AMENDMENT OF LAW.

HC Deb 27 April 1926 vol 194 cc1873-996

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

Mr. SNOWDEN

Yesterday the Chancellor of the Exchequer and myself metaphorically shook hands with one another before entering the ring. To-day we enter upon what may be a long and strenuous fight. I do not propose to deal in detail this afternoon with the proposals of the right hon. Gentleman, and I will leave a full and detailed examination of them until they appear in the form of definite Resolutions. I would rather to-day confine my observations to the general and wider aspect of the statement made to the Committee yesterday afternoon. The right hon. Gentleman will not complain if I apply to his Budget this year the test which he himself laid down in the Budget 12 months ago. On that occasion the right hon. Gentleman used those words: I have to think for more years than one, and I could not produce this year a Budget which will leave me stultified, and in the position of having misled the House and misled the taxpayers of the country. I cannot do that, and I have to consider the possibility that I may have to stand here next year faced with the consequences of what I have done.''—[OFFICIAL, REPORT, 28,th April, 1925; col. 38, Vol. 183.] The right hon. Gentleman stands there this year to face the consequences of what he did 12 months ago.

In regard to financial matters, what were the pledges given? What was the policy declared by the present Government, and emphatically by the Chancellor of the Exchequer? At the opening of the first Session of this Parliament, the King's Speech said that economy in every sphere was absolutely necessary to encourage a revival of trade and industry. How far has the right hon. Gentleman succeeded, during the 18 months he has been in office, in redeeming that pledge? He excused himself 12 months ago on the ground that he had not been long in office, and we were quite prepared to concede to him all that he was entitled to by that claim; but I may point out to the Committee that he had been much longer in office when he was called upon to present his Budget than the Labour Chancellor of the Exchequer had been. When the right hon. Gentleman took office, the Estimates, if prepared, had not been presented to the Treasury. When we took office they had been completed, and there remained only three or four weeks before they had to be presented to the House of Commons. He had been six months in office before he was called upon to put his financial statement before the Committee of the House of Commons. There had been time-1 will not say ample time, but there had been time—to examine those Estimates, to prune them, and to effect economies; and what was the result in the last Budget?

Let the Committee never forget that the test by which the Chancellor of the Exchequer must be judged on his omit pledges is how far he succeeds in reducing expenditure and reducing taxation: and yet, last year, he presented Estimates of expenditure which showed an estimated expenditure £9,000,000 over the Estimates of the previous year. He described that as a disappointing result, but he promised to improve on it. He has improved on it. He presented a Budget yesterday which shows an increase over last year's expenditure of £21,000,000, and in 18 months' time he has succeeding in increasing the national expenditure by £30,000,000 a year. This is after making certain economies, I admit—raiding the sick and the disabled, the unemployed, the Road Fund, and now the Sinking Fund, the extent of these raids amounting to £20,000,000.

The extent of the right hon. Gentleman's financial embarrassment was very well illustrated by a communique which appeared in the Sunday papers, issued, I know not why, by the French Finance Minister, announcing that ha had received a message of dire distress from the right hon. Gentleman, begging that he would give him something on account that he might present in his Budget to the House of Commons on the following day. The right hon. Gentleman knows my views in regard to the French Debt. Nobody will be better pleased than I shall be if he can succeed in inducing the French Government to meet some part of their financial responsibilities. He made an outrageous settlement with Italy, simply for the purpose of getting £4,000,000 to include in his Budget this year. I see in the newspapers this morning that the French Government are not to pay cash down. The first payment is not to be made for eight months, when half the promised £4,000,000 will be paid, and the rest they hope to pay before the end of next March.

This was the outcome of the right hon. Gentleman's Herculean effort s at economy—not his own efforts entirely, but assisted by that standing committee of the Cabinet the creation of which he announced last year, and assisted by the Colwyn Committee, who have been probing every nook and corner to see if it were possible to save a £5 note. The right hon. Gentleman has denied that he gave a promise or pledge last year to reduce expenditure progressively by;£10,000,000 a year. Let me read his actual words. He said: I believe we ought to aim at a net reduction"—

HON. MEMBERS

Hear, hear!

Mr. SNOWDEN

Do not let hon. Members be too eager— I believe we ought to aim at a net reduction in the Supply expenditure of not less than £10,000,000 a year. That is not taking an extravagant figure. Then I intervened with a question: Every year? and the right hon. Gentleman answered: Each year, progressively on Supply services. There is no reason at all why a strong and resolute effort should not achieve it. There should certainly be a saving of about £5,000,000 on the debt operations of each year."—[OFFICIAL, REPORT, 28th April, 1925: col. 60, Vol. 183.] Therefore, the right hon. Gentleman said there was no reason at all, provided he made a resolute effort, why there should not be a saving of £10,000,000 a year on Supply services, and—and this was certain—£5,000,000 upon the debt services. He denies that that was a promise. Well, I think it would be quite sufficient, if the statement were made to a young lady of a gentleman's intentions, to sustain an action for breach of promise. There was to be a reduction of £15,000,000 a year; expenditure has gone up by £20,000,000 a year. Now with regard to the promised relief of taxation.

4.0 P.M.

The right hon. Gentleman is increasing taxation this year by £9,000,000. Receiving a deputation' from, I believe, the London Chamber of Commerce or the Associated Chamber of Commerce a few weeks ago, the right hon. Gentleman said this: Few things would be more unfortunate than the re-imposition of taxation next year. That is yesterday— I should regard it as a melancholy necessity. The right hon. Gentleman came down yesterday and increased taxation by £9,000.000 a year. "Ah," he may say, "I said the re-imposition of taxation." But what in the world is the difference between increasing old taxes and putting on new taxes? The effect is precisely the same so far as the taxpayers are concerned. He is, he said, in a melancholy position. Why has he got into this melancholy position? The right hon. Gentleman says it is because of the coal subsidy. Was coal responsible for an increase of expenditure of £9,000,000 last year? Is coal responsible for the £20,000,000 addition? Not at all.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

£17,000,000.

Mr. SNOWDEN

The £17,000,000 was accounted for. The right hon. Gentleman at the end of last year had a surplus of £5,000,000 apart from the coal subsidy.

Mr. CHURCHILL

In this year, there is £4,000,000 provided for the April payment; there is £3,000,000 held in reserve for the May payment—that is £7,000,000 —and there is £10,000,000 paid into the National Debt Sinking Fund to pay for the cost of last year. That £17,000,000 is all included in the total of the Estimate.

Mr. SNOWDEN

The amount of the coal subsidy during the two months which enter into this year is only accounted for in the Estimates and the figures I have given. I have not included the £4,000,000 surplus for which the right hon. Gentleman is estimating. In the calculations I have made, unless expressly stated otherwise, I have excluded the cost of the coal subsidy. I realise that the Chancellor of the Exchequer is not responsible for that. As Chancellor of the Exchequer, that is his misfortune and. not his fault. He has failed to achieve the promised economy, and the explanation, in his own words, is that he has not put tot ward the resolute and determined effort, which, if applied, be said, would make it not a difficult problem. The second reason is that he gave away last year to the relief of what he described as the hard-pressed Income Taxpayer and Super-taxpayer money which he could not afford. He had not got it to give. Last year he had a surplus which he inherited from ins of £26,000,000. He threw that away in relief to the Super-tax and Income Taxpayer.

In replying to an interjection behind me the other day upon this point, the right hon. Gentleman retorted, and I am quite sure he would not have made the retort had he had time to think about it, "I should not have been in this position the right hon. Gentleman"—that is myself-." had not given away £30,000,000 to the taxpayers in the previous year." I gave it away, because I had it to spare, mid the result at the end of that year proved it, because, notwithstanding that gift, the right hon. Gentleman had a surplus of £26,000,000 at his disposal. What did he do last year? He gambled on hopes that have not been realised. He never looked beyond last year. He said that the revenue Would expand, and that the Death Duties would progress. He estimated an increased yield from Income Tax, Super-tax, and Death Duties of £25,000,000. They are down by £2,000,000. That is the first time, except one—and that was accounted for by the great lock-out in the coal industry in 1920—for 13 years—that the Income Tax has not responded to expectations. I do not want to be egotistical at all, but I think I am entitled to claim that in very specific terms I warned the right hon. Gentleman last year as to the consequences of what he was doing. I said: I do not think the Chancellor of the Exchequer can look forward to any considerable increase of taxation except from an increase of population. He failed to take into consideration that many of the sources of revenue upon which he was relying were of a temporary character, and were not likely to come to his assistance in future years. I said last year that the balancing of the Budget in my view would depend altogether upon whether the right hon. Gentleman's anticipations in regard to Special Receipts and the Excess Profits Duty were realised. That has turned out to he so. If it had riot been for the altogether unexpected yield from these passing sources of revenue, the right hon. Gentleman would, apart from the coal subsidy, have had a very serious deficit. I would like to point out to the Committee that it is a matter of the greatest importance and very disconcerting, when we look at the probability of the yield of the standing taxes of the country, to notice that the Chancellor of the Exchequer has estimated the receipts from Income Tax upon an unusually low increased yield. I quite admit that there are paradoxes in this. The Income Tax and particularly the Super-tax last year, I believe, were swollen to a very considerable extent by the collection of arrears. There were about £60,000,000 arrears of Income Tax and Super-tax at the end of March, 1925.

The Chancellor of the Exchequer himself, in reply to a question a week or two ago, said that these arrears were coming in very well, and it would be most interesting to knew to what extent the yield of the Income Tax last year was augmented by the getting in of these arrears. I do not, of course, place much, if any, importance at all on the revenue receipts in the early weeks of a new financial year, but the revenue receipts for the first three weeks of this year certainly have not been encouraging, because those items upon which the Budget depends are down by something like £11,000,000 on the corresponding week of the previous year. I say that there is something of a paradox in this non-expansion in the yield from the Income Tax, and the fact, stated by the right hon. Gentleman yesterday, and with which I quite agree, that there is an increase in the wealth of the country. It has been stated that the profits of public companies have now got back to the standard of the boom year of 1920.We might put against that the fact that in the last five years the Wages Bill has declined by £500,000,000. What are the features of this expenditure which the right hon. Gentleman is encouraging at such an alarming rate? The right hon. Gentleman apparently was not warned by the rashness of the promise he gave 12 months ago to reduce expenditure by £15,000,000 a year. He renewed the promise yesterday in very solemn terms. He said: On behalf, not alone of the Chancellor of the Exchequer, but of the Prime Minister and of every single member of the Government, I give a solemn undertaking, even after our recent dreary experience, that we will continue in the matter of economy to do the Utmost."—[OFFICIAL, REPORT, 26th April, 1926; col. 1700. Vol. 194.] If the right hon. Gentleman's utmost in the future is no better than his utmost in the past, there is not a very cheering prospect in front of those taxpayers who are looking for a reduction in the burdens which they have to bear. What is the prospect? There are two items of expenditure upon which reduction is possible, the Supply Services and the Debt. The right hon. Gentleman concluded the long Debate upon the Economy Bill the other day with a speech which was not a defence of economy but was a defence of increased expenditure. The one thing in which he gloried was that we were spending more this year upon education than under the Labour Government.

Mr. CHURCHILL

I was replying to your charge that we were starving education.

Mr. SNOWDEN

He took credit for that fact, but he did not tell the House of Commons that the increased Education Vote this year is due to the maturing of educational improvements which were carried out by my right hon. Friend the Member for Central Newcastle (Mr. Trevelyan). I want particularly to refer to a statement of the right hon. Gentleman, which we on this side of the House cannot allow to pass unchallenged. He said: The First Lord has succeeded in doing what ha never been done before, namely, a substantial increase in new construction and a substantial reduction in calls upon the taxpayer. That statement is absolutely untrue. When we took office, I found the Navy Estimates for the coming year had been finally sanctioned by the Government. I have never made this statement before, but I think I am justified in making it now in view of the right hon. Gentleman's charge. I had strong personal representations made to me by two of the Ministers in the previous Government that the Navy Estimates for the year had been fixed. They had been fixed at £61,500,000, and that was the Navy Vote which would have been presented to Parliament that year if the Conservative Government had remained in office. What did we do? The Navy Vote in 1923–24 was £58,000,000 under the Conservative Government. The following year, it would have been, if the Government had remained in office, £61,500,000. We agree that there were many things that we did as a Labour Government which we should probably have done otherwise had we had longer time for consideration and longer experience, and I am certain one of those things we should not have done in those strange circumstances would have been to agree to the increased construction of cruisers. Notwithstanding that, and agreeing to the new construction of five cruisers, we reduced the Navy Vote from their figure of £61,500,000 to £55,500.000.

What happened following year? Let the Committee note that there was no new construction last year. They raised our figure from £55,500,000 to £60,500,000, and this year it is £58,000,000 —between £2,000,000 and £3,000,000 higher than our figure—and we are committed to a prospective expenditure upon new construction of £58,000,000, and the right hon. Gentleman has the audacity to state in the House of Commons that the First Lord of the Admiralty has for the first time in history succeeded in launching a new programme of construction and relieving the taxpayer. The First Lord has told the House we must not expect further reduction of naval expenditure. He has scraped to the bone, and after having been cut to the bone they are asking for £2,300,000 more than we asked the House of Commons to grant when we were in office. He further said: I approved a programme of construction larger than any that our naval advisers pressed upon us. That statement is untrue. We approved a total programme of new construction of five cruisers.

Mr. CHURCHILL

For how long?

Mr. SNOWDEN

A programme of five, and five only. What has he done? He has agreed to a new programme spread over a number of years which involves the building, not of five cruisers only, but of 16 cruisers. Both those statements made by the right hon. Gentleman are utterly at variance with the facts of the case. In the Navy, as in every other Department, the right hon. Gentleman has been extravagant. He has failed to carry out the pledge he gave to the House of Commons last year.

The other heading under which a reduction of expenditure is possible is debt reduction. The right hon. Gentleman, to the surprise I believe of the majority of the Committee, announced yesterday that he was prepared to pay back into the Sinking Fund £10,000,000. It ought to be paid back. He said, "I inherited from the previous Chancellor of the Exchequer a surplus of about £4,000,000. That went into the Sinking Fund." It ought to have gone into the Sinking Fund by law. It did. It has been there for 12 months, and now the right hon. Gentleman proposes to take it back in order to help his finances. He has raided the Sinking Fund to the extent of £1,000,000. Bat, he says, on the average since the new Sinking Fund was established we have paid the statutory figure. The right hon. Gentleman yesterday announced the abolition of the three years' average in regard to Income Tax. At the same time he has applied it to the Sinking Fund. Why did he not go further back? If he had gone to the previous year he would have found that about £100,000,000 of surplus were paid into the Sinking Fund, and £200,000,000, I believe, the year before. There is a nest for the right hon. Gentleman to raid to help him in the embarrassment he is piling up for himself for future years. Instead of raiding the Sinking Fund, why did he not recall the Super-tax that he unnecessarily gave away last year? There was to be, he told us a year ago, certainly a reduction of £5,000,000 a year in the charge for debt services. Yet last year it increased by £3,250,000, and the right hon. Gentleman this year is estimating for a reduction of only £1,000,000 in the charge for these services. What is the reason for that excess over the Estimates last year is very important.

The right hon. Gentleman expatiated yesterday upon the great benefits which had come from a, return to the gold standard. There have been advantages, but there have been disadvantages too. What happened last year? The average rate of interest on Treasury Bills—about £500,000,000—was 4½ per cent. At one time this year the rate has been, as high as £4 18s. 0d. per cent. A difference of 1 per cent. in the price of Treasury Bills makes a difference of £5,000,000 a year in the' cost to the Exchequer. Where does this money come from that is lent to the Government on Treasury Bills? No tender of less than £50,000 is accepted. It does not come, therefore, from the savings of the workpeople. These Treasury Bills are convenient, and, indeed, the best form of short term investment that there is in the world. They are taken up by banks, financial houses, and insurance companies. Banks borrow their money from their customers at 3 per cent. They lend it to the Government at 4½ per cent. The difference between 3 per cent. and 4½per cent. represents the profit that is made by the banks. The credit of the banks is apparently 50 per cent. better than the credit of the British Government. The Government undoubtedly are in the grip of the banks and the financial houses. It is no wonder that the banks last year were able to announce far larger profits than in the previous year. One bank chairman was frank enough to confess that it was mainly due to the fact that they hail had a windfall in the higher interest upon their Treasury Bills. This grip upon the Government by national and international finance cannot be allowed to continue without bringing about financial disaster to the country, and whatever may be one's views about the nationalisation of banks and the public control of credit, cases like that to which I have just referred are going to make the public ownership and control of banking and credit absolutely essential.

This is a very serious matter in view of the right hon. Gentleman's financial problem. He has in the next two years £1,000,000,000 of debt to convert. What are the prospects? The rate has been a little lower during the last few weeks, but on Treasury Bills during the last six months—short-term bills—the Government have had to pay 4½ per cent. There is in the market to-day a new issue by the Glasgow Corporation. The credit of the Glasgow Corporation is the highest of any municipality in the Kingdom. When other municipalities were borrowing at 6 per cent., Glasgow was able to effect a public issue at 5½ per cent. The Government are in no better position. An issue under the Trade Facilities Act, guaranteed by the Government, is for all practical purposes a Government issue. There is the same security behind it as there is behind the War Debt. There have been two issues in the last few weeks, one for the Kent coalfields, and one last week for Africa at 5 per cent. at a discount. Yet the African loan was very soon at a discount after the allotments bad been made. Therefore, there is no prospect at the moment of the right hon. Gentleman dealing with this conversion of £1,000,000,000 within the next two years at less than 5 per cent. unless there is an unexpected change in the money market, and his financial policy is certainly not encouraging that. In addition, there is the 1929–47 block of War Debt of;£2,000,000,000. The conversion of £1,000,000,000 of debt at 5 per cent. to a 4 per cent. basis, after deducting the loss of Income Tax, relieves the Exchequer of £8,000,000 a year. If the £2,000,000,000 which must be dealt with at a comparatively early date could be converted at 4 per cent., there would be a net reduction of £16,000,000, and if we could convert the £2,000,000,000 block there would he a saving of £24,000,000. There is little prospect of that. I do not know whether any Member of the Committee saw a very remarkable article by a man whose opinion is entitled to respect in connection with this important matter. I refer to Professor Cassell, of Sweden, who wrote an article some weeks ago dealing with the probable future of interest rates. After elaborating the argument with very great care and intricacy, he came to the conclusion that for the next five or six years, at any rate, we could hardly expect any fall in any international interest rates. That is a rather gloomy prospect for the right hon. Gentleman.

The burden of taxation may be imposed in such a way as to be a real burden upon industry, but I think the extent to which the heavy taxation at the present time in this country is a burden upon industry has been greatly exaggerated. I am not saying that because of what I think is an incontrovertible argument, that Income Tax falling upon profits, unlike local rates, is not a burden upon industry. I put it for this further reason, that 100 years ago, when the national income of this country—I do not mean the Government's stated income, but the value of all incomes and of wealth produced in the country—was £400,000,000, the national taxation, nearly all indirect, was £72,000,000, whereas to-day the national income is ten times the figure of 100 years ago—it is estimated at about £4,000,000,000—and the amount of taxation in relation to national income is precisely the same as it was 100 years ago. There is this important difference to be taken into consideration, that if you take one-sixth of a national income, of £400,000,000 it is an infinitely greater burden than to take one-sixth of an income of £4,000,000,000. Therefore, the burden of taxation to-day is undoubtedly much lighter than it was 100 years ago. There is this further important difference to bear in mind, that 100 years ago the whole of national taxation was raised for unproductive purposes. A great deal of national taxation to-day goes back tie the people in the form of social services, and in that way it is a re-distribution, and a very beneficial re-distribution, of the national income.

I see one way of lightening the burdens of present taxation. I am not speaking at the moment of reduced expenditure, unnecessary expenditure, upon armaments and so forth. May I here say that the Labour party have never subscribed to the principle of national economy as it is understood and advocated by the party opposite? In the years before the War, I remember speaking from the place where the noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor) now sits, and stating in connection with the Budget of that time, which amounted to £200,000,000, that I hoped to live to see the day when the Chancellor of the Exchequer would present a Budget for £300,000,100. My state- went was received with hilarity in every part of the House. We of the Labour party take up the position that money spent through the State and through the municipalities upon social services is the most economical and beneficial way of spending money, and that in that way we get a far better return for the money spent. We are ruthless opponents of un-remunerative and uneconomical expenditure.

I have said that I can see one way in which the burden of national taxation can he reduced, and it is this: double the amount of national production; double the amount of wealth produced each year. It can be done, and having done that you have reduced the burden of taxation by 50 per cent. There are different forms of the re-distribution of wealth. The Chancellor of the Exchequer made several interesting references yesterday to the result of my reduction of the Sugar Duty two years ago. I hope that his observations will not be forgotten by my hon. Friends. I was criticised at the time I took off those duties. I took a great risk, I was told. What did the right hon. Gentleman tell us yesterday? He said that the result of cheapening the price had lead to an enormous consumption of sugar. The enormous increase in the consumption of sugar means the employment of a vastly greater amount of labour. Therefore, the effect of that reduction of indirect taxation has been, on the admission of the right hon. Gentleman, of a most beneficial character. Can the right hon. Gentleman point to a single instance where his reduction of the Income Tax and the Super-tax last year has added to employment by a single person?

There are no tax reductions in this Budget. I beg the Committee's pardon. There is one reduction. The right hon. Gentleman has reduced the Excise Duty on chicory. One of the newspapers this morning described it as a "Chicory Budget." That remission of taxation is purely Protective in its character and Protective in its intentions. In the last, four Budgets direct taxation has been reduced by £158,000,000, and indirect taxation by £56,000,000, some £20,000,000 of which was the reduction of the Beer Duty. Since then the right hon. Gentleman has increased indirect taxation by £2,0,000,000. Therefore, there has been a reduction in indirect taxation by £36,000,000, and a reduction in direct taxation by £158,000,000.

I want to say a few words about the right hon. Gentleman's references to the Silk Duties. He said that he might quote from my speeches. I should be perfectly willing that he should quote every word I said in the debates last year on the subject of the Silk Duties. I do not withdraw one single word. Twelve months' experience of those Duties has amply justified everything that I said. I said last year, mare than once, that the right hon. Gentleman would not kill the artificial silk industry by those Duties. I said that it would take more than that, to kill a new and growing industry like that. I said that he would get his revenue. I made a mistake. He has not got his revenue to the extent that ho estimated. [HON. MEMBERS: "More".] If the policy that he put before the House yesterday were sound, it means that he has discovered a panacea for all our troubles of taxation. He says that the Silk Duties have not increased prices, they have not injured trade, and the foreigner has paid them. This is a brilliant discovery made by the right hon. Gentleman since he left the Free Trade platform and joined the Protectionist party. If by putting a tax on manufactured goods and raw materials the right hon. Gentleman will cause no increase in prices, no injury to trade, and the foreigner will pay, where is the limit to be set in applying that policy? Why does he not apply it to cotton? He could raise £40,000,000 a year by applying it to cotton. Why does he not apply it to food? He could raise £60,000,000 a year by applying it to food. I will tell the Committee why he does not do it. He does not do it because he knows that the statement he made yesterday was sheer bunkum, and nothing else.

Mr. CHURCHILL

The right hon. Gentleman should certainly refer to the statement I made, which was that the course of these Duties had been influenced by the fact that they applied to expanding trades.

Mr. SNOWDEN

The right hon. Gentleman's imposition of these Duties, I gather, as a logical conclusion, has helped the expansion of these trades. I describe that statement, as sheer bunkum, and the right hon. Gentleman went on to admit that it was bunkum a moment or two after he had made his statement yesterday. He said that the state of the artificial silk industry was not so good as it had been. Why this falling away in the prosperity of the artificial silk industry? Surely, if these protective Duties are going to sustain it, it should not, after eight months of the operation of these Duties, be in a declining condition, and the wave of prosperity should not have been retarded. He now admits that that is the case.

I am not going further into the question as to the effect of the re-imposition of the McKenna Duties upon employment. I do not accept the right hon. Gentleman's figures which he gave yesterday. May I remind the Committee of what I have said repeatedly, and which was jeered when I made the statement last year? I said that if you take a new and growing industry like the motor trade, a tariff has not the same effect upon it as it would have upon an old, well-established industry. I admit that with the figures in regard to import and export trade, and the like, in the motor industry, you can prove any case you want to prove. The right hon. Gentleman himself admitted that yesterday. He said—and this came as a cold douche after loud cheering by hon. Members opposite as to the beneficial effect of the duty the right. hon. Gentleman imposed last year: It must be remembered., however—here again I add my word of caution—that as regards motor cars, as in the case of artificial silk, the conditions observable are those which apply to trades in a rapid and general state of expansion, through a change in world habits. It would he foolish for anyone to close his eyes to the actual facts that we have experienced in regard to these duties, but it would be imprudent to attempt to draw a general and unchanging rule from them."—[OFFFICAL., REPORT, 26th April. 1926; col. 1704. Vol. 194.] I hope hon. Members opposite will take that advice to heart.

Mr. CHURCHILL

Is that bunkum?

Mr. SNOWDEN

No, the right hon. Gentleman is not all bunkum; he has occasional lapses into sanity and common sense. I said at the opening of my observations that I would not deal in detail at this stage with the new taxes which are proposed by the right hon. Gentleman, but before I do say a Few words about them, I want to refer to the right hon. Gentleman's raid on the Road Fund. I am inclined to think that the opposition which the right hon. Gentleman's intention has aroused in all parts of the country has led him to modify his original intentions. But, still, they are of such a character as to demand the opposition of all who are interested in developing the roads of this country. The right hon. Gentleman has raided the Fund to the extent of £7,000,000, and the fact that he has taken £700,000,000 from the accumulated Fund is a far more serious offence than his proposal to lessen the amount of money to go into the Road Fund in future, because the present moneys in the Road Fund are allocated. The Road Board has undertaken obligations to the extent of £36,000,000 for, I think, the next three years, and what the right hon. Gentleman is doing by stealing this £7,000,000 from the Road Fund is to lessen the amount of development work which the Road Board has either undertaken or has in contemplation. I will not say more about that, beyond saying that in the Committee stage we shall offer to this proposal our most strenuous opposition.

The part of the right hon. Gentleman's Budget which, no doubt, has excited the largest popular interest, and which will invoke a bitter controversy, is the proposal to tax betting. I want to express my very decided views on this matter. I am not going to say much at the moment about the moral issue involved, though that is great and important. No. Chancellor of the Exchequer ought to propose a tax which he knows will outrage the most sacred feelings of a vast number of people in the country. I want rather, for the moment, to deal with the economic argument In defending this tax the right hon. Gentleman used this as an argument, which ought to have made Mr. Gladstone rise in his grave. It was an optional tax, he said. Surely, it is a new principle in finance to defend a tax on the ground that it has the merit of being an, optional tax. I have always lived in the school that the canons of taxation should be, first, to levy a tax so that every person will pay in proportion to his ability to pay; and, secondly, in proportion to the benefit that he gets from the spending of public money. The right hon. Gentleman defended this tax on the ground that a person need not pay unless he wished to do so. If every tax were of that character, how much revenue would the right hon. Gentleman gather in?

Mr. RADFORD

The Entertainments Duty.

Mr. SNOWDEN

The right hon. Gentleman has abandoned the principle of compulsory taxation, and has embarked on the policy of optional taxation.

Sir CLEMENT KINLOCH-COOKE

What about drink?

Mr. SNOWDEN

When a Chancellor of the Exchequer imposes a new tax, he ought to consider whether it is a tax which can be easily evaded. I am betraying no secrets when I say that the Chancellor of the Exchequer has proposed this tax in the face of the adverse advice of all expert opinion. If hon. Members will go to the Library, they will find there the evidence of the present Chairman of the Commissioners of Customs and Excise, given before the Betting Commission on this question, and no witness could be stronger in his emphatic condemnation of such a proposal as the right hon. Gentleman has submitted. The Chairman of Customs and Excise said that if you are going to put a tax on betting, you will have to put a tax on all betting: you will have to legalise what is illegal betting to-day. Are hon. Members prepared to face that? The majority of the House of Commons, or, at any rate, the majority of those voting last week, said most emphatically, "We are not prepared to do that." The Chairman of the Board of Customs and Excise said, that unless you do that, if you adopt the plan of the right hon. Gentleman, your system will ultimately burst the bounds altogether.

It. can be easily evaded. How many policemen are you going to have on a racecourse to see that every bookmaker gives a ticket to the person who makes a bet.? Why, you have not sufficient police force available to insure that such a tax will be collected. Someone ignorantly shouted a few moments ago, "Entertainments Duty!" I am the last person to whom that remark ought to be addressed. There is all this difference between a Betting Tax and an Entertainments Tax. An Entertainments Tax can be easily checked, but collusion between the bettor and the bookmaker is 1890easiest thing in the world, because both of them are interested in evading the payment of the tax. We have passed through the years of terrible financial distress during and after the War, with an Income Tax of 6s. in the pound, and not one of the predecessors of the right hon. Gentleman ever thought of imposing a Betting Tax. The financial resources of the right hon. Gentleman are completely exhausted when he has to raise the revenue of the country by imposing a tax upon what everybody will admit is one of the greatest evils in our midst. The right hon. Gentleman evidently does not regard it as an evil. I suppose he regards it as a virtue, and if it should succeed in giving him the revenue he anticipates, then, I suppose, that will be an added virtue to this vice.

Speaking a few months ago, the right hon. Gentleman said, in referring to his Budget of last year—and, if I might be permitted to use the expression, I think that this is a perfect example of Churchillian rhetoric— As a matter of fact, the Budget is the most delightful hamper, the most overflowing cornucopia of luxuries, the most delectable and carefully-chosen repast that ever was laid upon the table of the nation by a British administration. If I am spared, physically and politically, to introduce another Budget, I hope next year to he able to rub the noses of the critics in an abundant pool of indisputable facts. What are the indisputable facts in the pool in which the right hon. Gentleman is going to rub our noses? He has raised expenditure by £30,000,000 a year. He has imposed new taxation of £20,000,000 a year. He has lowered Government credit by 1 per cent. He has destroyed any immediate possibility of Debt conversion at a reduced rate of interest. He has given £42,000,000 a year to relieve the special objects of his compassion. He has robbed the sick, the disabled, the unemployed. He has raided the Road Fund. He has discredited the fiscal system of the country by relying on the encouragement of a grave social evil to raise £1,500,000 a year. These are some of the indisputable facts in the pool in which the right hon. Gentleman was going to rub the noses of his critics. Twelve months ago I described the Budget as a Rich Man's Budget. To-day I describe this Budget as the Budget of a profligate and a bankrupt.

5.0 P.M.

The FINANCIAL SECRETARY to the TREASURY (Mr. Ronald McNeill)

There is an old saying, which has now almost reached the dignity of a constitutional maxim, that it is the function of His Majesty's Opposition to oppose. I am quite certain that there is no one who undertakes that duty with greater enjoyment to himself than the right hon. Gentleman. I could not help reflecting while he was speaking that, of all historical roles, that which I can imagine that the right hon. Gentleman could most properly fill would be among those officials of Darius who sought occasion against the prophet Daniel. I do not think in his earnest research that he really found, during the hour in which he has entertained us, very much occasion against my right hon. Friend. There is one thing I am certain of and that is that he would be delighted, and quite ready, to send my right hon. Friend to a den of lions, though, if I may judge by the criticism which we have heard just now, I believe those lions would prove as tame and innocuous as the original ones. The right hon. Gentleman began his attempt to find occasion against the Chancellor of the Exchequer by reminding us that last year my right hon. Friend said, with the caution that distinguishes him and of which we had several examples yesterday, that this year he would no doubt "be faced by the consequences of what he was doing 12 months ago.

The right hon. Gentleman brought out this quotation, thinking that by doing so, and by doing so alone, he was embarrassing my right hon. Friend in view of what has taken place. I do not think that my right hon. Friend, or those who are supporting him, need shrink from the consequences of what was done last year. Taking into consideration the whole of the circumstances of the country at the present moment, the difficulties with which he has been confronted, the state of trade, the social conditions of the people, I do not think that the fact that, with the small adjustments of taxation to which I shall refer in a moment, he has succeeded in balancing the Budget and showing a surplus in face of all those difficulties is a consequence of which my right hon. Friend need be ashamed.

The difficulty I have in dealing immediately with the right hon. Gentleman's criticisms is two-fold. A considerable part of his speech, and I think the most important part, was, as he will himself recognise, of a very technical description. I mean that part in which he dealt with the national credit, the terms on which the Government can borrow money and the consequences which might arise from that state of things when conversion of loans will become necessary. I pay a tribute to the right hon. Gentleman on the way in which lie dealt with it in a very carefully prepared speech that was of a very technical character. But I hope that neither he nor the Committee will expect me to deal with those points without having seen in print what he said on these subjects.

I will now make only one general observation. I think we all recognise the tremendous importance of the conversion operations which will be necessary within the next few years and the tremendous obstacles which do stand in the way of successful operations of that sort owing to commitments already inevitably made and the consequent condition of national credit. The only moral to be drawn from that is that everything that is possible should be done not merely by my right hon. Friend but by all parties to support the credit of the State, not to make demands for further commitments, and to exercise, not merely in the Government service but throughout the nation, the economy upon which alone the ultimate credit of the nation must rest. If the right hon. Gentleman's observations only mean that the party to which he belongs, and which he leads will support the Government in all efforts of economy—I am not now merely talking about small questions of economy in a Government Department but in the very much larger sense of not making demands upon the Government for legislation which would involve commitments and involve expenditure—then I certainly, and I am quite certain I can speak for my right hon. Friend, will have no complaint with regard to what he has said in regard to that side of our national finance. The right hon. Gentleman made a statement, and I think he said that it was in the French Press, in regard to our negotiations with France, a statement which has not a shadow of foundation.

Mr. SNOWDEN

You will find it in the Sunday newspapers.

Mr. McNEILL

I understand he has seen it in some newspapers. Surely he has enough experience to know that because he has seen a thing in a Sunday newspaper it is not necessarily true and that he should bring, on no better basis than a paragraph in a Sunday newspaper, a charge of a rather serious nature—

Mr. SNOWDEN

This was an official communiqué which appeared in all the Sunday newspapers and also appeared on Monday morning. It was a communiqué from the French Finance Ministry to say that they had had representations from the British Chancellor of the Exchequer that it was important that some temporary arrangement should be made in regard to payment in order to—the word "help" was not used—in view of the Budget statement on Monday.

Mr. McNEILL

I did not gather that there was a communiqué from the French Ministry of Finance. I do not make any complaint against the right hon. Gentleman because he mentions it. I can, however, say that, taking it entirely from his account, it certainly entirely misrepresents what actually occurred. After all, if the matter is properly understood, will anybody in this House think that anything improper has taken place? The right hon. Gentleman certainly brought it forward in the course of his speech as if it were a most improper action. If I understand that he withdraws that aspect now, I shall accept the withdrawal.

Mr. SNOWDEN

I do not withdraw it, because I have not made it. I simply used it in this connection. I was speaking of an embarrassed Chancellor of the Exchequer and I said that he had sent this request to the French Government telling them to let him have something on account which might be included in this year's Budget.

Mr. McNEILL

I withdraw all accusations against the right hon. Gentleman. I understood he did not mean it in that sense. We, on this side, entirely misunderstood him. As the matter has been brought up, let me say exactly what occurred and I submit to the House that it was a very proper thing. It is well known—from time to time plenty of pressure has been brought upon the Government on the subject—that there is a large debt to this country from the French Government, that there have been negotiations going on for a settlement of that debt, that an arrangement had been come to, that the Finance Minister was coming to London, and that the whole arrangement had been held up by political disturbances in France. Does the right hon. Gentleman suggest that it shows a desparate state of embarrassment on the part of my right hon. Friend that he is anxious for this settlement to be brought to a conclusion? Is it anything improper or ridiculous or a sign of embarrassment that he should be anxious, before laying before the country a review of the financial position for the whole year, that, if possible, we should know where we stood in regard to the French Debt, and, if an arrangement should be come to, whether we could count on any payment on account of the French Debt before he made the financial statement of the year? That seems to me a most natural and proper thing for my right hon. Friend to do, and I cannot understand that, under the circumstances of the moment, any Chancellor of the Exchequer in his senses would have omitted to do it. I cannot accept the view of the right hon. Gentleman opposite that this is a sign of the terrible embarrassment of my right hon. Friend, whom he appears to think is nosing about to find hen roosts that he can rob, or the view that, because he finds across the Channel a tree that he can shake, his embarrassment is such that he can be spoken of in the language of denunciation with which the right hon. Gentleman concluded his peroration.

The right hon. Gentleman, continuing his criticism of the Budget speech, made a great point about the difference between imposition of taxation and reimposition. He said they were exactly the same thing, and he reproached my right hon. Friend because last year he said, as he says this year, that it would be a very unfortunate thing if the remission of taxation which were then made had to be reimposed. They have not been reimposed, but the right hon. Gentleman says, "No, perhaps not, but it is exactly the same thing because he has put on other taxes in other directions." It is quite true that, later on in his speech, the right hon. Gentleman made a peculiar revelation of the state of his mind on what the Chancellor of the Exchequer calls optional taxation. It is not only for him the same thing whether you reimpose Income Tax or whether you impose a Betting Tax, but the fact that the tax is optional is positively mischievous, according to the right hon. Gentleman's point of view. He hardly ever heard of such a thing before. Why, almost all indirect taxation is optional in that sense! Any indirect taxation which is not put upon the absolute necessities of life is optional in that sense, and has always been recognised as such. I do not know where the right hon. Gentleman studied his taxation and economics when he says that ho never heard of such a thing. It has always been regarded as one of the great advantages of indirect taxation, that it was open to the taxpayer, in regard to that particular form of taxation, whether he would contribute to the State or refrain from indulgence. That is the option at the disposal of everybody who takes a glass of beer.

Viscountess ASTOR

Hear, hear!

Mr. McNEILL

The Noble Lady exercises the option by avoiding the taxation. But the tirade about optional taxation is not only beside the mark, it is entirely out of touch with the history of taxation in this country. Another complaint which the right hon. Gentleman made against the Chancellor of the Exchequer was this. He said that this terrible embarrassment in which he finds himself—an embarrassment mostly in the imagination of the right hon. Gentleman opposite—was due to the fact that last year he did such an improper thing; he remitted taxation when he had not got a surplus out of which to give any remission of taxation. If that means anything it means that any realised surplus should be surrendered into the old Sinking Fund, and that the taxation of the following year, on both sides of the account, should be estimated without taking into account what surplus would be shown.

That was not the view of the right hon. Gentleman last year. On the contrary, he proposed that the surplus at the disposal of the Chancellor of the Exchequer should be used for the remission of taxation. The only difference is that he wanted another sort of tax remitted. He wanted to abolish the Sugar Duty. The Chancellor of the Exchequer did not agree as to the particular form the remission should take, but that is quite a different thing from the criticism now made by the right hon. Gentleman. Almost in the same sentence he went on to make another serious complaint against the Chancellor of the Exchequer. He said that Income Tax, and it is one of the most serious symptoms of our present condition is falling in its yield. I understood the right hon. Gentleman to say that the yield of the Income Tax was falling so much that it was a serious symptom—

Mr. SNOWDEN

Really, I am getting so accustomed to being misrepresented that I had almost made up my mind I would not interfere when any further misrepresentation was made, but I think I must on this particular point. What I said was that the Income Tax was failing to respond to the increase of last year; that is a different thing to saying it was falling. I said that the yield of the Income Tax was not going to be so expansive as in the previous year.

Mr. McNEILL

I am quite willing to take the words which the right hon. Gentleman has just used, and my comment upon it is this, that at the same time that he says this he is still making the complaint that the Chancellor of the Exchequer took something off last year. I should have thought that when such a state of affairs exists, to which the right hon. Gentleman referred as a serious symptom, and I agree it is a symptom that requires careful consideration, when the Income Tax, as I thought he said, shows a falling off, but as he now says, fails to respond, when such a state of things exists it is serious, and the remedy for it is to give some relief to the particular tax. That is the traditional and orthodox manner of dealing with a tax which begins to fail to respond or gives a less return than might have been expected. The orthodox manner is to relieve that particular form of tax, which is exactly what the Chancellor of the Exchequer did last year. The right hon. Gentleman complains that I am misrepresenting him. I have no intention what- ever of doing so, but if I might give a quid for his quo—I am not accusing him of misrepresentation—my difficulty is that he makes assertions which we have to take upon his ipse dixit. He gives us no argument at all. It is not as if they were self-evident propositions; quite the reverse. For example, the right hon. Gentleman tells us, with all the air of authority he can command so well, that Income Tax is not a burden on industry. I am a very humble-minded man, and I want to learn from the right hon. Gentleman, but it is a startling proposition. I was brought up to believe the contrary; most of us have been. Almost every book on economics and taxation that I have ever read have taught me the opposite. But the right hon. Gentleman makes the assertion that all this is untrue. He says, "Do not believe for a moment that Income Tax is any burden on industry." He might have taken us into his confidence as to the reasons which have brought him to that conclusion, but no, not a single word of argument.

He makes that assertion, and then he went on to say that there were only two possible ways, as I gather two possible fields, in which economy could be followed out with any hope of success. One was Debt, and the other the Supply Services. Then we had that disquisition, to which I have already referred, of rather too technical a nature to deal with at a moment's notice, but from which I understand the general result was that the right hon. Gentleman and his party, if they ever have an opportunity of doing so, are going to cut the Gordian knot of all these financial difficulties by doing away with the present banking system and nationalise the banks of this country. There, again, he did not think it necessary to tell us why it should have any effect in remedying for a moment the particular evils to which he referred. He left it almost immediately and spoke about economy in the Supply Services, and with all the air of a solemn revelation which it was now possible to make for the first time, a revelation that he had carefully concealed up to now, we were allowed to know what happened when he was in office with regard to the Navy Estimates.

I am quite willing to make a very large admission to the right hon. Gentleman with regard to economy on the Naval Estimates. He tells us that the terrible Estimate of his predecessor of £61,000,000 was ruthlessly cut down to £55,000,000, showing a large and spendid economy standing for ever to the credit of that short-lived Socialist Government. I think he is wholly entitled to that. But I doubt very much Whether there would have been anything left in the Navy Estimates if they had stayed in office very long. If the right hon. Gentleman had his way, if a good many of his followers behind him had their way, we should soon have had that economy—a complete disappearance of the Naval Estimates and of the Navy. We are content, in this respect, to face the consequences, as my right hon. Friend said last year, and if and when the time comes for us to have to face, not only the consequences but our constituents, we would far rather go without this particular economy, of which the right hon. Gentleman is so proud. We hope that whatever economies we make, we shall leave office, when the time comes, with a British Navy still in being.

The right hon. Gentleman, in dealing with the question of Debt, made a very extraordinary complaint against the Chancellor of the Exchequer. I thought that, if there were one thing in the Budget more than another which would have had the approval and support of so orthodox an economist as the right hon. Gentleman, it was the way in which the Chancellor has dealt with the Sinking Fund. But no, there must be an occasion found against the prophet, and so the right hon. Gentleman has managed to find it to his own satisfaction. I am sure, through inadvertence, he rather failed to make quite clear to the Committee exactly what had been done. I think he may have given the impression to some of the more thoughtless Members of the Committee that the Chancellor of the Exchequer had appropriated this surplus of £4,000,000, had, in fact, raided the Sinking Fund in order to make up the balance of the £50,000,000 of the Sinking Fund of 1923. I do not think he explained that the £4,000,000 was in the old Sinking Fund, a very different matter from the Sinking Fund established by the present Prime Minister in 1923, and into which £50,000,000 has to be paid. That £4,000,000 was a realised surplus, which was surrendered at the end of the year into the old Sinking Fund. I am not complaining of the Budget Estimates of the right hon. Gentleman. Supposing they had been absolutely correct—

Mr. SNOWDEN

They were exactly accurate.

Mr. Mc NEILL

There would have been no £4,000,000 in that case. When you take a realised surplus of that sort, and in effect take it from the old Sinking Fund, into the new Sinking Fund, in order to keep £50,000,000 intact, that is a very different thing from the impression which many hon. Members got that there had been an improper raiding of the Sinking Fund. I have already said that we entirely agree with what the right hon. Gentleman said as to the necessity for maintaining national credit, and in that connection I would remind the Committee that the whole system of the Trade Facilities Act, as the Chancellor of the Exchequer announced, is now to be brought to an end. Although not perhaps a matter of first-rate importance, it is of importance from the point of maintaining the national credit, and it is because further guarantees of this sort, at a time when these Acts have outlined their usefulness, would be a drag and a check on national credit that the Government have decided to bring them to an end.

There remains only one other matter on which I need comment. The right hon. Gentleman said that he would reserve for future occasions a more detailed examination of the actual proposals for new taxation. The matters in this Budget which naturally attract comment—the right hon. Gentleman referred to them all—are the Silk Duty, the McKenna Duties, the Motor-Car Licence Duties and the Betting Duty. So far as two of them are concerned, the Silk Duty and the McKenna Duties, I do not think we shall find any great difficulty of defence this year. There is nothing new in them. I do not know whether the two sides of the Committee will again raise the old question of Free Trade versus Protection with regard to the McKenna Duties, and whether we shall have over again this year all the speeches in the same or similar words to those used a year ago; but so far as we are concerned, certainly so far as I am concerned, I am quite content to say that the Silk Duty and the McKenna Duties are giving us a very useful addition to the revenue. I will not say that they are giving additional employment, because I am not certain that that is so, but, at all events, they are assisting employment, and the downward tendency of unemployment, which is a very happy and blessed feature of recent times, is being, pro tanto, assisted by the operation of these particular Duties. It is doing that, moreover, without adding to the price of the articles sold. Therefore, when you have three certainties—no addition to the price, a useful addition to the revenue, and probably assistance from the point of view of unemployment —I do not think it will be necessary for us to go further for their defence.

As regards the Road Fund, so far as detail is concerned I would rather reserve myself also until a later period, when we know exactly what attitude is taken on the Report stage by right hon. and hon. Gentlemen opposite. But, as a preliminary to those Debates, I would say that I hone the Committee will not miss one very important feature of the situation The right hon. Gentleman again introduced the word "steal" in this connection. My right hon. Friend the Chancellor of the Exchequer was accused of "stealing £7,000,000." As the right hon. Gentleman has shown us this afternoon, and by his complaints to me, he is very particular in the choice of words, and he would not for the world misrepresent anyone even inadvertently. Therefore, when he says that the Chancellor of the Exchequer is "stealing £7,000,000" he means stealing; he means taking something that does not belong to him. My right hon. Friend, of course, is the representative and spokesman of the taxpayer when he stands at this Box, and that £7,000,000 is to be placed to the credit of the taxpayer in the Exchequer of the country. The right hon. Gentleman says that it is stealing, because the money does not belong to the taxpayer. To whom does it belong? I am certain that when the detailed history of this matter is gone into, it will be seen that there is not a shadow of excuse for saying that this money belongs to anyone except the taxpayer. Therefore, it is a matter entirely for the taxpayer, through the agency of my right hon. Friend, to decide, with all the conditions taken into account at the moment, what is the way in which that money can be most usefully spent in the interest of the taxpayer?

The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) said yesterday that it was quite natural that £200,000,000 or £300,000,000 should be spent on roads alone at the present time. He said that my right hon. Friend the Chancellor the Exchequer scoffed at the idea of the possibility of profitably spending £200,000,000 or £300,000,000 on the roads. My right hon. Friend scoffed at nothing of the sort. I think It is very likely that you could, if you had it, spend quite profitably £200,000,000 or £300,000,000, or twice that sum, in renewing the roads of the country. What my right hon. Friend did say, when it was suggested by someone interested in the Road Fund that £200,000,000 or £300,000,000 should be spent now upon the renewal of roads, was, "We ought to have some sense of proportion in these things, and we ought to realise that we have not £200,000,000 or £300,000,000 at this moment to spend upon that, or upon any equally desirable object." The right hon. Member for Carnarvon Boroughs, if he says that we should spend that sum, is no doubt ready to propose the exact method by which that £200,000,000 or £300,000,000 could be raised by taxation now. If at a later stage he does propose that that sort of sum should be raised by taxation for the roads—I do not think that he will—it will be time enough then for my right hon. Friend to give his personal reply.

There is one other point that I hope the Committee will bear in mind in connection with this subject. Altogether apart from the taxation which, for very good reasons, was allotted for the purpose of roads in 1909 and renewed in 1920, since the War the State has spent more than £18,000,000 upon the upkeep of the roads, for which there was no sort of contractual obligation whatever. When the balance sheet of the Road Fund is taken into account and the history of the particular transactions out of which the Road Fund grew is recalled, it is necessary to consider the total benefit which the Road Fund has derived from the National Exchequer, and, as my right hon. Friend said, keep "a sense of proportion" as to how much can or ought to be spent, having regard to all the other necessities of our time. When the time comes for these matters to be gone into with the close examination of detail which the right hon. Gentleman. opposite will no doubt give them at a later stage, I do not think that we shall shrink in the least, as he seems to think, from facing the consequences of what was done last year, and we shall be perfectly prepared to answer all the criticisms which he may make.

Sir JOHN SIMON

The speech of the Chancellor of the Exchequer yesterday, and the Budget proposals which he introduced, cover so wide a field, that it is easy to deal at great length with a number of these topics at a time when many Members of the House would wish to express their first view of the Budget. I will have regard to the time and make only a short demand upon the attention of the Committee. When I listened to the Chancellor of the Exchequer yesterday, I was reminded of a saying which I think is attributed to a critic of his great predecessor, Sir William Harcourt—that the power and the prehensile character of his mind were like the action of an elephant, equally able with his trunk to pick up a pin and to uproot a tree. I myself unfeignedly admired the way in which the Chancellor of the Exchequer dealt, in a comparatively short space of time, with a vast number of matters small and great, remissions of taxation so important as the matter of £500 going to the abolition of the Excise Duty on chicory—I cannot think of any other remission, except perhaps in relation to antiques—I hope the genuine antiques—and matters of immense importance on the other side of the Account.

I would like to begin with a very important matter, not acutely controversial, which we shall no doubt discuss more in detail on one Resolution. The Chancellor of the Exchequer has announced his intention of abolishing the three years' average for Income Tax and substituting the figure for the single year preceding the year of charge. There are many attractive arguments which may be advanced for that change, and at the same time—I am speaking from a fairly long experience, both on behalf of the Crown and of the taxpayer —I am not by any means clear that the change will really commend itself to all concerned. At present the scheme of Income Tax calculations is ludicrously elaborate and varied. If I remember rightly, railway companies and gas companies are taxed on the profits of the preceding year; colliery enterprises are taxed on the average of five years: income from foreign investments is taxed on income in the actual year of charge: and there are all sorts of varieties of that kind, which really have no justification. At the same time, the three years' average is a method which has been recommended by the Departmental Committee of 1905, and, although I know that the last Commission was prepared to suggest the change, yet I am not at all certain that it will turn out to the advantage, in the long run, of the Treasury or the commercial public. It certainly will increase very greatly the difficulty of estimating with accuracy the yield of the tax.

As things are, the revenue always has some notion of how the future is to work out, because as long as assessment is based on three past years, the Revenue Authorities have a pretty good notion of how two of those three years may be expected to come into the calculations for the new year. Not only that, but I doubt whether, after experience, it will not be found that some advantage is lost from a failure more or less to equalise the ups and downs of business. The Committee must remember that this proposal is not, and cannot be, that you are to pay Income Tax on the income of the year in which you are taxed; it must necessarily be a tax based on something previous to that, for otherwise you would never be able either to assess the tax or to collect it until the end of the year for which the tax is charged. For my own part, I express some doubt as to whether it will be found to be a very great advantage, though the matter is not one that causes any great heat or controversy. The reason why the Chancellor of the Exchequer is rather disposed to favour it is plain enough. It will always be the case that the Treasury is a little disposed to favour such a system if thereby it cuts out two bad years. It will always be the case that the commercial community will be a little slow to welcome it if they lose the advantage of two bad years. No doubt it is true that, in the end, the thing will equalise itself, but I doubt whether it is going to prove such an immense advantage as the Chancellor of the Exchequer seems to suppose.

I wish to put to the right hon. Gentleman another question, with which, perhaps, he will deal at some stage of these discussions, because, although it is not in the Budget, recent events have made it a matter of very great interest to all who have to consider the national finances. Will the right hon. Gentleman be able to indicate his view as to whether something ought not to be done to prevent the possibility of Death Duties being evaded by a sudden change of domicile on the part of a British subject? I would like to point out that a change of domicile for this purpose is a thing that may happen in a moment—between night and morning. It is not like a change of nationality, which requires the gradual building-up of the conditions upon which alone most civilised States will accept one as a member of a new community. A change of domicile, as I say, can take place between night and morning, but there may be difficulty in proving that it has taken place. I dare say, in connection with some recent instances, there may be a good deal to be said about that point, because it is one thing for a gentleman to say in his will that he has changed his domicile, but it is a very different thing for his executors, after he is dead, to prove that he actually did so. At the same time, I cannot help thinking that sound public finance requires that this matter should be considered. An analogy occurs to one which, I think, was mentioned by the hon. and learned Member for the Exchange Division of Liverpool (Sir L. Scott) the other day. We do not limit Death Duties to property which, in fact, passes at death, because, if we did so, people would give away their property on their death-beds and great sums of Death Duties would be avoided. Therefore, Parliament, by a series of changes, has now gone so far as to say that people who make voluntary gifts of their property within three years of the date of their death, must expect that that transfer shall be treated as though it was the passing of their property at death. It seems to me that, while these are not matters of acute or violent controversy, they are of great importance, and I am certain that the Chancellor of the Exchequer, concerned as he is with the public revenue, must be thinking a great deal about them.

May I occupy the attention of the Committee on three points which no doubt are matters of much greater controversy? The first is the proposed Betting Duty. I listened to the Chancellor's explanation of how this matter stands with the admiration which I always feel for the right hon. Gentleman's powers of exposition. He showed once again that had it been his misfortune to be called to the Bar and to practice the legal profession, he would at once have established his reputation not only as the clearest of all possible expounders of a difficult subject but one who can put his explanation into very few words. He explained to us the complexity of the present law on the subject. What he did not point out and what has a good deal to do with the question, is that when the Act is passed, which I think was called an Act for the Suppression of Betting Houses, it was really the intention of Parliament to stop altogether the business of the professional bookmaker. Indeed, the Report on the proposed betting duty to which the ex-Chancellor of the Exchequer referred just now, has an appendix in which one can read the speech that was made when that Measure was proposed in the House, and it is quite plain that the Government which proposed it, intended and hoped to put an end to the business of professional bookmaking altogether.

They failed, for two reasons. The first was because, as so often happens, the language of an Act of Parliament turned out to be quite inadequate to express the intention of Parliament. The language of the Act is in effect something of this sort.. "It shall be illegal for anybody to open or keep a house or office or place for the purpose of making bets with persons resorting thereto." There are two flaws in the language of that Act, and it did not take long for people to find them out. First, there is the famous controversy, or the controversy that used to be famous, as to what constituted "a place within the meaning of the Act." It was discovered that as long as a bookmaker did nut anchor himself too solidly to one spot, did not stand under one umbrella, or placed his feet on one particular box, he was not pursuing an illegal occupation because he was found on race courses openly engaged in receiving his clients and effecting transactions with them. The second reason was because the language of the Act only made betting a criminal offence if you carried on an office for this purpose to which people "resorted" for the purpose of making bets. Parliament forgot the telephone and the telegraph and the other methods by which you can send what you want to send to the bookmaker without personally visiting him at his own office. For these reasons, as we all know, not only has the Act failed to secure the result expected, but it has given opportunities for an immense development and extension of the system.

I do not think, however, that was the only reason why the Act failed. I think the Act really failed because there is a sentiment in a large section of the public which does not regard it as wrong to bet, and considers that a Parliament which tries to put unreasonable or extravagant obstacles in the way of betting, is doing something quite contrary to the opinion of a large mass of the public. There is a great deal in that. My own view—though I must listen to the arguments—is distinctly opposed to the betting tax, but I cannot pretend to base my opposition strictly on high moral principles. Let me make a confession. I occasionally adventure half-a-crown on a game of golf. I am sorry to have to add that I almost invariably lose the half-crown, but I find it very difficult to think that there is some extreme moral principle here involved when one reflects, for example, that raffles which are held at church bazaars, or sweepstakes of the most innocent and innocuous character, undoubtedly attract the support of the most virtuous of the community.

Mr. MACQUISTEN

Golf is sometimes a game of skill.

Sir J. SIMON

That is true—sometimes. So I understand is picking a winner. At any rate, I cannot pretend to put my opposition on that high moral plane. At the same time, I think it is a most serious consideration for the House of Commons and this Committee, whether in our legislation we are going to take a step which I think may fairly be regarded as acquiescence in and approval of what has been described as a terrible national evil. I do not appreciate the state of mind of anybody who thinks you can oppose a betting tax on the highest moral principle and who at the same time wants to tax the consumption of intoxicating liquor. It does seem to me, however, that it is a very serious question for the House of Commons and this Committee whether we ought to give what will be regarded as an imprimatur to this method of amusement or excitement, which beyond all question produces the most terrible havoc in a great many homes when Carried to excess. The ground upon which I should oppose this Betting Duty is not the high moral ground, but the ground, as it seems to me, of practical difficulty. The result of the breakdown of the intention of Parliament has been that you not only have the turf accountant who carries on the perfectly lawful business of credit betting; you not only have the bookmaker on the racecourse who will enter into cash transactions with you, but you have in all our industrial areas in the streets, alleys and courts, unfortunately, a terrible amount of illegal and illicit street betting. It is the one case in the history of England to-day which may fairly be quoted against us, if we were disposed to sneer at the United States for failing to enforce the law as to prohibition. It is the one case in which the law says one thing and the people do another to an immense extent every day and every night.

The Report of the Committee on the Betting Duty recognising that fact, was disposed to indicate that if you are going to have a tax on betting you must not put the burden of the tax on the people who are now doing what is lawful and thereby confer a great advantage on all the people who are now doing what is unlawful. That is the real difficulty which the Betting Tax here raises. I do not myself see how you can, as a matter of fair play or good government, put bookmakers and backers who keep within the law at a disadvantage compared with those who break the law. If you do, you make it certain that you are encouraging people to break the law. What the Committee on the Betting Duty had to consider was not the present proposal of the Chancellor of the Exchequer —which I think has not been very widely supported by expert opinion behind the scenes—but a very different proposal, namely that you should legalise cash betting off the race course; that you should make it possible for the people now engaged in street betting to go to a betting office and bet there; that you should give a licence to the man who is now carrying on an illegal business and that you should then attempt to raise your tax, not only from the turf commission agent and the bookmaker on the racecourse, but from this new class of individuals who would then be given a legal status by an Act of the Legislature. At any rate, that proposal is intelligible, though, I think it would run entirely counter to the better judgment of the nation. It would involve definitely legalising betting in conditions where it is not legal to-day. It would not have the disadvantage—the grave disadvantage —which this scheme seems to have, namely that it is going to put bookmakers and backers who are carrying on a lawful business, at a serious disadvantage as against others who at present are secretly breaking the law. The inevitable result of that course is that you are actually encouraging illegality and driving this business—which, as I say, in excess and in many homes is nothing more or less than rank poison to the life of the people—underground into the very channels and through the very medium where you ought to do your very best to stop it.

6.0 P.M.

Let it be granted that the law of this country and the police are not strong enough to stop betting. I wish they were. That is no manner of reason why you should make the unlawful, underground, illicit, unregulated thing tenfold worse than it. is to-day. On these grounds it seems to me most surprising that the Chancellor of the Exchequer should bring forward this proposition and that he should attempt to defend it by saying, "I am not taxing anything that is illegal; I am only taxing the section of this business which at present may be carried on under the law." This is one of the Chancellor's bold novelties, and we all greatly admire his courage. It is a new notion. Let me trouble the Committee with one quotation which will prove it to be so. The present Prime Minister was a predecessor of the right hon. Gentleman at the Treasury and he considered this tax. The hon. Member for Penrith (Mr. Dixey), who has taken some interest in this subject, asked a question about this very tax as recently as last December. On 9th December last year, the hon. Member for Penrith asked the Prime Minister whether the Government would not consider some scheme for a tax on betting. The Prime Minister said, last December I do not wish to debate the matter, but I can tell my hon. Friend that before he became a Member of this House, and when I was Chancellor of the Exchequer, this matter was gone into most exhaustively, and that there are one or two objections which seem almost insurmountable."—[OFFICIAL REPORT, 9th December, 1925; col. 447, Vol. 189.] While, of course, it may be that the right hon. Gentleman has discovered a way over the obstacle, I think I am expressing a very widely held view when I say that it is a most serious thing for us to contemplate the taxing of a portion of a business which is lawful while failing to stop or to suppress another portion which is unlawful, with, as I think, the inevitable consequence that we are encouraging illegality and driving this most unhappy practice into channels where it cannot be regulated and still less suppressed.

I want to say a word on the second subject, which is the subject of the Road Fund, and I will be very brief about it. The Road Fund is a subject on which, I think, we who sit on these benches have a very special right to speak, because the fact is that the Road Fund is a Fund which had its origin in 1909 as part of the proposals of the Budget of my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George). As the Committee remembers, it took this form: There was a tax on petrol, and there was a tax on motor cars, and it was certainly the case that from the very beginning the money thus raised was to be put into a special fund, a Road Fund, which was to be dedicated for a special purpose, and indeed, if you look up the old debates, you will see that the present Foreign Secretary, who had just before been the Minister of Finance, stated across the Table in those debates that the Conservative party were either going to accept or resist this proposal according as they received the assurance that the money thus raised was going to be dedicated to roads and to nothing else. There cannot be any doubt, therefore, that in its origin it was intended to be devoted only to roads.

I do not myself take quite so severe a view as to the constitutional right of Parliament to consider the new circumstances and to deal with them as some other people do. I, myself, should draw a distinction between this case and the case which we had on the Economy Bill, for example, about the contribution of the State to National Health Insurance. The contribution of the State to National Health Insurance was a bargain in this sense, that there was another party to the bargain, that the approved societies came in, were negotiated with as a body, and were asked and agreed to undertake certain duties in return for certain promises. That is, as far as anything ever can be, a Parliamentary bargain. But I quite agree that there is a constitutional right in Parliament to say, after many years: "Well, we find that this Fund, started in this way, dedicated originally for a particular purpose, has become so big, so unnecessarily large, that it can be reconsidered." I think it fair to say that I draw that distinction, and I think Parliament might quite properly draw it, but here again I cannot think that the extremities to which the Chancellor of the Exchequer finds himself driven are really any solid justification for saying that this money is not needed for roads. I cannot think that that argument stands square for a moment.

The true position is this: The roads of this country are now occupying a position in national life, in relation to national trade, which is quite different from what a previous generation ever dreamed. It is quite true that when railways came along, and for long after, it looked as though the road was a way by means of which people would pass with horses, and on foot, and it might be on bicycles, and that it would, therefore, cease to be a really important medium of internal communication over long distances, and that continued for a great many years. Indeed, it is an example of the imaginative power of my right hon. Friend the Member for Carnarvon Boroughs that he pictured in 1909 that this was going to be the big thing it is, but what has happened since then really is this: Take my own constituency in Yorkshire. Much of the wool that is being carried to the West Riding of Yorkshire, and which comes into Manchester Docks, does not go by railway to Bradford at all; it goes by road to Bradford. The cotton that comes into Liverpool does not go by railway to the Lancashire towns; it goes by heavy traction along the roads. [An HON. MEMBVI: "Some of it !"] I do not say all of it, but a great deal of it, and there is the strongest indication that if the roads are good enough, and if they stand the traffic, that is going to be a profitable and economical way of carrying on a great deal of the business of this country.

Mr. CHURCHILL

If they pay their tax.

Sir J. SIMON

I quite agree, but my point is not that. My point is that the roads of this country are really occupying to-day a far more important position in the structure of internal trade than they ever did before.

Mr. MACQUISTEN

They will be still more important in the future.

Sir J. SIMON

It may come to that, but, at any rate, the question for the Committee in these circumstances is: Is it really wise for us to say that we are not going to spend this money, which has been raised for this purpose, on roads, but we are going to take it for general national purposes? I understand the temptation, and I think I understand the emergency. I am not puffing it, as the Chancellor of the Exchequer sees, on the ground of a gross breach of contract or anything of the kind, but I do most gravely doubt whether, as a matter of fact, taking a long view, it is a wise thing to do. You have these considerations suggested: You have the consideration, first of all, that if, as the Chancellor seems to think, our internal trade is so much more important than our external trade—he used a phrase yesterday which surprised me when he suggested that—you are bound to consider whether the trade and commerce of the country does not most urgently need the improvement of roads and the making of great new roads, both trunk roads and other roads, throughout the country.

You have to consider, secondly, this: What is the loss which trade suffers to-day from the crowding, from the bottle-necks, from the absence of rapid means of road communication? The loss is enormous, and there is no instance in which it is more obvious that time is money. Then, I think you have to consider this: Before we have got through many of our industrial troubles, I think we must prepare ourselves to face the possibility that there are men who will be trying to be engaged in the future in some highly organised industry, who, as a matter of fact, will be surplus to the industry, and who may have to get other and different work, and even apart from that, if you have, as you now have, over a million unemployed—

Mr. CHURCHILL

Under a million.

Sir J. SIMON

Well, let me say a million. The point I am making does not depend on the exact figure. If we have this terribly large figure of unemployed, it does seem a most surprising suggestion at this time to say that you should deal adversely with that particular fund, which, if vigorously used, might not only improve country roads, might not only maintain and improve great trunk roads, but might be used for making new means of communication. What are the arguments against that? There was one argument against it which really surprised me, coming from the Chancellor of the Exchequer, who actually said that if you go spending money on roads like this, what will happen to the railways?

Mr. CHURCHILL

No.

Sir J. SIMON

I can quote it if the right hon. Gentleman likes. There is a sentence in his speech which is practically What I have stated. You might have used the same argument when the railways were put down. You might have said: "You must not authorise railways, for, if you do, what will happen to the stage coaches? "

Mr. MACQUISTEN

That was said

Sir J. SIMON

There is no doubt that if it was said, it was a very obscurantist thing to say.

Mr. MACQUISTEN

It was the railways that stopped road transport in this country.

Sir J. SIMON

The hon. and learned Member for Argyllshire (Mr. Macquisten) is full of information, but I am sure he will agree with me that it was a very stupid thing to say, and it is seldom that we have a stupid thing said by the Chancellor of the Exchequer.

Mr. CHURCHILL

My argument was that it was a very wrong thing that the railways should be rendered obsolete by unfair competition. If they are rendered obsolete by fair competition, that is an economic fact, which we cannot control.

Sir J. SIMON

I am glad to have it quite clear. I thought the right hon. Gentleman used a phrase in which he quite plainly said that, if you had this money spent on the further improvement. of roads, it was going to be a serious obstacle to the railways. I quite agree that money has to be fairly spent, but all that I am arguing is that the railways in this matter must look after themselves, and you might just as well argue that you cannot have motor omnibuses because there are tramways, or that you cannot have electricity because people have got oil lamps, as to say that you are not to have good roads because the railway interest is powerful and is deeply concerned about the future.

Mr. CHURCHILL

That was not at all my argument.

Sir J. SIMON

I can assure the right hon. Gentleman that there is a phrase in his speech which might be so understood, and I did so understand it. However, let it now be conceded that if anybody uses that argument, it is a bad argument, that the Chancellor of the Exchequer repudiates it, and that he never at any rate meant to say anything of the sort.

Mr. CHURCHILL

I do not want to interrupt the right hon. and learned Gentleman, but there are two separate arguments. One is the argument of unfair competition with the railways, and the other is whether it is within our financial capacity to make such a very heavy expenditure—two or three hundred millions—on the roads, however desirable it might be, at the present time.

Sir J. SIMON

I quite agree, and I was dealing really with the one and was just going to deal with the other. The right hon. Gentleman expressed surprise at the suggestion that it might be possible to raise and to spend a great capital sum on roads. I do not see the difficulty. If this Road Fund is a Fund in the future, as it has been in the past, which is earmarked for road purposes, I confess that I should have thought that a very considerable capital sum could very properly have been raised on the security of that Fund, and that it would be perfectly possible and very proper that it should be used for the purpose of very rapid and substantial road development. It is a wholly reactionary proposal that we should do something which stops or delays that development; it is bad for trade, it is bad for our efforts to deal with unemployment and to find means of employment; it really delays rather than assists the recovery of the nation to more prosperous conditions; and it is, as a matter of fact, diverting a Fund which, before the War and after the War, has been throughout dealt with by the right hon. Gentleman's own colleagues as though it was a Fund for road purposes and for nothing else. If the Home Secretary were here, I would have had; I quotation to point out how he said so quite recently, and on those grounds I think the road proposal of the Government is open to very serious criticism.

Allow me to add two or three words on the steady tendency of this Budget to extend a change in the fiscal system in the Protectionist direction. The tax on imported wrapping paper seems to me to be a perfectly miserable tax. The size of the industry in this country which is supposed to be protected thereby is less than the size of some of the single enterprises that are going to be injured by the tax if it raises the cost of wrapping paper. Every household, especially every poor household, is exposed to the effect of a tax like that—unless it perform the miracle of not raising the price of wrapping-paper. When we come to consider the tax in detail, I expect great difficulties to arise over what is to be done in the case of imported commodities, the main value of which is in their contents, but which are wrapped up. Are we going to tax all the wrapping-paper in those comparatively trumpery cases? I am sure it will be found impracticable to do so. If, on the other hand, it is said, "I am going to disregard the wrapping-paper unless it is a substantial fraction of the whole value of the duty," what we are doing is not assisting British production but putting a penalty on the British producer who has got to buy all his wrapping paper under these new conditions while imports come in which will not be affected by the Duty. I cannot think that this proposal, which was left out last year, is one which on fair examination can possibly be justified.

I can quite understand the right hon. Gentleman's reason for wanting to round off his Motor Car Duties by bringing in commercial motor cars, and I thought there was great force in what be said, because I know it is a fact that this difficulty about spare parts and all the rest of it creates an immense amount of complication and does very little good. At the same time, the language which he uses when he announces this proposal shows how cheerfully and boldly and absolutely the Chancellor of the Exchequer disregards the assurances which the head of his Government has made. He used language in flattest contradiction of the most solemn assurances of the Prime Minister. In his Budget speech, yesterday, he said commercial motor cars could not possibly be taxed, as no such tax could be justified within the limits of the Safeguarding of Industry policy.

Mr. CHURCHILL

Hear, hear.

Sir J. SIMON

Yes, but the Prime Minister at the last election assured the country that the only means by which any industry which complained of foreign competition could possibly secure any sort of protection would be by coming within the four corners of the Safeguarding of Industry Acts, and, therefore, whatever may be the practical convenience—

Mr. CHURCHILL

Nothing ever limited the right of the Chancellor of the Exchequer to propose taxation in his Budget.

Sir J. SIMON

If you please. That makes the matter exceedingly plain. It appears, then, that the administration to which the Chancellor of the Exchequer belongs is an administration of this sort—that the Prime Minister is at liberty at election times to give assurances, as the head of the Government, as to certain kinds of taxation which in no circumstances will his Government adopt, whereas the Chancellor of the Exchequer says "That does not limit the right of the Chancellor of the Exchequer to propose what he pleases in his Budget." It shows, what I have always believed, that there never was a sham greater than the sham of pretending that the assurances of the Conservative party on the subject of Protection were worth anything at all.

The next instance, which is equally remarkable, is the renewal of Part I of the Safeguarding of Industries Act. People have short memories, and the right hon. Gentleman takes full advantage of the fact. The person who introduced the Safeguarding of Industries Act was the present Prime Minister, and he was challenged at the time as to why he said Part I was limited to five years. He gave his reasons. I do not know whether the Chancellor of the Exchequer will do me the kindness of listening to the reason why five years was the period. The reason was that it was argued that certain industries must be given time to strike root, must be given time to start, and, said the Prime Minister five years ago: the object of fixing the period of five years, which I quite agree may be described as an arbitrary period, is that that is a term of years which, after very careful consideration, we believe is long enough for any industry to prove that when it is not having special financial assistance, and when there will still be in some cases competition, those industries can so solidify their position and so perfect their experiments that they may be able to stand and flourish in free competition at the end of that period."—[OFFICIAL REPORT, 31st May, 1921; cols. 876, 877, Vol. 142.] It is the old story. It always happens. First of all, they ask for a small piece of Protection for some particular industry. They say, "You are very young; you are exposed to all the cold blasts of the world; you are in danger of losing your young life. Instead of being thrown to the winds of the world in your infancy, you ought to be given a short period during which you may establish yourself." And assurances are always given that the proposals made are quite temporary, for the purpose of just giving the thing a chance of starting—because when it has had a chance of starting it will grow up by itself and face the world quite comfortably. The thing that, happens is the thing that always happens. When the end of the five years comes, the Government says: "We cannot possibly expose you to the new conditions. You have got accustomed to the present conditions, and you must have them, and so this time, instead of giving you five years' protection, we will give you 10." I wish I had the tongue of the Chancellor of the Exchequer when in the old days he was denouncing such proposals, because nobody sees more clearly than he that this is a perfect example of the ways in which Protectionist systems always tend to work.

The last point I wish to make is that there is a, new feature in some of these financial proposals, or, at any rate, a feature which is not very old, which in my humble submission ought to be resisted, and as far as this Opposition is concerned ought to be repudiated. It is a system by which a Chancellor of the Exchequer comes to the House on Budget day and says, "I make this proposal, and it will last for five years, and I make this other proposal, and it will last for 10 years." I quite agree that if Parliament as a whole—not as the result of controversy or party conflict, but as a whole—agrees to some particular course of conduct, that that is a case where Parliament may very well be said constitutionally to be bound. I believe that was the position about the State's contribution to the approved societies, because the House of Commons as a whole was agreed to such an arrangement, but I repudiate altogether the idea that it is in the power of the Chancellor of the Exchequer to-day to say, "I am going to carry a tax, and I am going to announce that it will last for five or 10 years." As far as I am concerned, I hope it will be clearly understood that if the day came—I hope it; may come—when a Government with different political and fiscal opinions sits on that Treasury Bench, with a Chancellor of the Exchequer who was not a Free Trader once, but is a Free Trader now—these announcements which are made by the Chancellor of the Exchequer and these legislative declarations which he wants to carry by his majority through the House of Commons, will be said to have no force and no validity, and that when that new Parliament arises it will be perfectly within the competence of the Government of the day to sweep away the whole Protectionist system which has thus been set up.

Mr. HILTON YOUNG

As regards the last words which fell from my right hon. Friend the Member for Spen Valley (Sir J. Simon) I would point out that all Governments have to make engagements with foreign countries which have to last over periods of years, and it would be singularly unfortunate if we were to be prevented from entering into an engagement, equally binding, with our own Dominions to last for a period of years. Constitutionally, of course, there can be no question that one Parliament cannot bind another, but looking at the very small thing which the Chancellor of the Exchequer has done for preference in this Budget I can only regret that the bonds by which he has tied this engagement to the Colonies are necessarily so weak. May we hope that my right hon. Friend the Member for Spen Valley may yet be persuaded to join cheerfully in the funeral of the three years' average? There is force in the arguments which he has advanced in its favour, but the argument against it, which is entitled to prevail, is that the three years' average tends to separate by too long a period the time of taxation and the time at which the money is earned out of which that taxation has to be paid. That is a hardship to the taxpayer, and it is in the interest of the taxpayer that the State should bring the time at which the tax has to be paid and the time at which the profits are earned into as close approximation as possible.

Let me put an instance. I do not know whether it is accurate in law, but it may appeal to my right hon. Friend in fact. Suppose there was a prosperous junior member of the Bar who was earning £5,000 a year and who then took silk, and, by a sad fatality, earned no income for three years. In the third of those years he would have been living for two years on nothing but hopes and memories, but would still be paying Income Tax upon the £5,000 he earned three years before. That is an extreme instance, but it illustrates the evil.

Sir J. SIMON

I think he would be paying tax on one-third of the £5,000 only.

Mr. YOUNG

At any rate he would be paying tax. The right hon. and learned Gentleman will pardon me if I do not follow him on this occasion through all the special topics to which he has referred. He, I think, would be the first to agree that there is a disproportion between the concentration of attention upon a. new tax of £26,000,000 a year when we are considering a Budget of £812,000,000. That would be to strain at a gnat and to swallow a camel. That is, perhaps, the only occasion upon which we have free opportunity of dealing with the broadest aspects of the Budget, and I fear we have to recognise, when we come on to those more interesting and closely-fought discussions upon this or that minor tax, that we are discussing matters which, as regards their fiscal importance, are quite trivial in comparison with the total of the year's Budget.

Before I refer to the total of the annual revenue and expenditure, let me refer to the state of our capital account. Perhaps this is the gravest aspect of our finance, most needing consideration. The broad facts are well known. We have £945,000,000 of debt maturing in the course of the next three years. We have a floating debt of £704,000,000. The Chancellor of the Exchequer has referred with legitimate pride to the achievements of the nation in the reduction by half of our floating debt since the War. That is one aspect; but another aspect is that a floating debt of ifs present magnitude is' a constant threat to the solvency of the nation. It stands now at 9 per cent. of our total liabilities, in comparison with 2 per cent. at which it stood before the War, and there is a long road to travel in the reduction of floating debt before we arrive at comfort and safety. But these well-known facts are not those in connection with our capital account to which I would give prominence. They are these—that it is not, perhaps, as widely realised as it should be that at the same time that we are making this effort to pay off debt we are constantly creating fresh debt. That is the gravest feature of the present situation. The new subjects of expenditure which are so lightly voted in this House are not paid out of revenue only, they are causing the constant issue of fresh debt, causing a constant fresh burden to our national credit.

In the course of the past six years we have raised loans for £156,000,000£fresh loans. I am not referring to guarantees, but let me pause here to interpolate a word upon the cessation of the Trade Facilities Act. As one who had, perhaps, a quasi-paternal interest in that Act, I can yet say that I accept the conclusion to bring it to an end. It was not in tended as a permanent part of the financial structure of the country. It has served, I claim, a highly useful purpose, and if it is decided that supplies of credit are now sufficient without that assistance, I think the decision may be accepted. But I would say this, that it can only be accepted on one condition. There is still a great region of use of the asset of State credit in the promotion of Colonial enterprises, and in the Dominions, and I am confident that we ought only to accept the end of the Trade Facilities Act if it be replaced by some new and more efficient scheme for making use of this great national asset for the development of our Empire. The worst feature of this constant addition to the burden of our debt and credit is the fresh issue of Local Loan stock. I do not question the purpose for which it is issued, but we have to recognise that year by year by the issue of fresh Local Loan stock a fresh harden is being placed on our national credit.

Not only this, but there is an even more serious aspect which claims the attention of the House, and that is the threatened contingency of future increases of fresh borrowing which are now imminent. Many instances will occur to the House. I do not question the £10,000,000 which is going to the East African colonies, or the £33,000,000 involved in the Electricity Bill, because I believe that probably will be useful. We must, however, look at the whole picture. The most. serious threat is the £100,000,000 of fresh capital to be raised for the unproductive purpose of buying out the coal royalties.

It is not for me to argue now about the purposes of any of these fresh borrowings. I only wish to point out the accumulating weight which they are piling on our national credit. It is perfectly clear in this connection that the first essential of financial prudence is to keep up our Sinking Fund. The part of Cassandra is always an ungrateful one, but nevertheless it is only right to say that last year it was pointed out that we had cut down our margin of regular permanent revenue below the region of safety; and the result must be to threaten the Sinking Fund. The margin of safety in regard to the regular revenue has proved too small, and consequently the Sinking Fund has suffered. At first sight it seemed to be a most admirable and courageous decision on the part of the Chancellor of the Exchequer to allocate £10,000,000 of surplus to the Sinking Fund. I still think it was a right and courageous decision, and a remarkable instance of financial prudence; but I think we must admit after a little further investigation that not every claim can be made for it which was put forward at first. This £10,000,000 for the Sinking Fund is derived by taking £7,000,000 from the Road Fund, and that really was a capital asset, and it was invested in interest-bearing securities. Of the rest, £5,000,000 is derived from beer in anticipation of revenue, and this should be looked upon as a capital asset.

It. is clear that this £10,000,000 is obtained by the realisation of capital assets and ought in any case to be devoted to the reduction of debt. I do not think it can be considered as a set off against the raid on the Sinking Fund which occurred last year. No doubt it is a right thing to do now, but it will not bear the burden of the justification of two wrongs.

I believe it is now recognised that all easy economies and easy reformations in our Budget are over, and that if more is to be done in the way of a reduction of our annual charges it will require a united effort which can only be achieved when all forces are combined to make a great effort at national unity. One begins to look forward to an ideal development, that of a national policy in finance. We have a national policy in foreign affairs: why not in finance? The Leader of the Opposition when in office followed the national policy at the Foreign Office.

This policy runs on with consecutive tradition from Government to Government. Is it, impossible in these matters of high financial policy that we should have a national policy which should rise superior to the conflicts and confusion of temporary party strife? If that be so, I suppose in the view of many of us it is of first consideration that, we have a Budget of £800,000,000 or over. That is a sum which the country cannot bear. It means having a people overtaxed. Can there be any doubt, in those who look at the state of the nation as a whole, that we are suffering from the evil of over-taxation? The very figures show it. Before the War the ratio of taxation to national income was 7 per cent. Even then we were a highly-taxed nation in comparison with other nations. Now the ratio is more than double; it is 17 per cent. of our national income. Never in the history of the world has there been a, nation which has borne such a burden for public purposes as we are bearing at the present time. It is high taxation. It is over-taxation. Do not all the signs of the times prove it?

To what is the depression of trade due? It is due to the high cost of production which is the natural consequence of over-taxation. To what is the struggle to maintain a standard of living amongst the wage-earners due? Again it is due to this great and universal evil of over-taxation which causes unemployment. I am not going to traverse on this occasion the argument which is already so familiar to the House, that over-taxation and high income tax results in the depletion of capital, and is thus responsible for the evils affecting our trade. That argument has been thrashed out, and it. is not necessary to repeat it. What, I will do upon this occasion is to lay some stress upon another aspect which has not perhaps received adequate attention, and it is this The worst evil of over-taxation an excessively high Income Tax, because it reduces effort, initiative and enterprise. I am not speaking of the large capitalists, or the millionaire, of whom a great deal too much is heard in our discussions on this subject. I am speaking of the middle range of incomes, the people who provide the country with leadership, effort, initiative, invention, brains and a willingness to undertake risks in competition. These are the prime movers of the great machine and engine of industry. If you enfeeble these you are dealing a fatal blow at the nerve centre of the nation's industry. The Income Tax now stands normally three times higher than it was before the War.

I was recently in a tropical district where the whole population was suffering from a dreadful tropical parasite which reduced men, women and children to a state in which they could only creep about half alive, and were not able to do more than half a day's work, deprived entirely of energy. That is the effect of an excessive Income Tax on enterprise, its effect upon the nerve-centres of the country. What is the real impulse to work. It is to be found in the desire for a return or gain to a man and his family for his work. We have now reduced his return by one-twentieth, or 5 per cent. We have reduced income by that amount. The surest way to increase the enterprise and prosperity of the country is by doing something, to increase the return upon a man's work. Halve the Income Tax and you would increase the effort, and therefore the prosperity of the country by 10 per cent.

By over-taxation we are led into a vicious circle. That is one in which high taxation produces subsidies, and subsidies produce in their turn high taxation. By high taxation you diminish hard work and enterprise, and we are left behind in competition with our rivals. Then subsidies have to be found to recover our position. These again increase the burden of taxation, and we come back to where we began. How can this vicious circle be broken? Firstly, by more healthy and more sane remedies for our depressed trade than the remedy of a subsidy. That question is discussed when we raise the question of fresh markets for our trade. We want a cure and not palliatives. We require fresh and willing buyers and new sheltered markets to replace those lost. We have lost the sheltered markets which we gained by getting a start in production. We must find fresh sheltered markets in the Empire.

Secondly, to break the vicious circle we must look to reductions of expenditure. It must be recognised that reductions as big as needed can only be obtained by changes of policy. The best hope of a substantial and immediate reduction is in the Estimates for the Fighting Services. But this must lie in pressing forward the policy of disarmament. Economy is bound up with that Conference, the news of which we await so long, and await, we hope, ultimately not in vain.

To turn to the other field of economy, the field of the social services, is it possible to express any very great hope of the large-scale reductions which are necessary being forthcoming there? The large-scale reductions sufficient to bring our Budget within the required dimensions are not to be got while the country is in its present frame of mind. I do not want to make an unduly controversial observation; I make an observation, as it were, on the natural history of our nation at the present time, and it is this, that we have come to rely too much upon the efforts of the State and too little upon our own efforts. We have come to think that the State can intervene to save us from the curse of Adam. We can no more escape it than we can escape the curse of Eve. I refer to the figures as to pensions which are given in the recent White Paper published by the Chancellor of the Exchequer. I do not refer to War pensions, but to civil pensions. The percentage of pensions for State employés has increased by 128 per cent. since 1914. and the percentage in case of teachers and police has increased by no less than 181 per cent., while the value of money has only increased by about 60 per cent. We find, in such evidence as this proof that we have come in rely too much upon the State and too little upon ourselves.

I do not want to advance any ultra-individualist view. I am not advocating any such harsh reductions in social services as were referred to by the Chancellor of the Exchequer with disapprobation. Some of the most magnificent achievements of our public life and political sagacity have been obtained in the past by the application of the principle of equalisation of burdens, by transferring burdens off shoulders that are too weak and on to those that are stronger and better able to bear them. While the application of that principle has achieved the most results, nevertheless it is a hard saying, but one worthy to be believed, that you can have too much of this good thing. The corruption and abuse of the best of principles often produces the worst results. It would be the worst possible result to carry this principle of the equalisation of burdens so far as to affect the efficiency of the vital centres of energy of the nation. That is what we are in danger of doing. We must not sacrifice the vital energies of the nation, even to pure benevolence. In the long run all will suffer more if we do not do our first duty to the community by keeping its initiative and enterprise healthy at the core.

Another phase of this aspect of our present frame of mind is a profound illusion about public money that is irrelevant. It is the tendency to treat public money as if it came from nowhere. It does not come from nowhere. It does not fall like a shower of gold in the lap of the Chancellor of the Exchequer as once another shower fell in the land of Danae. Public money is earned by some body. It belongs to the man or woman who earned it in the first place, and you are only entitled to ask them to part with it if it is absolutely essential that they should do so for some vital interest of the nation. And, even after they have parted with it, if from month to month and from year to year you cannot show that that vital interest continues, they are entitled to have it back. The first sentence of the greatest code of laws in the world runs: Justice is the perpetual and constant desire of rendering to each man that which is his just due. It is the just due of each man to have that which he earns, unless it is essential for the purposes of the State. We are hero in this House as the guardians of the taxpayers. As their guardians we should do justice; but we are sometimes, perhaps, led aside from this principle into forgetfulness as to the origin of the money we spend.

For these evils of a general nature into which I have wandered, there is, perhaps, only one remedy, and that is the remedy of a. change of mind, of a return to a greater measure of self-reliance on the part of our fellow-countrymen and countrywomen. Something can be done to assist in that return by the State. There is a remedy for a state of paralysis which is well recognised in medicine, and that is the electric shock. One sometimes wonders if the best that could be done to this nation would not be the administration to it of such an electric shock as would result from the adoption as a national policy of a steady refusal on the part of this House and the instruments of Government further to use public money for the sake of any form of subsidy to trade, or for the extension of any further assistance to the individual. It would be a severe shock, but it is one that may be necessary. Were it to be given, I believe that things would improve, that all men and women of this nation would look into their hearts and would become convinced that they could, by reliance on their own efforts, and not on those of the State, work out better the salvation both of themselves and of their community.

Mr. SEXTON

Let me say at the outset that I am not going into figures, but I may say, without invidious distinction or individual reflection that, in the words of the old adage, while figures cannot lie, liars can figure. It has been my privilege to listen to the introduction of at least 10 Budgets in this House, and, up to the advent of the right hon. Gentleman the present Chancellor of the Exchequer, I think I may say that they were as dry as dust He has relieved the monotony, and has added, not only to the interest, but to the gaiety of the House and of the nation by his method of dealing with the Budgets he has introduced. On the introduction of his first Budget I, like other Members of the House, came immediately under the glamour of the right hon. Gentleman s method—so much so that in a moment of impulse, and as the victim of first impressions, I made such a public declaration in his favour that on more mature consideration, I found it very difficult to enter into any criticism of the Budget at all. On this occasion it was a case of "once bitten, twice shy," and I refrained from giving any particular expression of opinion until I had had an opportunity of considering the real merits of the case. I have come to the conclusion, rightly or wrongly, that this Budget is, indeed, a. thing of shreds and patches. It reminds me very much of what is known as the travelling tinker's budget. In that particular fraternity, the rule is that when one tinker gets a. job at a particular place and stops up one hole, he leaves two or three others for the fellow that is to follow him. This Budget of the right hon. Gentleman's fits that case to the utmost. Let me take the Road Fund as an example. There the right hon. Gentleman has left a good many holes. Where he has attempted to block up one he has knocked the bottom out of others. The right Gentleman the Mem- ber for Spen Valley (Sir J. Simon) dealt very effectively with this phase of the question, and the fact does remain that if you tax the heavier vehicles on the roads, the inevitable result is that you increase the cost of carriage on the roads to the advantage of the railways. That is the only fact worth considering in this case. There is only one other thing I want to say with respect to vehicular traffic, and that is, that with the raising of the tax on the vehicle of the small owner from £96 to £108, the possibility is that the man with small capital will try to recoup himself by limiting his costs and doing with less labour than he employed before.

Then we come to betting, and here the right hon. Gentleman has accomplished what my right hon. Friend the Member for Preston (Mr. T. Shaw) could not accomplish—he has got the rabbit out of the hat. And a very poor example it is indeed. Like my right hon. and learned Friend the Member for Spen Valley, I am not going into the moral aspect of the case. I have an annual flutter on the racecourse, and I am not always successful, any more than he is, and therefore I am not going to touch on the moral aspect of the case. All I have to say is that it is a fitting climax to a Budget of this character that the Chancellor of the Exchequer, who, not to-day or yesterday, but for the last six weeks, has been putting his hands into the pockets of the working classes of this country in order to cover up the hole he has made, should now be ending up in Tattersall's ring. That is really what follows. First of all, we had Unemployment Insurance; then the contributions of the dead men of the Army and Navy—which is even meaner than pinching the pennies out of a dead man's eyes at a wake. There was the pinching of the National Health Insurance Fund, the Unemployment Insurance Fund, and, last but not least, the Army and Navy Fund. I do say that, in the circumstances, the description of this Budget as a thing of shreds and patches is a fitting one, so much so that I have taken the opportunity of consulting the Muse, with the following results: But, alas, even this was not the last lap, By which to recover his losses; Necessity forced him to fill up the gap, To drop all cackle and come to the 'osses. So he'll now have his fling inside Tattersall's Ring, To S.P.'s he'll be telling the story; And with winks and with nods he'll be taxing the odds, So we'll leave him alone in his glory.

7.0 p.m.

Mr. HARMSWORTH

I wish to congratulate the right hon. Member for Norwich (Mr. Hilton-Young) on his most excellent speech, and the more so in view of the fact that in this House we have very few occasions of listening to so sound a speech on the economic situation. I think most Members have come to the conclusion that., at any rate, one aspect of the Budget is not so very unsatisfactory. I refer to the part that is known as the revenue side. That, after all, is the principal side we shall have to deal with when it comes to the Finance Bill. I should like to say a few words on the revenue side before coming to the more important side, in the long run, the expenditure side. Although I know my hon. Friends on the other side will make a great attack on one or two of the proposals, such as the betting and the safeguarding proposals, I think with those exceptions, from their point of view, the Chancellor has made a very satisfactory Budget.

I think really the Chancellor has been extremely fair in his proposals to take one-third of the moneys that are allocated to be spent upon roads. I know hon. Members will suggest that at the present moment, in view of unemployment and the bad state of the roads in rural districts, that money should be spent. It is just as bad to advocate a great expenditure on the roads as it is to advocate a great expenditure on any services in this country if the money is not there to enable the work to be carried out. To suggest that the money taken from those who use motor cars should only be spent on roads, is a proposition which, if carried out in regard to receipts from other taxes, would place the Chancellor in an impossible position in framing his Budget in the future. The ex-Chancellor of the Exchequer told us to-day how very wicked the betting proposals were, and that they were going to enable the Government to tax betting. But if it is possible to raise £5,000,000—it may he found that that is an exaggeration—through a tax on betting, I cannot conceive any possible kind of attack that could be made on levying a tax on what is obviously a pure amusement, and in the view of hon. Members opposite a very evil amusement. It is money which after all is not vitally necessary for any particular purpose in the country. It is not money taken directly out of industry, and it is not money which would probably be spent in any other way. I cannot see any argument which would be a danger to the Chancellor in getting his proposals through.

I would also like to congratulate him on his proposals to carry through the Key Industries Act again and also on his Imperial Preference proposals. Members on this side have always looked to the Chancellor and the present Government for a broadening of the principles of Imperial Preference, and they hope that in the future the Chancellor will propose some step, if it is only a very small step, towards what is the ambition of most Members of this House interested in Empire questions, namely, a real trading agreement or zollverein between the different Dominions within the Empire, so that we can eventually, if we are to keep the Empire together, have some trading agreement which will take the place of this sentiment which keeps us together at present.

I am going now to turn to the expenditure side. The future has been painted by the right hon. Gentleman behind me in a very serious light. He has not exaggerated it, it is more serious than he has stated. I heard what the Chancellor of the Exchequer, the Prime Minister, and other members of the Government have continually stated in answer to questions, that there is a Committee, the Colwyn Committee, which continually studies expenditure in different Government Departments. May I ask the Financial Secretary whether it is possible for them on any occasions to publish these reports which presumably are made to the Cabinet? I know that in answer to questions given every day he says that any committee appointed by the Cabinet has to report only to the Cabinet, and its Report cannot be made public. If the expenditure is continually going to rise—and this Committee is supposed to be doing good work—I suppose it continually sits and is not like other Committees which we have discovered only sit once in 18 months or two years—why should we not have the Report before the House? Why should we not be able to judge what is the state of the Government services? Nobody is going to underrate the difficulty of economising or the difficulties the Chancellor will have in the different Departments when he tries to cut down expenditure. At the same time, it is perfectly obvious that not only has it got to be done, but it can be done, and the Financial Secretary should find plenty of instances where he could economise in the Government services.

The Chancellor when he proposed his Budget last year began in the wrong direction. I would have thought the best method of entering upon his office, presumably for four or five years of the life of this Government, would have been first of all to try so to cut down expenditure that he would, by the end of his term of office, have such a surplus of revenue that he could put before the country proper proposals not only for the reduction of taxation, but also for any social benefits which he thought necessary for the country to have. It would have been better if he had proposed the benefits he gave last year towards the end of his Chancellorship, when the state of the country would have been such as to warrant them, instead of proposing them at the very start of his Chancellorship, when we not only still have trade depression, but also a state of affairs which might be nothing, but which on the other hand might prove to be something, and that is a slight reduction in yield from the Income Tax.

Ever since I have sat in this House I have heard Member after Member say that the trade revival was coming next year, and, as we know, next year never comes. To-day no hon. Member is going to say that the revival of trade has come. There is always this flickering that is apparent on the surface. The revival never materialises. I suggest to the Chancellor that it never will materialise until he seriously takes in hand this question of taxation and reduction of public expenditure. I was very surprised that on coming into office he did not immediately take in hand the reduction of public expenditure. It is a very serious matter for industry and business. It is only from industry that the money can come which is going to pay for the different social benefits given throughout the country. Not only does industry have to pay the money, but it has to pay for vast levies upon the rates, and I should like to point out to the Chancellor that the rates this year are steadily increasing in every district. I believe that at the present moment the Chancellor is making great efforts to discourage the local authorities from over-expenditure. That should have been done before. Local authorities are going to take their cue from the central authority, and, if the central authority continues to spend too much money, you cannot expect the local authorities not to do likewise.

The conversion of the War Loan is one of the most serious questions this House will have to face in the next three years. It is perfectly able to convert the whole of the War Loan before 1930. It will have to convert a very large portion of it, but it is possible to convert the whole amount. If it were able to convert it with a saving of 1 per cent., it would be a saving of £50,000,000 a year. As the Financial Secretary knows, such a saving on the War Loan would be a very substantial reduction of taxation. The possibility of it taking place and the cheaper credit which it would show in the market—it would not be possible unless money became cheaper—would not only be most excellent from the point of view of the Government, but also from the point of view of business generally. It seems to me that during the past year, and still in the present year, the very opposite is the case. Gradually money is becoming dearer. Suppose before 1930, if the present state of affairs continues, you have to refloat a proportion of the loan at 5½ per cent. and tremendously increase the expenditure of the country. It would be a most terrible thing, not only from the point of view of the Exchequer, but of trade as a whole.

The ex-Chancellor of the Exchequer produced Estimates of £790,000,000. The present Chancellor in his first Budget added £9,000,000, and, in the present year, is adding another £13,000,000, or, without the coal subsidy, at any rate, another £9,000,000 on to that. I do not see the slightest reason why the gradually accumulating effect of social legislation which has been passed in this House should not cause another £9,000,000 to be spent. The majority of the different schemes which have been carried, and carried without the slightest notion of what they are going to cost, and merely passed because it is thought they will be popular among the Government supporters, are going to be cumulative in their cost to the National Exchequer. The Chancellor is going to have a very difficult task to prevent such an increase in expenditure for the next few years as will make the position look as if some further increase in taxation, whether direct or indirect is necessary after all.

In the last two years, although we have had 6d. off the Income Tax, which has saved the country about £26,000,000, we have had increases in other directions, in new taxes mostly, silk and betting and various safeguarding duties, of which I am entirely in favour, but which at the same time are increasing the revenue of the country. The revenue from these extra proposals has been almost as great as the reduction of revenue which he has proposed in taking 6d. off the Income Tax, if not greater, and therefore the Government are raising in one way or another just as much, if not more money than they were when they came into office, which is a very serious state of affairs and is directly opposite to the trend of policy of previous Chancellors of the Exchequer and previous Governments. Although I am certain the Chancellor of the Exchequer will remedy that state of affairs in the future, it is a matter that is so serious that if it is not seriously taken in hand, in view of the conversion loans and other matters coming in the future, it may, before this Government leaves office, result in such a state of affairs that we shall have to increase taxation.

The Chancellor of the Exchequer should not be too optimistic over the result of his Economy Bill. In his joy over his great victory, I think he was a little like the tailor in the fairy story who wrote on a placard that he had killed nine with one blow, when what he had managed to kill was only some flies that had settled on his table. In saving his £8,000,000 or £9,000,000 he has done extremely well, but it is a very small amount of money when you are dealing with a Budget of £812,000,000, and, although the Opposition did their best to prevent him from getting these £9,000,000, I think their purpose was too bold, not merely from the point of view of trying to get popularity in the country through the people who had been deprived of that money. I think their purpose was deeper than that. It was that if the right hon. Gentleman is not able to economise he will have to do what will be a far more unpopular thing in the country than depriving funds of their surpluses. He will have to increase taxation, and, if he attempts to increase taxation, he will find it a far more unpopular thing than attempting to deprive people of what, after all, has only been given them in most cases by Parliament since the War and by what was imagined at one time, when the Coalition Government were in office, to be a more prosperous nation. I have a table here showing the increase in expenditure on social services since 20 or 30 years ago. In 1891 the expenditure was £22,000,000. This is from a White Paper that the Chancellor knows very well. In 1901 it had increased to £36,000,000, in 1911 to £63,000,000, in 1921 to £306,000,000, and in 1924 it was £332,000,000.

I am not going into the merits ordemerits of those Social Services. The Chancellor of the Exchequer probably puts them on too high a level in relation to the prosperity of the country, because, though I think the country should give everything it can possiby afford, I hold the opinion that if it is more than it can afford it will have in the end to take it away, and there is nothing so difficult as cutting people's salaries down once they have been raised, or trying to deprive them of something once they have been made used to it, and have imagined they are going to have it for all time. It is a well-known maxim that if you never have a thing you may never want it, but once you have had it you do not want to give it up, and every single time the Chancellor of the Exchequer proposes new schemes for the people—and apparently they are inexhaustibie—that section of the people are going to imagine that it is their's for ever, that it is their absolute and complete right, and, if he attempts to take it away from them he is, as we heard during the Economy Bill, robbing them or taking something from them which is really their's. As everyone knows, it is not their's. It was given them because the country could afford it. If the country had not built up such prosperity in the past we could not have afforded any social legislation whatever. If the country were as poor as Italy was a few years ago, before the War—it is now prospering—we could not afford any social legislation of any kind. It is only by her prosperity that she is able to afford this social legislation. It is much more important to put the finances of the country in order than to try to satisfy people by proposing further and most costly legislation.

I should like to echo what my hon. Friend said about local loans. That is a very serious state of affairs. Local authorities have been issuing continually increasing numbers of loans ever since the War. It is a very easy way out of their difficulties. If a local authority gets into a difficulty, it can immediately issue a, loan. Until the money is spent it considers it can carry on for any length of time, and eventually, probably after two or three years, it can issue a new loan. I do not know what authority the Government can have over the issue of loans by local authorities, but it is a, matter that wants the most serious consideration by the Chancellor of the Exchequer. He must recollect that every loan that is issued by local authorities is going to prejudice his case when he comes to issue what is much more important, the great conversion loans of the future, because I presume the supply of credit and capital for that sort of investment is limited, and he might have difficulty in finding the money.

I am going to suggest two avenues where he might economise. One may surprise the Committee, but, at any rate, it came in answer to a question of mine on the Post Office. I discovered that there is a great deficit on the working of the telegraphic service, and it came out in answer to another question from the opposite benches, to my considerable amazement, that a portion of it, probably £250,000, was caused by Press telegrams being sent at a reduced or uneconomic rate. That is not right. All Press telegrams should be sent at an economic rate and it is a disgrace that there should be any service of any kind which is open to a subsidy of that sort. The right hon. Gentleman must certainly take that matter in hand at once, put these Press telegrams on an economic basis, and make them pay the proper proportion so that the service can become a paying service, because no service should be run on a permanent basis with what is nothing more or less than a subsidy.

The other item that comes to my mind at the moment is merely the question of the Overseas Trade Department which, as a matter of fact, we have been considering upstairs. I think it could be easily done away with. It does absolutely no good. I know a number of small businesses regard it as an excellent thing to be shepherded to various fairs and exhibitions, but there is no business man who has a very high opinion of the Department. It has not been observable that our export trade has greatly profited by it. In fact, judging by the figures, I should say it is having a most depressing effect upon our export trade. There alone the Chancellor has a straightforward saving of about £300,000, or, if he has a few people to carry on the old Department of the Board of Trade, at any rate he will save £250,000. There is £500,000 that he might save. It is not a great deal, but there are two suggestions that have occurred to me to-day. I am certain the right hon. Gentleman will attack these matters with a resolute spirit. He will find that, if the financial condition of the country is not put on a really stable and clean basis at the present moment, it will render precarious the whole of our social system. I believe if trade realises that the matter is really being seriously taken in hand, and if a reduction in taxation is made possible, as well as these arrangements that I have suggested for converting the loans, the financial condition of the country can be saved. I would urge the Chancellor to answer the question as to expenditure and not to say, as he said, or gave the impression in his Budget speech, that there is no possibility of a reduction of taxation and expenditure, but to give the country at least some hope that in the future it is going to have its annual expenditure greatly reduced.

Mr. PETHICK-LAWRENCE

When I listened to the Chancellor of the Ex- chequer yesterday I was in some uncertainty whether to congratulate or to condole with him upon the role he had taken upon himself. He is inclined to act, if not to speak, in superlatives. When he is at a wedding he desires to be the most jovial guest there. When he is at a funeral he must be the most lugubrious of the mutes, and his only regret on the latter occasion, like that of the late President Roosevelt, is that he cannot play the principal part in the ceremony without taking his place in the hearse. Last year he gave us a Budget of a joyous character, and all was rosy in his presentation of the case. This year he chose to take a sombre tone. I do not take the sombre colours in which he painted his Budget too seriously. My own view is that, having set himself to raid the Insurance Funds of sickness and unemployment, it was necessary for him to take a gloomy tone in order to justify that attitude. There is always a sufficient margin open to him —though he receives the advice of his experts, he is responsible for the final Estimate—to take the cautious or the optimistic line. We are in the middle of a Parliament. I am sure the Chancellor of the Exchequer looks confidently towards having at least another year and perhaps a couple of years before the end of this Parliament. In these circumstances, he will naturally not be in a very great hurry to take off taxation this year, but it will be very much his desire to give release from taxation in the last year or the last two years of his term of office, when the approach to the country is very much nearer than it is to-day.

The sombre feature to me of this Budget is that, in the first part of it, the Economy Bill, of which this is merely a second part, the. right hon. Gentleman took from the common people of this country resources which they have looked forward to as their own, in order to relieve the burden of their misfortunes. In consequence largely of having relieved the Income Tax payers of the burden which they had borne before last year, he was obliged to take that course. The Economy Bill is passed, and we are not dealing with that to-day, but with the second half which is included in the Budget proposals. There are three main propositions in the Budget to which I desire to draw attention before I deal with a matter which I feel is one of special importance, and for which the Chancellor of the Exchequer is specially responsible. The first proposal with which will deal is the Road Fund. In attacking the Chancellor's raid upon the Road Fund I am speaking not only for my own party in my constituency but, as I understand it, for all parties. In my constituency I have been specially requested on behalf of the Highways' Committee to resist the encroachments upon the Road Fund. The ground of that complaint is not a denial of the constitutional right of Parliament to spend money out of taxes in its own way, but that the money spent upon the roads to-day is inadequate.

The Chancellor of the Exchequer stated yesterday that this country was the best roaded country for an area of its size. What about the population If we are concerned not only with. the area but with the population, no such statement could possibly be made. Last autumn I spent some months in the United States of America. We have had pointed out to us recently the great prosperity of that country. What is it on which the United States are spending most lavishly at the present time? I have no hesitation in saying that it is their expenditure upon roads. I was in the State of California, which is about the area of this country but has a population of only a tiny fraction of what we have here. The roads there are exceedingly good and far more extensive in proportion to population than the roads in this country. If we are to have an expansion of trade, which we all hope may come in the not very distant future, we shall be taking a suicidal step if we refuse to spend on the roads the largest amount compatible with the national necessity. I look upon the roads as one of the principal forms of capital, and just as in the Economy Bill the Chancellor of the Exchequer raided the human capital represented by the health of the people, when he took the surplus of the Insurance Fund, so I consider that in attacking the road fund he is dealing a blow at the material capital which goes to build up the prosperity of the country.

The next sub-division of the right hon. Gentleman's proposals are the Protective Duties which he has introduced in various forms. He made a very interesting admission with regard to the Silk Duties. He said: It is, however, my duty to admit that while the cost to the consumer has not indeed been increased by the Artificial Silk Duties, we have probably intercepted to a very large extent the reduction which otherwise would have reached the consumer in this country."— [OFFICIAL REPORT, 26th April, 1926; col. 170:3, Vol. 194.] That admission is quite sufficient for my purpose and for the purpose of the party with which I am connected, when it is taken in conjunction with the fact that there has been an enormous fall in the general level of prices in this country during the past year. If the Silk Duties have had the effect of preventing a fall of prices in silk and artificial silk garments which otherwise would have taken place, they have prevented the fall in the retail prices of these articles keeping pace with the fall in the price of other commodities, and they have to that extent injured the trade in those articles and injured the consumer by preventing the cost of living there falling at the same time as the fall in general prices. These two things are very serious.

The new protective taxes consist, in the first place, of a tax on commercial cars, which has been put on in defiance of the Prime Minister's pledge as to not being a subject suitable for safeguarding. It is put on merely for the sake of symmetry and convenience. Commercial cars and such things are chars-a-bane are subject in this Budget to three separate disabilities. In the first place, they have to face this additional Import Duty; secondly, they have an additional Licence Duty; and, in the third place, they are deprived of the advantage of the good roads which would otherwise have fallen to their lot. Dealing with the question of the Import Duties, I thought at first that the Chancellor of the Exchequer was under the impression that they would not raise the price here, but that the effect would be that the whole of the cars would be manufactured in this country. That cannot be true, because he anticipates to receive duty to the amount of £300,000. So long as there is the receipt of that duty, it must have the effect of raising the prices of these cars and to that extent injuring the industries of this country which use them.

When these duties on cars were re-imposed last year, it was alleged that there could be no injury to industry, because it was luxury cars that were being dealt with. The removal of that reservation takes away the safeguard and thereby injures the industries in this country which are users of these commercial cars. Whatever argument could be advanced with respect to home production in regard to these cars, it cannot be applied to wrapping paper which is mainly manufactured abroad. The proposal of the Chancellor of the Exchequer in regard to wrapping paper is injurious to the trades which use paper for wrapping purposes. The effect will be small and it will be spread over a very large area, but it is none the less real for that reason. What does he propose to do to help the export trades, which use a great deal of wrapping paper in exporting their goods, to meet the injurious effects of the duty? Does he seriously propose to make rebates? If so, he will land himself in a great deal of cumbersome machinery.

The third branch of taxation is the Betting Duty. I preserve a more open mind on that duty than does the right hon. Member for Colne Valley (Mr. Snowden). I shall watch the proposals of the Chancellor of the Exchequer detail, in order to see whether they can really meet the objections lo the proposals. The two objections are, that a Betting Duty cannot be imposed without in effect legalising and encouraging betting, and that practically they will have great difficulties confronting them. If the Chancellor succeeds in convincing me that these objections are unreal, I shall not take up a purely stand-pat attitude.

The whole of the right hon. Gentleman's trouble really, he states, comes front the coal trade, and although he shares responsibility for the imposing of the subsidy he tries to escape blame on the ground that the evils in the coal trade were not of his making. There I join direct issue with him. The misfortune that befel the coal trade was to some extent at any rate, due to the course which he took. In support of that, I would remind the Committee of what was said by Sir Josiah Stamp, one of the most distinguished statisticians and economists, in a report last July, after being specially appointed by the Government to suggest what were the reasons of the trouble in the coal trade. He said: In my view, therefore, the recent improvement in the exchange or decline in the price level, whether or not compulsorily brought about by the anticipation and then the realisation of the gold standard, is sufficient in itself to account for the special plight of the industry since March. I would not be quoted as saying that the whole of the trouble in the coal trade arose from that cause, but I think I am entitled to say that in regard to the crisis in the coal trade, the serious decline in industry and the increase in unemployment which took place in the late spring and early summer of last year, the return to the gold standard was the largest single cause in bringing about those effects. That may seem an extravagant statement to some hon. Members who have not studied the question. Therefore I am going to give them two figures which will, perhaps, surprise some of those who have not studied the question as fully as perhaps we have. The "Economist" publishes from time to time figures showing the index figures of wholesale prices. Taking 100 as the index for 1914, the wholesale price level for March of last year was 182, and the index figure for March of this year, 159. That is a drop of 23 points, or 13 per cent. Any hon. Member who knows anything about manufacture must realise that a fall of 13 per cent. not in profits but in prices must necessarily lie a very serious thing in relation to trade.

What actually brought that about was this. First of all, the Chancellor of the Exchequer made it necessary that the pound should rise, to the level of the dollar. That was, as some of us feared, a serious thing. But worse took place, because not only did the pound have to rise to the level of the dollar, but it had to rise with the dollar, as happened during the succeeding months of the year. That is how it came about that we have had this 13 per cent. fall in prices. It is quite true, if everything had fallen in the same proportion, not very much harm would have been dine, but, as a matter of fact, everything did not, and could not, fall in proportion. For one thing, the cost of living could not, and did not. The Chancellor of the Exchequer told us the other day that it had fallen seven points, and quoted that as a sign of the benefit of his action. That fall of seven points, however, is on a total of 179, which, I think, is only about four per cent. So that, while the wholesale price level has been falling 13 per cent., the cost of living, corresponding more to retail prices, has fallen only four per cent. and that has been a great part of the cause of our troubles at the present time. Why is there that discrepancy? Such things as rents, royalties, debenture interest and Government Debt interest have not fallen, and, therefore, while the manufacturer may be able to get his raw materials at something like 13 per cent. reduction, he has to pay the same amount, of overhead charges, the same amount of debenture interest, and all such things as before, and he is placed, therefore, in an extraordinarily difficult position. That, of course, has mainly affected our extort trade, and has, in particular, dealt a smashing blow at the Coal industry. So while the Chancellor of the Exchequer has claimed that this matter of coal has caused his trouble, I will take him back from coal to gold, and say that he himself is largely responsible.

The Chancellor of the Exchequer made three attempts to defend what he had done. Incidentally, I am quite sure those who were here will agree with me in saying that he seemed less happy over his defence of that than over a good many other things. Instead of the buoyancy he usually shows, he seemed to me to have not even convinced himself. He said, in the first place, that we have certain payments to make to America, and that the return to the gold standard had reduced the amount we had to pay. That is an utterly absurd argument. Even if we do pay in gold, we have only got that gold by our own export of goods, and if there be a fall in prices, we do not escape in the least payment to America because of that fall. We have to send at least as much of our goods abroad in order to pay the debt to the United Sates.

Precisely the same thing is true of his second argument with regard to the purchase of food from the United States and elsewhere. The fact that the pound has risen does not benefit us in purchasing food from abroad, because we have to purchase food from abroad by exporting commodities, and the fall in prices will affect them at least equally with the things we are endeavouring to import. Then, he said that it benefited us by raising the value of dividends on sterling loans. That possibly is correct, but that does not benefit the nation as a whole. It does benefit the holders of these particular stocks, and that is really only in keeping with the fact that the whole of this action benefits, in the main, all the holders of various forms of wealth bearing a fixed rate of interest whether they be holders of stocks abroad or stocks at home. It also benefits the City. It does benefit to a certain extent the financial houses. I am not in the least going to suggest that there are no benefits that arise, or have arisen, from this policy, but what I do say is that the tremendous injury to trade and commerce, particularly to our export trade, has far outweighed any advantages that may came to individuals or to individual interests in this matter.

The Chancellor of the Exchequer said —I forget whether it was yesterday, or some little time ago—that there were no responsible people who would have negatived the whole British policy of seeking to return to the gold standard. I am not prepared to say that we could depart permanently from a gold standard, but what I do emphatically say is, that there were two grave mistakes. First of all, the moment chosen was the wrong moment. It was the moment when British trade was first beginning to recover very slowly from the depression, and that was the wrong moment to give it a great blow on the head, and send it back. In the second place, if it were necessary then, or at any future time, to raise the pound in terms of the dollar, it ought to have been part of file arrangement with the United States, that the United States central banks should allow prices slightly to rise, in order to meet us, whereas, as a matter of fact, what has actually taken place is that American prices have fallen in terms of the dollar, and forced our prices to fall still more.

I do not want, to take up any further time of the Committee, but I have thought it necessary to raise these points in order to meet the statement of the Chancellor of the Exchequer that it was not his fault that he has had to economise, and that it was all the fault of the quite unexpected coal disaster whereas, I contend that the coal disaster and the injury to trade are, in part at: any rate, his fault for restoring the gold standard at the time and in the manner in which he restored it.

Mr. ROY WILSON

I do not propose to-night to follow the hon. Gentleman who has just sat down, and discuss here the question as to whether it was wise or not for this country to return to the gold standard. I am one of those people who believe, and believe profoundly, that we took a wise step last year. The view I have always taken since then is that, having committed ourselves to this course, no useful purpose can be served by any discussion now as to the wisdom of that course, but that it is the duty of everyone in this country to do what he can to make that decision a successful one, as, indeed, it has been successful, in my judgment. To-night I should like to begin, if I may, by offering my congratulations to the Chancellor of the Exchequer upon what, in my opinion, and, I think, in the opinion of the City, and, indeed, in the opinion of all fair-minded people, is a courageous Budget, and, perhaps, the best Budget that could be produced in view of the very trying times in which we live. I do not intend this evening to weary the Committee with any criticism upon the new taxes provided for in this Budget. There will be plenty of opportunity for that at a later stage in the Debates on the Budget. But I would like to emphasise the point that has been made to-day, and, indeed, was made by the Chancellor of the Exchequer himself yesterday as to the urgent need, the crying need, the imperative need for greater economy in the overhead administration of our national finances. I know that in the City of London, among people who are said to be authorities on finance, the view is held that it is, indeed, a serious state of affairs if we in this country are to accept the proposition that our present expenditure in this country is to be regarded as the minimum expenditure which the next few years is likely to see.

I realise quite fully that it is not very useful to criticise in a matter like this, unless at the same time one is prepared to offer concrete suggestions to the Government in the serious efforts that, I know, they are making to effect economies in our national administration. And I should like to assure the Committee, as one who during the last few years, and particularly during the years when the trade and industry of this country were suffering so severely from the slump in 1921, came into contact during that period with many great business concerns which were obliged to face the question of economies, and cut down administration expenses, that I realise the difficulties with which the Government are faced in bringing their overhead expenses down to a more reasonable level. Some of the proposals which I venture to offer to the Government to-night, and, indeed, all of them, may have been considered, but I hope nothing will be lost by repeating them, if only that they may, perhaps, form the basis of discussion inside this House and outside with the object of assuring ourselves that we have, in fact, examined —and examined with due care—all the proposals which are likely, or which may be considered to be likely, to bring us some relief.

My first suggestion to the Government is this. I, for one, believe that there will be really no practical economy effected in the various departments of His Majesty's Government until the decision is taken to ration all departments; to say to all departments, each of them in turn, "That is the sum that is to be allotted to you for your expenses during the next 12 months, and you have got to cut your coat accordingly, make your arrangements accordingly, and live within that sum appropriate to your particular department." I say that because I realise quite fully the very great difficulties the Chancellor of the Exchequer is up against, if he is dealing, department by department with the heads of departments, who can come forward with a very good case, not only for keeping up their existing expenditure, but even increasing it. Therefore, I do submit that the question of rationing each department should be carefully considered again, if it has already been considered by His Majesty's Government.

My second point is this. I was very glad to learn from the forecast in the speech of the Chancellor of the Exchequer that some consideration is to be given at once to the question of co-ordinating the various defence services. I believe that if it were possible to form a Ministry of Defence for our three great Fighting Services, we should find that it would be possible to make some substantial savings in the administration of those Departments. Another suggestion I have to make is this. Why not consider the question of abolishing altogether the Ministry of Transport? Quite frankly, I do not see that the Ministry of Transport to-day is at all a necessity, and I think that it could be quite easily worked in with the Board of Trade, with very considerable overhead savings in connection with that particular Department.

8.0 P.M.

Now I come to a subject which I realise bristles with difficulties, that is, the question of the salaries of the Civil Service Departments and of civil servants generally. It is disturbing to see an increase of £11,000,000 in the Civil Service Estimates for this year. I am not going to suggest to-night that it would be fair or reasonable, or even practical politics, to suggest to the Government that the civil servants, who are serving admirably in their various Departments, should have any severe cuts in their salaries. But drawing from the experience which I have gained in the course of some years, I want to suggest to the Government, in all seriousness, whether it would not be possible to say to all civil servants over a certain salary, say £500 a year or £600 or £800 a year if you like—fix your own sum—that for the next three years there should be a halt in the automatic increases granted in connection with these higher salaries. What that might involve, I do not know, for I have no knowledge of the working of Departments or the contractual obligations between the Government and the civil servants, but I do believe that if that were done and a halt were called to what I may term the automatic increases over a certain figure, it ought to result in a substantial relief to the Exchequer.

I will not refer to the suggestions made inside this House and outside as to the reductions of salaries of Ministers and Members of Parliament, although I do think that if, as time goes on, we see no daylight as to the end of this trade depression, that matter will have to be considered. Certainly, it would be a lead to the nation if everybody, Ministers and Members alike, receiving salaries from the State, would agree to a reduction of those salaries as the first step in practical economy. I know it will be said, and has been said, that any Member of Parliament; who wants to economise can voluntarily surrender his salary, but I do not regard that as a practical answer to the suggestion I have made.

The last suggestion for economy I have to make is this—and I make it with a good deal of diffidence, because quite frankly I am not certain as to how it would operate. I should like to see the Government, if they consider it possible, extend at once unemployment benefit to domestic service, because I believe—and I am going to be quite frank with the Committee—that if unemployment insurance were extended to domestic servants, we should find many thousands of women who to-day are receiving unemployment pay taking up domestic work. I believe there is a large proportion of these women who are to-day taking unemployment pay who would very much rather work in domestic service if they could be satisfied that they retained the right to receive unemployment pay in the event of their being subsequently thrown out of work. If, as I believe, the estimate I have had given me is correct there is a shortage of something like 200,000 domestic workers in this country, and if we realise that, even supposing a quarter of that number, 50,000 women, were taken off the unemployment register by reason of the extension of unemployment benefit to domestic servants, that would in itself effect a very considerable saving to the Government in a course of 12 months in the matter of unemployment pay.

I would like, before I sit down, to offer a very few remarks on one aspect of our national affairs, to which the Chancellor of the Exchequer referred frequently in his Budget statement yesterday. He said, in the course of his remarks, that the attempt to help the coal industry to put its affairs on an economic basis had overshadowed and overwhelmed all other interests and claims. I suppose everyone in the Committee will agree with me that, if the Great War has taught us anything at all, it has taught us that any settlement of international disputes by arms and force is bound to involve great misery and hardship to the nations of the world. It is because of the realisation of that fact that the League of Nations has come into being. It is equally true to say that a good deal of our trouble in the last few years, and many of the difficulties we have had to face in getting back to more normal times in regard to trade, has been due to strikes, lockouts and threats of strikes. I want, if I may, in all seriousness to offer a suggestion to the Government which I beg them to consider. It is this. If the establishment of the League of Nations is likely to result, as we all believe it is, in the settlement of international disputes, is it beyond the wit of this Government to bring into being a similar sort of league in this country—call it what you like, a League for the Settlement of Industrial Disputes—consisting of say a dozen members, six representatives and members of trade unions in this country, and six representatives of employers, with a neutral chairman, which would deal with all industrial disputes, and whose judgment and findings on these industrial disputes should be submitted to the country before any strike or lockout was allowed to take place. This may be an ideal; it may be an impossible ideal, but I believe that the strike and the lockout are the most senseless weapons man ever invented for the settlement of industrial disputes. Although I am not going to develop the suggestion I have thrown out to-night in regard to establishing such a league, at any rate I think it is worth considering by us all, if only because we have seen in the last few days the splendid efforts which certain of the great trade unions are making now to help the Government in settling this grave shadow which lies over the nation in regard to the coal industry. I apologise to the Committee for, perhaps, straying from the purely financial side of the Debate, but I offer the suggestions, in regard to economies and the last suggestion, in the hope that they may be of some help to the Government.

Mr. MORRIS

If I do not follow the hon. Member who has just spoken in the very interesting suggestions for further economies, it is because I desire to limit the remarks I have to make to two of the most startling of the new proposals in the financial statement of the Chancellor of the Exchequer. The first is his proposed raid on the Road Fund. This is very important, particularly from the point of view of the rural areas. When the Road Fund was initiated, it was set up for three purposes: the maintenance of roads, the upkeep of roads and for the purpose of new construction. The Minister of Transport could spend the funds at his discretion as he chose, and he had complete jurisdiction and complete discretion, with one limitation only, namely, that one-third of the sum of the food should be spent on new construction, and not more than one-third. It was within his discretion to draw up regulations for the administration of the Fund, and under those regulations he classified. or had classified, the roads of the country under three heads, first-class roads, second-class roads, and, lastly, the great- bulk of the roads which come in the third-class—the unclassified roads.

I understand that the roads in this country for which the inhabitants are actually responsible in the matter of their upkeep and maintenance, extend to 140,000 miles. Of these 140,000 miles there are only 38,000 which fall within the first or second class of roads. In respect of the first class, the Road Fund provides 50 per cent. of the cost of maintenance, and with regard to roads which fall within the second class it provides 25 per cent. As far as the rural areas are concerned, apart from the small amount of main roads, the great. bulk of the roads fall into either the second class or into the third class of unclassified roads. What has been the result? With regard to unclassified roads, these have not received a penny piece from the Road Fund at any time, and up to the present there are 171 rural authorities throughout the country who have never at any time received, in respect of the maintenance of roads, a single penny from the Road Fund.

Surely it was the public duty of the Chancellor, rather than to raid this Fund to the extent. of £7.000,000—and, indeed, he goes further than that, because he proposes, in addition to the £7,000,000 taken this year, to take every year one-third of the taxation placed on licensed cars, an amount which is calculated this year to be somewhere in the neighbourhood of £3,500,000, and which is going to be a progressive amount—instead of raiding the Fund to obtain this sum, surely it was the first duty of the Chan- cellor to ease the very heavy burdens that now fall on the rural community. They have been keeping these roads up, not only for their own purposes, but in the new conditions of transport these roads have to be kept up for traffic coming from other parts of the country, and they are maintained for the purpose of giving facilities, not only to the people in the rural areas themselves, but to people travelling from different parts of the country through the rural areas. It is a national charge, but they have not been able to obtain a fair deal from the Road Fund up to the present time.

Let us see how this tax operates as far as they are concerned. Take the county which I have the honour to represent, Cardigan. A penny rate in that Division brings in somewhere in the neighbourhood of £900. The Division has a mileage which they must maintain —comparing it for instance with another county in Wales, Monmouthshire—of a, little less than the extent of the mileage of Monmouthshire, but a penny rate in Monmouthshire brings in. not £900, but something between £6,000 and £7,000. There is 50 per cent provided for the upkeep of first class roads, and there is a greater number of these and second class roads in Monmouthshire than there is in Cardigan. What is the position? Even in regard to the roads which fall within the first and second class, they are penalised as against the other area because of their low rateable value. The first charge upon this Fund should be for the purpose for which it was originally intended, and not for the necessities of the Chancellor of the Exchequer when he is called upon to balance his Budget, but to assist in the development of rural areas and rural industries. That has been the view of this House. This House passed a Resolution three years ago, on the 27th February, 1923, stating: That, in the opinion of this House, the Revenue raised by taxation on mechanically-propelled vehicles should be adequate to cover the additional cost of road maintenance attributable to motor traffic, that the grants now paid to road authorities should be increased accordingly, and, since practically all rural roads are now used by motor vehicles, grants should also be allotted in respect of all these roads, whether classified or unclassified."—[OFFICIAL REPORT, 27th February, 1923; col. 1875, Vol. 160.] So far no grant has been made in respect of these unclassified roads. It is the duty of the Chancellor of the Exchequer and the Government to see that the first charge on this Fund should be made in accordance with this Resolution. I protest against this raid on the Road Fund. A good deal more will be heard of it. This is adding to the serious burdens that have increased in recent years from Is. to as much as 3s. and 4s. in the pound upon rural ratepayers in respect of the burdens of these roads.

I pass from the raid on the Road Fund to another startling change, and that is the Betting Duty. The House has been shy of dealing with the ethical side of this tax, but one cannot brush aside the ethics of this tax as if it were of no account. The Select Committee which inquired into the desirability and practicability of this tax were faced with the moral issue, and that the moral issue is important, as far as taxation is concerned, cannot be denied. As a general proposition, it will be accepted, I know, on this side of the House, and also in all parts of the House, that the State has no right to reap a revenue from a vicious undertaking. It is another question I know as to whether betting is a vice. That is the second question which arises. Let me deal with them from the point of view of the Select Committee. The Select Committee had the task of making an inquiry for the purposes of arriving at a calculation with regard to the incomes of bookmakers, and they made a very interesting set of inquiries. They turned for information, among other sources, to the Estates Duty in order to find whether it would give them some information as to the incomes made by bookmakers throughout the country, and they make this Report with regard to it: The Estates Duty returns give no assistance, as all bookmakers die as gentlemen. It is a remarkable fact that bookmakers, when they come to die, die as gentlemen and not as bookmakers. Most other professions die as what they are or have been. But that is an indication from the ethical point of view that a bookmaker is not satisfied with the profession to which he belongs. He prefers to die as a gentleman. The case does not rest merely there. A great volume of evidence was heard, and it cannot be brushed aside as negligible, on behalf of the Free Churches of this country, on behalf of the Established Church, and also on behalf of the Roman Catholic Church. The evidence of the Free Churches was practically unanimous in treating betting as a vice. The evidence of the representatives of the Established Church was divided, as were the representatives of the Roman Catholic Church. What was the opinion given by some members of the Church of England, very distinguished members, and what was the opinion accepted by the Select Committee? The opinion accepted by the Select Committee was not the opinion of the Free Churches. They regarded that opinion as being an extreme one. It accepted the views put forward by Bishop Welldon and Dr. Lyttleton, not as representatives of the Church of England, but as former headmasters of distinguished public schools, and their view was that betting may be immoral and wrong in certain circumstances, but that in other circumstances it was neither immoral nor wrong. If a man was betting within his means, within his income, he was doing something which was quite right and which was not morally wrong, but if he was betting beyond his means he was certainly doing something both immoral and wrong.

Accepting that test, what is the position of the State, assuming my first general proposition is accepted, that the State should not reap any revenue from what. is an admitted vice? That is the reason why we in this country have never placed a tax on a house of ill fame. Is the State in this case going to inquire into the Betting Duty in order to reap a revenue from that part which is moral and right, from those people who are betting within their means, and to decline a revenue from that part which is immoral? It may be answered that the State reaps a duty from the sale of intoxicating liquors; that the same thing applies to the trade in intoxicating liquor. If it is wrong in the case of the sale of intoxicating liquors it does not make it right in the case of the Betting Duty. Then there is the practicability of this Betting Duty. I do not know how the Chancellor of the Exchequer is going to collect his revenue. The principle of the law of England has been against betting in recent times. The tendency of the law has been to put betting down. The Chancellor of the Exchequer says he is making no actual change in the law. I am not quite sure about that, because these resolutions indicate that the bookmaker himself must take out a certificate and pay £10 in respect of it, and he must register his place of business and pay £10 in respect of that registration. That is a change in the law. If he is not going to make any change in the law, how is he to recover the tax as far as the credit bookmaker is concerned?

Mr. R. McNEILL

The hon. Member is under a misapprehension. What the Chancellor of the Exchequer said was that he was making no change in the law as to the legality or otherwise of betting.

Mr. MORRIS

Yes, I am coming to the question as to how he is going to collect the tax unless he is going to make some change in regard to the legality of betting. At the present moment the law is that money in respect of a betting transaction is not recoverable. I assume for the moment that the tax will be paid by the bookmaker on the bet that is made. Assume that the backer loses and does not pay the sum that is due from him to the bookmaker, what is the position then? Is the Chancellor of the Exchequer going to recover the tax due on the bet that is made, and if he is, on what principle is he going to recover that duty? If he is to recover there will have to be a change as regards the legality of betting, and that would be a great change in the law as it is at the moment. It may not make legal what is now illegal, but it gives the blessing of the Government's recognition to a form of betting which in itself is not legal. It must be remembered that credit bookmaking is not a legal form of betting to-day. It is merely a loophole in the law which cannot he got at; loophole which is due, not to the intention of Parliament, but to the invention of man subsequent to the passing of the Act. But those questions can he more properly debated later, when the terms of the Resolutions are before the Committee.

I have no hesitation in saying that, although no great stress has been placed on the ethical view of the Betting Tax. that is, after all, one of the most important phases of this duty. That £150,000,000, or thereabouts, should be diverted from the ordinary channels of trade in this country, as we have been told is the case, is a very serious menace to the trade and development of the country. It is not very often that I agree with the hon. and learned Member for Argyllshire (Mr. Macquisten), but in regard to this duty I agree to a very large extent with what he has said. He described betting repeatedly as a vice. He said that for one family that is ruined by drink, 10 are ruined by gambling. I do not know whether his figures are correct, but one knows what gambling is, that it is merely the child of avarice and the parent of despair. It brings ruin to many homes. Whether or not the proportion is as high as the hon. and learned Member for Argyllshire said, we do not know, but, we do know the ruin wrought by the drink habit. The Chancellor of the Exchequer has told us that he is looking for revenue and not for trouble. He will certainly find a great deal of trouble in this duty. He cannot flout the opinion of the great Free Church and the Established Church, and the opinion of many right hon. and hon. Gentlemen in this House. It is a great pity that this new departure was made in order to find revenue in this time of stress.

Mr. RAINE

In common with many other speakers yesterday and to-day, I would like to add my congratulations to the Chancellor of the Exchequer on his introduction of a very bold Budget. I do not think any part of it has struck a more courageous note than that whereby he has added £10,000,000 this year to the Sinking Fund, in order that the total amount of the Sinking Fund, settled by Parliament two or three years ago, shall not be interfered with. That is further evidence that we are building our finance on a solid basis and are firmly establishing our credit. If the Chancellor's proposal is carried out it will mean that a year hence he will have half a million less interest to provide, and, if he is able to set aside the whole £60,000,000 during the current year, it will mean a saving of £3,000,000 for interest in next year's Budget. This is one of the directions in which the Chancellor of the Exchequer will be able to obtain an ever-increasing reduction in expenditure.

The Chancellor of the Exchequer has brought in a new regulation with regard to the collection of Income Tax, namely, that it shall be on a one year's instead of a three years' average. Perhaps he is not, aware that at their last meeting the Associated Chambers of Commerce, by means of a card vote, decided by a three to two majority against any alteration of the present system. No doubt there are very cogent arguments on both sides of the question. If in the change over from one system to the other the Chancellor of the Exchequer carries out what he promised yesterday, namely, that no hardship would be caused, then no very great harm can be done. Other speakers have suggested that the Chancellor should ration the various Departments. I cordially agree with that suggestion. But I would go a step further and suggest that the Departments in their turn should ration the grants which they make to municipalities and other local authorities. I speak as one who has been a member of a local authority for a long time. I have often felt that if, instead of the continuous interference from London with this that and the other thing, we were told at the beginning of the year that we would have so much money to carry out particular work, and that if we spent more, wisely or unwisely, there would be no more for us the following year, it would make for greater efficiency not only nationally but locally.

I would like to say a few words on the Betting Duty. Seeing that I am not a betting man, and do not even indulge in the luxury of putting a half-crown on golf in the way that the right hon. Member for Spen Valley (Sir J. Simon) confessed that he did, I may be able to make some impartial observation on the subject, more particularly as for some years I have served as a magistrate of my own borough. Ever since I knew anything about the subject I have thought that there is a great deal of injustice in the matter of betting. People like myself, if we are so inclined, can go to a telephone and put our bets on, and no one is any the wiser, but those who are not so fortunate as to have these facilities and must pay cash are liable to be interfered with by the police. Many a time, when we have had these people at the court, I have felt very reluctant to pass sentence on some of them, because I felt that we were not getting at the right people. It is the tout who is brought into court and is punished. He is the servant of some obscure bookmaker, and we do not get at the bookmaker at all. But it is impossible to get away from the fact that the magistrate has to administer the laws and not to make them.

I am sorry that the Chancellor has not gone further in this matter and entirely legalised betting. Why should we any longer keep up what can only be called the hypocrisy of the present position? If betting were legalised, I for one would advocate most strenuously that at the same time all the street betting should be at once ended, and that instead of being able only to fine these people we should be able to put them in prison. Street betting is the curse of which many opponents of this tax make so much capital. If we were to register all bookmakers, whether small or large, we could stipulate that their good conduct during the year would decide whether or not their licence was to be renewed for the following year. Generally speaking you would, ipso facto do away with the very undesirable element which is mixed up with betting. I have no hesitation in saying that no Act of Parliament will eliminate the desire in almost every human breast to take part in the game of chance. If you legalised betting you would also do away with a lot of the betting that now takes place, because the spice of illegality would be taken out of it. Far more than that, you would he able to sue in the Courts, and sue successfully, for the payment of some of the bets which these scamps refuse to pay, hiding themselves behind the Gaming Act. Only a fortnight ago there was published in the newspapers the details of a most disgraceful and unsportsmanlike case. A certain person opened an account and won a very large sum in the first month. He very naturally took the cheque when it was sent to him but, later on, when he lost about half the amount—a sum of £400 or thereabouts—he refused to pay. The bookmaking firm brought the case into the Courts, not because they had any hope of recovery but in order to expose the position.

With regard to the Silk Duties and the various other duties, whether those classified as the McKenna Duties or those which have been put on for revenue purposes, it is gratifying to know that all the gloomy forecasts have been falsified. I am one of those who, along with many thousands in this country, do not believe in these duties per se, but like other people I have arrived at the conclusion that it is more than time for us to look after our own people, in the same way as the foreigner looks after his people. We have had the spectre of unemployment in my constituency for four years, and, in such circumstances, one is inclined to take almost any step to reduce the amount of unemployment. I am not going to argue as to what might have been, in regard to various trades which we had in this country, because this is not the time for a general discussion on the question, but, I think, had we taken some of these steps in years past, we would not have the unemployment which exists to-day, and, certainly, I do not think that the constituency which I represent would be in such a parlous state as regards unemployment as it has been in during the last three or four years. For these reasons I most heartily support the Budget.

Major McLEAN

I wish to congratulate the Chancellor of the Exchequer and the Government on their decision not to renew the Trade Facilities Act and also on their decision to terminate the disputes as to assessments under the Excess Profits Duty. I think these decisions mark one more milestone on a hard and difficult road which is leading us away from the finance of the War years. As regards the new taxes I congratulate the Chancellor of the Exchequer on his proposals and I should like to mention particularly the extension of the McKenna Duties to commercial vehicles. In this connection I make reference to the increased duties on road vehicles. I regret that, so far as I can see, no distinction has been drawn between the road vehicle, tyred with rubber, and other road vehicles. A great deal of the damage done to our country roads is due to vehicles which have not rubber tyres. I welcome the Duty on wrapping paper and I am glad the Government have not been deterred from including this duty in the Budget by what I may term the sustained eloquence of hon. and right hon. Gentle men opposite on a similar duty last year. As far as the betting duty is concerned, I confess that to some extent, I was and still am, troubled by what may be called the moral argument. Perhaps I can very shortly indicate my views if I say that, on this emit at any rate, I agree with the arguments addressed to the Committee by the right hon. and learned Gentleman the Member for Spen Valley (Sir J. Simon). There is one small item in the Budget, namely, the remission of Excise duty in the case of home-grown chicory, which may be regarded as a trifling matter, but I hope and believe that the remission of this duty will encourage some farmers in our arable districts to grow this crop, and I trust they will find it profitable.

As regards the Road Fund, I agree with the Chancellor of the Exchequer that there is no binding obligation on the Government to use the whole of the Road Fund, and neither more nor less, in the construction and upkeep of the roads of the country. On the other hand, I can conceive a case in which if, as a result of evidence, it was clear that the roads of the country were deteriorating, it would be the duty of the Government to use, not only the whole Road Fund, but other funds as well for the upkeep of the roads. I do not suggest, however, that such a case has arisen. I congratulate the Government on being the first Government to recognise the claim of the unclassified roads to a grant under the Road Fund. I think the hon. Member for Cardigan (Mr. Morris) was not quite fair to the Government in that respect. The Government propose to grant £1,250,000 for this purpose.

Mr. MORRIS

That is for the first time, and I pointed out that, as it is being distributed between 171 authorities, it will come to about £7,000 apiece.

Major McLEAN

I agree that it is questionable whether the, amount is sufficient but I assure the hon. Member that this grant will be very welcome to our unclassified roads and I think the Government are to be congratulated upon making it. One wonders how this sum has been arrived at. First, there was to have been a grant of £750,000 and another £500,000 has been added. The inference is obvious that the amount has been arrived at not on the basis of the require- ments of unclassified rural roads, but on the basis of the amount which the Government can afford to give out of the Road Fund. Looking at the matter from the Government point of view, it is quite clear that a local authority has no right to expect the Government to help it to any great extent, unless it is doing its best to help itself. Naturally, I look at this matter from the standpoint of my own county of Norfolk which is one of the most highly rated in the Kingdom. I will not weary the Committee with figures, but to take only two instances, the highway rate in the current year is 3s. 7d. compared with 1s. 2d. in 1913–14 — and we cannot disregard the fact that some of these ratepayers also pay rates to their district council. To take only one district, the rural district council of Swaffham has a highway rate this year of 1s 11d. compared with a former rate of 9d.

Notwithstanding the great efforts which the Norfolk County Council and other local authorities are making, I do not think there can be any doubt that the present rate of maintenance and improvement is not overtaking the wear and tear of modern traffic conditions. On the contrary, deterioration especially of the unclassified roads is taking place. While that is true of Norfolk or any other part of the country there is a very serious situation and one which will have to be faced, and the longer we postpone facing it the more difficult will it become. It may be said that local authorities so situated ought to apply for increased grants, but that does not really apply up to the present to the unclassified roads. So far as the classified roads are concerned, many of these authorities are so hard pressed that it is doubtful whether they can afford to put up the extra £1 that is required for every £1 the Government give for Class A roads, or the extra £3 which they have to put up in order to get £1 from the Government for a Class B road. I suggest that the time has come when we ought carefully to go into the question of the finance of our roads, and to make grants in greater proportions to those authorities that are the most hardly pressed, provided always, I agree, that they are doing their best to help themselves. How can we arrive at a method of giving help to such authorities? There may be various ways suggested, but I would like to indicate one which I think would be fair and easily worked. It is not a question of considering the amount of the financial resources of any county or district. You have to consider, not only their financial resources, but the expenditure to which they are subject. I will take, on the one hand, the assessable value of a county or district, and I will take, on the other hand, the road mileage, and to a county where you find the amount of money available for each mile of roads is low, I would give a larger grant than to a county with a much larger amount of money available per road mile.

Let me give some figures, which, I agree, are round, and which are chosen purposely as simple figures in order to illustrate my argument. In Norfolk we have about 400 miles of Class A roads. 470 miles of Class B roads, and 4,400 miles of unclassified roads. If you are going to use this system of giving larger grants to the authorities most hardly pressed, you have to reduce those roads to some common denominator. For the sake of argument only, let us say that a Class A road is worth four miles of unclassified roads and that a Class B road is worth two miles of unclassified roads. On that basis the 400 miles of Class A roads come to 1,600 miles, the 470 miles of Class B road to 940 miles, and the 4,400 miles of unclassified roads remain, of course, the same, giving a total of 6,940 miles, or, let us say, 7,000 miles. On the other hand, the assessable value of the county is £1,585,000, or, to take round figures, £1,500,000. On those figures, if my arithmetic is correct, I think you will find that the assessable value per road mile of the county is about £200. Many counties will have a very much higher figure, and some counties will have a lower figure, but I suggest that to take that proportion of the assessable value to the road mileage of the county would give a very fair basis on which to base increased grants to the most hardly hit local authorities.

I would like the Chancellor of the Exchequer, before he brings forward his proposals next year, and the Government to inquire into this question of the finance of our roads, and if they find, as I say, that in some of the country districts, not only are they not keeping pace with the wear and tear of the roads, but that in many cases the roads are actually deteriorating, and in some places becoming quite impassable, that is a situation which, I think, it is up to the Government to face, if, all the time, the local authorities are doing what they can to help themselves. If the result of such an inquiry should be to prove that what I have asserted is correct, I hope the Government will find some way of giving increased help to those authorities that are so hardly pressed.

Mr. GILLETT

It is hardly to be expected that I should join hon. Members opposite in congratulating the Chancellor of the Exchequer on his Budget statement. As a. matter of fact, if I express any opinion, it must he one of disappointment at the dulness and the uninteresting aspect of the Budget, which is rather different from what one has become accustomed to hear from the right hon. Gentleman the Chancellor of the Exchequer. One thing in regard to which I was specially disappointed was that there was no definite statement made as to the monetary policy of the Government. The Chancellor of the Exchequer, seemingly well contented with what he had done in his last Budget, dwelt upon the gold standard and the tax upon silk, and seemed quite content with the result, but whatever we may think about the return to the gold standard, and however important it may he that everybody should try to make it a success, now that the step has been taken, to my mind, it is no use hiding from ourselves certain results that have accrued to-day and that are having a very important bearing on the problem that is before the Committee this evening.

I always feel that all the talk about economy has a certain aspect of humbug about it, because everybody is very keen on economies in the things in which he does not believe. One hon. Member has made the suggestion that Members of Parliament might economise on their salaries, and things of that kind. Personally, I am not an enthusiast on that aspect of the question. Hon. Members opposite would probably make some other suggestion, but if I proposed to them that they might economise on Singapore, they would tell me it was impossible. You have only to go round to the different benches, and you will find supporters of economy on every bench, but when you come to discuss the subject upon which you will economise, you will always find that they are ready to economise on the things in which they do not believe. To my mind, there are only two things on which any large saving could be made. One is in connection with the debt, and the other is in connection with military expenditure. The second one hardly comes before us specially this evening, so I will not touch upon it, but in connection with the debt, I should have been glad to know, if the Chancellor of the Exchequer would have told us a little about it, what his views on the present position of the money market are.

No one can dispute that the return to the gold standard has had a profound effect, The Chancellor of the Exchequer, in his very airy and pleasant way, when he spoke about it said the, Bank Rate was no higher. As a matter of fact, that statement was quite correct, because a year ago, when he spoke, the Bank Rate was 5 per cent., and it is 5 per cent. today, but if he had taken the year that had preceded his last Budget and had looked at the Bank Rate, he would have found that for about three-quarters of that year the Bank Rate stood at 4 per cent., and that it rose to 5 per cent. a short time before his Budget was introduced. To-day, we have a 5 per cent. Bank Rate, and we have had it at 5 per cent. nearly the whole of the year, with the exception of two or three months when it fell to 4½ per cent. The right hon. Gentleman indicated in his speech yesterday that the Bank Rate was the same, very much as if he were arguing that the return to the gold standard had had no effect whatever upon the Bank Rate, but when you come to the practical outcome of the Bank Rate and its connection with the Government Debt, you find that it is the effect it has upon the amount of money that has to be paid for Treasury Bills. I put a question to the Chancellor of the Exchequer a short time ago, asking him what amount of interest had been paid during last year and the previous year on Treasury Bills, and the answer I received was that in the year 1923–24 there had been issued £2,470,000,000 three months Treasury Bills, and the next year the issue was £2,400,000,000, or about £70,000,000 less, but the interest on Treasury Bills in the first of the two years was £17,300,000, and last year it was £20,800,000.

Therefore, so far as I can see, the result on a rough comparison—because the total amounts are not quite the same —is that the Chancellor of the Exchequer had to find an extra £3,500,000 in order to finance his Treasury Bills during last year, and that has to be set against the return to the gold standard, because no one can doubt that, to a large extent, the policy of returning to the gold standard was the outcome of the high Bank Rate. The Chancellor of the Exchequer also referred in a rather light way to the inflow and the export of gold, and to the demand of India. The insatiable demand of the Indian people to consume gold gives the City a very great deal of concern, and the position is that having returned to the gold standard we now have to face up to these difficulties. We had a somewhat unexpected drain, which went on for some time, and now we are waiting in the City to see whether any gold will come in. This is the time of year when gold ought to be coming in, in order that we may have sufficient to withstand the drain in the autumn, when the demands of the United States begin to come upon this country.

What I want to know is whether the Chancellor of the Exchequer has any views upon the outlook. I gathered from something he said in his speech that probably there would have been a reduction in the Bank Rate if it had not been for the present coal crisis. We are all in the dark as to the views of the Bank of England on the amount of gold that ought to be held before a reduction in the Bank Rate can be justified. Hon. Members, acquainted with the City, will remember that before the War one could fairly well judge when the Bank Rate was likely to rise or to fall, because one knew fairly well the amount of gold necessary to justify a reduction in the view of the Governor and the Directors of the Bank of England. We have had such a short experience of after-War history and conditions that we have not to-day a notion of how much gold it is regarded as needful for the Bank of England to have before a reduction would be justified. Personally, I was surprised when the Chancellor of the Exchequer said, or suggested, that we might have had a reduction by now if it had not been for the coal crisis, because it seems to me that we have not seen gold coming into the Bank of England recently; although there is talk of mysterious amounts of gold in the vaults of the Bank of England, or other places, yet, as far as the market is concerned, there is no information.

I should have been glad to hear from the Chancellor of the Exchequer, that he, at any rate, had an optimistic outlook as regards the money market policy, because in pre-War days we knew perfectly well that if certain things took place other things would inevitably follow. One could usually expect that with bad trade one would have easy money. To-day we have bad trade, but we do not seem to have easy money; it is a case of getting the worst of both worlds. In the old days there used to be some slight recompense, but to-day there is nothing as a recompense, and the fact which impresses the money market when they consider the outlook is that we are not getting in the gold that we might have expected. This has had a certain limited effect upon our floating debt, and must continue to have, and the Chancellor must go on finding interest at the rate of about 4¼ per cent. on his Treasury bills until the Bank of England can reduce the rate. Another effect of this return to the gold standard—it did not absolutely accompany it, but it followed automatically a few months after—was that the voluntary understanding in the City not to finance foreign loans was also abandoned, and towards the end of last year there was an outburst of lending.

9.0 p.m.

If we look at the rates at which loans have been issued recently, we see a distinct rise in the price of issue until, as the "Times" very truly remarked, the Chancellor of the Exchequer is faced, as he is in the next two years, with the fact that about £400,000,000 of debt is falling due and that he cannot convert those loans at any advantage whatever to himself. The "Times" distinctly states that, and I think it is quite correct. It seems to me that one of the most effective ways of saving would have been to convert the loans at a much lower rate of interest, but, linked as we are now to the United States and the gold standard, it appears exceedingly doubtful whether in the near future we shall see a, sufficient reduction in the rate of interest for the Chancellor of the Exchequer to have any opportunity of converting his loans on a better footing than they are at the present time. Therefore, although the Chancellor of the Exchequer has been very optimistic in his Budget outlook, I cannot say, speaking from my small experience in the City, that I can share his optimism or see anything to be specially cheerful about.

I referred earlier to the fact that we have talked about economy, and I was rather surprised to hear from the Financial Secretary, speaking on the other aspect of this question—one aspect is how much we can save, and the other is where and how we are going to tax—that he was amazed at the statement of the ex-Chancellor of the Exchequer that Income Tax was not a burden. Many of us forget that, whilst a number of years ago all taxes were looked upon as an evil, at the present time it is said that it is not mere taxation that is the evil but the way in which the taxes are being spent—that it is an evil to get money from the public and then not to use it for the benefit of the nation. I do not myself consider it an evil to raise money from certain wealthy quarters for old age pensions, and I doubt whether any hon. Member would challenge a statement of that kind. Therefore, we come once again to the problem of the expenditure and whether we think that evil or sound. The right hon. Member for Norwich (Mr. H. Young), who at present is mid-way between the Liberal and Conservative parties—I do not know at what stage he has arrived—gave us a very interesting address about Income Tax, and said it was essential that we should reduce Income Tax. Personally, I do not look upon Income Tax as a burden upon industry, in except in so far as it falls upon the. reserves of industry. I do not accept the theory of many hon. Members that we need a saving in Income Tax and in Super-tax in order that people may be wealthier and have the capital for new industries. I believe that if we spread the wealth amongst the population it would be quite easy, by our financial system, to raise money to-day. Their theory is a survival of the old ideas prevailing when wealthy men provided the means for developing private businesses. With joint stock companies, one can raise large sums of money from vast numbers of small people. It may be easier to raise it from a few wealthy men, but it can be raised on the money market quite easily.

As to the result of Income Tax, one hon. Member took the view that it acted in a depressing way upon business incentive, but industry to-day is not managed by the owners of the capital but by managers, and the vast mass of these men are paid a fixed salary. They may have a limited number of shares in the company, but to a very large extent, the payment they receive is by means of a fixed salary, and to that extent only are they influenced by the income Tax or the Super-tax they pay, and it seems to me that the effect of the tax is rather to make them anxious to increase the success of the company so that they can ask for higher salaries and thus neutralise the taxation they have to pay. I listened to all the appeals for economy, but apart from what I have said in regard to debt and military expenditure, it seems to me that the proposals will be largely futile. I cannot see why the Civil Service clerks getting over £500 a year should be asked to forego part of their pay when you are not asking the clerks in big banks to forego any part of theirs. It seems just as futile as asking those who have invested in Government stocks to accept a reduction of 1 per cent. in their interest while you leave the interest received from private companies untouched. If you want economies they should be spread over all the taxpayers.

My feeling in looking at this problem is that I cannot share the optimism of the Chancellor of the Exchequer. I suppose every Chancellor of the Exchequer has to draw a cheerful picture and state that everything he proposes is for the best. To talk about a reduction in unemployment and to forget the increase in the number of people coming under the Poor Law is a very one-sided picture. Many of us who look closely into these matters can see dark sides of the picture upon which the Chancellor has not laid stress. It was very clever of the right hon. Gentleman to get £5,000,000 from the brewers, and I have a feeling of admira- tion for him for securing a, hidden reserve of that kind. The Chancellor told us how he proposes to shake the tree in order to obtain the fruit, but he does more than that, he goes into the next garden to steal the apples, to add that to his own store.

The policy of shifting the burden of taxation from the shoulders of the nation on to the municipalities is one which the right hon. Gentleman is much too fond of. I can only say that however much I may differ in regard to economy on the lines laid down by hon. Members opposite, I support economy in administration. The real economy, however, which is needed is to obtain the money from those who have ample funds, and spend it in the interests of the vast mass who are still suffering for want of it. The policy of a return to the gold standard has a very dark side, and I think the number of unemployed is partly due to it, and the fact that the Coalition Government did not tackle the debt problem before deflation took place is an evil from which we are suffering, and shall continue to suffer as long as this vast mass of debt remains. I do not think the people of this country are going to be satisfied by little economies of the kind which are now proposed while this problem of the debt still remains unsolved.

Major KINDERSLEY

I do not propose to follow the last speaker in all his arguments, but I suggest that some of the unique information he has given as to the way financial affairs should be carried on might be communicated to the late Chancellor of the Exchequer. Before I come to deal with the speech of the Chancellor and his, Budget proposals, I should just like to call attention to the speech which was made by the right hon. Gentleman the Member for Colne Valley (Mr. Snowden). He spoke about there being no difference between the re-imposition of old taxes and the imposition of new taxes, and he said, "What does it matter because it is one and the same thing, and it falls on all the taxpayers." Speaking of the surplus of £26,000,000 the same right hon. Gentleman said that last year the present Chancellor of the Exchequer reduced the burden of the Income Tax and the Super-tax, and he further stated that this money had been completely thrown away. Surely the right hon. Gentleman is not justified in saying that, because when a tax is remitted the whole body of taxpayers must benefit.

Then the right hon. Gentleman the Member for Colne Valley came to the question of Treasury bills, and he seemed rather confused in his account of what happened. First of all, he said that the savings of the working classes were not invested in Treasury bills, but only the money of the banks. I should like to point out that the money in the banks is not only the money of the working classes, but of all classes of the community, because the banks are a great pool of the savings of the community as a whole. The interest on the deposits which working class people have in banks is paid inter alia out of the profits which the banks make out of Treasury bills. The right hon. Gentleman seemed to think that the big bankers said to the Treasury, "You shall not have our money except at 4¾ per cent. interest." But the bankers do nothing of the kind. What happens is that the Treasury asks for tenders for Treasury bills every week, and if the bankers do not tender at the right price or tender at too high a price, they do not get any Treasury bills, and it frequently happens that they do not get any. There are very large sums of foreign money which go into Treasury bills, and therefore it is quite impossible for the banks to lay down to the Treasury what rate it shall pay for their money. It is quite impossible, and it is not the way in which the money market works in the least. I want to make that clear, because otherwise the Committee might go away with a misunderstanding of what actually happens.

The right hon. Gentleman the Member for Colne Valley said that the real remedy for all our troubles was to double our production of wealth, and then we should halve our taxation. On this side, we all cordially agree with that. It is what we have always asked hon. Members opposite to help us to do, but, instead of that, they are crying for the moon, and seeking after a policy of Socialism which has never been successfully tried anywhere. They are putting spokes into the wheel of the present financial and commercial system, and, by so doing, are stopping that increase of production which we on this side all feel is so desirable. If they would only give up their, as I think, foolish dreams, and throw their weight into trying to make the present system work, I think we might realise what their own ex-Chancellor of the Exchequer suggests, and might easily double the production of this country and so halve our taxation.

I now come to one other argument of the right hon. Gentleman the Member for Colne Valley. He was, I think, dealing with the Super-tax and the McKenna Duties, and he said, "If it is true that the foreigner pays part of these duties, why do you not put a tax on cotton and on foodstuffs?" I do not propose to tell the Committee why, but, if the right hon. Gentleman knows so little about the arguments of those who are in favour of Tariff Reform as to be able to ask a question like that, I still have hopes that, when he has learned something about our arguments, he may yet be converted.

I now want to deal, if I may, with the Budget speech, and to say a word about the gold standard. I am one of those who believe that the Chancellor of the Exchequer was absolutely right in returning to the gold standard when he did. He has been criticised to-day by, I think, one or two speakers for being precipitate in returning to the gold standard. They said that it might have been all right if he had returned to the gold standard later on, but why do it at that moment? The answer is that he was faced with this position, that the Act which prohibited the export of gold expired at the end of last year, and something had to be done. Personally, I believe it would have been a great blow to the credit of this country if we had shown that our financial position was not strong enough to enable us to return to the gold standard when we did, and that we were obliged to renew the Act forbidding the export of gold. The reason the Chancellor had to take the step then was because circumstances compelled him to face the position.

I cannot enter in detail into the arguments about coal prices and all the other evils that have been enumerated by hon. Members opposite as following the return to the gold standard, but I do say that certain evils have been eliminated. When I spoke on the Budget proposals last year, one of the evils which I pointed out would be eliminated was the speculation in exchange. Speculation in foreign exchanges is one of the great curses of our time, and the return of the pound to parity with the dollar has practically eliminated speculation in American exchange. To-day, great speculation is going on in the franc, and if is only when currencies are unstable that they can become the prey of the speculator, who only makes matters worse. That is one great advantage that we have reaped from the return to the gold standard.

There is another advantage, namely, that we have stabilised, or tended to stabilise, wages on a common basis. Our example has been followed, and undoubtedly will be followed, by other countries as soon as they can do so, and I would tell hon. Members opposite that really a general return to the gold standard would be a far better way of stabilising world wages than any attempted agreements such as the Washington Convention, because you cannot be certain that conventions are always read in the same sense or kept in the same spirit, whereas you can be quite certain that these economic factors will compel a world adjustment, and you are much more likely to see a world adjustment of wages if all countries base their currencies on a common standard. Then I think we may justly claim that the drop of seven points in the cost-of-living figure is due to the return of the gold standard. It is one of the things to which we looked forward, but I am perfectly free to say, and to admit, that everybody knew that the return to the gold standard would for a time—it was difficult to say how long; experts differed—cause a certain amount of hardship and dislocation. Nobody denied that, but what we did say was that when we got through that period, as I believe we now have, then the advantages would outweigh any temporary disadvantages of that kind.

There is no doubt, also, that the Chancellor of the Exchequer can claim that the reduction of our Floating Debt to 704¼ millions from about 1,400 millions in seven years is a very great achievement, and I would beg him to go on, because this Floating Debt is a very great danger to the financial stability of the country. I think more than one hon. Member has already mentioned that we have here a debt which has not a fixed rate of interest, which is not funded, and on which, therefore, the rate of interest varies with the rate for money for the time being, and if we had, owing to causes beyond our control, a considerable drain of gold front this country now that we are back on the gold standard, and should we have to put up the Bank rate, the Chancellor of the Exchequer would have to pay a higher rate of interest on that Floating Debt, and it might upset his calculations very considerably. Therefore, I would urge him to take every step to continue this good work of funding, and, on this whole question of debt, I welcome very much the announcement of the early decease of the Trade Facilities Act. As far as I can see, the only real hope of getting any big reduction in our taxation is by reducing the rate of interest on our debt, and, if we are continually creating fresh securities, guaranteed by the Government, into which money will flow as trustee securities, there is no doubt that we are putting back the day when that conversion can be carried out.

In this connection I would like to ask the Chancellor to consider this. I do not want to go into the question of the Electricity Bill—it would not be in order —but I would beg him fully to consider whether it is necessary for the Government to guarantee £33,500,000 for the purposes of that Bill, and whether the ends of that Bill, of which I entirely approve, cannot be achieved without it? It is a pity to take this wise step of stopping the issue of the trade facilities guarantees, and at the same time add another large sum by this guarantee. I know cases where, owing to the operation of the three years' average in relation to Income Tax, businesses have been closed. The partners in one case had a good result in one year and could not face the possibility of having to pay Income Tax on that good year over the three years' period. That business had, almost in self-defence, to be dissolved. That should not be. I think the abolition of the three years' average is a move in the right direction.

I want to say a, word or two about the Betting Duty. I know that this moral issue is going to be raised. It has been raised to-night. It has been raised by the hon. Member for Cardigan (Mr. Morris), and I think what he said should be a lesson to everyone of the appalling muddle you get into when you begin to discuss this moral issue. He said he did not believe it was necessarily wrong to bet. I agree. I do not think you can say it is wrong.

Mr. MORRIS

The hon. and gallant Member is misinterpreting what I said. I was quoting the evidence of Bishop Welldon before the Select Committee.

Major KINDERSLEY

Well, we will take the gentleman quoted. He apparently said he did not believe betting was wrong. It depended on the circumstances and whether you bet beyond your means. I think that is quite fair. You can say exactly the same thing about drinking. I do not believe it is wrong to drink a glass of beer, but if I drank too many glasses, well then, I suppose it becomes an evil. There are those who argue—and they are perfectly consistent —that to bet is wrong, whether it is a penny or anything else, and to drink a glass of beer is wrong, but they have to convert a large number of their fellow-countrymen to that view, and then at all costs stop drinking and betting. That we understand. It seems to me that if a thing is lawful in itself, the State is perfectly entitled to take a revenue from it as they do in the case of alcoholic liquors. I see no difference between the taxation of betting and of liquor. Excess in both is undoubtedly a very great evil. Those who know anything about the poorer parts of London or great cities know that betting is in some respects as great an evil as drinking. That does not alter the case that if a thing is lawful you cannot make it a moral issue and say the State is morally wrong in taxing it. The State deals with what is lawful. Religious bodies and so on deal with what is expedient. It is a different thing altogether. There is one point on this Betting Duty, and that is the point raised by the right. hon. Gentleman the Member for Spen Valley (Sir J. Simon). I think there is a point that you may possibly increase street betting. I do not know anything about betting. I do not bet and do not profess to understand it, but it seems to me that a different type of client goes to the credit bookmaker from the type that makes use of the street "bookie." I do not think that those clients are likely to go to the street "bookie" even if he gives longer odds than the others. At the same time I hope the Chancellor will consider the point.

I come to the question of the Road Fund. Here I cannot feel, as some Members do, that the Chancellor in the circumstances, and under the great financial pressure, is prohibited from doing what he has done and taking a certain amount from the reserve and from the annual income of the Road Fund. That is a doctrine you cannot possibly uphold. I think the beer drinker might just as well claim that all the tax he pays should go to the improvement of the public-house. You cannot mark revenue in that way. It is perfectly true this Fund was started for the improvement of roads, but it has grown out of all recognition and will continue to grow. I do not believe that under the great financial pressure from which we are suffering to-day the Chancellor has done anything contrary to sound finance or Parliamentary pledges in taking what he has taken from the Road Fund. The Chancellor has shown great courage and great resource in framing his Budget, and I particularly would like to say how glad I am—and I think I can say this from the point of view of the City too— that, he had the courage not to dissipate his surplus in the relief of taxation but to use it to increase the Sinking Fund. It is entirely sound and I am perfectly sure will meet with the approval of all sound financial opinion. I ask the Chancellor of the Exchequer to realise that financial opinion is rather aghast that we have to face Budgets of £800,000,000 or £810,000,000. It is a burden which the country cannot really bear. I grant that from the point of view of your export trade it is possibly true that your rates send up your cost of production whereas Income Tax is paid from profits. At the same time the imposition of taxation is always an evil and it does take from that pool of saving which should be in the hands of the people and which should be used in fresh enterprises.

People tell me to-day that enterprise is being stopped—I have talked to many people in the City about this—because a man feels that if he is going to venture his money, and run a risk, it is not worth doing it because the State takes so much of his remuneration. There is no doubt about it, this heavy taxation is stopping enterprise in that sense. It is also diminishing the pool from which fresh enterprise must be financed if we are to provide for our increasing population. Unless we can each year set aside for investments in fresh enterprise a large amount of money we shall not be able to provide for our increasing population, and the standard of living must fall. For these reasons I beg the Chancellor to realise that, while we appreciate many points in his Budget and the way he has provided for the expenditure he has to meet, we are very alarmed and disturbed at the size of that expenditure, and we beg him to take every step to reduce it. If he will do so, I think every one on this side will be prepared to give him cordial support in whatever steps he deems it necessary to take.

Major OWEN

It seems to be the general thing for hon. Members opposite to congratulate the Chancellor of the Exchequer. I am sure he would much rather they changed their tone and would proffer him their sympathy rather than their congratulations. It is well known that certain nations always sing in a minor key, while others sing in a major. Last year when the right hon. Gentleman introduced his Budget we would all have come to the conclusion that he belonged to a nation which always sings in a major key. But yesterday, in spite of the blare of trumpets that accompanied his entry last year, he slipped in quietly behind the Chair, and the House was attuned to the very minor key in which he was going to address them. By his very attitude he sought not the congratulations of the House but rather its sympathy, and it is to offer him my sympathy rather than my congratulations that I rise to-night. It is, indeed, a very necessary thing, and a thing that the Chancellor of the Exchequer at such a time as this needs in very great measure from those who sit in this House. What strikes everyone at once in this Budget is that the ordinary return of taxation is decreasing. Until quite recently it was to be expected that there should be an increase of somewhere about 2 per cent.—a naturally increasing return of taxation. Last year the returns from taxation, instead of increasing naturally, de creased by £2,000,000 below the Chancellor's estimate. This year, again, the yield from taxation, as it existed last year, will, according to the estimate of the Chancellor, be £2,000,000 less than it was last year. In other words, as it appears to those who advise the right hon. Gentleman, instead of our taxation gradually increasing year by year as the population increases, and in accordance with the improvement in the prosperity of the people, we have come to a point where the yield gradually gets less.

If we look at the other side, we find that, since the present Government has been in power, instead of a gradual decline in expenditure, as was witnessed in the War, we have got an increase in expenditure year after year. Last year the Chancellor estimated that it would be in the neighbourhood of £799,000,000. Actually it was £807,000,000. I am not including the coal subsidy in the figure. On ordinary expenditure, which was not unusual and not out of the way, but expenditure which we are to meet year after year, there was, over and above the amount estimated by the Chancellor at the beginning of the year, an additional sum of about £8,000,000 required. This year, in spite of his Economy Bill, raiding this surplus here, and that surplus there, taking it from the capital of the country, the total expenditure is £812,000,000. Last year the expenditure was £19,000,000 greater than the low level year of 1923–24. This year it is an additional £5,000,000, that is £24,000,000 above the expenditure of 1923–24. Instead of going to the root of the matter and decreasing expenditure, the right hon. Gentleman brings in a new fangled tax which every Committee that has examined it has turned down as being impracticable and impossible.

Mr. CHURCHILL

Not impracticable.

Major OWEN

Impracticable and impossible is what they usually say. But we will come to that later. Let us see where the right hon. Gentleman can reduce expenditure. Owing to the monetary policy pursued by the Government, it is practically impossible for him to-day to convert any of our War Debt at a rate that will pay the Government, and decrease what we have to pay in interest on the loan. We cannot do very much on that score. I am not one of those who believe in reducing the rate of interest payable to those who lent their money to the country at a time of stress and danger, but if the Government had pursued a monetary policy more favourable and more useful from the point of view of trade and industry, we should today be able to carry on conversion at similar rates to those conversions which have taken place already.

Much money, running into millions of pounds, could be saved on Civil Service administration. We find an increase of £9,000,000 this year in the administrative expenses of the Civil Service. The only real source which the Chancellor of the Exchequer could tap, and should tap, is in the Defence Services. Let the Committee understand quite clearly that I am not one of those who believe in a small or inefficient Army or in an inefficient Navy. I joined the Army during the War, and I knew what it was to fight in an Army that was unprepared. In the years before the War, the years of great competition in armaments, we spent on armaments a sum equivalent to 3 per cent. of the total national income. We spend the same amount to-day, in a time of peace, after a War which has exhausted the military capacity and the military desire of European nations, and at a time when we were led to expect that we should have a period of peace and prosperity. Nevertheless. We find that we are spending to-day the same ratio to the national income that we spent in the years of the great competition before the War. Prior to that we considered that we were keeping within the limits of safety when we were spending a sum equivalent to 2 per cent. of the national income. It is time that we reduced it to that level to-day.

With every desire not to see our country falling behind any other nation but with a desire that we should place ourselves in a position that we can afford, I maintain that we could save on that ground alone a sum equivalent to £36,000,000 a year, without doing any harm to the country generally, or to its safety among other nations. How do we stand to-day with regard to the sum payable in taxation in proportion to national income? In the year 1913, the approximate total national income was £2,300,000,000 and the tax revenue of that year was £163,000,000, while the ratio of the tax revenue to the national revenue was only 7.1 per cent. There were plenty of economists in those days who said that we were getting beyond the margin of safety and getting into the margin of danger. In 1920, the approximate total national income was £5,600,000,000, the tax revenue £1,032,000,000 and the ratio of tax revenue to national income 18.4. In 1922, the ratio of tax revenue to national income had risen to 22.2, a point of very serious danger for the country. By last year the approximate total national income was £3,900,000,000, the tax revenue £684,000,000 and the ratio of tax revenue to national income 17 to 17½ per cent. That is a serious position which the Chancellor of the Exchequer ought to face. If he does not face it and if the Government do not face it, then the words of the right hon. Member for Colne Valley (Mr. Snowden) will be verified, that this is a Budget showing nothing but extravagance and profligacy, and all we can expect for this country, whatever party rules the country, is bankruptcy and disaster. We have to reduce tat ratio as between the tax revenue and the total national income.

A great deal has been said on both sides in regard to the Betting Tax. I am not going to say anything about the moral question. It may be a vice. I am not expressing any judgment. In many cases it is a vice. That it is a folly, no one can doubt, and that it is a luxury that few can afford still fewer can doubt. What is likely to happen? If the professional bookmaker who is now carrying on what is supposed to be a legal trade, is taxed, he will very naturally, as always happens, put the incidence of the tax on to the one who does the betting —the backer. The backers will find that the tax is absorbing all their winnings or a large portion of them, or that the tax is increasing their losses. The result will be that the volume of taxable money passing through the hands of the professional bookmakers, those who carry on a credit system or on racecourses, will very soon diminish, but the fact that the volume of taxable money will diminish does not mean that the amount of betting will decrease. The only result will be that the betting will be driven underground into offices and factories and workshops. It is there now, but the volume will be increased. That is the natural thing to expect. The consequence will be that the tax will be evaded to a very large extent by habitual betting men, and the fact that. it will have been driven underground into offices, factories and workshops and out of sight will not be compensated for by the estimated increase of £5,000,000 in revenue. That £5,000,000 will never be obtained, because the form and the way in which the tax is being imposed is calculated to drive the betting from the legal forms which are allowed at the present time into the illegal and hidden forms that are doing so much harm throughout the country.

Let the Committee consider, the Road Fund. The Chancellor of the Exchequer considers that he has a perfect right to set on one side the agreement made when this Fund was first established in 1909. The understanding that that time was that all the proceeds from this tax would be employed in improving and increasing the first-class roads throughout the country. The hon. Gentleman who has just sat down said, "Oh, yes, that was perfectly all right when the Fund was established, but the Fund has grown out of all recognition." The only answer to be made to that is that the needs also of the country have grown out of all recognition, and every penny that is obtainable from that Fund is required for the improvement and betterment of our toads. I think I have said enough to justify my opening remarks that what we have to do to-day is not to congratulate the Chancellor of the Exchequer, but rather to sympathise with him in his exceedingly difficult position.

Mr. PENNY

I regret I cannot agree with the hon. and gallant Member who has just sat down who said he could not congratulate the Chancellor of the Exchequer on the Budget which he has presented. I consider it an extremely sound, sane and sensible Budget which will commend itself to the country at large, and although it is accused of being dull, I do not think it detracts in any way from the Budget; that it is not spectacular, since it is based on sound common sense and was presented with that cheerful lucidity which is a joy to the Government supporters and at, the same time confounds the right hon. Gentleman's enemies, that is, of course, if he has any. I must say that I think one of the wisest provisions of the Budget is that in regard to Debt redemption, which carries out the policy inaugurated by the Prime Minister, and will be received with the greatest satisfaction throughout the country. I also think the guarantee of a 10 years' preference to all articles which come under the purview of Imperial Preference is an exceptionally wise step for the simple reason that it gives security and confidence, and I congratulate the right hon. Gentleman most heartily upon having done this.

10.0 P.M.

I am very glad, indeed, to find that no more loans will be granted under the Trade Facilities Act to bolster up projects and companies which, if they want these facilities, should really go to banks, and relieve the State from the possibility of any further burden. I am also one of those who feel pleased that the right hon. Gentleman has brought in this Betting Tax. I think he very much underestimates the amount of revenue which he will receive from that tax. To my mind, looking at it from the moral aspect of which we have heard so much, it is all sanctimonious humbug for us to say it is immoral to legalise betting. We all like to have our little bit on. I am not ashamed of it. Everybody likes to feel he can pick out a winner and that his knowledge may bring him in something. As the bookmaker says, "If you don't put it down, you can't pick it up." I sincerely hope that the Chancellor of the Exchequer will not stop half-way, but that he will legalise street betting, because I do really think if this be done, it will be a great protection to the man who bets. At the present time, there are all sorts of subterfuges taking place with regard to the street bookmaker, and if he does not pay the money should the backer win, there is no redress whatever. If it were made legal, it would be a protection, both to the bookmaker and to the backer, and would not increase betting.

The thing that I regret more than anything is that no definite steps have been taken by the Chancellor of the Exchequer, as far as I can see, to reduce the great expenditure which takes place in the State Departments. Excepting for the reference he made to the unification of the defence forces, nothing has apparently been done. It seems to me that the tool employed is the rake to pull in new Revenue, instead of getting the axe to work to cut down expendi ture. There is no doubt from what I have seen as a member of the Estimates Committee the Departments of the State are very extravagant, are very swollen and overlap, and can be cut down to a considerable extent. I think it would help the Chancellor of the Exchequer very much if he were to see that the terms of reference of the Estimates Committee were extended, so that the Committee could give him more advice in securing the economy which this country so much wants at the present time I do not speak against the Civil Service, because I do not think there is a class of the community to whom we owe a greater debt. These officials are ready to work all hours and put in the best for their country. But we have to remember that there is a great amount of dissatisfaction amongst the clerical workers of the City, who realise that by our heavy taxation we are checking the expansion of trade, and we are endangering the security of their own employment. They realise at the same time that the civil servant is a man who has an adequate salary, who has security of employment, and at the end of his service receives a pension. The clerical worker in the City is not in that happy position. He has an adequate salary, perhaps, but he himself has to put by a sufficiency to provide for a rainy day.

Therefore, I would ask the Chancellor of the Exchequer to look into this question, to see where overlapping can be done away with, and where extravagance can be checked, so that he will not present to this House the huge Budget which we see year by year, and which, from what he states, he sees very little hope of reducing for years to come. I know that he will experience terrific difficulty in cutting down in the Civil Service. It is growing more and more a huge vested interest in this country, and will dominate Parliament presently, if steps such as I suggest are not taken. I would suggest, as has been suggested on many occasions, that the only way to do this is to take a firm and courageous stand, and ration the Departments, the same as would be done in any business, by saying, "So much we can afford, so much we can allow this Department, and you will have to do your best with it." I am sorry the Chancellor of the Exchequer, through stress of circumstances, has found it necessary to override the pledges made with regard to the Road Fund. I dislike assigned revenue of any kind, and I think it is a lesson this House should learn that we should not pass legislation where revenue is assigned. It always reminds me of the days when I was young, and had to take something unpalatable which the nurse used to mix it up in jam. That is why I think legislation hedged about with promises and restrictions should be avoided for it usually covers up something distasteful.

I feel that the Chancellor should be a little more generous in regard to the provision he is making for the repair and upkeep of the roads. The incidence of the taxation was never equitable. The ordinary motor car had to pay far more than the heavy lorry or char-a-banc which certainly did far more damage to the roads. Motor car users, therefore, will have a grievance that the Chancellor of the Exchequer is not seeing that the roads are put in that condition which they are entitled to expect, seeing that they have been called upon to pay the heaviest part of the tax. I would also like to bring to his notice, as he spoke about giving consideration to a tax on petrol, that it was the heavy licence duties on big-powered engines which acted as a deterrent to American motor cars coming over here. Though at first blush it may look as if a tax on petrol was the best way, I would like him to thoroughly examine that question before he brings it into operation Then there is the question of toll gates and toll-bridges to which I have so often called attention in this House. There are 64 toll gates and 127 toll bridges in this country, all of which form a heavy burden on industry in the districts in which they are, especially upon agricultural produce. Here again Scotland has always an advantage over England because by the Roads and Bridges Act of 1878 they were abolished in Scotland but here we are still going on in the same way. It is a national, and not a local question. Could not the Chancellor possibly see his way to make some generous allocation for the freeing of these toll gates and toll bridges, and also for clearing away dangerous corners?

I am afraid I cannot elaborate many other points, because there are so many Members of the Committee present who wish to congratulate the Chancellor of the Exchequer. I would, however, ask him to consider the question of putting a poll-tax on aliens. We want every job in this country for our own people at the present time. I do not say that we should turn them out, because many of them do good service to the country, but if they wish to enjoy the amenities of this country they ought to be called upon pay for them. Although the amount of revenue may be small, the Chancellor is looking in every direction for revenue at the present time, and, therefore, let some of those who want to come and live over here pay for the pleasure of doing so. Again, there is the question of a tax upon advertisements on hoardings. It would help the Revenue, and save our countryside from the disfigurement which is going on at the present time. In my own constituency there are various areas where these hoardings are depreciating the value of property, both from the selling and the rating points of view. He might consider whether something might not be done in that direction.

The last point I wish to raise in regard to that very vexed question of the cooperative societies, about which I may possibly incur the anger of hon. Members opposite. Seeing that trade is so difficult in this country, I feel that in common justice to ordinary traders the co-operative societies should be placed in an identical position with the other traders in this country as regards taxation. They contend that there will be claims for repayment of taxation. on the amounts paid to shareholders, but that is purely hypothetical, and should not weigh with the Chancellor. I feel strongly that nothing should be done to make it more difficult for ordinary traders to compete, owing to one section of the community having a pull over them such as the cooperative societies have at the present time. Having put those points, I do sincerely trust the Chancellor of the Exchequer will continue to strain every effort to secure economy in administration and to reduce the heavy burden of taxation under which we are staggering, and which is retarding our industry to so great an extent.

Mr. KIDD

The proposals of the Chancellor have brought forth a variety of criticism from every part of the House. After listening all day to the various suggestions from budding Chancellors, I have come to the conclusion that the only point on which there is perfect unanimity is that in the preparation of the Budget of to-day the Chancellor is set a task rather like that of making bricks without straw. There are one or two observations from both sides of the House to which I would like to devote attention. My hon. and gallant Friend rather worked himself up into a state of indignation about the cost of running this country, which has risen from about 7 per cent. of the national income in 1913 to something like 17 per cent. in 1925. There is no mystery about that. An addition has inevitably been made to our debt during the War and that addition by itself explains the difference between 7 per cent. and 17 per cent. The right hon. Member for Norwich (Mr. H. Young), in his most attractive speech, must have awakened sympathy on both sides of the House when he expressed the wish that we could establish, as in foreign policy, some continuous national financial policy. After all, that is a gospel which on no part of the House will get support on the platform. No man will go on a platform and preach this doctrine. We think that some of us are more given to offering this or that bribe, but we are all inclined that way. It is an easy way of making ourselves popular by giving away something belonging to somebody else. It is much more popular than preaching the gospel of perfect reason so beautifully expressed by the right hon. Member for Norwich.

We come back now to these hard facts. Not a single Member in any part of the House has pointed to one single item that we can eliminate from the expenditure side of our account. Our expenditure to-day is fixed to such a large amount that any criticism we can offer on the expenditure side must of necessity be niggardly and really of no help towards a final solution of the country's difficulties. The right hon. Gentleman the Member for Colne Valley (Mr. Snowden) struck the right note when he said, as I understood him, that the one cure for the nation's position at the moment was to double our production. You cannot disturb the expenditure side very much. There has been a great deal of criticism about the Betting Tax, and we have heard complaints about this being taken from that fund and this being taken from the other fund. Do you think the Chancellor of the Exchequer, or any other Chancellor of the Exchequer, would gladly seek these devices if he had an abundance of revenue to play with? I think he has acted quite rightly with regard to the Road Fund. I think his Economy Bill in law and in equity is quite sound. With regard to the Betting Tax, he does not discuss in these days the question of morals. It is sufficient for him that. a certain section of betting is legal, and that another section, street betting, is illegal.

I share the objection of the man in the street who puts a shilling on a horse that he should be regarded as a criminal while another man who puts his bet with a bookmaker by telephone is supposed to be a gentleman. But those who put forward this question of equality should realise that it is not the function of the Chancellor of the Exchequer in the preparation of a Budget to bring in legislation which will create that equality. On the other hand, the Chancellor—we give him credit for opinions which would never identify him as an elder of the Scotch Kirk—when he finds that betting on a racecourse is perfectly legal says, "I will tax it." There is no objection to that, and, therefore, against these two critics of his Budget proposals he has a complete answer. To the one who contends that there should be equality in this respect he has the answer that it is not for a Budget to legislate to create this equality, and to the man who objects to betting on moral grounds, while he may have a certain sympathy with that point of view, he can argue that it is sufficient for him to find that betting is legal and he is going to take from that legal sport a certain amount of tax. All these devices are proof of the necessities of the situation. The only constructive suggestion that has been made in this Debate is this proposal to double our production, and I ask the hon. Member for Collie Valley what he and his party are doing to assist double production. What is the good of preaching the gospel of double production and all the time in the country, if not in this House, preach a gospel which tends not to double production but to paralyse production?

Mr. SUTTON

It is done by the employers.

Mr. KIDD

That is the sort of contribution we hear when one speaks of promoting double production. Nothing disturbs the workers of the country more than the contrast between the American situation and our own. He sees the American workers prosperous, and cannot understand how two peoples, speaking the same language and reading the same literature, are so different as far as wages are concerned. He hears no sufficient explanation, and it is beginning to dawn upon the worker of this country that it is because of the different attitude of the American unions towards industry as compared with the attitude of the unions here. The worker is realising that the policy of industrial aims only has led to an elasticity and adaptability in American industry which secures a common outlook by all engaged in industry. Every man engaged in industry in America is there, in a sense, in a common character. You might have variety and degrees of interest, one man earning £5, others £10 or £20 a week, but there is no hostile influence at play to disturb the common outlook of the American worker in his industry, and the result is such a co-operative effort that you have production on a huge scale, with diminishing cost per unit of article, and a largely increased wage fund.

What we want to know from the right hon. Member for Come Valley is, why cannot he preach that American gospel to his Party here? Once he has done so, once he has persuaded his party to adopt the American system, once the trade unions of this country pursue the policy of the American unions, once there are established such conditions as will procure the same common outlook and the same co-operation in industry, then we can be sure that we will have a production quite as large as that in America and a wage fund to correspond. According to the right hon. Gentleman that is the only way in which we can redeem the national situation. I ask again, what are his party doing to stimulate production? They have the American example to guide them. It is not a Tory theory; it is not a theory at all; in America it is an accomplished fact. We have heard much said about the large home market of America. The largest home market that America has is their home market arising from the largely increased capacity of her workers to consume. That increased capacity of her workers is the direct result of the prosperity which in turn follows the peace engendered by the gospel which I am adumbrating.

Mr. R. RICHARDSON

Go and tell the coal owners that that is so.

Mr. KIDD

What is the right hon. Member for Colne Valley doing, and what is his party doing?

Mr. SEXTON

What is your party doing?

Mr. KIDD

This extra production is hindered by the party opposite, and by them only, for the simple reason that for party purposes the interests of the British working man are to be subordinated. Until you lift that fog from British industry, we shall not redeem the national situation. I would warn the Committee of this: Expenditure is largely steady, and you cannot reduce it except in a niggardly way. Therefore, if you are to recover national prosperity, the recovery must be on the revenue side of the balance-sheet. I do not care whether it be a Liberal Chancellor of the Exchequer or a Socialist Chancellor of the Exchequer or a Coalition Chancellor of the Exchequer or a Conservative Chancellor of the Exchequer. Once he has exhausted every effort, with a proper regard for the security of the country and with sympathy for the social services, we find that he cannot seriously diminish his expenditure. It is along the other side of the account that we are to find redemption. We shall only find it by the simple policy of imitating the methods of America and by double production.

Mr. A. V. ALEXANDER

I do not propose to follow the last speaker at any great length, but I would say, in the first place, that it is impossible to compare America and this country in the way that the hon. Member has done. You cannot compare for one moment the natural resources of America with the resources of this country. You cannot compare volume of production per worker with the volume of production per worker in this country. We get this kind of talk from the mineowners with regard to the pro duction of miners in America, but there can be no comparison between the output per man, in the mines in America and the output here. One must consider the differentiating factors such as the fact that in America they work seams of a different kind; they work five, six and seven feet seams and use a great mass of machinery.

Mr. RICHARDSON

30 feet seams.

Mr. KIDD

I referred to the production cost per unit article. I was not referring to coal, but to something which is comparable with production in this country.

Mr. ALEXANDER

The hon. Member was replying to my right hon. Friend the Member for Colne Valley (Mr. Snowden) who said that the only real remedy, if we could get to it, was doubled production, and the hon. Member's reply was that we could only get it by adopting the American system. I have not time to reply to him at length, and I am only saying that one cannot compare America and this country in that respect. Moreover, there is something deeper still. We must have regard to the experience of the organised and un-organised workers of this country for the past 50 years. The system which the hon. Member has suggested is a system of payment by results as it obtains in America. What has been the experience of the worker in this country? When they have by increased labour and greater productivity earned a higher reward, the next move of the British employer has been to cut the piece rates. That is the experience of the organised worker in this country. I am much obliged to the hon. Member for Linlithgow (Mr. Kidd) for waking up this dull Debate, for it has been dull since about seven o'clock, but I beseech him, especially in this kind of crisis, instead of giving lectures of this kind only to our side, to take the same course with regard to the employers of labour in this country who have kept back our workers decade after decade—our workers who are as fine as are any in the whole world —from the attainment of the legitimate results of their labour, given freely and fully. Instead of making the kind of speech which we have heard from the hon. Member for whom I have every respect, it would be better if he talked to both sides, and not to one side only. If we got that kind of spirit, perhaps we would be able to treat with him.

The Financial Secretary to the Treasury, in his reply to my right hon. Friend the Member for Colne Valley, referred to the Chancellor of the Exchequer as a prophet, and he seemed to think that we were looking for an occasion against that prophet. I think it is a dangerous simile. There are many of the past prophecies of the Chancellor of the Exchequer in which we shall not have great difficulty in finding an occasion against him, so we were not at all perturbed about that aspect of the right hon. Gentleman's speech. Perhaps I may be allowed to quote, at a later stage, some of the statements made by the Chancellor of the Exchequer in the role of a prophet some years ago. The Financial Secretary said that the right hon. Gentleman the Member for Colne Valley had not produced any arguments in support of his statement that Income Tax was no burden on industry., I wondered whether the Financial Secretary really heard all the speech of my right hon. Friend, or heard it perfectly. What my right hon. Friend did say was that the statement that Income Tax was a burden on industry was too often exaggerated, which is a very different thing from saying that it is no burden at all.

Those who are versed in the effects of fiscal policy and taxation on industry will see at once that Income Tax has an effect upon the rate at which you can borrow capital for the industry of the country. People who are lending money consider the return which they will get upon it, and the rate of tax which will be levied upon the return when they get it, and that does affect very often the rate which you have to pay for the capital employed in your business. When we have said that, we do not admit for a moment that Income Tax is anything like the burden upon industry that we have been led to suppose by many speakers to-night. We think it is far less a burden upon industry than the rating burdens which are at present placed upon it. I know that, if I were to take Sheffield as an example, and to take the present rating burdens upon industries there which have been depressed now for four or five years without cessation, the companies and firms concerned who have paid no in- terest upon their ordinary share capital, or indeed upon their preference capital, in many cases, would much prefer a real relief from the rating burden to a reduction in the Income Tax. That would be the biggest possible contribution which the Chancellor of the Exchequer could make towards the recovery of those industries.

The Financial Secretary to the Treasury was a little confused, I thought, about my right hon. Friend's argument concerning the raiding by the Chancellor of the Sinking Fund, and he could not understand why we took- a different view from the Chancellor about the use of the surplus which accrues from the last year's Budget. I should have thought the Financial Secretary would have realised that the £50,000,000 which is put to a Sinking Fund every year is surely to be taken as exclusive of Treasury balances which accrue at the end of each financial year. If we take that perfectly orthodox view, we are surely right in saying that the Chancellor of the Exchequer is going back and raiding a balance which has already accrued and been put into the old year's Sinking Fund, in order to balance his Budget in the present year, and I think that, on reflection, the Financial Secretary will come to the same view as we have taken. The right hon. Gentleman will reply both to my statement now and to my right hon. Friend to-morrow, and then he will be able to explain, as he tried to get my right hon. Friend to explain, why that is utter rubbish, which I think was the phrase he used.

There was one part of the speech of the Chancellor of the Exchequer which interested rue very much. He said, at the beginning of his speech: The consuming; power of the people is maintained. It is more than maintained, it is increasing. It is increasing faster than the population, but it is not increasing very rapidly."—[OFFICIAL REPORT, 26th April, 1926; col. 1687, Vol. 194.] I take it that he formed an opinion like that on the Customs figures for the year. If not, we shall be interested to hear later on what ground he has formed that opinion. A little later on in his speech yesterday, he said: However, speaking generally about the Customs and Excise, I feel bound to say that they show only moderate resiliency."—[OFFICIAL REPORT, 26th April, 1926; col. 1688, Vol. 194.] I think the one statement rather detracts from the other, but I want to put to the right hon. Gentleman to-night this fact, that our experience in distributive industry is that the consuming power of working-class people is not increasing, as would be supposed from his statement yesterday. I have had to make considerable inquiries in the consumers' movement in the last three years for the submission of evidence to bodies like the Colwyn Committee on National Debt, the Balfour Committee on Trade and Industry and other Committees appointed by the Government, and, invariably, we have been asked what our experience has been as to the habits of the people in regard to consumption. Our experience in the last few years has been that the standard of demand of the working classes respecting simple commodities has consistently declined. The trade returns show that more margarine has been substituted for butter. We find that workers who before the War were ordering bespoke tailored suits, to-day are buying only cheap ready-made suits. We are not speaking from theory, but from our own experience of our own factories supplying 12,000,000 to 14,000,000 organised consumers. We find in the boot factories that people require and demand a cheap-class article of a lower grade, because they cannot afford the type of article they had before the War.

In those circumstances, how can the Chancellor of the Exchequer tell us that the consuming power of the people is maintained? It may be perfectly true, as he said in his Budget speech, that the nation is richer than it was a year ago. From our experience we think that the nation is richer, but we find that the worker is poorer. We are led to that view, as was said by the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) this afternoon, by our experience as to the accumulated wealth of the country, the returns from Inland Revenue since the War, and the declining wages of the worker. The right hon. Gentleman the Member for Colne Valley said this afternoon that he thought wages had declined in the last four years by about, £500,000,000—I think that very conservative estimate of the decline —whereas each year there has been a continuous increase, judged by the In- come Tax and the Super-tax of the wealth of the rich.

Mr. CHURCHILL

Are you referring to real wages or nominal wages?

Mr. ALEXANDER

Real wages.

Mr. CHURCHILL

£500,000,000 decline in real wages

Mr. ALEXANDER

Yes, I think so, in real wages; but I would like to look into that and I do not want to commit myself by a reply to an interjection. It is very much to be regretted, in these circumstances, that the Chancellor of the Exchequer in the last Budget and in this Budget should be moving away from an almost unbroken continuity of reduction of indirect taxation to an increase of indirect taxation and a reduction of direct taxation. He seems to have changed his views very much since the days when he was in charge of the trade of the country. If I remember rightly, his first Cabinet appointment was at the Board of Trade, and in those days he made many speeches of which he and his friends were so proud that he published them in a book called "The People's Bights." In one of those very brilliant speeches, if I may say so, he said this in regard to the increase of indirect taxation: Mr. Balfour and his friends seek to arrest the tendency to decrease the proportion of indirect to direct taxation which has marked in unbroken continuity the course of the last 60 years. We, on the other hand, regard that tendency as of deep-seated social significance, and we are resolved that it shall not be arrested. So far as we are concerned, we are resolved that it shall continue until, in the end, the entire charge shall be defrayed from the profits of accumulated wealth. I wish the Chancellor of the Exchequer were taking a view to-day more in accordance with that statement. That old economist, John Stuart Mill, said that war always makes the rich richer and the poor poorer, and we have now a greater gap shown between the wealthy of the country and the poor, and I regret that at this time the Chancellor should so far go back upon his published eloquence and wisdom as to increase the proportion of the taxation to be paid by the indirect taxpayer and reduce the charge upon the direct taxpayer. [Interruption.] Well, I will tell the right hon. Gentleman. He is quite right that in saying, when he was speaking in 1909, the proportion was about 50–50. At that time he was arguing for a continuity in the decline of indirect taxation. It continued to decline until in 1922–23 it went down to 39 per cent. in 1924–25 it was 37.3 per cent., and last year it was raised to 38.4, and I should say that, it will be 39.75 per cent. in the next financial year. With regard to the present Budget I am afraid we shall be seeing a still larger proportion of our taxes raised by indirect taxation. I urge upon the Chancellor of the Exchequer that that is not the way to secure the highest amount of prosperity for the country. We believe that the more you can relieve the mass of the workers from taxation of that kind, the larger is their demand for goods and services.

In discusing the Budget of 1923–24, the present Home Secretary put forward the plea that there was a larger amount of labour required for luxury production than for ordinary goods and service in the case of the working classes. We do not believe that. We believe that the greatest amount of employment is secured when there is a reasonable standard of living for the mass of the people quite apart from luxuries, and if the Government wish to assist in that direction they should do all they can to relieve them from taxation and increase their purchasing power in that direction. We think it is all the more remarkable that the Chancellor of the Exchequer should be moving at this time for more indirect taxation when he has relieved the Super-tax payers to the extent he has relieved them in the past.

Mr. CHURCHILL

I increased the Death Duties, and the hon. Member might mention that.

Mr. ALEXANDER

The Death Duties are only paid once, and the relief given to Super-tax payers is permanent.

Mr. CHURCHILL

The amount of the decrease in the Super-tax and the increase in the Death Duties is £8,000,000 in a full year, and they exactly balance.

Mr. ALEXANDER

I think the balance will he found to be very much in favour of the Super-tax payer who is relieved year after year by means of this Budget.

Mr. CHURCHILL

We can increase them.

Mr. ALEXANDER

We shall see. It is not possible to deal with this subject by question and answer across the Floor of the House. It is, in our judgment, quite wrong to be increasing indirect taxation and relieving the rich to that extent, and at the same time to tell us that it is impossible to relieve the food of the people from direct taxation. I was very interested to hear the Chancellor of the Exchequer state in his speech that the consumption of sugar per head of the population is not only equal to but larger, rather, than before the War. A considerable factor in that was the reduction of the Sugar Duty in the 1924–25 Budget of my right hon. Friend; and, more than that, it has been a considerable factor in providing employment in many industries. Sugar is a raw material that is used in many industries, and we have found a considerable relief in connection with our manufactures of articles like jams, confectionery, pickles and so on, and a very considerable increase in the employment afforded in trades in which unemployment was very heavy until that time.

Moreover, we have seen the benefits of cheaper food reflected in the purchasing of people in our stores from week to week, and I hope the Chancellor of the Exchequer will believe me when I say that we are very often able to test far better by the weekly purchases of known members in working class circumstances in the stores than he can possibly hope to do just by technical opinions given to him by people who get much of their information from books. We were able to notice that, as soon as the Budget of 1924–25 was in operation, there was a distinct gain of purchasing by the working classes in other directions as well as in the case of the articles relieved from taxation. We, therefore, urge him to go on with the good work, and we shall urge him on the Finance Bill to do so.

We want to say something else to him, and that is that he will be making a very great mistake if he is led, by some of the suggestions made by his back benchers to-night, into extending the policy of Protection. I could not help thinking, when I was listening to the argument of the hon. and gallant Member for Hitchin (Major Kindersley) about Tariff Reform that it would be best for him to try his arts first of all upon the Chancellor of the Exchequer, because it seems to me that so far the Chancellor has resisted anything like a. wholesale move towards Protection, though he is yielding far more to the, Protectionists on his side than some of us like to think. We on this side hold the view that Protection is no cure for unemployment. No variation of view can be found on this side as to that, though variation of views may be found on some subsidiary aspects of the question. The Chancellor of the Exchequer advanced the wonderful theory during the Debate that, in the case of some of the taxes he has proposed, the foreigner has paid the taxes.

Major HILLS

Hear, hear !

Mr. ALEXANDER

I am very glad to hear that cheer from an economist like the bon and gallant Member for Ripon.

Major HILLS

Certainly, in some cases.

Mr. ALEXANDER

I would like again to quote the view of the right hon. Gentleman in his more sane days, when he was in charge of the Board of Trade—

Major HILLS

His salad days.

Mr. ALEXANDER

Well, I would say his more sane days. This is what he said then: Will the foreigner pay? Of course, the first thing that will be said, I have no doubt, will he that they will find the money by taxing the foreigner. I hope you will not expect me to waste much time on that mischievous, foolish policy. I think it is a safe general rule to say that every tax which a British Chancellor of the Exchequer can impose will be paid by the people of Great Britain and Ireland. That does not sound very encouraging for the argument used to-day, that the tax is paid by the foreigner.

Mr. CHURCHILL

I think there is no doubt whatever that in this particular case it is paid by the foreigner. I was careful to say that the exceptional circumstances in this case, in my opinion, precluded the drawing of a general rule, but the fact remains.

Mr. ALEXANDER

There is not the slightest doubt that another argument the right hon. Gentleman used in the same speech will also apply in this case, that that may be so quite tem- porarily, but that ultimately the whole burden of this tax will be borne by the consumer.

Mr. CHURCHILL

I said that the consumer has been deprived, in my opinion, of a reduction which would have accrued to him by now.

Mr. ALEXANDER

Then, in fact, the foreigner has not paid the tax, but the consumer has paid it, because he has not benefited by the fall in prices that he was properly expecting to get with a new and expanding industry. I think that that answers the case perfectly well. We think it is most unfortunate that the Chancellor should be following such a policy, even though he himself quite clearly, from his intervention, now hankers after the old Free Trade days and the Free Trade doctrines of his youth, and cannot be easily won away from them. We think it most unfortunate, in present circumstances, that he should be opening the door, however slightly, to the policy of Protection in, this country. It is unfortunate that in connection with that he is going to stabilise the preference to the Colonies for 10 years. I know there will be differences of opinion on that in all parts of the House. Many of us think he is making a great mistake in stabilising the preference for 10 years. He knows full well, from his long experience in Government, how easy it would be for a Dominion to say to us that we have been guilty of a breach of faith if there is a change of Government and the policy of preference has to be done away with by the removal of a tax upon food.

Mr. CHURCHILL

That is safeguarded.

Mr. ALEXANDER

Perhaps the Chancellor will tell us what the safeguard is.

Mr. CHURCHILL

The safeguard is that the preference falls if and when the tax is reduced below the level at which the preference is now paid.

Mr. ALEXANDER

Of course that is so, but the very utterance of his policy gives the Dominions hope to believe they are going to get the present stabilised preference for a minimum period of 10 years. If there is any proposal to depart from that by a reduction of the preference, we should then be charged with breach of faith. His Protection policy and the Imperial Preference policy are unfortunate because of the move in the world to a better policy. We are now having an International Economic Conference prepared for at Geneva; Preparatory Committees have been set up. It would have been far better for a country with the influence and importance of our country in the Council of the League of Nations that we should have held our hands from fiscal changes of this kind, and gone to the International Economic Conference prepared to argue for a fiscal policy which would help to recreate the markets of Europe.

I do not underestimate the value of Empire markets. They form 23 per cent. or 24 per cent. of our export trade. We still have an export trade to Europe of 33 per cent. to 34 per cent, of our total exports. If we could only get a good economic understanding through the League of Nations at this new Economic Conference and get to a freer trade policy between the nations of Europe, I believe we could get a bigger market in Europe than we could hope to get from our Dominions for some time, with their present population. However you may strive through the League of Nations for political amity, these things will soon become scraps of paper unless you can move towards the abolition of economic strife. It would be futile to arrange for political agreement when you could get economic agreement as well. The kind of thing that is happening as the result of the Chancellor of the Exchequer's policy is this. France will be negotiating on the one hand for debt., and will, partly as a reply to our tax on silk, put up tier duties against us to 30 per cent. You will have a tariff wall accentuated if the Free Trade countries of the world go into the low and sordid fiscal strife that some of the other countries have gone into. The Chancellor knows when that is carried to its logical conclusion you have all the elements which lead to fiscal strife and bloodshed between nations later on. I should have thought when he remembered all the passages of his speeches cm the fiscal question in that direction the would have held his hand till the international Economic Conference had been able to consider them.

I hope we shall have plenty more opportunities of discussing some of the duties which are the subject of such fiscal controversy on the Committee stage of the Finance Bill. The Chancellor of the Exchequer will make a great mistake if, whilst dealing with many other important parts of his financial policy, he overlooks that the prosperity of the country, as of every other industrial country, must ultimately rest on the consuming power of the people—I think he has said that many times in the course of his long political life—but we shall not do that by setting up fiscal barriers. We shall not do it by increasing the proportion of indirect to direct taxation. We want in fact a better distribution of the wealth that is produced by labour if we are to maintain in the main the consuming capacity of the people of the country and we shall continue to press that point of view upon the House and the Government.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.— [Commander Eyres Monsell.]

Committee report Progress; to sit again To-morrow.