-day of £800,000,000, which appears to be standardised according to a good deal of the competent criticism of the time—it is four times the pre-War revenue of Great Britain—we have pursued a policy of returning to the gold standard; and, at one point, nearly 2,000,000 out of work, and in spite of all that —our deflation, the balancing of our Budget, the definite effort to restore our credit—the system has stood the strain. But what I want to urge is that it has stood the strain at a very considerable price for millions of our people. I do not deny that it has been a very heavy price for a good deal of our industry and commerce is well. What is the practical duty in parting with this Finance Bill of every hon. Member of this House? If there be one duty which in common we owe to our country in this matter it is this. Do not say or write anything which is going to damage British credit to-day. The net effect of that, with the burdens we already carry, is to make it harder for us to recover, and to aggravate the load of suffering which the people have shouldered with not very much complaint in recent years.


I am glad to associate myself with the applause that came from all parts of the House in response to the helpful, thoughtful, powerful, and constructive speech delivered by the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham). It is the kind of speech which is required in Debates upon our financial policy. I will give the most careful consideration to the various constructive suggestions which he has made. Perhaps, in the course of my remarks this evening, I may refer to some of them. I will give the most careful consideration to his remarks, and I express, on behalf of the Government, our acknowledgment of the manner in which, without in the least withdrawing any of his disapproval of the general policy of the Government, he has thrown his knowledge and experience into the common stock.

We are now at the end of the Debates upon the Budget. In a very short time it will be passed, for good or ill. I shall permit myself, in making a few final observations, to look back a little over the course of our Debates. The first reception of the Budget, not only here, but out-of-doors, was overwhelmingly favourable. I took the trouble to read all the newspapers, or, at any rate, to look at all the newspapers the next day, and I think, with hardly an exception, there was a general chorus of approval, of modified approval, or, at the very worst, of mild detachment. A cynic has said, "Distrust first thoughts; they are usually honest." Certainly, I must admit that the second thoughts, of the Press at any rate and to some extent of the Opposition in the House of Commons, were very different from those of the first few hours and days. We have had the most vehement declaration of fierce unrelenting opposition from the hon. and gallant Member for Leith (Captain Benn), who sits perched below the Gangway on the Opposition side. I must admit that he has made his threats good. He has not promised without performing, and the part he has played in these long discussions, almost single-handed, however painful it has been to the physical convenience of the House as a whole, has certainly been a very recognisable feature of the whole of the Budget Debates. Then we had an outburst in important sections of the popular Press, which I must also recognise has continued in undiminished activity so far as possible up to the present time. Of course we have had the vigorous denunciations which one would naturally expect from the official Opposition, and I am not in the least alarmed by this agitation and opposition, because I am quite sure there is no real substance behind it. Political agitation, unsustained by some real grievance, is like a bonfire on ice, it blazes away merrily as long as the fuel lasts, but it does not seem to get any general hold of the surface on which it rests. If we look over in cold blood some of these criticisms which have constituted this agitation, I think those who use them will feel that upon the whole, and it is in that way we must judge them, the progress of discussion has disposed of those criticisms and worn away the attempts to create a spirit of anger or discontent in the country in consequence of the Budget.

I will begin by saying a few words about the Silk Duty. I was told that I was going to be hanged by a silken cord. I was told that we had ruined the prosperity of the firm of Courtaulds. I was told that we had committed an ineffable meanness in taxing the finery of poor working girls. I was told that we had struck hard and indeed that we had struck low at an infant industry which, in the general decline and depression of British trade, was alone bearing up bravely against foreign competition, and developing its exports. All these things we were told, and the most careful and elaborate calculations were presented to us, showing how serious would be the burden placed upon the users of artificial silk in consequence of these duties. Here we are now almost within a few days of the application of these new duties. As far as artificial silk is concerned, it is clear that the foreign importers who compete with our domestic industries intend to make a substantial diminution in the price at which they will place their goods on the British market, a diminution which will go a long way towards meeting the duty charged at the ports. I have received a letter from Messrs. Courtaulds, who have been for many weeks very strenuous and active opponents of these duties. The letter is as follows: I beg to confirm what I told you over the telephone this afternoon, that is that Messrs. Courtaulds, Limited, have decided to accept further orders for artificial silk yarn until 30th September next at their present price, that is to say, they will not pass on any part of the 1s. Excise Duty to their customers. It will be seen that there is going to be, at any rate in the case of the firm which governs prices here, no increase of any sort or kind with regard to the price of artificial silk, and there is no justification for the slightest addition to the retail price of the articles which contain artificial silk. I want to make that declaration quite clearly and plainly at the present moment. The right hon. Gentleman opposite has been driven from pillar to post and forced to abandon one position of sombre expectation after another. He says that we may get through the 1st July, but what is going to happen after the stocks which have come in have been dispersed? I do not hesitate to say that we have, according to all reasonable expectation, already embarked upon a trend of circumstances which will lead to a gradual and progressive diminution in the price of artificial silk through improvements in manufacture, and through the fact that there is a growing element of competition. I do not hesitate to say it is a reasonable expectation at this moment—if I should be called upon next year to stand here at this Box and review, as I may do, the fiscal history of the past 12 months— that I shall be able to show not only that there has been more employment, new factories, greater developments in both the natural and the artificial silk industry, but, so far as the artificial silk is concerned, I think I shall be able to show that there has been no increase in the price at which these articles can be purchased by the general public. Therefore I am content to leave the Silk Duties as they have commended themselves to the opinion, sometimes the reluctant opinion, of all parties in the House of Commons. If I am right that there will be no increase in the price of artificial silk, then the drawbacks which have been given to the Lancashire and Yorkshire trade will act as a direct stimulus to their exportation, and this will compensate them for any friction to which they may be exposed during the process of collecting the duties and obtaining the drawbacks.

In the second place, we have had from the official Opposition a steady stream, amounting almost to a drone, of class prejudice, abuse and criticism of wealth and of attempts to depict it as something like a crime to make any remission to the direct taxpayer. We have had arguments continually put forward which can only lead to one conclusion, and that is that the direct taxpayers should never receive any relief, but, on the contrary, we have been told that we ought to aim at relieving the indirect taxpayer altogether and throw the burden, as was suggested by the hon. Member for Bow and Bromley (Mr. Lansbury), entirely on the backs of the Income Tax payer.


I said that the tax should be levied according to ability to pay.


I think the hon. Member meant that the whole burden should be thrown upon the direct taxpayer.


Certainly, according to the ability to pay.


I have been told this afternoon by the hon. Member for Peckham (Mr. Dalton) that all the good feeling created by the Prime Minister not long ago has been destroyed by this Budget, that it will eventually split the country into two nations, and arraign the poor against the wealthy. The hon. Member for Peckham uses this kind of argument and language on all occasions, and the party opposite use the same argument against the present economic position. The fact of the matter is that they seek to substitute for private ownership a universal system of State control of production, of distribution and of exchange.




At any rate, that is the official policy of the party to which the hon. Member belongs. Even if this Budget had been one which commended itself to their view, I believe hon. Members opposite would have continued this policy of class warfare and of trying to exploit the sufferings, the unfortunate circumstances and the hard conditions of the great mass of the workers in this and other countries. I am sure that exploitation would have continued as a great weapon in their political warfare. I deny that anything in this Budget has embittered that feeling, and people are already throwing in all the energy they can. I am told that this Budget has created unemployment, and although not many hon. Members have dared to say that in the House, outside that statement has been thrown into our ears with ceaseless iteration. We have been told that unemployment has increased by 228,000. 70,000 of these are due to the relaxations of the late Government and 161,000 are in the coal industry. But what has the Budget got to do with that Is it suggested that the Budget has been the cause of trouble in the coalfields, and that it has been the cause of the relaxation which were granted last year? That, I think, is absurd. To say that a Budget which has not yet become the law of the land has been the cause of creating unemployment is a wilful and shameful attempt to mislead public opinion. The effect of the Budget, such as it is, is naturally limited. The sums of money at the disposal of the Chancellor of the Exchequer are not large enough materially to influence any great movement of national life at this moment. In so far as we have been able to produce any effects at all, it would be impossible for such effects to manifest themselves until the Budget had been at work for some considerable time. Perhaps a year hence there would be more justice in making the Budget play a part in our affairs, whether for good or for ill. For the present, any effects on industry which are due to Budgetary conditions can certainly not be attributed to the Budget of the present year. A longer interval will be needed before they become apparent.

Then we are told that this Budget breaks the pledge of the Government by introducing Protection. I think the Liberal party are very ill-advised to use such violent language about the breaking of pledges. The language would be very wounding and very insulting but for one fact—that nobody believes it to be justified; nobody takes it seriously; everyone feels that it is not based on truth, and it is only truth that injures and wounds. What have we done? I am still a Free Trader; what have I done in this Budget? I have simply collected the wild oats that were sown by Mr. Asquith, by Mr. McKenna, by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), by the right hon. Gentleman the Member for Carmarthen (Sir A. Mond), by the right hon. Gentleman the Member for Spen Valley (Sir J. Simon) and by the right hon. Gentleman the Member for West Swansea (Mr. Runciman)—I have simply collected these relics from the field and have fastened them together with a silken thread. That represents the whole of my action or offence. For everything that has been done, except the Silk Duties, with which I have already dealt, there is absolute warrant in decisions which have been taken, and which are publicly known, by Liberal statesmen of unimpeachable orthodoxy and of scarcely challenged authority.

Let me, however, say a word about the character of the pledge which governs the action of the Government. As I view it and understand it, we are pledged not to commit the country, during the present Parliament, to a decisive change in our fiscal system. That is, I think, a broad, frank, full interpretation of the declarations which were made at the Election, of the platform on which the Election was fought, and of the statements which have since been made in the House of Commons. I accept fully all the verbal pledges that have been made, but that is my interpretation of it. The House may be sure that the pledges which have been made by the Prime Minister and by other Ministers, and which were embodied in the platform of the party, will be strictly and faithfully honoured in substance and in spirit. There is no question whatever of a breach of pledge in that matter. [Interruption.] I know that the hon. and gallant Member for Leith is always on the watch, ready to drop his bomb, like an aeroplane hanging over a neutral zone between contending States, but I beg him to study very carefully the language I have used.

This pledge, which will be strictly observed, was not the only pledge that the Government gave in regard to fiscal matters. We pledged ourselves to introduce in an effective manner the principle of Preference within the Empire upon existing duties, and in doing that we were simply carrying out declarations which had been openly made, and votes which had been given in the House of Commons, giving effect to the Resolutions of 1917, to which all parties in the House were officially committed. I listened this afternoon to the speech of my right hon. Friend the Member for the Scotland Division of Liverpool (Mr. T. P. O'Connor) It was a speech addressed nominally to the author of the Budget, but it constituted, from beginning to end, a solemn lecture, warning the defaulters and backsliders in the Labour ranks who, in spite of the views which the right hon. Gentleman has so often expressed, have shown a tendency to treat Imperial matters on a broader basis than that merely of party politics. I wish that all who are present in the House could have heard the powerful and eloquent manner in which my right hon. Friend revived the old-time glamour of Parliamentary debate. I am sure there must have been many uneasy consciences on the Labour Benches when they found the Father of the House, the old Radical Free Trader, reproaching them with their weakness in yielding to the growing convictions and movements of their minds in regard to Imperial Preference. I must remind my right hon. Friend of some of the language which he used. "The wolf is at our door." "Selfish men are trying to get rich at the expense of the community"—[An HON. MEMBER: "As a result of Protection!"]—as a result of Protection. A preferential tariff on wheat was the danger which he feared. Such a plan united the evil forces of the world in a conspiracy against the poor. And, he said, once you begin to tax, this is where you are bound to come.

What tax have we imposed for the purposes of Imperial Preference? No tax has been imposed for the purposes of Imperial Preference—not only no food tax, but no tax of any sort or kind has been imposed for any other purpose but that of revenue With the exception of the safeguarding duty on lace, every tax has been imposed for revenue, and none of them affect the basic articles of consumption, or even the luxury foodstuffs of the mass of the people. All that we have done to incur this solemn protest and impressive condemnation is to grant rebates in favour of the Dominions from duties which are at present in existence, and which have been imposed by Governments of every hue, purely for revenue purposes. All that we have done is to take off taxation in favour of Dominion produce, a process for which, as the Noble Lord the Member for Oxford University (Lord H. Cecil) was prompted to remind my right hon. Friend, Sir Wilfrid Laurier was actually awarded the gold medal of the Cobden Club.

Then there are the safeguarding of industries pledges which have been given, and I should like to say a few words on that subject, because it is very important that the House should clearly understand the (implications of any policy of that kind. I summed up our pledges on the first occasion on which I spoke on these subjects in this Parliament. They may, broadly speaking, be said to be Imperial Preference without taxation on food, and Safeguarding of Industries without a general protective tariff. That is the position which we occupy. As I explained before Christmas, the original Safeguarding of Industries policy, as conceived by the right hon. Gentleman the Member for Carnarvon Boroughs and the right hon. Gentleman the Member for Carmarthen, and as enforced in the last Parliament, proposed the safeguarding of industries by duties imposed from time to time against the exceptional competition of particular countries. They were duties aimed only at particular countries. There has been a change in that respect, as was fully admitted to the House. When we came into office, we found immediately before us the project of a German Treaty which commended itself to all parts of the House, as it did to His Majesty's Ministers, and, from that and other considerations, it became perfectly clear that the most-favoured-nation principle, which has long been the foundation of our commercial policy, would be violated by a continuance, after the war conditions had passed away, of the principle of safeguarding by discriminatory duties against particular countries.

We, therefore, abandoned that principle of safeguarding against particular countries by discriminatory duties, although the anti-dumping provisions embodied in the Safeguarding of Industries Act of the Coalition Government still remained in full effect. Instead, we proposed to give effect to the safeguarding policy by duties of a general character— general duties. A general duty is not a general tariff. I see a great deal of confusion, not only here, but in the Press, on that subject. A general duty is a general duty; a general tariff is an aggregate of general duties. The question that naturally arises, in proceeding by general duties instead of discriminating against particular countries, is, as I said before Christmas, how many duties could be imposed without carrying us into the region of a breach of the pledges which (have been given. That, naturally, has been and will be very carefully considered. Evidently, the change from a discriminatory duty to a general duty carries with it implications, in regard not only to the number of duties, but also, to some extent, to the range of the tariff in respect of the industries safeguarded. A general safeguarding duty, for instance, on some commodities, which carried with it the necessity of imposing a number of consequential duties on other commodities, would, naturally, carry us into a region where the question of the interpretation of the pledge would have to be considered. But, so far as we have proceeded at the present time, nothing has been done which, on the strictest interpretation from a hostile Free Trade point of view of our pledges, could be considered in the slightest degree to transgress the full spirit and intention of the pledges which were given at the General Election.

Then there is a third class of duties in the Budget—I mean duties for revenue on articles of luxury or quasi luxury. Personally, I am of opinion that these are entirely legitimate, and they are in accord with the practice of many Free Trade countries. For instance, in Holland, where the basis of the country's policy has been Free Trade, a considerable revenue has for many years been raised by the taxation for revenue purposes of finished and luxury commodities. Where possible, a countervailing Excise would be imposed, as I have imposed it in the case of the Silk Duties. But I do not consider that, if a suitable luxury commodity presented itself, which would yield a reasonable revenue, easily collected, one would be at all inhibited from imposing such a duty by the mere fact that it might prove inconvenient, or impracticable, or pedantic to impose a countervailing Excise. I said quite clearly that I should search and study luxury consumption and luxury importation with a view to seeing if there are means by which revenue sources can be extended without adding in any way to the cost of the necessaries or comforts of the mass of the people. The Silk Duty is a very good example of this kind of thing. I challenge the right hon. Gentleman opposite to say that if he were in a position to take off £6,000,000 of indirect taxation he would take off the Silk Duty before he took off the duty on tea. What nonsense we have heard about silk being one of the vital necessaries of the poorest people in the land. Tea is a basic comfort of the very poorest people. [HON. MEMBERS: "Why not take it off?"] If there were no difficulty in raising the revenue tea is certainly a commodity which Chancellors of the Exchequer would be glad to relieve, but to propose to continue a tax on tea when you wish to remove a tax on silk is one of the greatest errors in democratic outlook that it is possible to have.

I consider that no pledge has been given which in any way debars me as Chancellor of the Exchequer from making proposals to the House for bona fide revenue duties, and I do not consider that one should be deterred when everything else is satisfactory, even if it were not practicable to levy a countervailing Excise. I believe this process of substituting optional taxation in the region of luxury for compulsory taxation is one which in itself is entirely beneficial. Here I must for a moment diverge from my Noble Friend, who made such an interesting speech and one with which I was so very largely in agreement in the earlier part of the Sitting. My Noble Friend fixed upon consumption as the supreme test, and the moment of consumption as the moment of the realisation and enjoyment of wealth. He took a piece of coal and said that all the processes of getting it from the mine and transporting it by rail merely led up to the supreme moment when it was put on the fire. But I am of opinion that my Noble Friend must pursue his analysis of the history of the coal a little further, because if it is put on the fire for wasteful purposes, for purposes of unnecessary indulgence, that is quite a different form of consumption from what takes place if it is used to start some new productive process and to enable a further development of wealth to take place, and this distinction between luxury consumption and consumption which is necessary to maintain the health and well-being of the mass of the nation, or the consumption that is necessary to promote the further operations of production is a very important distinction which no system of taxation can afford to ignore. There is consumption for indulgence and consumption for further production. Included in the consumption for further production is everything that ministers to the health of the workers. That is quite true. That is a necessary part of the economic system, but I should deprecate trying to measure our wealth solely by our consumption, especially when you enter the region of luxury consumption. I do not admit that the importation of foreign luxuries and finished articles under the present conditions of the world's affairs necessarily creates a counter export from this country. There is a great difference between trade and tribute. Debts and indemnity and reparation claims incurred through the War now overhang the exchanges of many countries with an enormous weight, and while those debts, be they public or private, and those reparations are passing across the exchanges it is not true to say that every importation, if sufficiently prolonged, will ultimately induce a corresponding exportation. That fundamental argument of Free Traders, which figures in the famous petition of the merchants in 1828, is in abeyance in so far as the exchanges of the world are overhung by these enormous sums of indebtedness, whether by debt or reparation, which came into existence in the course of the Great War. Therefore it seems to me that the restriction of the consumption of foreign luxuries is not merely no affront to the general principle of the Free Trade system but it is also a measure which plays its part in the immediate economy of the country, because, by diminishing the luxury purchases which we make abroad we make it easier for ourselves to obtain the supplies of food and raw material without which neither our people could live nor our manufacturers thrive. So I shall certainly search for articles of luxuries which, by bearing an additional weight of taxation, would tend to diminish the taxation which weighs on industry, and also the taxation of the necessaries of the people. I do not believe that in that way I commit the slightest infraction either of fiscal orthodoxy or, what is scarcely less important, good sense.

I come now to the last criticism I have to meet. I have left it to the last because it is the most serious and the one I feel most anxious about, and the most damaging criticism I have to meet. It is the criticism directed towards the volume of our expenditure. It was brought forward by the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) and was enforced in a most drastic manner by the lash of my Noble Friend the Member for Oxford University (Lord H. Cecil). He went so far as to say the only way to stop this expenditure is to put an end to this process of improvement, to make up our minds that it cannot continue, and there is no doubt a great measure of truth in the fact that it is just the desire of these great Departments and of their branches to make things better, to have a more efficient service, to perform their task more fully—it is the desire of every Minister at the head of a great Department to try to render really good service to the country, to have a good tale to tell to the House of Commons—it is that desire, praiseworthy in itself, which constitutes the driving force of the immense upward tendency to expenditure at present. I have said that if the taxpayer is to have relief in the future, it will be essential for us to aim at a reduction of the total of our expenditure. I have not said at all, as a pledge or promise to the House, that I shall be able to achieve that reduction. Do not let the House underrate the enormous difficulties which stand in the way. I agree entirely with what has been said by the right hon. Gentleman the Member for Norwich and by my Noble Friend the Member for Oxford University, but I say do not underrate the difficulties. It is living in a fool's paradise to underrate the difficulties which in every direction, wherever you turn, confront the economist. It is "fixed bayonets" in every quarter. Whether you look at the military expenditure or at the domestic expenditure, the resistances are enormous, and they are backed not only with good argument, but with very powerful accumulations and gatherings of public interest and public opinion. Take the Army, the Air Force and the Navy as we inherited them from our predecessors. The Army is costing less than it did before the War: if you make allowance, as you must do, for diminished purchasing power, it is costing considerably less. It was £28,000,000 or £29,000,000 before the War. It is relatively less than that now. But, on the other hand, our obligations have increased. The British Army was never increased for the purposes of the German war. It was simply fixed at the level which is necessary for police work.


I am a little afraid of this line of argument, which, if it were replied to, would of course enter on a Debate on the military and naval Estimates.


I will confine myself simply to using these particular points as incidental features in the general argument which is entirely relevant to the question of expenditure. There is the Army. There is Air. The Air Force is at present carrying out a programme of expansion sanctioned by the party opposite.


That is not so.


It is a programme of expansion which was carried out last year and is going on in the present year, and is to be continued in the next year. The expansion has been absolutely continuous for the last four years. Then there is a question of the Navy. We had arguments from the late Prime Minister showing that we could not afford to let the bottoms drop out of our ships. Whatever you may say about expenditure on armaments, it is obviously necessary at certain periods to make provision, however modest it may be, for the gradual replacement of units of the Fleet which become worn out. I only say here are these facts. I do not accept for a moment that reductions are not possible. I am only pointing out that while it is very easy to talk about cutting down, when you come to look at the facts you see clearly that there are most powerful arguments on the other side. Turn to the Civil Service, or what I think are better called the Social Services. There is an idea in certain quarters that the enormous increase of the Civil Service Votes is due to the Civil Service having become much more numerous and having much more pay. I will not say that is not appreciable, but it is not the primary factor in the great expense we have to meet.

Let me take one or two instances. Nearly all these social services are covered by legislation, and in order to make large reductions you would have to reverse the legislation, which, of course, the House could do if it chose to embark upon it. But take education. It is fixed by agreement with the local authority, by Regulations, by standards, and so forth. Take health expenditure—housing expenditure—and old age pensions, which are growing automatically and which are a matter of public faith. There are the War pensions. Does anyone suggest that we should reduce the pensions of soldiers who were wounded in the War, and their widows? There is the question of unemployment insurance, which is not likely to diminish. [An HON. MEMBER: "Why not?"] It is certainly not likely to diminish while unemployment is not getting better. All these matters undoubtedly account for a great part of the expenditure, and there is the expenditure for the service of the Debt—the Sinking Fund and interest on the Debt. Does anyone suggest that we should repudiate our Debt? What could be more foolish than to diminish our Sinking Fund at a time when, as the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) has pointed out, there is a possibility in the course of a few years of very large and important conversion operations?

8.0 P.M.

In view of the steady stream of criticism there has been about the expenditure of the country, I think I am entitled to put frankly before the House some of the immense difficulties which will obstruct one's path if we are to achieve a net reduction in the total expenditure of the country. But I do not in the least despair. I propose, as soon as this Budget is passed away from the House, to begin, assisted by the Cabinet Committee, which I was authorised to announce to the House, and which will be under the direct authority of my right hon. Friend the Prime Minister, to search through all branches of expenditure, and I shall certainly not fail to examine that aspect to which the right hon. Gentleman referred, of the percentage grants and the relations between the national and the local authorities, in regard to which, I understand, the long-delayed Report will be almost immediately in my hands. If I do my best, I trust that, at any rate, I may rely upon the assistance of those Members of the House of Commons who have criticised most severely the present high rate of expenditure.

I have finished, and I have no more desire to detain the House, except to express my very sincere acknowledgments of the great courtesy and patience with which all parties in the House have dealt with the discussions on the Budget. Even when they have been most severe in their criticism, there has hardly been a moment when good temper has not been preserved, and I believe it is true to say that the main issues have been fought out, and have been fully exposed, and that, if the country read, as it ought to do, but has rather ceased to do, the Debates in this House with full attention, it would find that all the great questions which arise out of the Budget have been thrashed out very thoroughly across the Floor of the House. The Budget now leaves the House, and passes on to the Statute Book. You cannot consider the Budget apart from the pensions scheme, on the discussion of which we embark next week. All these plans are part of a common policy of His Majesty's Government. All are conformed, and are an implement of the pledges they gave to the electors at the last election. I am not in the least afraid of the issue, which is raised by the Budget and the pensions, being fought out in the constituencies of the country. The hon. Member for Peckham said, "If we merely go forth and explain what the Budget is, we shall succeed in accentuating the bitterness which exists "—or words to that effect— "We shall succeed in securing the condemnation of the Government."


This is a very free translation of what I said.


At any rate the hon. Member said, "If we merely go forth and explain." He will not be the only person, and his party will not be the only party that will explain to the country the policy which has occupied, and will occupy, practically the whole legislative period of this Session. Others will go forth, and they will be able to explain that a Budget has been passed which is based on sound finance and strict fulfilment of all our obligations and the due payment of our debts, that a Budget has been passed which diminishes the burden of the direct taxpayers by what amounts almost to a shilling over the whole range of the Income Tax payer, that discriminates in favour of earned incomes, has given a long deferred, much-needed measure of relief to the smaller class of Income Tax payers. and. in so far as the higher class have been touched, a burden has been shifted from the effort of producing new enterprise new wealth, and transferred to the wealth which passes from one hand to another at death. They can also explain that these reductions of direct taxation follow, as a natural complement, the very large reductions of indirect taxation made by the right hon. Gentleman in the preceding year. They can also say that no new burden of any kind is placed upon the masses of the people, except in so far as the masses of the people may wish to use silk or to purchase foreign motor cars. They can also say that Imperial Preference has been carried with a very great measure of general assent into actual effect, and when the pensions scheme, for which the finance of this year and future years makes immense pro vision is carried into effect, 6,000,000 wives will have behind them the assurance that if their husbands die they will have £25 a year, with an allowance for their children, irrespective of any further resources which they may obtain. If we all go forth and explain these matters to the country, I have no doubt that we shall find they receive from the broad masses of the people the same measure of support and recognition that they have, after these weary days, won triumphantly and unquestionably from the House of Commons.


The House has listened to one more very remarkable speech from the Chancellor of the Exchequer. He takes exception, as he has taken exception before, to criticisms which we have passed from these benches on the action which the Government have taken in relation to the pledges of the Prime Minister with regard to Protection. I am not going to traverse old ground again in that matter. The right hon. Gentleman, full of the courage of his new convictions, excuses every action that has been taken, and also opens up a new vista, which, I am bound to say, we on this side of the House must view with very considerable alarm. I do not know whether the Chancellor of the Exchequer means anything definite by the indication he has made, but we who have taken a very considerable exception to the variety of Protective measures which have been introduced into this Budget must view with considerable alarm the right hon. Gentleman's suggestion that he will still be looking about for new sources of luxury taxation and for im- posing fresh taxes on quasi-luxury articles. We for our part would be glad if, instead of looking about for new sources of taxation, he would look about for new means of reducing expenditure.

I am also bound to draw attention to the right hon. Gentleman's new rendering of the story, which was told by his colleague the President of the Board of Trade at the beginning of the Session, about the difference between a general tax and a general tariff. The question I would like to put to the right hon. Gentleman's colleague, if not to the right hon. Gentleman himself, is this: Under the pledges that have been given—and the Chancellor of the Exchequer himself admits a pledge has been given not to introduce a general tariff—can you put a tax on imported iron and steel? Because, taking the right hon. Gentleman's own definition, a general tariff is an aggregate of general taxes, and the only question as to when one is the other, or is not the other, is how many general taxes go to make a general tariff? It is because of the uncertainty, or, rather, of the elasticity of this pledge, and the uses to which it has been put, that we on this side have raised such strenuous objection to these protective proposals.

My particular object in rising, however, was not to criticise the general proposals of this Budget, but to draw attention to one particular feature of them which I had hoped to raise at a previous stage of the Budget discussions, but which I have been unable to do, and I am particularly glad to have this opportunity of referring to this matter since the speech, to which I listened, of the hon. Member for Linlithgow (Mr. Kidd), in which he said that it had been the object and the intention of the Government in this Budget to stimulate trade and industry. My contention, is that the stimulation has taken place at the wrong end of trade, and also that many unexceptionable methods, which would not have been matters of controversy, have been open to the right hon. Gentleman, and he has neglected the opportunities which he has had. I wish to refer particularly to certain matters connected with the motor industry. The right hon. Gentleman has seen fit in his Budget to introduce a measure of protection for the manufacturers in the motor industry, on the ground that these motor cars and allied articles are luxuries, and that, therefore, this tax can come under the definition of a luxury tax.

So far from believing that, we on these benches believe that it is the business of the Government, so far as finance can protect industry, to deal with these matters so as to bring such articles as motor cars, motor bicycles and things of that sort more and more within the reach of a larger number of people, and not to call them luxuries, and by putting a tax on them, keep them luxuries, but by freeing industry, by using fiscal methods to help the purchaser, rather than to give a dole to the manufacturer, to use that weapon so that a larger and larger circle of people may enjoy those things to which the right hon. Gentleman now refers as luxuries. An hon. Member sitting below me says, "What about secondhand cars?" It will interest him to know that I am going to have a word to say about secondhand cars a little later, but I want to point out the opportunities in the motor car industry which the Chancellor of the Exchequer has had, and which he has wasted. I would like to make two preliminary remarks. In my view, one of the fiscal incidents which is hampering trade, and which is particularly hampering the motor car trade, is the method by which we at present tax motor users. I believe you will not get a fair method of taxing motor users, and of raising revenue from the use of motors, until you revert to the taxation of motor spirit, instead of a scale of motor licence duties, and I am perfectly sure, if you should ever return to the taxation of motor spirit, you would have a tax which was fair, equitable and revenue-producing.

It being a quarter past Eight of the Clock, and there being Private Business set down by direction of the Chairman of Ways and Means, under Standing Order No. 8, further Proceeding was postponed, without Question put.