FINANCE BILL.

HC Deb 21 July 1926 vol 198 cc1235-321

Order for Third Reading read.

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

Mr. DALTON

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

I move this Amendment because I believe this Bill to be a bad Bill, following the bad tradition, of the Finance Bills of these post-War years, broken only in 1924, when my right hon. Friend the Member far Colne Valley (Mr. Snowden) was in charge of the finances of this country. We have heard a. good deal lately about French finances. There is one thing which we might with advantage learn from the French; they know how to get rid of unsuccessful Finance Ministers. We, on the other hand, are very tolerant, patient and long-suffering in this respect. The Chancellor of the Exchequer last year introduced a Finance Bill which was full of glamour and sensation. This year he has gone as near to a humdrum Budget as it is in his temperament to go. There is little glamour in this Finance Bill, in spite of the Betting Duty. Apart from that feature, it would be true to say that it is not only bad in principle but dull in detail. It is not unnatural that the Chancellor of the Exchequer this year should be singing in rather a minor key, because the great hopes of further reductions in taxation that were held out last year, which were to be secured from substantial economies in supply services, have not matured, and the hopes of further reductions of taxation have come to nought. In spite of concentrated economy campaigns against the social services, more particularly education and health, the Chancellor of the Exchequer has been unable to produce any considerable reduction in expenditure, and on the basis of existing taxation was landed with a prospective deficit of £8,000,000—a prospective revenue of £805,000,000 against an expenditure of £813,000,000. Therefore it is not unnatural that he should sing this year in a minor key.

When we turn to the balance sheet, we find that it is still dominated, as it has been since the War, by two factors—armaments and debt. These two forms of unproductive expenditure are responsible between them for more than 50 per cent. of the total expenditure. The total expenditure is £821,000,000, and subtracting £55,000,000 for Post Office expenditure (which is more than covered by a revenue of £59,000,000) we arrive at £766,000,000 as the net expenditure, of which £304,000,000 is for debt interest and £117,000,000 for armaments, a total of £421,000,000 out of 766,000,000 devoted to armaments and debt interest on loans, or more than 53 per cent. of the total and about 1os. 7d. in the £. If you add to that the Sinking Fund of £60,000,000, and war pensions £64,000,000—I do not grudge a single penny under these two heads—you arrive at a total of £545,000,000 out of £766,000,000, which may accurately be described as the combined cost of war in the past and preparation for war in the future. The balance left over for truly productive expenditure in the proper sense is very meagre. Further, it is apposite in this connection to note that the Income Tax and the Super-tax, at the low levels to which they have been reduced as a result of past Budgets, bring in only £320,000,000, which is not enough to cover debt charges, not enough to pay for the upkeep of our immense financial cenotaph represented by this £7,000,000,000 War Debt still outstanding.

Before the War the Income Tax and Super-tax yield covered the debt charges more than twice over, and the alteration in the ratio brought about since the War is the measure of the financial degradation at which we have arrived, the end of which we have not yet reached. It is against the burden of armaments and debt charges that an economy campaign has to be directed, rather than against the educational opportunities of the children and the development of the health, housing and other social services. But the prospect of relief given to us in the policy of His Majesty's Government under the heads of armaments and interest on the Debt are very small indeed. Although we are pledged to disarmament by the Treaty of Versailles, we are told that it may take several years, yet before we can hope to find a plan through the League of Nations. Meanwhile, we are pledged to a great expansion of the Air Force to 18 times its strength in 1922. We are also pledged to a great increase in expenditure in respect of Singapore and in other directions. That expenditure is more popular with hon. Members opposite—[HON. MEMBERS: "Hear, hear!"]—I hope they will cheer after I have finished my sentence—it is more popular with hon. Members opposite than expenditure on education or on health services. I think hon. Members opposite cheered me somewhat prematurely.

Major Sir BERTRAM FALLE

You cannot have the one without the other!

Mr. DALTON

That is a matter of argument, but while this expenditure is viewed with great enthusiasm by hon. Members opposite we do not find them on our side when we are fighting the battle for expenditure on social services in order to build up the physical and mental qualities of the people. If I may turn to the French Debt negotiations in this connection, it appears to me that all the concessions of the Chancellor of the Exchequer to the French in respect of their debt, which means, of course, a future diminution in our receipts from that source, would have been well purchased and worth while making if they had formed the basis, or part of the basis for negotiations, including an Anglo-French agreement for disarmament, more particularly in the air. As far as I know, the Chancellor of the Exchequer made no attempt to link together debt and disarmament in these negotiations. The result is that we have made enormous concessions to the French, to be paid for by our own taxpayers in the future, and we have no quid pro quo in respect of any undertaking to check this suicidal competition in Air Forces that is proceeding between ourselves and out French Allies. We are drifting, with the approbation of many hon. Members opposite, to a more and more extensive preparation for war, which will be accelerated and rendered more likely by the policy now being pursued in common by the Allies in the late War. We are drifting, equally helplessly, with regard to the interest charges on the debt. We are still paying nearly £100,000,000 a day in interest alone upon the War Debt. The only means by which that can be reduced, short of repudiation, is by a repayment of the debt, or by conversion to lower rates of interest. These two policies are complementary one to the other. The faster you repay the more you strengthen national credit, and the more economical conversion operations become.

It is partly because we are repaying debt so slowly that the prospects of conversion are so bleak. That they are bleak cannot be denied. The Chancellor of the Exchequer has lived to see British credit standing so low that within the next few years we are likely to see conversion operations increasing rather than reducing the burden of the debt charge. The Chancellor of the Exchequer is aware, he has told us in several speeches, of the large maturities which are impending; indeed, he has made it one of the excuses for not carrying out the recommendation of the Royal Commission on the Coalmining Industry with regard to the nationalisation of mining royalties. One reason why the Government are not willing to carry out the Report of the Coal, Commission is because they say that it would damage national credit to issue an additional amount of gilt-edged securities, although they are backed by the coal resources of the country, a large and tangible asset such as we have not got to put against our War Debt. In the next year or two, in 1927–28, we have maturing £63,000,000 of 3½ per cent. War Loan. It is perfectly clear that at the present low level of national credit, conversion will have to be carried out at an increased cost rather than a reduced cost to the taxpayer. We shall not be able to borrow at the low rate of interest of 3½ per cent, in order to replace this maturing 3½ per cent. liability. Similarly, in the same year, we have £80,000,000 maturing of 4 Per Cent, National War Bonds. We cannot now-borrow at 4 per cent.; the rate is nearer 5 per cent. Under both these heads, and certain others which might be mentioned. conversion operations, instead of being a cause of relief, will be a cause of added burdens to the taxpayers of the country. The prospects of relief from conversion, are, therefore, very meagre.

When we turn from conversion to re-, payment, we find the enormous total which I have mentioned, of £6,500,000,000 Internal Debt, and £1,100,000,000 of External Debt, or a total of £7,600,000,000.Wehear a great deal about the reductions of taxation that have been made in the past year or two being necessary and beneficial in the interests of trade, industry, and investment; but I think it is still true that the safest investment of all is the repayment of one's own debts, whether that principle be applied to individual economy or the economy of a great nation. I have no doubt at all that a given sum of money applied to Debt reduction produces far more beneficial results than the same sum of money applied to the reduction of the taxation of wealthy people, who spend a large part, not in helping trade or industry, but in luxury and extravagance and in an unduly distended standard of life.

My own suggestion of policy is that we should fix a term within which we should aim at the redemption of the whole of this Internal Debt. That does not introduce a new principle. When the present Prime Minister funded the debt to the United States, the term of 62 years was agreed upon. The Chancellor of the Exchequer or some Member of the Government will be asking this House later to assent to a loan to Palestine and the East African Dependencies. I find from the explanatory Memorandum that that loan will have to be repaid in 40 years, even although it will have behind it the solid capital assets of railways, roads and other public works. Therefore, there is nothing new in principle in proposing that we should fix a term within which the whole of the debt should be repaid. There may be dispute as to how long the term should be. I would like to see it short enough to give a prospect to those who are now in middle age of seeing the whole of this debt cleared off before they die. Evidence was given before the Colwyn Committee on debt and taxation, not by a member of the Labour party but by a highly respectable professor of political economy, whose evidence, based on a simple arithmetical calculation, was to the effect that if we raised the Sinking Fund to £100,000,000 a year, and made it fully cumulative, the whole debt could be paid off in just over 30 years. That is a very hopeful calculation. Even if we do not take quite so short a period, that calculation alone proves that it is perfectly possible to secure the redemption of the whole of this debt within a comparatively short time, without placing any undue burden of additional taxation upon the people of this country.

The Chancellor of the Exchequer made an after-dinner speech last Wednesday at the Mansion House. It has already been referred to in terms of admiration more than once. I was greatly encouraged when I read the speech. It was full of admirable financial precepts, which could not, indeed, have been better had they been designed to provide me with a text for my remarks to-day. He said: There were some broad and simple truths which gave a sort of rough-and-ready, rule-of-thumb guide through all these mysteries and tangles (of finance). These simple rules did not require any lengthy explanation. Everyone knew what they were. One of them was 'Pay your debts, and pay them quickly.' I was greatly encouraged when I read those words. But then I remembered that at the present rate of repayment of our debts, under the Chancellor of the Exchequer's policy, we shall take rather over 150 years to pay off the National Debt. I think I am entitled, therefore, to say that the Chancellor of the Exchequer's practice is inferior to his precepts. Then he went on to say: When they adopted sound methods of finance they paid the price at the time and got the reward afterwards. That, again, seemed to me to be admirable, all leading up to a more vigorous policy of debt reduction. Then I remembered that the Chancellor of the Exchequer was himself responsible, or was very largely responsible, for adding rather over £100,000,000 to the War Debt of this country through his post-Armistice operations in Russia, in defence of the various White hopes whose very names we have almost forgotten—Yudenitch and the others.

Mr. SPEAKER

The hon. Member is going rather wide in his remarks. He cannot, in a speech on the Finance Bill, touch Russia and the Chancellor of the Exchequer's views on that question. He must keep to what is in the Bill.

Mr. DALTON

With great respect, it is not my intention to go further than to mention the fact that the War Debt and its magnitude were partly caused by this particular operation. I shall not pursue the matter further than that. I was then going to make a calculation regarding the Betting Duty. In a full year the Betting Duty will bring in about £6,000,000, which will be barely sufficient to pay the interest on this particular part of the War Debt which was due to the Chancellor of the Exchequer's adventures in Russia, or the adventures which other people had to undertake at the Chancellor's instigation. That is another example of what the Chancellor of the Exchequer calls paying the price at the time and getting the award afterwards. The "reward afterwards" in this case is the Betting Duty. With regard to the repayment of debt, I do not wish to go beyond the suggestion which I have already made, but it is high time that the Government had a policy. At present the Government have no policy of debt redemption, except to muddle along at a rate which will mean an expanse of more than 150 years before the whole burden is paid off. That is not good enough, and if we are to face this thing in earnest, we should at any rate envisage some point a little less remote than 150 years hence by which time the whole burden will have been lifted from the shoulders of the taxpayer.

I submit, further, that the taxation of the wealthier sections of the community is much too low, having regard to the necessities of the country. I would illustrate that by referring to certain changes which have taken place since 1919 in the distribution of wealth. The other day the Chancellor of the Exchequer, told us that the fall in wages in this country since 1919—which he admitted had been very great—had been balanced by the fall in the cost of living, his view being that although the wage-earners were getting less money that money was worth so much more that they were as well off in the aggregate as they had been before. I do not accept that view for a moment. But, in so far as there is any truth in it, it has a double application. If the money is worth more to the wage-earners it is worth more to the wealthy people whose money incomes have increased. The increase of wealth in the higher range of incomes has been much larger than would appear from mere statistics of money value I would set against one another two sets of facts which I think go to show that at the present time the taxation on large incomes and large fortunes is lower than it should be or a broad view of financial justice. Compare the Income Tax payers in 1919–20 with those who paid Income Tax in 1924–25. I find from the Sixty-eighth Report of the Inland Revenue Commissioners for the year ended March, 1925, that whereas in 1919–20 there were no fewer than 7,800,000 people with incomes of over £3 a week (or £160 a year), by 1924–25 the number had fallen to 4,700,000.In other words, it was nearly halved; 3,100,000 persons who had previously been obtaining £3 a week or more had fallen below the That is the measure of the way in which wages and small salaries diminished in that intervening period. On the other hand, if you take Super-tax payers, you will find that in 1920–21, the first year in which liability to Super-tax was brought down to £2,000, the number of incomes over £2,000 was 79,000, and in 1924–25 the number had gone up to 90,000. Eleven thousand more had climbed above the line of Super-tax liability. If, in addition, you allow for the fall in prices, it will be seen that the enrichment of that Section of society, represented by Super-tax payers and those just below the Super-tax limit, has been very considerable indeed. In view of that fact, I think we are entitled to assert, without any fear of contradiction, that, during this period, even apart from fiscal policy and apart from the effects of successive Finance Bills, the rich have been growing richer and the poor have been growing poorer. That tendency has been encouraged by the policy pursued by the Chancellor of the Exchequer. He has been only too willing to give the rich a helping hand on their road to greater riches and to give the poor a helping hand on their road to greater poverty, and that is the gravamen of our complaint against the policy of which he is, the author.

4.0.P.M.

It would not be proper for me to sit down without drawing attention on this occasion to one more feature of the right hon. Gentleman's finance, which has had an effect similar to those I have been describing. That is, the tendency to evade national burdens by shoving them on to the localities, or, in other words, by transferring burdens from taxes to local rates. The policy of the Economy Bill and of much else has enabled this Finance Bill and the Finance Bill of last year to be framed in such a way as to remit national burdens falling mainly on the well-to-do in order to throw corresponding charges on those localities which are less able to bear them. It may be said without exaggeration that the reduction in the Super-tax last year is being largely paid for by the ratepayers in necessitous districts such as West Ham, Bedwellty, and the rest. There is that local shift of burdens in addition to the shift of burdens as between classes of differing wealth in the community. This Bill, for the reasons I have been endeavouring to lay before the House, and for other reasons with which I have not time to deal, is the latest of a series of bad budgets, broken only by the good budget of 1924. This Bill is full of evil and anti-social tendencies, and for that reason we should not be doing our duty if we did not challenge it even in this last stage, and if we did not divide the House against it.

The time has come when we should announce as our policy that we intend to reverse the fiscal engines which the Chancellor of the Exchequer is operating and which are driving the poor ever deeper into poverty while carrying a small minority of the nation through successive tax remissions, upwards towards higher levels of ostentatious wealth and wasteful luxury than have ever before been known in the history of this country. It should be the business of finance to soften social injustices rather than to exacerbate them; it should be the business of finance to lighten unproductive burdens on the community rather than to allow them to remain and to grow heavier; it should be the business of finance to lay the foundations, not for future wars, but for a more hopeful relationship both between nations and between classes within the country. [Interruption.] One way would be to reduce the disparities of wealth which at present give rise to that feeling which the hon. and gallant Member deplores, but I am not going to allow him to draw me too far from the line on which I started, though I should be prepared to discuss the matter with him on another occasion.

My submission, in conclusion, is that whereas these are the objects which a financial policy in an enlightened country should follow the finance of the Chancellor of the Exchequer and of the Government is following exactly the opposite direction. It is moving along the wrong line. It is doing nothing to deal with those heaviest of all burdens which press upon the taxpayers at the present time. It does not adjust burdens fairly as between different classes of wealth and different sections of the community. The time has come to lay down the principle that these engines which are now operating to the detriment of the great majority of the community, and to the benefit of only a small section should be reversed whenever the electors of this country in their wisdom shall decide to reverse the positions occupied in this House by the party opposite and by ourselves.

Mr. PETHICK-LAWRENCE

I beg to second the Amendment.

This instrument, whose Third Reading we are discussing to-day, raises altogether approximately £825,000,000 of revenue, and it can be regarded from two points of view. It can be regarded from the point of view of the total amount which it is proposed to raise, or from the point of view of the incidence of that amount upon the taxpayers of the country. During the progress of this Bill through its various stages in this House it is the second of those considerations which we have had uppermost before us, namely, the incidence upon the taxpayers of the country of the burdens of taxation. This afternoon I propose, very briefly, to deal mainly with the other aspect of the question, namely, the total amount it is proposed to raise. I do this because I desire to put forward what I conceive to be the Socialist point of view upon this question as distinct from the point. of view which is held by the exponents of the other two principal parties in the State.

The essential Liberal point of view, as I understand it, is that all taxation is an evil; that the individual is a much better judge how to spend money than the State, that it would be very much better if the taxation and the expenditure of the State came down and down until it reached something like nil, and that the expenditure of the individual should be correspondingly increased. That view, if carried to its logical conclusion, would mean that the army of defence—or the whole of the defences of the country—instead of being provided communally by the State, would be provided as it used to be provided in old days, by individuals called upon to raise separate forces in order to join the King in providing for the protection of the country. It would mean that education would entirely cease or would be carried on exclusively by individual educational enterprises instead of in the aggregate by the community as a whole. It would mean that the care of health, instead of being in part entrusted to medical officers of health, would be confined, as a great Liberal thinker like Herbert Spencer very strongly represented that it ought to be confined, to the private medical services which individuals could provide.

Conservative and Socialist supporters agree that certain services are better provided communally than individually, but they differ to a large extent in the services that they favour. As far as I understand the Conservative position, it is that in the main the Fighting Services ought to be provided communally, and that the more money you can spend on those the better, but that, so far as the other services of the country are concerned, the smaller the Budget the better for the country.

The Socialist looks upon the State to some extent as an interested shareholder looks upon the company in which he has an interest. He looks upon the balance-sheet of the State very much as that shareholder looks upon the balance-sheet of his company. He looks upon the Budget statement much as that shareholder looks upon the profit and loss account of the company in which he is interested. When the chairman of a company is expounding the affairs of his company for the year, he does not apologise for the amount of the turnover. (My right hon. Friend the Member for Colne Valley (Mr. Snowden) says that he does apologise if the turnover is too low). But he does not apologise if the turnover is larger than it was in previous years and larger than the shareholders expected it. What he is interested in, and what the shareholders are interested in is to see, first of all and mainly, whether a good profit has been made. That is the main interest of the Socialist in the business of the State. Of course, where you are dealing with an ordinary company the profit takes the shape of actual money receipts over and above expenditure, and the money is available to be distributed in dividends.

When you are dealing with the balance sheet and the profit and loss account of the State, of course you do not get profits in that technical, monetary form. But the profit that the State derives from its expenditure is just as much real though it is not expressed definitely in terms of money. Hon. Members opposite realise the great profit to be derived from the fact that the defence forces of the country, instead of being provided by private individual expenditure of one body here and one body there, are provided by the country as a whole, and, in so far as it is necessary for us to have a defence force, whether for the external or internal preservation of order, it is perfectly clear that it can only be raised on national and on what I call communal lines. But the Socialist looks also at the other services render a very considerable profit to the community. Those are services that minister to the health and happiness of the people as a whole; and, from our point of view, the profit to be derived by the citizens of this country from communal expenditure on health, education, and other services of a similar character is of the utmost importance to the well-being of the State and the well-being of all the citizens within it.

Coming to the total amount which is raised by this instrument — about £825,000,000—I should like to say that, in the first place, roughly £25,000,000 of this sum comes from special receipts and is not, strictly speaking, raised by the people of this country at all. Therefore, we are concerned with about £800,000,000. It is quite a common thing among large numbers of people in this country to argue that we are proceeding on a very serious course, because we are taking what is roughly 20 per cent. of the national income for the communal services of the country. (The national income is probably nearly £4,000,000,000, and £800,000,000 is roughly 20 per cent. of that figure.) But I would point out that there is a certain fallacy in that method of argument. As a matter of fact, out of the total £825,000,000, only a small half is actually spent on what I should like to call the communal activities of this country. Before you come to the communal activities you have to consider that part of the revenue and expenditure of the country, which is, in fact, merely re-distribution. Taking first the National Debt charges and allowing for that part of the National Debt charges which goes to America, and it will be found that something like £326,000,000 spent on the National Debt charges goes to individuals in this country. If you add to that sum a sum of £122,000,000, which according to the White Paper dealing with the finances of the country is the total amount spent in pensions, you reach a sum of about £450,000,000. Therefore, out of this £825,000,000, a sum of £450,000,000 is really a redistribution of the wealth of the country, and the communal services of the country are what is left over after that has been taken into account. If you take £450,000,000 of redistribution from £825,000,000, you get £375,000,000, and if you allow that £25,000,000 comes from abroad, you find that that the taxation of the people of this country only amounts to a sum of £350,000,000 a year on behalf of what I call the communal activities of the State. Of that sum about one-third goes in providing the Army, Navy and Air Force, and the other two-thirds go in the general activities which we in the Socialist party, so far from disliking or disparaging, believe to be of the greatest value to the well-being of the community.

I said the main thing which the chairman of a company was expecting to point out was the profit, but, of course, that is not the only question to which he would have to refer and it is not the only question on which the shareholders would expect him to be able to justify the actions which his board had carried out. The second factor would be reasonable economy in expenditure. I wish particularly to emphasise the analogy there, because though we on these Socialist Benches firmly believe in a large communal expenditure on behalf of the social activities of the country, at the same time we are quite as zealous as hon. Members opposite or hon. Members below the Gangway to see that every penny of expenditure shall be economically and wisely spent and shall not be flung away in any method which would not get good value for money. Finally, the chairman of a company would have to justify the raising of the money and the expenditure on the ground that the enterprises carried out by the company were legitimate forms of enterprise. It is there perhaps that hon. Members opposite will come more particularly into conflict with us on this question when the analogue of the State is substituted for that of the private company. I contend that in this twentieth century we are realising, more and more, that certain things for the benefit of the country cannot be carried out by private means. Education is one of these and there are also the great health services. I do not propose to go into these subjects to-day, because I should then be going outside the province of what we are entitled to discuss on this Finance Bill. But I contend, and I desire to make it quite clear to this House, that where the Socialist point of view differs fundamentally from the point of view of Members of both the other parties is that we do not look upon national expenditure as evil in itself, even though it must be contributed by national taxation. What we demand is that national expenditure shall produce a real profit, in the widest sense of the term, to the country; that it shall be economically administered so that not a penny is wasted, and that the forms of expenditure shall be such as commend themselves to the great bulk of the people of this country.

I said I proposed to address myself mainly to this question of the total amount, and scarcely at all to the question of incidence, but before I sit down I should like to say this. With regard to the incidence of taxation as it is imposed by this Bill, I find myself in agreement with the hon. Member who moved this Amendment. I cannot find that this Bill really carries out the highest traditions of finance. Many of its provisions I regard either as niggling or as vicious, and in particular I single out the further impositions which are made in restraint of trade. The proposals for the repetition of Part I of the Safeguarding of Industries Act I regard, in the main, as injurious to trade. I know it is argued that they will benefit certain trades in this country. I think that argument is fallacious. I believe when the plus and the minus are added up together, it will he found that the minus has exceeded the plus, and I think that is also true, and perhaps even more true, of the small but obnoxious duty which is to be imposed on wrapping paper. Had the House been full, had all Members been in their places, when the discussion on that duty took place, I am not at all sure that the majority of the Conservative party would have held, because those who were present found themselves in increasing numbers forced to vote against these duties, and this was particularly so when it came to the duty on straw paper. It is a very small thing, but all the same I think those who were present will agree that it was proved conclusively from these benches that the inclusion of straw paper in wrapping paper was, in fact, a piece of sharp practice. I say so because those interested in the industry were told quite definitely that it was not to be so included, and therefore they made no attempt whatever to defend their case. Not only were they told it was not to be included, but up to that time straw paper had not been included in the Customs definition of wrapping paper, and it was not until after the Committee had reported that the whole position was changed and—I suppose for the purpose of giving colour to this piece of sharp practice —that straw paper was included in the term "wrapping paper" in the Customs description of imports. As I say, it is a small matter but it is typical of all this safeguarding business. With the avowed object of buttressing up one comparatively small trade, a certain amount of trouble, inconvenience, expense and injury is inflicted upon a large number of other trades throughout the country. That is why I say that, so far as the incidence of this Budget is concerned and also as regards the perpetuation of certain things in it, I regard it as both niggling and vexatious.

Finally, one word with regard to what I have called the redistribution. Perhaps what I said in the earlier part of my speech might convey the idea that I thought this redistribution of something like £450,000,000, just because it was redistribution could be regarded with comparative indifference. I do not take that view. In so far as this redistribution is used as a cloak for enabling the broadest backs to escape part of the communal expenditure, I think it is a very injurious thing. I may mention that the contribution which comes from the payers of Estate Duty, Income Tax and Super-tax in this current year only exceeds by £20,000,000 the total charges on the debt. Last year it exceeded those charges by £230,000,000, and in previous years by larger amounts. That, to my thinking, is a very serious thing. From the point of view of illustrating that the communal services of the country do not cost as much as some people suppose, it is quite true you can write off an amount which is simply in the nature of redistribution, but in so far as realising how taxes can operate, redistribution is exceedingly important. It is, I think, obnoxious that the receipts from persons of great wealth should only provide £20,000,000 over and above the amount which goes in the payment of debt. Therefore, although for reasons which I have given I am not one of those who grudge the total figure of this revenue Bill, yet I do feel that so far as the incidence of taxation is concerned, it has not been equitably arranged between the different portions of the community, and, so far as the smaller duties are concerned, I think this new attempt to bring back into British taxation a large number of small petty and vexatious duties is an injury to the well-being of the State.

Mr. RUNCIMAN

The two speeches to which we have just listened attacked the Budget on general as well as on particular lines, and I agree, to some extent, with the views which have been presented to the House by both hon. Gentlemen. I must confess, however, when, I heard the hon. Member who seconded this Amendment say that the Liberal doctrine of taxation might be summed up in the single phrase that all taxes are evil, I wondered from where he had drawn his information. I gathered from a later passage in his speech that he thought Herbert Spencer was the most, typical Liberal in the whole range of British thought, and that was his justification for stating that the view that all taxes are evil, is good, sound Liberal doctrine. I am not altogether sure that the hon. Gentleman was not rather near the mark. He did not hit it. All taxes are disagree able, even if they are not evil. I can imagine circumstances under which taxes would be a positive good. One only has to look across the English Channel to see what would be the effect of a far wider and more pungent range of taxes than the French people suffer from at the present time. I do not accept the doctrine that all taxes are an evil, but I do say that the form in which taxes are imposed can in itself become an evil, and that is the reason why I object to some of the details of the Budget of this year, as I did to some of the evils of the Budget of last year,

No one can examine the new taxation and the provision which has been made for the collection of revenue in this Budget without realising that the right Ion. Gentleman has fallen back on to the obsolete machinery of Protection in a very small, insignificant, and almost contemptible form. There is nothing like the great wide range of Protective policy which characterised the propaganda of Mr. Joseph Chamberlain in days gone by. There is merely a desire to satisfy, in this direction or that, the Protectionist leanings of the supporters of the present Government. I do not know that these taxes in the total are going to do very much harm in themselves, in so far as they absorb the money of the taxpayer and swell the revenue, but they have an objectionable side, which was mentioned by the Seconder of this Amendment, which is of very great importance. They add to the friction of trade, they impede the transfer of goods, they make it more and more difficult to conduct exchange without interruption. In themselves, they are sometimes badly justified, as, for instance, in the case of wrapping paper, but the main objection that I have to them is that in their cumulative effect, so far from stimulating exchange, they interrupt it, and they also have the additional disadvantage of throwing on the consumer a much larger burden than can be measured by the benefit which comes to the revenue.

I satisfy myself, therefore, to-day with merely registering my objection to the Protective duties for which the right hon. Gentleman has made himself responsible, and with saying; for the last time on this Budget, that in so far as he has attempted to stabilise or render permanent the Protective tariff, such as it is at the present time, he has entered into an obligation which naturally will not be honoured by his successors and has done nothing whatever to give to the Dominion trader or to the trader in this country that settled and unvarying policy, which is one of the best assets that a business man can have in dealing with forward business. In the days previous to the War, every trader knew that we were not likely to depart from the Free Trade basis of raising revenue, and that, in itself, gave him the kind of stability that he wanted.

The objection, if I may say so, that I take to the views put forward by the Seconder of the Amendment is that, while paying lip service to the importance of turnover, he rather turned his mind away from the source from which turnover must spring, namely, that of production, to thoughts as to the distribution of the revenue so raised. It is far more important for us to-day, as it is more important for the Treasury, to realise the source from which they are to draw their revenue. We cannot have a large revenue in a country with a declining trade. It is absolutely impossible for us to keep up our present scale of expenditure and balance it with an annual Budget, unless the total turnover of the country is fully maintained, and that turnover cannot be maintained, unless the importance of production is constantly present in the minds of all those who are responsible for the conduct of industry. The hon. Gentleman, in the application of the general principle to which he adheres, appeared to ignore the fact that whatever money is taken out of the taxpayers' pocket is not money which is merely put into the hands of the State to spend in place of the private taxpayer spending it. It frequently is money which would have accumulated in the taxpayers' account and would have gone to swell the sum total of capital without which industry cannot be conducted, and the objection to passing it through the State is that there is no such process in any State machinery whereby you add to the capital sum in the national possession. [An HON. MEMBER: "That is Individualism!"] It is Individualism, but it is Individualism on which the State can be built up, and no State can be built up by ignoring Individualism.

What is important is that we should recognise how far these doctrines can be carried. There is one very simple distinction that I should draw between the old Individualism, such as my hon. Friend learned in his earlier days, and the more intelligent Individualism that is characteristic of to-day, and it is this, that we now recognise that there can be no such thing as the individual being cut off entirely from his environment. He makes his environment, but he is also the creature of his environment, and it is by recognition of that principle that we have plunged headlong into the provision of education, for a whole generation past, at State expense, and it is better that the money should be spent in that way rather than that it should be left purely to individual enterprise. We have learned that in practice. There is also the further fact that these social services, to which he made reference, arc based on the idea of the mutual responsibility of citizens of the State for each other. The doctrine of mutual insurance runs through the whole of our provision for the risks of ill health, of unemployment, and of death, and what is left of the expenditure which is of a communal nature, namely, that which is necessary for defence, should be kept within the strictest and narrowest possible limits; and if some of us, who are constantly preaching the doctrine of disarmament, are doing so, guided, as we are naturally, by a peaceful sentiment, we are also keeping in mind the fact that Europe in its present impoverished state cannot attempt profitably to go on, year after year, maintaining as large military forces as it had before the War.

On that, I only make one comment, because the expenditure of the year is not necessarily under review on the Third Reading of this Bill, and it is this rather remarkable fact, that if you assess the military expenditure of Europe in terms a francs, the military expenditure of this country is actually at the head of the list in Europe. I admit that that is not altogether a fair test, but it is a very remarkable fact that, assessed in terms of francs, it is actually higher in this country than it is in any other country in Europe. Let me take a moderate test, I do not want to take the franc at 250, but I will take it at 140, which is probably rather lower than the amount at which it will be stabilised. Even at that, our Army expenditure in this country exceeds that of France. That is a very startling fact, and it is one which must constantly be kept in mind by this House when it is pressing on the Government an extension of our military liabilities.

I return to the main source for which revenue alone can be raised, and that is the total turnover of the country. Turnover is, after all, the only means by which revenue can be provided. There has been a very grave interruption in the turnover of this country during the coal stoppage,and I should like to examine how far the revenue of the right hon. Gentleman is likely to be affected by the coal stoppage of the last nine or 10 weeks. We can assess it in detail, but, of course, no one can arrive at an accurate total of the loss which has conic to the country as a whole by the stoppage in the coalfields. What we can do is to take a rough estimate, such as was attempted at the close of the general strike—and I think the figures have not been challenged seriously in any quarter—namely, that the total loss to the country during that period came to at least £30,000,000. If we then take the period from the 16th May to the 16th July, I think it is fair to say that the loss owing to the stoppage in coal mining has come to at least £28,000,000. The loss on the railways has been less than, I think, most people anticipated. During the same period, compared with 1925, there has been a diminution of traffic in goods of about £1,400,000, and in passengers of about £600,000, or £2,000,000 in all. The two big categories in the metal list, pig-iron and steel, show, of course, far and away the greatest drop. They are directly dependent on the provision of coal, and it naturally follows that under the headings of both pig-iron and steel there has been a very big and almost sensational fall in the exports from this country and in the production for home use. If you take together the pig-iron produced for home use and that which is provided for export, there has been a loss during the same period of at least 1,000,000 tons. I assess that at only £5 a ton, but that means a loss under the heading of pig-iron alone of something like £5,000,000. In the case of steel, there has been a loss of at least 1,200,000 tons, and that, I think we may fairly say, represents something just under £10,000,000. If you total up what may be called these big, heavy losses which are the direct result of the coal stoppage, it is certain that at least, in our home and export- trade, the loss represents £45,000,000.

Now I turn to the textile trade. I am taking each one of these, because they are the basis upon which the right hon. Gentleman must naturally build up his revenue, and I want to assess the possible diminution in his revenue. Take the textile trade. In the export of cotton—I do not know what has been the output for home purposes; I can only make a guess at that, but in the export of cotton —there is a drop of £7,700,000 during the period from the 16th May to the 16th July in woollens, there is a fall of £1,660,000, and in other textiles a fall of about £176,000; and in the case of wholly or mainly manufactured goods, the drop in the export comes to no less than £17,500,000 during this period. if we add up these various categories, we come to the first total, but, of course, not the final total, of the dead loss which this country has suffered from the coal stoppage. If we add them up together there are £46,000,000 for home and export trade in what may be called "heavies," there is a loss on articles mainly or partly manufactured for export only of £17,500,000, and there has been a loss in one or two other smaller items, bringing the total in these categories up to no less than £63,500,000 during that period of some eight weeks. It is only fair to add to that the drop which there has been in the production of goods for home consumption, and as far as it is possible to draw up any estimate at all, the figures seem to lie somewhere within the very wide range of from £13,000,000 to £20,000,000, probably nearer £20,000,000 than £13,000,000. Then we have also to add to that large total the amount which has been lost in wages, and so far as the miners are concerned, it appears to be an accurate estimate that no less than £25,000,000 has been lost in wages to them during the stoppage of the general strike and since then. Of course, it does not mean that they have deprived the other industries and trades of this country of £25,000,000 spending power, because to some extent that has been made up by money subscribed in relief and distributed to the trade unions, and so on. It is, nevertheless, a loss to a very important section of the industrial population. If they have lost £25,000,000, I am sure that there can be no doubt about it that workers in other industries have lost at least £10,000,000 in wages during the last few weeks.

Let me sum up the totals. We find ourselves in this position: a loss of £30,000,000 during the general strike; £63,500,000 in the export trade, about £20,000,000 in the home trade, £25,000,000 loss of wages to miners, and £10,000,000 loss in wages of the workers in other industries, making a total of £148,000,000. This, in itself, is not the end of the tale, for there have been large numbers of industries which have suffered during that period. Let me take one of them. There is the direct. effect of the stoppage in the export of coal and in the provision of coal bunkers for the shipping trade. The amount of laid-up tonnage has nearly doubled since the 1st April of this year. There a-re now 1,376,000 gross tons of shipping idle in British ports, against 736,000 tons on the 1st April. That, in itself, means a loss of £700,000 during that period. But what is of even greater importance is the effect of this in the widening of the circle of industries —growing wider and wider as the weeks go on.

We have lost £160,000,000. That by no means covers the whole ground, for every one of these industries has in itself other industries dependent upon it Their purchasing power is reduced. The demand for their ordinary commodities disappears. The range of unemployment must in itself go over a far wider territory than anything we have been able to estimate during the last eight weeks if the stoppage continues. That is one of the effects of the coal stoppage which nobody can estimate. The only thing of which we can make sure is that, bad as may be the drop in the total national turn-over and in the present national revenue, it will grow increasingly greater as the weeks pass by.

I should like to say two or three words on another aspect of the same subject. We know that this stoppage is likely to have a detrimental effect upon the Revenue. It also has a very seriously detrimental effect upon the national credit. Nothing can be of more importance to the Chancellor of the Exchequer than the provision that must be made during the next three years for funding the rapidly maturing Debt. I am sure it must be constantly in the mind of the right hon. Gentleman that there is no less than £950,000,000 of short-dated Debt falling due for maturity between now and 1929. The success which he has in funding at a low rate of interest will decide in his future Budgets very distinctly the amount of taxes to be provided by the taxpayer in the years to come. For instance, if the right hon. Gentleman were able to take the whole of that matured Debt during the next three years and put it on a 4½ per cent. basis—which is by no means an unreasonable hope—he would save the taxpayer at once £20,000,000 or £30,000,000. If he could get it upon a 4 per cent. basis, he would increase that saving each year as the maturities were met, and also provide for a very large saving in interest charges. I see no prospect of his being able to do that under present conditions.

In the first place, there has not been left anything like a large enough margin of revenue over expenditure to leave him a very large surplus to make up for the stoppages during this year, especially the coal stoppage which we have been attempting to assess this afternoon. It will make it all the more difficult for him to have available in this country a very large amount of available capital for investment at the time when he wishes to change his long-dated into short-dated loans. There will always remain a demand in the City of London for short-dated paper. it is an essential part of our financial system. Every chance that we have is diminished by the effect of the stoppage in the coal mines and in the coal trade, and in the export trades which are frequently dependent upon them. We may truthfully say that the effect of the coal stoppage touches not only those directly concerned in the various industries; not only touches those who are the consumers of coal, but also is of direct importance to the taxpayers as a whole. Very few can hope to see any reduction in taxation in the years to come unless the right hon. Gentleman can fund a great deal of the debt at a lower rate of interest.

Notwithstanding the fact that the outlook at the present time is dark, and that we see very little chance of an immediate settlement and a resumption of work, we can, at all events, say that indications in other directions show how eagerly the commercial community—the great manufacturers, and those who represent the big concerns, as well as those engaged in the trades themselves— are anxious to supply the needs of the world. Given the opportunity to do so, they will show not only the enterprise which is necessary but that eagerness to do what is required for the countries which live very largely on the exports from Great Britain to satisfy their needs, as well as add, to our own national income. That we are capable of doing that I have no manner of doubt. There is very little doubt that anyone who makes a full survey of British industry can see that in almost every department it is more efficient than it was 12 or 15 years ago. The textile trades are equipped with more modern machinery. Their methods are more up-to-date. Their organisation for selling abroad, their representation in the great Asiatic markets, is better, more skilful and more energetic than it was 12 or 15 years ago. In the engineering trade you have more skill, adaptability and ingenuity, while designs and manufacture are rapidly on the increase. The finest textile machinery in the world is still produced in Lancashire. If we turn to the very large categories of manufacture—the making of peat ships and the engines which propel them—we have in one or two instances been outdistanced by our competitors abroad. We are rapidly making up the leeway at the present moment. Some of the finest internal combustion engines in the world are made in this country. They are of British design, and not dependent in any way upon foreign origin for their ingenuity or efficiency. All these various trades are ready to take full advantage of any opportunities, as they have done in the past, when a resumption of work comes in the greatest of our producing industries. Whatever effort is made by those in authority in the industry, these others are in a position to bring about a rapid resumption of activity, of coal production, of the manufacture of iron, and the extension of our engineering trade, which will confer benefit not only upon the right hon. Gentleman—who is by no means free from anxiety—not only upon the taxpayer as a whole, but upon the consuming community of the world, who are largely dependent upon what We sell and send to them.

Mr. DUFF COOPER

I do not think that the right hon. Member for West Swansea (Mr. Runciman), who has just sat down, was justified in complaining of the hon. Member for West Leicester (Mr. Pethick-Lawrence) for having quoted Herbert Spencer as representing the true Liberal doctrine with regard to taxation. The right hon. Gentleman must realise that for those who are outside any of the Liberal camps and who can hardly follow the kaleidoscopic changes that go on within them it is very difficult to know where to turn in order to obtain the orthodox faith of Liberalism. Just as during the days of the Great Schism, when there were two or more Popes in Europe, seekers after the true faith were compelled to turn to an earlier source than any of them in order to obtain the truth, which led to the Reformation, so to-day we are driven to the works of some of the earlier apostles of Liberalism in order to obtain the true doctrine. Nor can I congratulate the right hon. Gentleman on his correction of Herbert Spencer. In the old days Liberals thought more clearly and used less equivocal language. Herbert Spencer said boldly that all taxation was evil. But the right hon. Gentleman the Member for West Swansea, dealing with this subject, said he would not go so far as to say that all taxation was an evil, but that all taxation was disagreeable. This differentiation was to my mind, a splitting of hairs that will not bear splitting, and I think that Herbert Spencer would have held that the words "evil" and "disagreeable" when applied to taxation meant very much the same thing. I think the Chancellor of the Exchequer is to be enormously congratulated upon the success of his Budget. If anything would convince me more than I am convinced of that view it would be the speeches to which we have listened this afternoon—it would be the interesting and illuminating way in which the three hon. Members who have spoken have not dealt with any single proposition contained in the Finance Bill.

The hon. Member for West Leicester in his speech made some sort of vague reference to paper. A vaguer reference to Preferential Duties was made in the speech of the right hon. Gentleman the Member for Swansea. When the betting tax was mentioned by the hon. Member for Peckham (Mr. Dalton) it was only to connect it in some way with the Russian Civil War of seven years ago. We have not really heard a word about the Finance Bill as such. We heard from the hon. Member for West Leicester a very interesting lecture on Socialism, but the Budget is not meant to be a Socialist Budget, and the hon. Member for West Leicester does not do the Budget any harm by saying that it does not conform to any of the principles of Socialism. The hon. Member began by saying that he was going to deal with the question of the amount raised, and he was going to criticise that. Many hon. Members, perhaps, would agree in the criticism of that amount by deploring the size of it. On the contrary, the hon. Member for Leicester considers that the amount is not enough. He wants to see a very much larger sum raised. All these items in the Finance Bill which we were told had provoked much violent opposition, and which we have had detailed in the Press and in speeches inside and outside this House, and which have been talked out over and over again, the Betting Tax, the raid on the Road Fund, Preferential Duties, and the Safeguarding of Industries, not one of these has found its way into the three speeches to which we have listened from the hon. Members opposite, from two Socialists and one Liberal.

Therefore I cannot see how the right hon. Gentleman the Member for West Swansea can justify himself in voting against the Bill, bearing in mind the survey of the financial position which he has given us. Hon. Members opposite, of course, will vote against it, but they cannot expect. to convince anybody else that their view is right, and that this is a bad Bill simply on the ground that it is not a Socialist Budget in any sense of the term. I expected the speeches to deal with the most novel feature in the Finance Bill, and that is the Betting Tax. I have listened to the Debates in the former stages of the Bill, and have always been surprised that the real charge against the Betting Tax has never been formulated.

It was said that the chief argument against it was the moral argument, and, if the real argument is the moral one, the Government would have to give it serious consideration. But, although everybody has mentioned the moral argument, nobody has ever in this House, as far as I am aware, said that betting is wicked and wrong, and, unless it is, there is no moral argument against betting. I say quite frankly that I do not think it is wrong, arid I shall be glad if, before the Budget finally passes, anybody who takes the opposite view will give us some reasons why he hold it. I can find no condemnation of gambling, for instance, in Scripture. That may sound an old-fashioned argument, but it should still carry considerable weight. I believe, on the other hand, that in the Koran betting is condemned, and perhaps it, is natural that some of those people who wish to introduce the Mohammedan rather than the Christian view of alcohol should also wish to introduce another precept of Mohammedan morality. I am strengthened in my view, because I have found that nobody is ashamed of betting, and people are ashamed of doing wrong. Even that pattern of stern morality the right hon. Gentleman the Member for Come Valley (Mr. Snowden), informed us that at an early stage of his life he indulged in a small wager to the extent of 6d. which was not successful. We all listened to that confession with amusement, and the right hon. Gentleman made it with a smile on his face. If he had had to confess that, even at the age of 13 and even for so small a sum as 6d., he had committed a theft, he would not have done i with a laugh, and the announcement would not have been received with amusement.

5.0.P.M.

The right hon. Gentleman the Member for Spen Valley (Sir J. Simon) also told us that he had occasionally betted to the extent of half-a-crown. He would not have confessed with the same airy unconcern that he had stolen half- a-crown. Yet he compared gambling with prostitution, as though the two things were analogous and could be compared. There is one great difference between them: the one thing is wrong and the other is not. If hon. Members would keep that distinction clearly in their minds, they would not be led away with humbug about the moral side of betting. We have all been deluged with tracts and literature with regard to this Betting Duty. I have studied some of that literature and tried to make out how some of the reverend gentleman who are the authors of the tracts justify their very strong moral objections to betting. The most in- genious of them, having searched the Decalogue in vain for any condemnation of it, say that they have found it in the Tenth Commandment. They say that the man who bets is committing the sin of covetousness. But I would ask them how can they seriously hold that view, and, if they can, can they pretend to have any knowledge of human nature? We all know the covetous man. We find him in all departments of life, but the covetous man is not a betting man; he is not such a fool. The avaricious man, who thinks solely of amassing wealth, does not waste his time or money in betting. The spirit that drives men to commit the folly of betting is exactly the opposite. It is the spirit of placing too little importance on money affairs, and regarding them in a reckless way and of not taking due thought for the future. For all these reasons, I submit that the moral argument against the tax will not hold water.

Once you have got away from that argument, how are you to look upon the practice of betting? It is a. foolish practice, and those who bet most will agree most heartily that it is. It is a foolish practice, which, practised as it is so universally in this country, becomes a serious social evil. Is it then the duty of the Government to attempt to ignore it, to look the other way, and allow it to go on; or is it their duty rather to attempt to restrain it, to restrict it, to control it, and, if possible, to derive some real benefit from it to the whole community? Surely that is the Government's duty, and that is exactly what the Government ale doing. My only regret is that it is still being found impossible to include all betting transactions in the present proposals of the Government. I hope that in next year's Budget some practical proposal may be brought forward to include street betting as well as credit betting and betting on the course. I always feel strengthened in the certitude of my own view being right when I find myself being opposed by extremists, whether they sit on my right hand or my left hand; but the most satisfactory situation of all is when one finds. oneself faced by two bodies of extremists, sitting at the two opposite ends of the pole. That is the position of those who are opposing this Betting Duty to-day. Of all the strange alliances in the history of politics, there is surely nothing stranger than the alliance between the Puritan and the bookmaker. Although we have heard less of the bookmakers' arguments in this House, they have had a considerable weight in influencing public opinion, and their voices, powerful if riot musical, with which those who have visited the race course are familiar, have been raised in indignant protest and have found their way into the Press to a greater extent than the voices of the Puritans. I have received a great number of letters and circulars from bookmakers giving me most moving and painful pictures of the harm that this tax is going to do I have heard of gentlemen who are in the habit of betting to the extent of £10,000 or even £100,00, and it has been made plain to me that they will be faced in future with the alternative of either reducing their stakes or else being put in the impossible and intolerable position of having to give up betting altogether. I think it would not be a great loss to the community if these gentlemen did retire from the arena. The argument that these big punters, who are to be hard hit by the Betting Duty, are the backbone of racing is absolutely untrue.

As in all financial transactions, in which huge sums are involved, it is not the few people of great wealth who count; it is the huge number of people who make small bets, and they will, I am afraid, continue to bet as cheerfully in the future as they have done in the past. They may realise that the real effect of the Government's proposal will be to make betting a little bit more of a "mug's game," that the odds will be a few pounds more against them, but that will not deter them from having their occasional, or even their regular speculations. Racing will go on exactly in the same way, and, if betting be diminished to some extent, as has been allowed for in the Government's proposals, so much the better for everybody concerned. The most satisfactory way of dealing with some of the literature which has been produced on this subject would be to forward occasionally to those people who say that the Betting Duty will increase and encourage betting enormously the circulars which one receives from the bookmakers, which prove conclusively that it is to have exactly the opposite, effect. And, in order that the bookmakers may not think they are being treated with incivility, it may be permissible to send them some of the tracts pointing out the enormity of the offence which they are committing and seeking to persuade them to give up this method of earning their living. That has largely been the policy with which the Chancellor of the Exchequer has so successfully met the various attacks that have been made upon him, and I think he is to be congratulated upon the way in which he has avoided the Puritan Scylla and the Charybdian bookmaker, and steered his barque successfully between the two, bringing it laden with revenue safely into the harbour of the Treasury.

I should like to say a few words of criticism or perhaps of warning or perhaps of exhortation to the Chancellor of the Exchequer. The hon. Member for Peckham criticised the Government on the ground that too much was being spent on armaments. That criticism I entirely support. We have been disappointed in the promises which the Chancellor of the Exchequer made last year to effect substantial reductions. He has been, I am sure, more disappointed than anyone else, and I only hope his disappointment will not discourage him or retard him from resuming the struggle. He will shortly be engaged again in the conflict with the great spending departments, which every Chancellor of the Exchequer has to take part in annually in this country. He came off badly in the battle last year; I hope be will prove more successful this year. I can assure him that he will have the whole-hearted support of many in his own party who believe that there is no danger threatening this country at the present day which is half so great and imminent as the danger of excessive expenditure. Some people think that the Liberal party is gradually passing away and that it will no longer fill any place in the councils of the nation. It has even been suggested that it has already passed away, and that hon. Gentlemen opposite are merely the ghosts of a party that once existed. I do not know how that may be; but, if it dies, it will probably die intestate, and its possessions will be divided between the survivors. The old theories, the old beliefs, the old battle-cries, the old watchwords, the old ideals, some of them will be pounced upon by the Labour party and some may fall to our share. I recommend the leaders of my own party to stake out an early claim to one of the old Liberal watchwords that has lately fallen on evil days; I mean the word "retrenchment." The claim should not be disputed, because it has been made abundantly clear by the speeches of hon. Gentlemen opposite that the Labour party will never lay any claim to retrenchment. Let us make it one of the principal planks in the Conservative platform. Let us, in the next few years that lie between us and another appeal to the electorate, give some practical proof that it is a real part of our practical policy and that we are determined to put it into force. "Peace, retrenchment and reform," are the three watchwords which used to go together. I think we would do well to concentrate on retrenchment, as all the others must follow it. Without peace we cannot have retrenchment, and without retrenchment we can no longer afford to reform.

Sir FREDRIC WISE

I entirely agree with what has been said by the hon. Gentleman who has just sat down with regard to rerenchment. He referred to the Liberal party, and although the Liberal party may be in a bad position I should like to congratulate the right hon. Gentleman the Member for West Swansea (Mr. Runciman) on the figures which he has given to the House. I am sure they will be a very great asset to the Chancellor of the Exchequer. I have personally made out similar figures, but I am afraid they are even worse than his, in showing the great loss which the country has and is sustaining in the strike and the lock-out. The hon. Member for Peckham (Mr. Dalton) said the Chancellor was singing a song in a minor key. I often think he sings in too high a key, and that he does not realise the terrible gravity of the situation, and I sincerely hope the figures mentioned by the right hon. Gentleman the Member for West Swansea will be carefully considered by him. The hon. Member for Peckham also dealt with the question of the loans. I am sure he must realise that all our Government loans have a fixed redemption date except Consols. I understood him to say, or to insinuate, that the loans have not a fixed redemption date.

Mr. DALTON

May I make my point clear? What I was saying was that we ought to fix a date within which the whole of the debt should be repaid and not merely re-borrowed on maturity.

Sir F. WISE

It would alter the whole prospectus of the issue of the loans if there were any method of altering the redemption dates, say, to 30 years. To think that this vast sum could possibly be repaid in 30 years is beyond comprehension. It would mean a gigantic increase of taxation, not only of Income Tax and Super-tax, but also of indirect taxation, which I know the hon. Member is against. If the Chancellor realises that the revenue of this country depends on its trade and commerce, he must understand that the revenue, and especially the Income Tax is bound to depreciate in the next year or two. I do not know whether he has studied the balance-sheets which have been publishedrecentlybyfirmsin the unsheltered trades, such as Armstrong, Whitworth and Company, John Brown and Company and the Ebbw Vale Company. The first two are firms of the highest standing—Ebbw is, also—which have paid dividends regularly up to this year. I often think it is the excessive burden of local rates and local taxation which affect these firms as much as anything. The chairman of one important company stated in his speech that in Britain the cost of Poor Law, workmen's compensation, old age pensions, health insurance and unemployment insurance is £3 18s. 6d. per head of the total population in 1925, or more than twice what it is in Germany, six times greater than in France and 25 times greater than in Italy. This heavy charge must affect our trade and our power of competing for the world's trade. The cost of our National Debt services is very high. We are not in a position to compare ourselves with Germany, which has repudiated her debt. Our services, that is, the interest on the National Debt, cost about £304,000,000 a year, while the cost to Germany for interest, excluding the Dawes payments and any external loan, is only £5,500,000.

It is almost impossible to conceive what that weight of interest must mean to the traders of Britain in competing with the rest of the world; but in spite of it there must be no repudiation by us, no inflation, and no capital levy. We have got to stand by it. We have got to deal with it by way of the Sinking Fund. I think I may say the Sinking Fund is a friend of mine. I believe in it. It places our credit on a sounder and firmer basis, but it loses its value and its weight if our expenditure rises. The Sinking Fund will do five things. It will reduce the National Debt, it will reduce the interest on the National Debt, it will reduce taxation, it will release for trade Government money which is unproductive, and it will advance the credit of the country. As I said before, the Sinking Fund is a friend; but £60,000,000 a year for the Sinking Fund is almost more than the country can stand at the present time, especially in view of our troubles over the general strike and the lock-out in the coal mines. After the Civil War in the United States it was 12 years before the United States started a Sinking Fund. I do not say we should copy that, but £60,000,000 is a vast sum to take out of the taxpayers' pockets at the present time.

If there is one thing we must have in the country it is cheap credit—we live on cheap credit—but the financial liabilities of this country have been going up by leaps and bounds. I refer to the Financial Bills and Financial Resolutions which are passed in this House. I congratulate the Chancellor of the Exchequer in stopping at the £75,000,000 for the Trade Facilities Bill; but there is the Credit Insurance Scheme. I am told the Credit Insurance Scheme will not take any money out of the taxpayers' pockets, but there it is; and there are the Agricultural Credits Scheme, and the liabilities under the Small Holdings and Allotments Bill which went through the Second Reading on Friday; and there is the credit which, I understand, will be guaranteed under the Electricity Bill. I think it is wicked that the taxpayers should guarantee the money to. be raised under the Electricity Bill; it could be raised without the taxpayers' guarantee. To guarantee that sum of £44,500,000, principal and interest, is a loose way of playing with Britain's credit.

Coming to the expenditure of the country, I cannot help thinking that it is really alarming. Government expenditure has increased since the Conservative Government came into power. On the Third Reading of the Finance Bill last year my right hon. Friend the Member for Norwich (Mr. Hilton Young) spoke and made an excellent speech dealing with expenditure, and the Chancellor of the Exchequer interrupted him to ask where a reduction of expenditure could be brought about. Naturally it was not for my right hon. Friend to say how a reduction could be obtained, but I believe he could put his finger on some of the policies which would bring about a reduction. I was hopeful during the Budget speech when the Chancellor of the Exchequer said, "Expenditure governs the position"; but, if he will forgive me saying so, I do not think he yet realises the fever of this terrible expenditure. In 1923-24 our expenditure was £789,000,000; this year it is £824,000,000. What is the position as regards the quarter's revenue, from 1st April to 30th June? That must be a very black spot to the Chancellor of the Exchequer. In saying this, I hope that one's constructive criticism may be listened to in a small way. The revenue for the first quarter of this year amounted to £146,000,000, a decrease of £22,000,000; the expenditure was £224,000,000, an increase of £4,000,000. Those are very bad figures, and they must warn the Chancellor of what is coming. The returns of Income Tax, issued this morning, show a reduction of £13,000,000, and the Super-tax returns, which no doubt worries the hon. Member for Peckham, show a reduction of £5,000,000 since 1st April, compared to 1925 figures. The Floating Debt has increased during the quarter by £70,000,000. Those figures are very serious, they paint a sad and a bad picture, and I feel that the sooner something drastic is clone the better it will be for the country and for the taxpayers.

I know the Chancellor of the Exchequer has the assistance of a Cabinet Committee, but I do not think that is sufficient. I think he ought to set up another Committee to go into expenditure, and do so at once, in order to see where reductions can be made so that, possibly, there may not have to be too large an increase in taxation next year. I would humbly suggest to him that the Government should stop issuing all credits or subsidies. In his speech last Saturday the Prime Minister showed that he was against subsidies, and the Royal Commission on Coal stated that a subsidy for the coal trade would be absolutely wrong. I cannot help thinking that a certain policy might be carried out in regard to reorganising the Ministries. I know it would be difficult, but the Chancellor likes difficulties—I am sure he does, he always has; and I wish he would endeavour to face this difficulty, and that he would also look at the figures of the quarter's revenue and the quarter's expenditure, which are alarming. We are heading to national bankruptcy. What is to happen about our trade balance next year? Last year our trade balance was only £28,000,000 to the good, and, as far as one can see, it will be very much worse this year.

May I further submit that finance is the life of the nation. It is a jumble of technicalities, a forest of figures, but I hope the Chancellor of the Exchequer will not be afraid on that account. Our people have been taxed up to the hilt, and evidently, judging by the figures the right hon. Gentleman the Member for West Swansea has given us, we must look forward to further taxation. The camel cannot live on its hump, and the British nation cannot live except by cheap credit. I hope the Chancellor of the Exchequer will put his foot down with regard to expenditure and the giving of credits. Let him guide Britain; let him show that we in this country are ready to reduce expenditure; let him realise that every penny he takes from taxation comes out of the pockets of the people, and when he realises that I feel sure he will understand the gravity of the national financial situation.

Captain WEDGWOOD BENN

The hon. Member for Oldham (Mr. Duff Cooper) complained that the Budget had not been attacked from this side of the House. I do not know how far that criticism is justified, but certainly an attack has been made from the opposite side by the hon. Member for Ilford (Sir F. Wise) who offered some very damaging criticisms in regard to the rate of expenditure. The hon. Member for Oldham said that there was no ground for attacking the Betting Duty on the moral issue, and he described the social evil which it represents, but surely that is an attack on the moral issue. If the hon. Gentleman will go to the housewives whose weekly budget is diminished by the amount wrongly wasted in betting, he will find that they regard the issue as one being very near a moral issue, as well as an important financial consideration in their domestic budget. Complaints have been made about the subsidies and their extension. Some of us on this side of the House voted against the biggest of all subsidies which was proposed last year. I know we took a great risk, because a great body of opinion was on the side that it was worth finding £23,000,000 or £24,000,000 to get a nine months' respite in regard to the coal strike. We spent that money, and we got nothing in return. The failure of hon. Members to object to that subsidy, I cannot understand. When we protest against further expenditure on armaments, and when we show a few instances in which further reductions are possible, we get no help in that way from the hon. Member for Ilford or the hon. Member for Oldham.

We suggested that those countries whose growth of armaments is greater than ours should be asked to consider a reduction of those armaments when they come to us asking for a. reduction in their terms for repayment of debt to us, but the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) poured scorn and contempt on the whole suggestion. That is not the view that is held by responsible statesmen in America. If hon. Members would only read the speeches made in America, they would find that American statesmen attach great importance to disarmament and debt settlement. When other countries interfere with our domestic affairs and ask us to tax our people in order to carry their burdens, it is not enough for the Government to say that we should like to see them at a round table conference.

Since the Budget proposals have keen put forward, a large amount of new evidence has come to hand. Take the case of the duty on wrapping paper. I was told the other day that the London County Council had been presented by their contractors for paper with a demand for a 10 per cent. increase on their contracts because of the rise in the price of paper due to the new tariffs. Take the motor ear duties, which were supposed to be doing such a wonderful amount of good to the motor car trade, and the recision of which was supposed to damage the motor car trade. Mr. Morris told us that on account of this foreign competition the whole motor industry was threatened and might come to smash, but his firm were actually manufacturing nearly twice as many motor cars in the year when he had no duties as in the year when he had them. I want to take advantage of the presence of the Chancellor of the Exchequer to apologise to him for suggesting what I did in regard to the Imperial Conference in 1907. Speaking at Edinburgh, in May, 1907, the Chancellor of the Exchequer said: They were told the Government had banged the door. Well upon what had they banged the door? They had banged the door upon Imperial taxation of food. Yes, they banged it, barred it, and bolted it. Anyone who reads the Report of the Imperial Conference of 1907 will see that at times the flow of the right hon. Gentleman's eloquence was checked by those well-informed Imperial statesmen who were present. The Chancellor of the Exchequer made a speech on Imperial Preference, and before the House meets again it will be necessary for the Chancellor of the Exchequer and the President of the Board of Trade to sit at the Conference, and develop the system of Imperial Preference. Therefore, I should like to ask the right hon. Gentleman what is going to be done, and whether he can find any flaw in the following arguments, which I have summarised from his speech in 1907. He puts aside the question of remission of existing taxes: this admittedly would only be of consequence as 'conceding the larger principle.' I want to know if that argument holds good now with the right hon. Gentleman? I think what I am quoting from is the best statement against Imperial Preference that has ever been made, and wish to ask the Chancellor of the Exchequer whether, in the light of his later experience, he can find any flaw in any of these arguments. The Chancellor of the Exchequer also said: Imperial Preference would bring Colonial affairs into Parliamentary Debate, which is objectionable. Is that not exactly what has happened? We have discussed on this question of Imperial preference subjects like the incidence of Imperial defence and other matters touching Colonial affairs which would never have been raised if preference proposals had not been presented to Parliament. In the same speech the right hon. Gentleman says: No fair system of Preference can be laid down which does not include taxes on bread, meat, dairy produce, wool, loather, and other staples. This means seven or eight new taxes. If that be so, then the present system is an unfair one. What are you doing for New Zealand? I know you are doing a great deal for Canada, but what is being done for New Zealand? We have no more loyal Dominion than New Zealand and we all know what she has done for Imperial defence. What is the Government doing for New Zealand by these preferences? Simply nothing at all. At the Imperial Conference in 1907 the Chancellor of the Exchequer said: Such an introduction can be calculated to produce an anti-Colonial party in this country. The moment we come up against the fact that we cannot reduce our own taxation as hon. Gentlemen desire because we have entered into a bond with the Dominions and are no longer masters of our fiscal system, then the prophecy of the Chancellor of the Exchequer will be fulfilled.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

Perhaps the hon. and gallant Member will permit me to remind him that at that time the proposals of Imperial Preference were based upon protective taxation of bread and meat To that I was opposed, and I am still opposed. While we were engaged in opposing this change which we considered likely to be detrimental, it was perfectly natural that every minor aspect of preference, such as the concessions suggested, should be scrutinised from the point of view of whether they did or did not vitiate the general resistance to the taxation of bread and meat. That has been definitely ruled out of the programme of any political party in this country, and it plays no part in the proposal for which this Government or the previous Conservative Government was responsible. In these circumstances, we are free to consider the remaining aspects of the question.

Captain BENN

That does not seem to touch the points which I am raising. The right hon. Gentleman now says that bread and meat must not be touched. What about wool?

Mr. CHURCHILL

If a duty were imposed in this country, the Dominions would be given a preference, and, if a duty were imposed on wool, a preference would be given in that ease. But there is no proposal or suggestion of imposing a duty on wool.

Captain BENN

These duties are constantly being introduced, and we want to know how far they may cause further duties to be presented. The Chancellor of the Exchequer went on to say that The value of the preference would lie in a better price and not in a greater volume of trade. The benefit hoped for is that of giving to the Colonial producer the price of the foreign supply, plus the tax.'' I ask the Chancellor of the Exchequer whether anything that has happened since 1907 has at all invalidated the strength of the argument that the value of the preference would lie in a better price. The right hon. Gentleman had considerable discussion with Dr. Jameson and Mr. Deakin, and they declared that the value of the preference was to enable the colonial exporter to extort a better price from the British consumer. After the lapse of 18 years, I would like to ask the Chancellor of the Exchequer if he has come to the conclusion that Mr. Deakin's view on the subject was better than his own. Clause 7 introduces the principle of locked preferences. It is quite true that Parliament is a sovereign assembly, and it cannot bind succeeding Parliaments. The proposal is that the preferences should be stabilised for 10 years, and they will regard that in exactly the same way as they would regard a treaty. It is not, however, a treaty, because this House cannot alter a, treaty. It is a unilateral treaty, if the Chancellor of the Exchequer prefers that expression. It is a declaration on our part, and they will believe it is a firm declaration, that, for a period of 10 years, a certain money preference will be given. Already trouble is beginning. There are two of these preferences which are of considerable value, one more particularly. There is the question of cameras from Canada, and already there is a great outcry from the camera manufacturers in this country against giving this preference to cameras from Canada, because they allege that they are really of American manufacture. Therefore, the locked preference argument is already answered. Then there is the question of motor cars, which, of course, are a considerable item.

Mr. CHURCHILL

The hon. and gallant Gentleman has introduced a phrase which has not been heard for many years. He speaks of the distinction between a free preference and a locked preference. I think I drew that distinction in those days, but the hon. and gallant Gentleman must attach to that distinction the meaning which was attached to it at that time. A free preference, in my opinion, is a preference such as we are giving now. It is given because, as far as we can see, it will do us no injury, and we hope it will help the Dominions. They give similar preferences to us. A locked preference would be a preference given by the Dominions to us or by us to the Dominions as a reciprocal matter, as a matter of fixed bargain on both sides, and that would to a very large extent tie the hands of Parliament. That is the distinction that I have tried to draw.

Captain BENN

I dare say the term "locked preference" was a very useful term in those days, but, in fact, there is no issue of substance between us. If we say to the Dominions that we are going for 10 years—they believe it is of some value, though, in fact, it is not—to give them something, and they reply that for 10 years they will give us something else, we may call it reciprocal freedom, but, in fact, it is a locking. In fact, industries will be built up in the Dominions on the strength of Clause 7 of this Bill, and that, will bind Parliaments in the future either to maintain these duties or disappoint interests in the Dominions.

Mr. CHURCHILL

On the contrary, if the hon. and gallant Member will read the words of the Finance Bill he will see that the Clause is so drafted as in no way to prevent the, duties being reduced, because the preference only holds good so long as the duties are above the level of the preference.

Captain BENN

If in any given industry the duties were reduced or abolished, the position of the Dominion exporter to this country would thereby he impaired, and if the duty were reduced past the stabilised amount of cash represented in Clause 7—because the ratio to-day is fixed into a cash sum—severe damage would be done to the importer. In fact, by Clause 7 of this Bill, we are tying the hands of future Parliaments, and, although these preferences do not, except in the case of motor cars, represent anything of any importance to the Dominions, they excite hopes in the first place, and, secondly, so far as they are not a sheer illusion and almost a mockery, they foster the growth of interests there which will fetter our freedom at home. Once the taxpayers of this country understand that all the appeals of the hon. Member for Oldham and of the hon. Member for Ilford cannot affect the Chancellor of the Exchequer, because he is master of his own Budget, there will come a day£long may it be postponed—when people in this country will say that the Imperial tie, instead of being a free Imperial tie, a bond between people of like ideals and like blood, is a fiscal fetter, which they would do well to throw off.

Sir ROBERT HORNE

We have had one of those bright and illuminating speeches from the hon. and gallant Member for Leith (Captain W. Henn) to which the House has been accustomed in connection with these fiscal matters, but the hon. and gallant Member has not really directed attention today to the merits of the question. Although he has indicated, in passing, the formidable principles upon which he thinks that all duties on any kind of manufactures from other countries should be rejected, he has really confined himself to an attack on the consistency of the Chancellor of the Exchequer, and, since my right hon. Friend is very capable of taking care of himself in these matters, I do not propose to rake up the past speeches which he has delivered, although I think it would be very good for all Members of the House if they took the opportunity of reading the discussions that took place in the Imperial Conference of 1907. I think there is still a great deal for us to learn from those Debates, and that much of what was asked for at that time by the Dominions has really proved to be justified in the time that has followed since those discussions were held.

My hon. and gallant Friend has given us to-day a great variety of warnings, such as he has given on many past occasions. He reminds, me very much, on these occasions, of an old practice that used to take place in the Western Highlands of Scotland in days before people became more civilised, and when they were still in a state of rather primitive ignorance of the ways of the world. When there was anything that they disliked, or any person whom they wished to bring to an end, they made a wax figure of him and stuck pins in it, in the belief that in course of time, through this display of animosity and hostility on the part of the pin-pricker, the gentleman concerned would disappear from off the earth. Of course he did not, or, if he did, it was from causes totally different from the particular form of attack that was made by the person who disliked him.

We have had these prognostications from the hon. and gallant Gentleman very many times. We have been told all the terrible things that would occur if anyone dared to put a duty upon anything, and the hon. and gallant Gentleman is, no doubt, very much embarrassed to-day by the fact that these terrible menaces never come to pass. He referred to the question of the Motor Duties, and it is, no doubt, a most difficult point for him at the present time, and, perhaps, even grievous to his feelings, that, instead of the motor car industry of this country being ruined by the 33⅓ per cent, duty which has been put upon imported motor cars, it is going by leaps and bounds to greater prosperity. My hon. and gallant Friend referred to the fact that the Morris prospectus disclosed that in the year in which there was no duty there had been a considerable increase—I think it had been doubled—over the production of the year before; but he very carefully and cautiously told us nothing about what has happened since then. If he looks at the figures for the first four months of the present year, as compared with the first four months of the year in which there was no duty, he will find that there has been an enormous increase in the production of motor cars in this country, and that, instead of prices going up, as was threatened by all the arguments of the Opposition, motor cars are cheaper today than they have ever been before. We were also told, according to the ordinary rigid Free Trade doctrine, that the result of the imposition of this duty would be to destroy the export trade; and yet the result has been that the export trade in motor cars has been enormously increased.

The explanation is perfectly simple to anyone who understands it. It is this: If you are in a position to increase your production, if you have the certainty of a market which is going to buy your goods, undoubtedly you can produce at an immensely less cost that if you had only a small market; and the result is a complete exhibition of a theory which every man engaged in production understands, namely, that the larger production and cheaper cost enable you to sell at a lower price. That is why to-day we are selling motor cars, not only in this country but abroad, at much lower prices than previously. I am sometimes rather amazed at the kind of things we are told from the Opposition Benches in connection with this matter. We have been constantly treated to the view that any duty puts people who are producing articles within the defences of the duty so much to sleep that immediately terrible results follow in the shape of inefficiency. Has any inefficiency been caused in the motor car trade of this country by reason of the duty? If, on the other hand, one takes a wider view, and looks at what is happening in America, does anyone tell me to-day that America is reduced to inefficiency because of the enormously high tariff that it perpetually maintains as a defence for its own industries Everyone knows to-day that America is the most go-ahead country in the world, and the most efficient in its industries. No doubt there are some industries, like that in which my right hon. Friend the Member for West Swansea (Mr. Runciman) is concerned, in which we are at the present time still pre-eminent, but, taking the business of the country by and large, I do not think anyone can say that America is the least efficient country in the world, or that it does not compare very favourably in efficiency with that with which we conduct our business.

Accordingly, all these old arguments that are used here against duties are contrary to practical experience. Take the case of the Silk Duties. I have made careful inquiries with regard to what is happening in connection with the Silk Duties, and I find that, as regards raw silk, any change that has taken place in the price is inappreciable, and, with regard to manufactured silk goods, the increase in the price of the articles is really very small indeed compared with the amount of the duty. The result in the case of both these industries is that we are drawing a revenue for the Exchequer; that the amount of business in the country is increasing, and that the articles are really not being raised in price—not at all in the case of motor cars, and not appreciably in the case of silk—while in both these cases we have an enormously increased export trade.

I pass from that topic to the question of Imperial Preference. The hon. and gallant Member dwelt upon the difficulties that would be caused by the fact that we should have to debate in this House questions of our policy towards our Dominions and Colonies, and that we should be, embarrassed by the consideration arising out of Preferences which we hadgranted that the duty Was increasing the burden upon the British taxpayer. Ever since we have had an Empire, however, we have had perpetual arguments in this House with regard, for example, to the provision of defence for the Empire, Is that a circumstance that has ever diminished our respect for the Empire It certainly did not amongst the leaders of the party opposite when the suggestion was made that the only reason against England having colonies was that she would then be so strong that she would be a menace to the rest of the world. That was the doctrine we got from the Liberal benches many years ago. I do not suppose that anyone, even my hon. and gallant Friend, could be found so bold as to ask—

Captain BENN

It was Disraeli who said that colonies were a menace.

Sir R. HORNE

But there never was a time when he suggested the idea of getting rid of them. On the contrary, in one of the most famous speeches he ever made, in 1872, he urged the development of an Imperial policy such as we are trying to carry out to-day. No one is really going to believe that, because we have to discuss this question of duties, our feelings and our affections for our Dominions and Colonies overseas are going to be diminished. I wish the hen and gallant Member would face something which he never does face. He indulges in many arguments against our giving preferences to our Dominions on their goods, but is he prepared to face the withdrawal of the preferences which the Colonies and Dominions give to us? That is really the question. Is he prepared to face that withdrawal It would be no use to answer me by quoting something that my right hon. Friend said at the Conference. What I ant presenting now is the argument of practical application at the present time. We have a very difficult position to maintain. Anyone who is engaged in business knows the appalling difficulty of finding markets for our goods. Why are so many people unemployed to-day? It is because we are not getting orders in this country, and that is because the markets which used to take our goods are unable or unwilling to take them. Where are our best markets? It is demonstrable on the figures that what has saved our trade in recent times has been the amount of our manufactures which have been taken by our Colonies and Dominions. I think our exports to-day to the Empire represent 44 per cent. Of all our trade, and if you take manufactured goods alone, which are most important to us, it goes to an even higher figure than that. Does anyone imagine that we could keep these markets without the preferences which are given to us? If anyone thinks so I would beg him to look at what has happened in actual administration. If you take the case of Australia you find that before tile War 51 per cent. of Australian imports were taken from us. During the War, owing to dislocation of trade, we lost that market to some extent, and America and Japan began to export to Australia goods which we had previously sent. In 1919–20 our proportion of the Australian market had decreased to something like 44 per cent., and by the year following to 38 per Cent. Australia then increased our preference to an average level of 12 per cent., and when they still found we were being undercut in the Australian market by the countries which had the benefit of a depreciated exchange they imposed anti- dumping legislation solely for the purpose of helping the British manufacturer, The result is that Australia is now taking 53 per cent.—she has got back to the old level and gone beyond it—of her imports from the manufacturers of Great Britain.

Is not that worth while What would our trade be to-day without the support of Imperial Preference? Our position could not have been maintained. Is the hon. and gallant Gentleman prepared to sacrifice all that? Could he go to any business community in the country to-day and suggest that a policy should be indulged in which would get rid of all the benefits we enjoy in our Colonial markets. If he is not prepared to go as far as that how does he anticipate keeping these preferences if we are going to give nothing in return? He has been sufficiently warned. If he studies the Colonial Press he will find that there is a very active propaganda in Canada in favour of reducing the preferences to Great Britain and in some cases taking them away altogether if Britain is not going to reciprocate more than it is doing The Prime Minister of Australia. who is well known to be one of the most devoted Imperialists there is in all our Dominions, wrote a very solemn and deliberate article in one of our most important magazines last year in which he disclosed the fact that there were being made to Australia persistently offers from other countries more favourable than anything we give them in the shape of trade, and he said it could not be expected that the Dominions were going to turn deaf ears to these offers for ever if the old country was not going to reciprocate to a greater extent than it has done.

Captain BENN

What did he ask for from the old country?

Sir R. HORNE

He pointed out—the hon. and gallant Gentleman may pour scorn on it, but it is of considerable importance—that the fruit trade could be enormously helped if we could make a market for it which would enable it to develop.

Captain BENN

Meat and wool.

Sir R. HORNE

The hon. and gallant Gentleman cannot have read the article, because he made no such request. The article I referred to was in the "Nineteenth Century." He made no reference of that, kind at all, but he pointed to the fact that they could take a population of, I think, 750,000 people in the Murray Valley scheme for the purpose of growing fruit, and he said if we could guarantee them or give them such a preference as would induce them to go ahead with that scheme they could take a large number of our people who are now unemployed. There would be two advantages, one, that we should be able to give employment to people who cannot get it at home, and, on the other hand, that you would be constituting a market for your goods in Australia, because every man in Australia takes something like £10 worth of our goods in a year, so you would get both a market for yourself and a relief for your present distress from unemployment. I am never able to understand the kind of policy the hon. and gallant Gentleman constantly urges on the House. Our only future lies in building up the Empire rather than destroying it. Our only chance of restoring our trade is in creating markets in the Empire which will take our goods.

Mr. SHORT

I do not propose to follow the right hon. Gentleman in his discussion of the merits and demerits of Free Trade, Tariff Reform and Colonial Preference. 1 am a firm believer in the Free Trade doctrine and I believe a British Commonwealth based upon freedom and liberty, free from the artificial supports our commerce would derive from tariffs and duties of the character of which the right hon. Gentleman speaks, is more likely to be durable than one based upon materialistic and artificial supports which in my opinion are very much in harmony with the materialism of a soulless commercialism. With reference to the motorcar trade, I well remember the Labour Chancellor of the Exchequer pointing out that that trade was really in its infancy. If it suffered at all it suffered for financial reasons, and he went so far as to suggest that the imposition or withdrawal of a duty would not in itself seriously affect the industry. I think the history of the industry has proved the truth of my right hon. Friend's philosophy. I listened with considerable interest to the speech of the hon. Member for Ilford (Sir F. Wise), who always speaks with great clearness on financial problems. I agree with him in his protest against the growing increase in expenditure, especially when that expenditure involves enormous economy at the expense of the working classes and heavy burdens on the workers of the country. With regard to the guarantee under the Electricity Bill, I have not as a general rule favoured subsidies. I believe private enterprise should stand upon its own feet. There is no half-way house between private enterprise and the social ownership and control of any particular industry, and if private enterprise cannot support itself and stand upon its own legs, it should make way for a better system which will satisfy the functions of our social life and give the workers a fair, square deal and a reasonable standard of living.

I come to the point made by the hon. Member for Oldham (Mr. Duff Cooper). He was anxious that his party should take upon itself retrenchment. He did not give us a definition of what it meant, but, if it means economy, the policy has indeed been adopted by the Chancellor of the Exchequer, for he has economised in every direction at the expense of the working classes, but certainly not at the expense of the well-to-do, to whom he has given generous remissions of taxation. Then I was interested in the point made by the right hon. Gentleman the Member for West Swansea (Mr. Runciman). His speeches always appeal to my mind, and I have a great deal o4 appreciation for the arguments he advances. He drew a picture of the growing efficiency and capacity and power of our manufacturers, and the readiness with which they can cope with any difficulty. He said we were producing the finest machinery, and when the opportunity came we should be able to do this, that and the other, but he did not explain what all this was worth. When we get rid of all the oratorical niceties, and ask what does this mean to the workers, despite the boundless and illimitable wealth of nature, which has not failed, despite the wonderful skill and development of our mechanical contrivances and machinery, despite our power of coordination and organisation in the realm of industry, what do you provide for the workers at the end of it? A miserable subsistence wage. For the engineer, who produces this wonderful textile machinery, a wage of about £2 17s. a week.

At the very height of your economic and industrial power, before the War, when you had no excuse, when you were indeed the manufacturers for the world, when a great sponge was there to absorb the product of your labour and social activities, you were never able to give the workers more than a mean, despicable and miserable wage. The right hon. Gentleman talks of the growing power of capitalism, of this wonderful knowledge and mechanical skill, but the only remedy you have at this moment in the greatest basic industry of our industrial life, despite your ability, is to increase the hours of the miner and reduce his wages below even the subsistence wages that he now enjoys. I appeal to the House to address itself to these considerations which the man in the street is deeply thinking about. He is not moved by all the high-sounding talk of Imperial Preference, the building of a great British Commonwealth and a great Empire if the building of that Empire means the continuation of the conditions that prevail in our economic life and the law wages and long hours which are now foreshadowed for him in the great basic industry of our country. I have always regarded the Budget as a great instrument, appropriately designed and capably used, for rectifying the inequalities which arise from our economic system, for removing some of the disabilities which fall so heavily upon the working classes, and which create so many disabilities for them as compared with the position of the wealthy classes. I do not say that the Budget in itself can provide for the equitable distribution of the wealth that is produced; that is not within the realm of possibility so far as the Budget is concerned; but it can lessen the evils and mitigate the hardships and provide a greater measure of comfort in the homes of the people, by a rightful and human use of it as a great financial instrument. I have looked for some evidence that that opinion is shared by the Chancellor of the Exchequer, but I have found no evidence to indicate that he thinks that this is an instrument which can be used in that way.

The right hon. Gentleman went into office under most favourable conditions. The international situation was bright, trade was reviving, employ- ment was increasing, and unemployment was decreasing. In 192.5 he gave £42,000,000 away in remission of Income Tax and Super-tax. [HON. MEMBERS: "£32,000,000!"] Well, £32,000,000. During that year the unemployment figures increased. The number of unemployed increased per month by more than 140,000, as compared with the figures in the period 1919–24. When we look at the prospects at the present time we find that the stability which existed in the latter days of 1924 have been superseded by uncertainty and chaos; the revival of trade has been checked, and in every direction there is a disheartening outlook as far as our trade is concerned. During the period since the War the sacrifices of the workers have been enormous, and altogether out of proportion to the position which they occupy in society and out of proportion to the service they render to the community. Their wages have been reduced in the aggregate from £10,000,000 to £12,000,000 per week, or over £600,000,000 per annum.

The Chancellor of the Exchequer, whose versatility we all admire, whose cleverness we appraise at its proper value, and whom we regard as a great orator, who can come down to the House and make people smile, and cheer up Members on both sides, has not in either of his Budgets given one ounce of benefit to the great mass of workers. He has not tried to correct the disability which has arisen out of our economic system and which has caused the workers to make a sacrifice equivalent to the figures which I have mentioned, by reducing the taxation which falls so heavily upon the workers; whereas the Chancellor of the Exchequer in the Labour Government reduced the indirect taxes upon food, and at one stroke of the pen enabled the working classes to obtain for spending upon the necessary commodities of life something in the region of over £30,000,000 per annum. The Chancellor of the Exchequer called attention to that fact. I have not the exact quotation in my mind, but I remember that when he was speaking on the Widows', Orphans', and Old Age Contributory Pensions Bill, he said that the right bon. Member for Colne Valley (Mr. Snowden) had given to the workers as a result of the reduction of indirect taxation a fund out of which they would be able to pay for their pensions. Thereupon, the Chancellor of the Exchequer took back not simply with one hand but with two hands what my right hon. Friend the Member for Come Valley had presented to the working classes.

I think my figure of £42,000,000 in remission of Income Tax and Super-tax was correct. While the Chancellor of the Exchequer has given this generous remission to the wealthy people, he has exercised the most outrageous, disgraceful, vicious and vindictive economy upon the working classes. He has robbed the sick and the disabled. He has robbed the naval and military members of the forces of the Crown. He has interfered with National Health Insurance, and he has raided the. Road Fund. Generally speaking, he has attacked the standard of living of the workers in every possible direction. Although we were promised a revival of trade as a result of the reduction of the Income Tax and the Supertax, we have not seen that revival of trade. To knock 6d. off the Income Tax in a Budget of £800,000,000 is totally insufficient to do anything in the direction of a. revival of trade.

With respect to the Betting Duty, I do not claim to be more moral than any other Member of this House. I suppose I am very human and just about as good as anybody else. Having regard to the growth of public opinion, having regard to the results accruing from a long period of education, the public are looking for a higher standard of morality being expressed by our public bodies—I will not say by our public men—and by assemblies such as this. The objection I have to the Betting Duty is that it will make it more difficult because of the imposition of such a tax to remove what everybody admits, in all quarters of the House, to be an evil. I have no doubt that next year when the right hon. Gentleman realises, as he will, the revenue which he expects to get, and possibly more, and some hon. Member suggests that we ought to do away with, the Betting Duty he will reply, "We cannot afford it. We now derive so much revenue from it, and it, is impossible for me to agree to any such proposal as its withdrawal." We shall find year after year greater difficulty, as in the case of other taxes of a similar character, in securing its removal.

This is a bad Budget. It gives no reduction in food taxes. It makes little or no effort to lessen the poverty of the masses of the people. It confers no real advantage upon the workers. While it increases the burden on the workers, it gives generous remissions of taxation and exceptional gifts to the wealthy. I shall go into the Lobby freely against this Budget, believing that it is an instrument which is calculated to render no real service to the great masses of the community.

Sir JOHN MARRIOTT

With all due respect to the hon. Member for Wednesbury (Mr. Short), I do not propose to follow him in his very interesting disquisition as to the distribution of financial burdens between different classes of the community. I may say something later with regard to his concluding words. As I see the right hon. Member for West Swansea (Mr. Runciman) in his place, I should like to say with what complete agreement I listened to the very interesting speech which he delivered. Almost every argument which fell from his hips found an echo in my mind. I cannot say the same in regard to the speech of the hon. Member for West Leicester (Mr. Pethick-Lawrence), who seconded the Motion for the rejection of the Bill. The hon. Member for West Leicester put before the House an argument which seemed to me amazing from every point of view. He made great play with what he described as communal activities and communal expenditure, and told the House that of the large sum in the Budget, £824,000,000—I hope I do not misquote him and I am sorry he is not in the House—which we have to raise this year, only about £400,000,000, or less than half, I think he said, was in any sense communal expenditure. He arrived at that amazing conclusion by excluding from communal expenditure two specific items which I believe are responsible for over £400,000,000; one was the Debt charge, the charge for interest on the Debt, and the other, which I think he put at £122,000,000, was for pensions.

Does the hon. Member mean to tell the House or the country that the Debt charge, a charge which was for the most part incurred in defending this country during the Great War, is not communal expenditure of the most obvious kind? What possible interest could there be more communal, more common to the whole community, than that of defending the country in a great war such as that from which we have emerged. Moreover, I would like to hear of the hon. Member going on to a platform and telling the people of this country that the charge of £122,000,000 for pensions cannot be regarded as communal expenditure. That is a debt which we owe, for the most part to those men who fought for us and the country in the Great War. To exclude items of that kind from communal expenditure and to reduce the amount of expenditure on communal purposes to that extent, seems to me one of the most amazing arguments to which I have ever listened in this House.

I am very much afraid, from the discussions to which we have listened this afternoon and from the long discussions which we have had on this Bill, that the Finance Bill, to which I hope we shall put the final touch to-night, is not one, I frankly admit, in regard to which anyone can feel a very large measure of enthusiasm or even of special satisfaction. If I have to make one or two rather critical observations, I should like at the outset to say that in the framing of this Finance Bill, the Chancellor of the Exchequer seems to me to have exhibited conspicuous courage and resource, just as in the conduct of the Bill he has exhibited his characteristic courtesy in Debate. It is a peculiarity of the finance scheme of the present year that it has been presented to the House in two instalments, or, as Lord Dundreary said, in two compartments. First, the Chancellor of the Exchequer unfolded to us the expenditure side of the account in connection with the Economy and Miscellaneous Provisions Act. Having expounded that expenditure in a very able speech, he left the detailed defence of that very contentious Measure mainly in the hands of two competent colleagues. I am not proposing to discuss the Economy and Miscellaneous Provisions Act to-night, and I take it I should not be in order in doing so, but I think I am entitled to make a passing reference to it, because it really forms the basis of the Bill which we are now discussing, and, in making that passing reference, I should like to associate myself entirely with what has been said by the hon. Member for Ilford (Sir F. Wise) in regard to the expenditure side of this account.

It is my first, and perhaps my main, objection to the Bill we are now considering that it is calculated and intended to raise far too much money. A year ago the Chancellor of the Exchequer was apologising to this House for asking for a, Vote of £799,000,000, and here he is this year, with a falling revenue and a, still more depressed trade, unblushingly, almost with effrontery, asking the House for £824,000,000. In my judgment, this is a very great deal more than the country in the present circumstances can afford. I am not thinking of the individual taxpayer; what I am thinking of is the aggregate trade of the country. Hon. Members opposite are very fond of thinking of taxation in terms of the individual taxpayer; that is a common practice with members of the Opposition. I de not for a moment suggest that it is an unnatural way of looking at taxation, but I say that when we are considering the finance scheme of the year it is a fallacious and misleading way of looking at the matter. I want to look at it, not in terms of the individual taxpayer, but in terms of the aggregate industry and trade of the country, and from that point of view a bill of £824,000,000 is a great deal more than we can afford at the present time.

I observe that more than one speaker on the benches opposite was inclined to suggest that we were taking too little from the direct taxpayers of the country. I am not going into the whole of that sum; I merely take the figure estimated from Income Tax and Super-tax, and I find that a sum of nearly £320,000,000 is to be taken from the Income Tax and Super-tax payers of this country. The point I desire to make is this: that, to a very large extent, that sum of £320,000,000 is a deduction from, at any rate, potential capital which, under ordinary circumstances, ought to flow hack into industry. Everybody knows that capital is dear to-day. It is dear because it is scarce, like other commodities which are dear because they are scarce, and it is scarce because the flow of new capital into the capital fund is relatively small. Hon. Members opposite sometimes point to the strength of gilt-edged securities and to the fact that when there is a new issue of capital for some attractive investment it is sometimes considerably over-subscribed. Yes; but looking at it from the point of view to which I want to draw the attention of the House, I regard the strength of gilt-edged securities and this large inflow into apparently profitable investments as (being a sinister sign of the trade and commerce of the country at the present time. And for this reason. It is notorious that gilt-edged securities are high at times when it is not remunerative to put money back into your own business. From that point of view it is a sinister sign.

There is only one proposal in the whole finance scheme of the year on which I look with unmingled satisfaction, and that is the provision which in all our difficulties the Chancellor of the Exchequer has seen fit to make for the reduction of Debt. The House must have listened, and I am sure foreign observers must have read, with admiration and pride to the recital by the Chancellor of the Exchequer of the recent history of Debt redemption in this country. We ourselves may well stand amazed, as I believe the financiers of the world stand amazed, at the magnitude of the effort this country has made since the conclusion of the Great War. That effort has not been made without great sacrifice on the part of individuals, and I am quite prepared, like the hon. Member for Ilford, to admit that it has not been made without some sacrifice on the part of trade and industry. It is a magnificent and heroic effort. It may be asked, is it good business? I think it is, and for the reason which was admirably given by the right hon. Gentleman the Member for Swansea. I hold it to be of supreme importance that at almost any sacrifice we must maintain the credit of this country against the redemption of maturities which will become payable within the next few years. Within three years there will be Debt maturities amounting to nearly £1,000,000,000, and on the top of that, from 1929 onwards, there will be a sum of £2,000,000,000 of redeemable Debt.

It is obvious that these maturities, actual and potential, will put into the hands of any Chancellor of the Exchequer a very big opportunity, but the question of supreme moment to this country is whether we shall he able to seize the opportunity and be able to do what the right hon. Gentleman the Member for Swansea pointed out as so eminently desirable, get our Debt on a 4 per cent. or even a 4£ per cent. basis The advantage of this to the community and to trade and industry the right hon. Gentleman made abundantly clear. There is only one possible way in which we can take advantage of this great opportunity, and that is by such a maintenance or improvement of national credit as will permit of redemption on favourable terms. At the moment I am afraid the omens are by no means too favourable. It is true that in the last seven years the Floating Debt has been reduced by the enormous sum of £700,000,000, a truly prodigous achievement. It is also true that since 1920 there has been a reduction in debt interest of no less than £47,000,000 a year. These are figures which may well repay us for long years of self-denial and high taxation. They are figures which may well excite the admiration and envy of some of our neighbours. Nevertheless, it is a lamentable fact that our credit is less good by something between a half per cent. and one per cent.—I am sorry to have to confess it—than when the present Government, took office. Therefore, I should like the Government to take heed of the suggestion made by the hon. Member for Ilford, of suspending the Trustee Act as regards Dominion loans for a limited period of three years. That would carry us to the end of the period of compulsory maturities, and by conserving our capital resources for home consumption would enable us to convert on terms more favourable than seems at the present. moment to be possible.

I am aware of the great complexities of this problem, and I am still more conscious of the argumente which on broad Imperial grounds may be advanced in a contrary direction. But I hold so strongly, with the hon. Member for Ilford, and the right hon. Member for Swansea, that at the moment it is a matter of supreme importance to maintain the credit of this country, in view of these early debt maturities, that I should be prepared to make some small and temporary sacrifice of other princi- pies which I have long held dear. I only want to add a very few words. Assuming that we have to raise this gigantic aggregate sum; assuming the necessity—which I do not assume—for raising this vast amount of revenue, I think there is not a great deal to be said against the methods by which it is proposed to raise it. It is here, I think, that the Chancellor of the Exchequer has shown his courage and his resource. I must frankly say that I do not think much of his essay in protection. I do not think he thinks much of it either, for I do not remember in the whole course of these prolonged Debates that we have heard one word from him in defence of the duty, for example, on wrapping paper. I think he has been rather conspicuous by his absence from the House when that matter was debated. I apologise to him if I am in error—

Mr. CHURCHILL

My- hon. Friend will understand that I cannot allow that observation to pass. I take full responsibility for the duty, but I left the defence of it, naturally and necessarily, to my right hon. Friend the President of the Board of Trade, because it arises under the Safeguarding of Industries procedure, which is directed from the Board of Trade. I take the fullest responsibility however for the duty, and I am entirely in agreement with the President of the Board of Trade on that subject as well as with the principle of the safeguarding policy as defined by the Government last year.

Sir J. MARRIOTT

Of course, I never suggested that the Chancellor of the Exchequer would not accept responsibility for his own Budget. I do not suggest that for a, moment. All I said, and I am not aware that he has denied it, is that as a matter of fact he left the defence of that very questionable proposal, the apology for it—it needed an apology—to one of the more prominent of his Protectionist colleagues in the Cabinet. If my right hon. Friend had been present during those Debates, he would have heard a good deal of plain speaking and he would have witnessed some cross-voting from among the most loyal of the supporters of the Government. It seems to me that it is pertinent to ask, What you are going to get out of this petty essay in Protection? You are going to get at any rate an infinitesimal amount of revenue. We shall be told, if we are told anything, that the revenue is not the object for which the duty has been imposed. No doubt. If it were the object, it would be very poorly attained by the revenue which is anticipated. Then we are going to get, if no revenue or no revenue to speak of, Protection for, what is it? For 7,000 persons engaged in the wrapping paper industry. Yes, but you are going to get that petty revenue, and that petty measure of Protection at the risk of appreciable injury to tens of thousands of workpeople engaged in other industries which are in part at least dependent upon that of wrapping paper. But I have had more than one opportunity through your courtesy, Mr. Speaker, or that of the Chairman, of speaking on this question on oilier occasions, and I do not want to labour it again, though I do not pretend to be in love with that portion of the Finance Bill. It. was obvious, however, that the Chancellor of the Exchequer was bound to look, in the financial circumstances of this year, for new sources of revenue. As I have done before, I would like to congratulate him on the courage with which he has grasped the very thorny nettle of the Betting Duty. It seems to me that if you are seeking for new sources of revenue, it is merely commonsense to try to avoid any impost which would injuriously affect industry or commerce. Does anyone pretend that the Betting Duty is really going to injure industry or commerce? In the second place, it is important that whatever tax you impose should be fiscally remunerative. I believe that this Betting Duty will prove to be very remunerative in a fiscal sense. It is opposed, I am aware, by a large number of people for whose opinion I have the greatest possible respect, from what is called the moral point of view. I must confess that I am amazed at that argument, and for this reason: No one, of course, can for one moment suggest that in putting a tax on betting you are putting a tax on a necessary of life. I should have thought that right hon. and hon. Gentlemen opposite would at least have been glad that the necessaries of life were avoided in new taxation. As to the moral side of the question—well, I do not pose as having a great opinion on these questions, but I wish to say this: Assuming gambling and betting to be the great social evils that they are described as being—I am not for one moment denying that—I put it to those who oppose this tax, have they ever in their lives heard of the imposition of a tax which would increase the consumption of the commodity which is being taxed?

Here, if you like, is an admitted social evil. You are going to impose a tax upon it, a tax which, I believe, will be fiscally remunerative, and it passes my comprehension to know how by imposing that tax you can expect that the evil will he otherwise than diminished in the process of taxation. On that ground, if on no other, I shall give to that tax my cordial support. Let me say this in conclusion. Little as I like the expenditure which is implied in this Finance Bill, and completely as I agree on this point with my hon. Friend the Member far Ilford, and cordially as I support the proposals which have been put forward in the very admirable report of the Estimates Committee—a Report which I hope will receive, as it deserves, the very serious consideration of this House—yet, taking this serious view in regard to the expenditure side of the account, I hold that, assuming that that expenditure had to he met, my right hon. Friend the Chancellor of the Exchequer has addressed himself with courage and with resource to the task of raising the necessary money.

Mr. RADFORD

I propose to confine my remarks to one matter only, and that is the Super-tax provisions of the Bill. Clause 19, by means of references to relevant sections of the Finance Acts of 1918 and 1920, provides that Super-tax shall be charged in respect of the income of any individual, the total of which from all sources exceeds £2,000. That appears to be a plain and unequivocal statement, apparently implying that all persons who are fortunate enough to have incomes of over £2,000 shall bear additional taxation, and, obviously, that those with equal incomes will bear an equal amount of tax. Unfortunately, such is very far from being the case. On the Second reading of this Bill and during the Committee stage, I intervened to draw the attention of the Chancellor of the Exchequer and of the Financial Secretary to the Treasury to certain grave weaknesses in our financial law relative to Super-tax —weaknesses which were resulting in many very large incomes escaping Supertax altogether. My right hon. Friend the Chancellor of the Exchequer was, I think, not present on that occasion, but he may possibly have heard from his colleague the purport of my remarks. I actually put down an Amendment during the Committee stage with a view of tightening up the law and preventing these serious leakages, but unfortunately, as my Amendment naturally involved certain persons who were evading Super-tax becoming liable for it, it was held to be an imposing of a further charge and was ruled out of order. But I still hoped that on the Report stage the Government would have taken some action to stop these abuses. I have been exceedingly disappointed to find that they have done nothing whatever.

Any case that I made out, or endeavoured to make out, during the Committee stage, has been materially strengthened by a further case in the Law Courts within the last fortnight. It is a case of a most astounding nature of which with the permission of the House, I will give short details later. Right from the outset, when Super-tax was first imposed in the Budget of 1909, the dice were always loaded in favour of those persons whose incomes were derived from the dividends of limited liability companies. When I say "loaded" I mean not intentionally loaded, but unintentionally loaded. I will give one example of the difference of the positions of two equally wealthy men when Super-tax was first imposed in the Budget of 1909. Each of these two men owned a fine old business that may have been established for generations in their family. "A" owned his business as a private firm. "B" owned his business by means of a limited company, holding the whole of the shares of the company. Each of the businesses made a uniform profit of £20,000 a year. Each of these two men, in addition, possessed investments and other sources of income bringing him in £5,000 a year. It is clear to every Member of the House that these were equally wealthy men, that each of them possessed a potential income of £25,000 a year, if they chose in the one case to draw it out of the business and in the other to have dividends declared by the limited company and paid to the shareholder. But the two men lived on the £5,000 a year from other sources. The first man allowed his capital to be added to year after year in the private firm, by leaving his profit undrawn. In the same way, the limited company proprietor lived within the £5,000 that he drew from other sources, and he allowed the company's profits to accumulate in the coffers of the company.

Obviously, they were equally wealthy men. But for Super-tax calculations the income of the man who owned the private concern was £25,000, namely, £20,000 profits from the business, and £5,000 income from investments. The income of the other man who owned the whole of the shares of the limited company, making identical profits, for Super-tax purposes was calculated as £5,000 only. As a matter of fact, at that date he escaped Super-tax entirely. I submit that the second man, the proprietor of the shares of the limited company, was saving up money for himself to exactly the same extent—allowing it to accumulate in the hands of the company whose shares he owned—as the man who allowed it to remain in the business of which he was the proprietor. At the outset that was the position, without any step having been taken by the man who was the owner of the limited company to reduce or avoid his liability to Super-tax. He had formed his business into a limited company years previously, and he was in that fortunate position automatically. It was not long before people began to realise what an advantage it was, if they owned a business or investments or estates, to have them held by a limited company, of which they could in turn hold the shares. The injustice from the outset to professional men and highly salaried officials was also obvious, because they were charged Super-tax on the full amount of their annual incomes, whereas the company men were escaping in the way I have shown.

To begin with, no doubt, it was merely regarded as a sort of fortunate coincidence that those who owned their businesses in the form of companies were escaping Super-tax, although others had to pay. But gradually the thing developed. Not only were businesses transformed into limited companies, but companies were formed to take over the investments and landed estates of other taxpayers. Then the next difficulty came. How could these companies hand over to the proprietor the cash that they had accumulated without making the proprietor liable to Super-tax when the cash was handed over? A solution of this difficulty was found. The issue of bonus shares out of profits was held by the Legislature not to make the recipient of those shares liable to Super-tax on the amount thereof. It even went further, and it was found that the issue of bonus debenture to the shareholders of a company did not make the recipients thereof liable to Super-tax. Once the shares or debentures as the case may be found their way into the hands of the proprietor, then he could turn them into cash, either by the sale of the shares issued to him as bonus shares, or the company could pass a resolution for the reduction of its capital, and the repayment of a certain amount to the shareholders, and although this was in fact cash that had accumulated in the form of profits, it was not liable to be included in their Super-tax returns.

7.0. P.M.

Since I spoke on the Committee stage I have seen one case in the newspapers in regard to this question of bonus shares. It was headed, "A Prosperous Company," and was an account of an application to the Court to sanction the repayment to the shareholders of £25,000 out of the £30,000 issued share capital of a company. Counsel for the company who applied to the Court stated that the company w as formed about 1910 and that it had had a very successful career. Its funds were now greater than were needed for the business, and it was proposed to repay to the shareholders £25,000 in cash and reduce the capital from £30,000 to £5,000. As all liabilities had been met fully up to date, the Court made the necessary order. It is perfectly plain that the company had gradually accumulated undistributed profits and issued bonus shares to the shareholders until the initial £5,000 capital had grown to £30,000, and this £25,000 of accumulated profits was handed to the proprietor in the form of repayment of capital, and was absolutely exempt from any liability to pay Supertax.

Another case which I saw in the papers —and it is inconceivable to me that my right hon. Friends and their advisers in the Inland Revenue Department have not seen it also—was a case a few months ago where a company was formed to take over from a certain individual the whole of his estate and investments. The capital was somewhere in the neighbourhood of £1,000,000, but the purchase price to be paid to him for this estate and investments was to be paid in a most extraordinary manner, namely, in cash in 50 half-yearly instalments of a given amount, without interest. The transaction appeared so peculiar that I went to the trouble of working it out to see what was the meaning of it. The reason was clear. For the purpose of this case, whether it was £1,000,000 or £2,000,000 is immaterial, and we will take the figure as being £1,000,000. This man was in possession of a million pounds' worth of estate and investments, bringing him in an income of, say, £50,000 a year. He agreed to sell this million pounds' worth of estate and investments to the limited company of which he was to be the shareholder for £1,000,000, which was to be paid to him by the company in 50 half-yearly instalments of £20,000 each.

Before he did this he was in receipt of an income of £50,000 a year, and out of this income he had to pay 45. in the £ in Income Tax, which amounted to £10,000. He bad also to pay Supertax based on £50,000, which meant approximately, but not quite, £15,000. In other words, his total liability for Income Tax and Super-tax, out of the £50.000 which he was receiving yearly, would be just under £25,000. What was his purpose in transferring this estate and investments to the company? He transfers them to the company, and the company has to pay Income Tax just as the old proprietor had, amounting to £10,000 a year. That leaves the company with £40,000, but Super-tax, as distinct from Income Tax, is a personal tax, Income Tax being a tax on the source of income and Super-tax a personal tax. Therefore the company was not liable to Super-tax and had £40,000 a year left in its coffers.

By means of this deferred payment system which he had arranged with the company, the whole of that £40,000 a year, which was going to be paid to him in half-yearly instalments of £20,000, would not be liable to a penny-piece of Super-tax. For 25 years that man would receive the £40,000 a year which he would have received when he held the investments himself, but out of which he would have had to pay £14,000 or £15,000 Super-tax, and he would thus receive the whole of that money free from Super-tax liability.

Things went on like this until 1922, when the, Inland Revenue authorities began to become alive to some of the things which were happening. Here 1 would like to say, in order to make my position perfectly plain in this matter, that after I spoke in the Committee stage I was asked by one hon. Member: "Who constituted you an agent for the tax gatherer?" I said I was not acting as agent for the tax gatherer, but for the other taxpayers, because the avoidance by certain individuals of their due proportion of the taxes of the country puts a heavier burden on those who honourably meet their obligations.

When the right hon. Gentleman the Member for Hillhead (Sir R. Home) was Chancellor of the Exchequer in 1922 he introduced in his Budget of that year a certain Clause, Section 21, as it has now become, of the Finance Act, 1922, by which he hoped to deal effectively with this thing, which was rapidly becoming an evil. When he introduced that Budget, and referring particularly to these cases, he used the following words: I wish also to direct the attention of the Committee to certain instances of legal avoidance of Income Tax and Supertax which have recently become so prevalent as to produce, unless they are corrected, startling inequalities in the incidence of taxation as between different taxpayers." [OFFICIAL REPORT, 1st May, 1922; Vol. 153, col. 1033.] I will not weary the House with reading the Section referred to, but I will briefly give the gist. This Section 21 provides that where any company to which the Act applies had not distributed out of its profits in any year a reasonable proportion of such profits by way of dividends, the Inland Revenue authorities were to have the right to treat the shareholders Who were entitled to such profits had they been distributed, as having received such dividends and to assess them for Super-tax accordingly. This was unfortunately qualified in such a drastic manner as to make the Section practically inoperative. Further on in the Section it was provided that it only applied to any company which (a) has since the 5th day of April, 1914, been registered under the Companies Acts, and (b) in which the number of shareholders was not more than 50, and (c) which had not issued any of its shares as the result of a public invitation to subscribe for shares, and (d) which was under the control of not more than five persons.

I would first draw attention to the fact that the word "and" was inserted after each of these provisos and therefore no company would come under the provisions of that Section 21 unless each of these four provisos had been complied with. In other words any company which desired to keep clear of the provisions of this Section 21—and obviously every company owned by men liable to Super-tax would so desire—had only got to keep clear of a single one of these provisos to escape altogether. The first necessity was that the company had to be formed prior to the 5th day of April, 1914. Since this was in the year 1922 the legislature undoubtedly thought they had amply protected themselves in making it eight years previously. But they never protected themselves in the least against the business which has grown up in the buying of derelict companies.

In the Committee stage I read out one of these advertisements. It was very short, and perhaps I might read it again. It was in January of 1926, only a few months ago, and runs as follows: Advertiser desires to purchase the registration of a company formed prior to the 5th April, 1914. Memorandum must have wide powers as to holding and dealing in real and personal estate.—Apply Box .565, the Publishers of The Accountant.' London. a very reputable professional newspaper for which I have a particular regard. That was the first step. If they can manage to get hold of a company formed prior to the 5th of April, 1914, and transfer either their business or investments to that particular company, then they can be exempt from Super-tax. As the law stands now any millionaire, if he takes the necessary steps can be exempt from Super-tax. I say it is an absolute outrage that in our financial law that should be the position. But suppose anyone was unable to get hold of a derelict company formed prior to the 5th of April, 1914, what was the second necessity? It was that the number of shareholders should not be more than 50. You might say that that naturally takes it out of the category of any private company which would never have so many shareholders. It is quite true that a man does not wish to have other shareholders holding shares which rank with his own, but he does not mind if he is going to save thousands of pounds a year in Super-tax, creating some preference shares and giving 10 £1 preference shares each to 50 other persons. I can assure the House that if anyone came and offered me, if he were a man of repute who obviously was the proprietor of what he was offering me, 10 fully paid preference shares in his company I should thank him, and I think many hon. Members would do the same. I believe that the second proviso is such an easy one to get over that there is no need to deal with the others.

The third proviso was that which says that no invitation should have been made to the public to subscribe for shares. That was another necessity. I saw a case, also a few months or a year ago, and it was after seeing that case that I first put a question to the Chancellor of the Exchequer asking him whether his attention had been drawn to these limited companies taking over the assets of private persons. in this particular case there was a company with a capital of something like £2,000,000 in which the father and son were to be governing directors for life and hold all the ordinary shares. Simultaneously, they made what was, comparatively speaking, a trifling offer to the public of some 5,000 preference shares. When I saw that advertisement of the issue of 5,000 preference shares by a company with £2,000,000 capital, it was that which really started me investigating these eases, to see what was the reason for this, when the cost of advertising, etc., would nearly swallow up the £5,000.The reason was made plain. Apparently, they had failed to get hold of a, derelict company and had not thought of giving away shares -Co 50 different people, but by offering these 5,000 £1 shares to the public they took their company out of the operation of this section entirely, and were able to go on exempt from Supertax if the company did not pay cash dividends.

Since the Report stage there has been another case decided which I referred to earlier in my speech. This is a case of some men at Manchester who are the governing directors of a well-known firm in the iron and steel trade, Messrs. Hall and Pickles, Limited. These gentlemen had entire control of the business, and between December, 1916, and December. 1919, they paid no dividends at all, but they made loans to themselves out of the company's funds to the amount of £283,000. They went further. They did not take these loans and merely hold the money, but they themselves passed the necessary resolutions as directors or as shareholders to write off these debts as irrecoverable. This was too much even for the Inland Revenue authorities, and they took proceedings against these two gentlemen to make them account for Super-tax on this money. There Was no question of Income Tax, because Hall and Pickles, Limited, would be liable for Income Tax on its profits, including this money which had been paid out, but there was the question of Super-tax on the £283,000 which these men had drawn, calling it a loan and which had been written off by the company. Mr. Justice Rowlatt in the Court of First Instance decided in favour of the two Messrs. Hall—two brothers—and the Commissioners of Inland Revenue took the case to the Court of Appeal, and in the Court of Appeal a fortnight ago, judgment. was given against the Commissioners of Inland Revenue. These people appear to have got away with their £283,000 free of Super-tax. If I was unable to convince the Financial Secretary to the Treasury, when I spoke on this matter during the Committee stage, I submit, in view of the further cases which are coming to light, that it is inconceivable that he, or the Chancellor of the Exchequer, can continue to treat the matter as they have been treating it. The Financial Secretary to the Treasury, after I had spoken on the previous occasion, said: The Inland Revenue authorities and the Treasury are continually trying to strengthen existing legislation if experience shows that it is not proving completely satisfactory for its purpose. So with this particular Clause. I am not able for that very reason to give a definite pledge as to what we will do."—[OFFICIAL REPORT, 21st June, 1926; Vol. 197, col. 149.] We are told they are always strengthening the legislation to prevent such evasion, but 1922 was the last occasion on which any effort was made to deal with this matter. We had a to-tally weak and inadequate provision in. 1922 and, for four years since then, these people who are enterprising enough—or crooked enough —to want to avoid Super-tax liabilities which the bulk of the people of the country honourably meet, are being allowed to escape. I submit this is a violation of our British sense of equity and fair play. As I say, the bulk of the people in this country with over £2,000 a year, honourably pay the Super-tax to which they are justly liable, and it is wrong that these people—many of them among the wealthiest—should be allowed to get away without paying their due liability, thus throwing a heavier load on to the other Super-tax and Income Tax payers.

Mr. LEES-SMITH

The hon. Member for South Salford (Mr. Radford) will not expect me to follow him into the very intricate details which he has laid before the House. I will only say that he appears to have made a case into which the Treasury ought to inquire. Indeed, I had some notion that on the question of the purchase of derelict companies there was already some committee at the Treasury investigating as to whether that particular loop-hole could not be stopped up. In closing the Debate from this side of the House, the most suitable thing I can do is to sum up the real and the deep differences which separate us from other parties in this house and which lie behind all the detailed discussions which have occupied us on this Finance Bill, for, I think, 13 Parliamentary days. For my purpose, the speech delivered by the hon. Member for Ilford (Sir F. Wise) will form a, good text, because he laid down certain general principles into which I should like to inquire. The hon. Member has stated what, I think, is the outstanding financial doctrine which appears in every important speech from the Conservative benches. That doctrine is that owing to our rate of expenditure the scale of direct taxation is now dangerously high, and that the high level of. Income Tax and Super-tax is one of the most formidable burdens which industry, at this moment, has to bear and is largely responsible for our trade stagnation and unemployment. That doctrine dominates the Budget of every Conservative Chancellor of the Exchequer.

This Budget is really an interim Budget. It was preceded last year by reductions of Income Tax and Supertax amounting to over £30,000,000, and the Chancellor of the Exchequer indicated in his Budget speech that it was intended, in favourable circumstances, to lead up to a further reduction next year. Here is the first main difference between us. We opposed those reductions of Income Tax and Super-tax last year. We shall oppose them if they are repeated next year, and, if the predictions of the right hon. Gentleman the Member for West Swansea (Mr. Runciman) are correct, and if, next year, we are faced with the necessity for increased taxation, then our attitude will be that that increase of taxation must come from direct taxation alone, and that it must not be spread—as the Chancellor of the Exchequer has stated it will be spread—so as to include indirect taxation on the food and the necessities of life of the people. That is the clear difference between us in principle, and I wish to indicate what are not so much the socialistic as the purely financial arguments on which we base our opinion.

The hon. Member for Ilford read some of the balance-sheets issued by John Brown and Company, the Ebbw Vale Iron and Steel Company, and, I think, Armstrong-Whitworth's — the balance-sheets of trade in the unsheltered industries—and he made a point which the Chancellor of the Exchequer made two or three weeks ago. The hon. Member and the right hon. Gentleman pointed out that if we look at the general position of our unemployment and trade depression, at the moment, the situation is rather surprising. The bulk of our industry—to use the words of the Chancellor of the Exchequer—is in normal and healthy operation and the unemployment and stagnation are concentrated in a special group of trades. These are the unsheltered trades, the trades which depend for their prosperity on our export markets, the iron and steel, engineering, cotton, coal, and shipbuilding trades, which depend for their success upon being able to keep down their prices so as to hold their own, unprotected and unsheltered, against compe- tition in foreign markets. It is the position of these trades which is half the problem, and if you wish to secure that increased production to which the right hon. Gentleman the Member for West Swansea referred, it must be secured by assisting this special group of export trades.

All that is quite true, but what is the conclusion to which it leads? What ought the Chancellor of the Exchequer to do? We contend that, under these conditions, the position of those export trades where unemployment is concentrated, ought to occupy first place in the mind of the Chancellor of the Exchequer. If he follows that policy, which arises from his own statement, where does it lead? Let hon. Members read the report of the inquiry of the joint committee of workers and masters into the position of the shipbuilding industry. It is a unanimous report, and there is a section dealing with what the Chancellor of the Exchequer can do for them. What do they ask for? They ask for Budgets which will reduce their standing charges and enable them to lower their prices, and compete on more favourable terms with their rivals in foreign markets. When they refer to standing charges, they particularly ask for Budgets which would lead to a reduction in rates and in insurance contributions, these being the main standing charges which the Chancellor of the Exchequer can influence. What is the Chancellor of the Exchequer's reply? His reply and the reply of the Conservative party is the reduction of Income Tax and Super-tax.

That is no help at all to these trades. They are not paying income Tax and Super-tax. They are making losses. The reduction of Income Tax and Supertax assists those who are living on debentures or rents or mortgages or War Loans or inherited wealth, but it is of no assistance to those trades where the heart of our industrial difficulty is to be found. Income Tax and Super-tax do not increase standing charges, because standing charges are deducted before Income Tax is paid. Therefore, our first criticism of the policy for which the Conservative party stand is that, from the point of view of the needs of the country, it is at this moment headed in an absolutely wrong direction. These export trades are the trades to which assistance should be given, but the Chancellor of the Exchequer gives them no assistance. He is their greatest enemy; he is the greatest pest and nuisance with which they have to deal; he does not help them in their difficulties, but adds to their difficulties by increasing their standing charges, and he does so, in order that he may reduce the Income Tax and Super-tax by which he gives the greatest assistance to those sections of the State who are already enjoying the greatest share of the national wealth.

We should, if we had control of affairs, put reduction of Income Tax and Super-tax in a very secondary position compared with that which it occupies in the programme of the Conservative Government. Some day, if circumstances were favourable, we might consider a reduction, but here again I would point out that there is the greatest difference between how we should deal with a reduction of Income Tax and Super-tax and the manner in which it has been dealt with up to the present. I feel confident that we should never again undertake a general, all-round reduction, say, of Income Tax without taking into account the sources from which the income was derived. We draw a very sharp distinction between income which comes from earnings and represents effort and income which comes from inherited wealth, investments, or other forms, so to speak, of inactive ownership, and in our view reduction under present conditions should be confined to earned income, which represents the vital and the creative elements of production, while unearned income, which, so to speak, comes to one in one's sleep, without any present effort on one's part—

Mr. MACQUISTEN

There is a vast difference.

Mr. LEES-SMITH

There is a distinction between the two, and we say that the unearned income can wait until far different conditions may have arisen. We justify this attitude on financial grounds. It appears to me that this present system of a general, all-round, indiscriminate reduction really defeats the very reason which Conservative Chancellors of the Exchequer always advance for a reduction of Income Tax. What is the argument? It has been used over and over again this afternoon. It is that a reduction of Income Tax stimulates industry and enterprise, and thus helps a revival of industry and trade. But how does it stimulate industry or enterprise to reduce the Income Tax of those who are living comfortably on inherited wealth, or debentures, or mortgages, or War loans? Sir Josiah Stamp has pointed, out that when you reduce the Income Tax on the present general, all-round lines, at the most, only one-sixth of the reduction goes to those directors of industry who can be held to be stimulated by that reduction, and that five-sixths of it is dissipated amongst the interest-receiving, bond-holding classes, which simply receive the results of the exertions of others without being under the necessity of contributing any exertions of their own. That, I believe, is one of the reasons why all these reductions in Income Tax and Super-tax in the last few years have been a failure, and why at the end of it all, a trade revival has never taken place.

There is another reason for this policy, which I do not think has been brought out up to the present, and it is this: The Chancellor of the Exchequer, in a Debate about a week ago, argued that the workers of this country were really better off now than they were five or six years ago, because there had been a reduction of prices since 1920, and the level of prices was now only about half what it was at that date. There may have been a reduction of prices, but the wages of the workers have in that same interval fallen by £600,000,000 a year, or a little more, and, therefore, any reduction of prices has been more than counteracted by that corresponding movement of wages. But when you come to the classes with which we are dealing, they have had the advantage of the reduction of prices without any corresponding reduction of their incomes. When you come to those who are living on inherited wealth, or debentures, or mortgages, or War Loans—

Sir ALEXANDER SPROT

Savings!

Mr. LEES-SMITH

Yes, or savings—I am stating the difference between their position and that of the workers—they are still receiving exactly the same, their 5 per cent. or 6 per cent. or 8 per cent. which they contracted for, as in 1920, but owing to the reduction of prices, the sum is worth twice as much. Now, in view of that fact, look at the policy of Conservative Governments, which is to make their main object the reduction of Income Tax and Super-tax, of the benefits of which five-sixths will go to this very class whose real incomes are doubled, whose share of the national wealth is doubled, and the cost of maintaining whom to the community has doubled within the last six years. Sa that, from the purely financial point of view, our criticism of the whole principle of Conservative finance is that it differentiates against earned incomes, representing effort and creative energy, in favour of unearned incomes, representing inherited wealth and passive, inactive ownership.

Our next main criticism, which I will not expand for lack of time, is that, at the same time that it does this, it makes another differentiation, and that is a differentiation between those whose position is easy and comfortable and wealthy and those who are struggling to make both ends meet. We are still paying for the War, and, according to the sinking fund policy of the Government, we shall continue paying for it for another 150 years; and behind all our Debates, not only on finance, but on other subjects, the great unsettled question which is being fought out is whether the War is going to be paid for by the wealthy or by the poor. The general policy of the Conservative party is to reduce the Income Tax and the Super-tax, that is, to reduce the payments of the wealthy, and in order to do that they have struck 100,000 men off the unemployment register, they have increased the deductions from wages for insurance purposes, they have cut down the assistance that the workers can receive in times of sickness, weakness, and distress, they are taking steps to stunt the possibilities of developing their mental powers, and they are destroying the hopes of a new social order which were held out to our young men when they went out to the War. We have fought that policy at every stage, because our view is that the first duty of a Chancellor of the Exchequer, on account of which the wealthy classes ought to be willing to stand aside and wait their turn, should be the firm and obstinate maintenance of the workers' standard of life.

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

The hon. Member for Keighley (Mr. Lees-Smith), who has just sat down, intimated at the beginning of his speech that we are approaching the end of a rather lengthy series of Debates. In other words, our financial vessel is approaching harbour, and we hope to see it safely berthed in the course of the next hour or so. I think I may say that those who are responsible for the navigation have no reason to look back with anything but satisfaction upon the voyage that, we have made. The right hon. Gentleman the Member for Colne Valley (Mr. Snowden), at an early stage of our Debates, prophesied that we should have a very stormy course, and he told us that when we got into Committee we should have—I think he directed his observations expressly to myself—as active and penetrating criticism of our proposals as we could wish for. Well, I think the right hon. Gentleman, in prophesying that storm, was the victim of what is not an uncommon experience, and that the wish was father to the thought. I am sorry that he is not present, in order that I might have asked him whether he is satisfied with the fulfilment of his prophecy, because I can only say, speaking from the other side, that we look back upon the voyage that we have made, and we have had nothing more to contend with than pleasant ripples on the surface of very smooth and sunlit waters.

But before I go more in detail into the proposals of the Bill and into the Debates to which we have listened, I hope it will not be thought inappropriate if I say, at this stage of our financial legislation, and certainly in no pharisaic spirit, that we may congratulate ourselves on the contrast between our own position and that of our friends and Allies just across the Channel at the present moment. I am quite certain that we, in this House, wish our French friends a happy issue out of all their afflictions. We wish them well in every possible way, and certainly it is not any part of our duty to say to what extent, if at all, their troubles are due to avoidable causes. But we, at all events, may congratulate ourselves that, if we are in comparatively smooth financial waters, it is due mainly to the fact that during the last very strenuous decade of our history, the House of Commons has never hesitated to ask the British taxpayer to make the necessary sacrifices and to bear the necessary burdens to keep our finance upon a sound basis, and that the British taxpayer has responded to than demand, if not with active cheerfulness, at all events with complete resignation.

Although, as I have said, we are at the harbour mouth after a comparatively smooth passage, I do not think anyone can deny that we must have very considerable anxiety for our next voyage. The paralysis of the terrible coal stoppage continues, and we cannot yet foresee the end. We have had, in the course of this afternoon's Debate, a very penetrating and analytical speech from my right hon. Friend the Member for West Swansea (Mr. Runciman), in showing what results, from the point of view of the national finance, come from that stoppage. I remember very well the right hon. Gentleman on the Second Reading of the Bill estimated that the loss, owing to the coal stoppage and the general strike, amounted to a sum of £30,000,000. He has told us this afternoon that up till now it is likely to approach £150,000,000, in view of the coal stoppage still going on. In view of the development, it is possible that the estimate is an under-estimate rather than an over-estimate of the serious consequences of the present position. In this connection, I should like to remind the House of what was said on the Second Reading of the Bill on this point by my right hon. Friend the Chancellor of the Exchequer. He said: Two or three weeks' stoppage is recoverable. Eight or ten weeks will make a deep mark on the livelihood of the whole people. Twelve or fourteen weeks will probably mean that it will be two or three years before the country can recover. These are facts which we must face."—[OFFICIAL REPORT, 20th May, 1926; Vol. 196, cols. 507–8.] That is a serious warning of what may happen if the stoppage is continued over the longer period to which my right hon. Friend then referred. It is quite clear that whatever be the Estimates, be they accurate or inaccurate, or whatever form they take, the present stoppage must hove a very serious effect on next year's revenue. That is perhaps especially the case—and the cause of our anxiety—in view of the very important change in the system of our chief tax collection which is embodied in the present Finance Bill. I can only express the earnest hope that nothing that may result from this stoppage, no loss, to make it necessary in any way to reconsider or to modify the proposals which are in the Bill. At all events, it is quite clear that the position must give us cause for anxiety. It is for that reason, if for no other, that we need every penny of revenue that we can get. That is absolutely necessary. That necessity made it quite impossible during the Committee stage of the Bill for the Government to make the concessions which were asked for in various parts of the House, both on this side and on the other, concessions on points of merit with which there certainly was the warmest sympathy, but it was quite impossible for us to make in view of the probable cost to the Exchequer.

The hon. Member for Keighley devoted a large part of his speech to the question of Income Tax. One of the concessions demanded by the Labour party in Committee was that a larger allowance should be made in respect of earned income. The hon. Member in his speech has made an attack upon the Government on the ground that they have had too little regard for that particular description of Income Tax payer. The hon. Gentleman entirely overlooks the fact that in the Budget of last year my right hon. Friend made a very large concession to that precise species of taxpayer. The Labour party, in this respect, has shown itself totally against what was said by the lion. Gentleman who has just sat down, for, in spite of what he said, we on this side of the House very thoroughly recognise the distinction he attempted to draw between earned and unearned income. We on this side recognise the higher claim of earned income for consideration if concessions can be made. The right hon. Gentleman the Member for Colne Valley (Mr. Snowden) made it the chief ground of his complaint that my right hon. Friend has made too large a remission of direct taxation. I do not see how his statements, made time after time in various places, that all remission of direct taxation is financial wrongdoing, are to be reconciled, first of all, with the persistent demand from the benches opposite in Committee for a greater consideration for SOME branches of in- come. The Socialist party profess to object to indirect taxation in any shape or form. I would like in this connection to submit to the House that, in dealing with this question of direct and indirect taxation, hon. Members opposite are constantly guilty of falling into a very specious fallacy. In regard to the new taxation proposals in the Bill, they appeal constantly to the principle of the ability to pay. That principle is completely accepted on both sides of the House, but the fallacy to which I refer of the Labour party is this: It is very easy to take a single isolated tax by itself, and to say that this tax does not observe the principle of placing the burden on those best able to pay. That principle cannot be applied in regard to a single isolated tax. It must be taken over the whole field of taxation.

If the principle is applied over the whole field of taxation, then it would be seen that the principle, thoroughly sound, of putting the burden where there is the ability to pay, is very substantially and completely observed in the whole system of our taxation. Hon. Members opposite have made much of this supposed dualism —of the direct taxation falling upon the rich and indirect taxation falling upon the poor. But it is not true that direct taxation falls exclusively upon the rich, or indirect taxation upon the poor. Indirect taxation falls, as the rain from Heaven, upon the just and the unjust alike, and upon people of all classes of income. It is not by any means, or even especially, or exclusively, a tax that falls upon the poor alone. When we come to the new indirect taxation, so far from falling exclusively or mainly upon the poor—as suggested by the charge levelled by the right hon. Gentleman—the greater part of it falls really upon the well-to-do. There is no fairer form of tax than the tax which falls upon the article of luxury used or enjoyed by the well-to-do, and which can be quite fairly and properly avoided by anyone who does not wish to use that particular article.

It is, as my right hon. Friend has said in effect, voluntary taxation. There cannot be anything fairer than that a person who is in receipt of a certain income and a state of life that warrants it, spending large sums of money on luxuries such as motors, or champagne, or expensive cigars—there is no reason in the world why there should not be as weighty taxation of these articles as possible, and it is the height of absurdity to say that such taxation, dealt with in broad general terms under the designation of indirect taxation, by implication falls exclusively upon the poor.

The hon. Member for Keighley professed just now to define the distinction between the Labour party and those of us who sit on this side of the House, but I noticed—by an oversight probably —he omitted to refer to one distinction which some of us regard as a very important distinction between the two sides of the House. I go hack to the early stages of the discussion on this Bill. I remember that both the great financial pundits of the Socialist party, the right hon. Gentleman the Member for Colne Valley and the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham), made a most violent complaint that throughout our financial legislation we were showing an undue regard for the agricultural industry. The hon. Gentleman opposite did not say a word about that. May I remind the House that the right hon. Gentleman the Member for Colne Valley said that the agricultural interest was a parasite upon the industry of the country. He also said that The farmers were the pampered darlings of the Tory party. I should like to assure the right hon. Gentleman, who is not present to hear my words, that in a great many parts of the country—and I can speak for the agricultural population of my own constituency—they are evincing an amount of interest in the right hon. Gentleman that they never showed before. I am extremely grateful to him for having supplied me with some good bread to throw upon the waters, which will be returned to me after many days, when we have another Election. When the right hon. Gentleman speaks of the agricultural industry in the way he does, and says that the farmers are the pampered darlings of the Tory Party, I am not at all ashamed that it should be said that we consult the interest of what, after all, is still recognised as the greatest British industry. I do not think there is anything of which to be ashamed in a party of which that can be said, or that our party should show some regard for conditions in that great industry and for those engaged in it. That is not the only matter in connection with this Bill which gives great satisfaction in the rural districts. In those districts there is the very greatest pleasure at the provision or anticipated provision made by my right hon. Friend this year for the secondary or unclassified roads. It is more interesting to find that that part of the Bill is causing the satisfaction it is, since one of the storms with which we were threatened was with regard to what was called the raid on the Road Fund.

The right hon. Gentleman the ex-Chancellor of the Exchequer spoke of it as theft. That was on one occasion. It is quite true that on another occasion he said it really all depended upon the amount of money in the Fund. He said that if the Fund were only large enough, there would be no objection to the House of Commons revising its allocation. That struck me as being a departure from the high regard for principle which he professed on another occasion. I think that what was spoken of in the early days as "a raid on the Road Fund," which was to cause so much trouble, is now, at any rate, as far as I can ascertain, accepted, not only in this House but really throughout the country on the whole as a very reasonable proposition. [HON. MEMBERS: "No, no!" and "Hear, hear!"] All I can say is that that is the experience which I have had in going about the country and in talking about this proposal.

8.0 P.M.

Mr. DUNCAN

None of the motoring organisations take that view.

Mr. McNEILL

My time is short, but I should like to repeat what I said on the Second Reading, that the really distinguished feature of this Finance Bill is not any changes in the taxation which is being imposed, but rather changes in the method of financial administration. First of all, I must refer, although I have already spoken of it to-day, to a very important part of this Bill, namely, that which proposes a far-reaching simplification of the whole of the Income Tax Law, carrying out a recommendation of the Royal Commission on Income Tax. I submit to the House that this is a feature of the Finance Bill of 1926 which will give it a really notable place in the financial history of this country when all the minor matters—such as the Betting Duty, the Duty on Wrapping Paper, and other things which we have discussed—are entirely forgotten. The great change in the incidence of Income Tax from the three years' average to the previous year's assessment will remain notable, and will be remembered very greatly to the credit of my right hon. Friend the Chancellor of the Exchequer. It is not a little significant that the whole of Part IV of this Bill, which embodies this change in a number of very far-reaching Clauses, has passed through the Committee of this House, and through the Report stage in this House, without a single challenge of a word, and with only one small Amendment being put down for dealing with it. That is a very great tribute, both to my right hon. Friend for his policy and to the experts who have been responsible for the form in which those changes appear in the Bill. Then there is another change—I am dealing now with administrative changes —which did not entirely escape criticism, but which did not encounter any storm That was the Clause by which we have put an end to the forestalling of duties. The fact is that even now we are still feeling the effects of the enormous forestalling which took place last year, both in regard to the Silk Duties and to the Motor Car Duties. The Clause which we have put in the Bill is one which, I think, will be accepted both in the House of Commons and in the country as the proper way to deal with this question, because, whatever views any hon. Member may take as to the desirability or otherwise of an import duty, he must agree that if a duty is to be imposed, that duty should find its way into the Exchequer.

There has been another change which comes under the same head of administrative changes, and that is the stabilising of Imperial Preference. My hon. and gal lint. Friend the Member for Leith (Captain Benn), with his usual ability, argued strongly at all stages of our Debates against this proposal, and his view was supported elsewhere in the House. I cannot help thinking that there is something extraordinarily inconsistent in hon. Members laying great stress upon the contention that it is utterly impossible for this Parliament to bind any future Parliament on this or anything else, when they are the very same hon. Gentlemen who, with regard to the Road Fund, are never tired of saying that we are, and ought to be, bound by something which was done five or six years ago by a previous Parliament. The hon. and gallant Gentleman said again to-day that this stibilising of Preference would have no effect, and was of no value. I do not agree with him. I think it is of very great value. It is quite true that it cannot bind future Parliaments, but it is not at all true that, as the hon. and gallant Gentleman said, it will mislead the Dominions

The Dominions are quite familiar enough with our Parliamentary Constitution to know, as well as he does, and as well as I do. that nothing which this House of Commons can do can absolutely bind a future Parliament. But it is notice to them and it is notice to our own people that our policy is embodied in this stabilising for 10 years of Imperial Preference. It is also notice to them, if they are aware, as I believe they are, of the value of Imperial Preference, that if they place either of those other parties in power they do so at their peril. I do not for one moment think that either the people of this country are willing to do that, or that the Dominions would regard that with equanimity. But I sometimes hear from the benches opposite a protest that we on this side of the House have no monopoly of care for the Empire. That I freely admit. I have listened to admirable speeches on different aspects of Imperial development from some hon. Members opposite with which T entirely agree. Nor do we say for one moment, as is sometimes alleged, that. Imperial Preference is the only way by which yon can promote Imperial development or trade in the Empire. All that we say is that it is one way, and a very good way and that it is the way which has been accepted by the Dominions themselves. It has been pressed upon this country by the Dominions, and it has been accepted fin both sides as one important method of carrying out the Imperial policy. I regret very much that it can be said, as it can he said, that so far as this par- titular method of Imperial development is concerned we have a monopoly. I should be very glad to share that mono- poly with hon. Gentlemen opposite. I think it would be very much better that this great Imperial policy, accepted and approved by the Dominions, should not be the monopoly of any political party in this House. But hon. Gentlemen opposite cannot have it both ways. They cannot get up in this House and constantly refuse to support us in this policy, and then contend that in that respect they share with us any credit that this policy may bring.

There are three chief changes of taxation made in this Bill. They divide themselves naturally into three categories. I shall not have time to do more than merely enumerate them. First of all, there is the change of taxation made for the purpose of safeguarding, of which the example in this Bill is the duty to be placed upon wrapping paper. I would unhesitatingly accept the challenge made in the course of the Debate upon that duty if time did not make it impossible for me to do so. Secondly, there is the duty whose purpose is not safeguarding But simply the simplification of administration. That is the extension of the import duty to commercial motor cars. That is not done for the purpose of safeguarding nor primarily for the purpose of revenue, although it is welcome on that ground, but, as my right hon. Friend explained at the outset, it is for the purpose of the simplification of machinery, and to get over difficulties with which we were faced, and which were almost insuperable. Then we have the third change of taxation, and that is the duty to be imposed for revenue purposes, and for revenue alone. The chief example of that is that duty which has had directed against it more opposition than any other part of the Bill, the Betting Duty. I only wish I had time to deal with it on the lines of the speech delivered by my hon. Friend the Member for Oldham (Mr. Duff Cooper) this afternoon, which I thought was a most admirable exposition of the ethics of the Betting Duty, and I should like to have rather developed this argument and to show that if the moral issue is to be raised at all, it is one which we on this side of the House should not for a moment shrink from entering upon. I myself feel that, so far from there being anything derogatory to those who are anxious to see the moral interests of the nation promoted, our proposals promote those interests. I am convinced that in so far as betting is a social evil—and it is a social evil, not because it is wrong or immoral in itself, but because of the extent to which it is practised—this tax will put a control, and, as we maintain, a diminution, upon that habit which will really be for the advantage of the community.

I am sorry to say that my time is too short to enable me to develop that argument. I must admit that, so far as the Betting Duty is concerned, it is certainly experimental to a great extent. We do not know exactly how it will work out, though we believe it will give us valuable revenue and that it will diminish the evil of betting. Some people imagine that it will give us more

than we are expecting. If so, that, at all events, will not be a cause for tears. The present Budget was framed, as we all now realise, at a moment when we were, perhaps, rather more optimistic of the future than it is possible to be to-day, but it imposes no fresh taxation on the general taxpayer. The most important of the proposals which it contains have beers, as I think the Debates have shown, accepted, in the main, both in the House and in the country as a very reasonable way and a very fair way of dealing with the financial difficulties with which the country is faced.

Question put, "That the word 'now' stand part of the Question."

The House divided: Ayes, 324; Noes, 117.

Division No. 383.]	AYES.	[8.12 p.m.
Acland Troyte, Lieut.-Colonel	Cassels, J. D.	Everard, W. Lindsay
Agg-Gardner, Rt. Hon. Sir James T.	Cautley, Sir Henry S.	Fairfax. Captain J. G.
Ainsworth, Major Charles	Cayzer, Sir C. (Chester, City)	Falie, Sir Bertram G.
Albery, Irving James	Cayzer, Maj. Sir Herbt. R.(Prtsmth.S.)	Fermoy, Lord
Alexander, E. E. (Leyton)	Cecil, Rt. Hon. Sir Evelyn (Aston)	Fielden, E. B.
Alexander, Sir Wm. (Glasgow, Cent't)	Chadwick, Sir Robert Burton	Finburgh, S.
Allen, J. Sandeman (L'pool, W. Derby)	Chamberlain, Rt. Hon. N. (Ladywood)	Ford, Sir P.J.
Amery, Rt. Hon. Leopold C. M. S.	Chapman, Sir S.	Forestier-Walker, Sir L.
Applin, Colonel R. V. K.	Charteris, Brigadier-General J.	Foxcroft, Captain C. T.
Ashley. Lt.-Col. Rt. Hon. Wilfrid W.	Chilcott, Sir Warden	Fraser, Captain Ian
Astbury, Lieut.-Commander F. W.	Christle, J. A.	Fremantle, Lt.-Col. Francis E.
Astor. Maj. Hn. John J.(Kent,Dover)	Churchill, Rt. Hon. Winston Spencer	Gadie, Lieut.-Colonel Anthony
Atholl, Duchess of	Marry, Reginald George	Gates, Percy
Baldwin, Rt. Hon. Stanley	Clayton, G. C.	Gilmour, Lt.-Col. Rt. Hon. Sir John
Balfour, George (Hampstead)	Cobb, Sir Cyril	Glyn, Major R. G. C.
Balniel, Lord	Cochrane, Commander Hon. A. D.	Goff, Sir Park
Barclay-Harvey, C. M.	Colfox, Major Wm. Phillips	Gower, Sir Robert
Barnett, Major Sir Richard	Conway, Sir W. Martin	Grant, Sir J. A.
Beamish, Captain T. P. H.	Cooper, A. Duff	Grattan-Doyle, Sir N.
Bellairs, Commander Canyon W.	Cope, Major William	Greene, W. P. Crawford
Benn, Sir A. S. (Plymouth, Drake)	Couper, J. B.	Greenwood, Rt. Hn. Sir H. (W'th's'w, E)
Bennett. A. J.	Courtauld, Major J. S.	Grenfell, Edward C. (City of London)
Berry, Sir George	Courthope, Lieut.-Col. Sir George L.	Gretton, Colonel Rt. Hon. John
Bethel. A.	Cowan, Sir Wm. Henry (Islingtn., N.)	Grotrian, H. Brent
Birchall, Major J. Dearman	Craig, Ernest (Chester, Crewe)	Guinness, Rt. Hon. Walter E.
Blades, Sir George Rowland	Craik, Rt. Hon. Sir Henry	Gunstion, Captain D. W.
Blundell, F. N.	Croft, Brigadier-General Sir H.	Hacking, Captain Douglas H.
Boothby, R. J. G.	Crooke, J. Smedley (Deritend)	Hall. Lieut.-Col. Sir F. (Dulwich)
Bourne, Captain Robert Croft	Crookshank, Col. C. de W. (Berwick)	Hammersley, S. S.
Bowyer, Capt. G. E. W.	Crookshank,Cpt. H.(Lindsey,Gainsbro)	Hannon, Patrick Joseph Henry
Boyd-Carpenter, Major Sir A. B.	Cunliffe, Sir Herbert	Harland, A.
Braithwaite, A. N.	Curtis-Bennett, Sir Henry	Harmsworth, Hon. E. C. (Kent)
Brass, Captain W.	Curzon, Captain Viscount	Hartington, Marquess of
Brassey, Sir Leonard	Dalkeith, Earl of	Harvey, G. (Lambeth, Kennington)
Bridgeman, Rt. Hon. William Clive	Dalziel, Sir Davison	Harvey, Major S. E. (Devon, Totnes)
Briggs, J. Harold	Davidson, Major-General Sir J. H.	Hawke, John Anthony
Briscoe, Richard George	Davies, Dr. Vernon	Headlam, Lieut.-Colonel C. M.
Brocklebank, C. E. R.	Davies, Maj. Geo, F.(Somerset,Yeovil)	Henderson, Lieut.-Col. V. L. (Bootle)
Brooke, Brigadier-General C. R. I	Davies, Sir Thomas (Cirencester)	Heneage. Lieut.Col. Arthur P.
Broun-Lindsay, Major H.	Davison, Sir W. H. (Kensington. S.)	Henn, Sir Sydney H.
Brown, Col. D. C. (N'th'l'd., Hexham)	Dawson. Sir Philip	Hennessy, Major J. R. G.
Brown, Brig.-Gen. H. C.(Berks, Newb'y)	Dean, Arthur Wellesley	Herbert, Dennis (Hertford, Watford)
Buckingham, Sir H.	Dixey, A. C.	Herbert, S. (York. N.M., Scar. & Wh'by)
Bull, Rt. Hon. Sir William James	Dixon, Captain Rt. Hon. Herbert	Hilton, Cecil
Bullock, Captain M.	Drewe, C.	Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.
Burman, J. B.	Edmondson, Major A. J.	Hohler, Sir Gerald Fitzroy
Burney. Lieut.-Com. Charles D.	Elliot, Major Walter E.	Holbrook, Sir Arthur Richard
Butler, Sir Geoffrey	Ellis, R. G.	Holland, Sir Arthur
Butt, Sir Alfred	Elveden, Viscount	Holt, Captain H. P.
Cadogan, Major Hon. Edward	England, Colonel A.	Hope, Capt. A. O. J. (Warw'k, Nun.)
Caine, Gordon Hall	Erskine, Lord (Somerset,Weston-s-M.)	Hope, Sir Harry (Forfar)
Campbell, E. T.	Evans, Captain A. (Cardiff, South)	Hopkins. J. W. W.
Hopkinson, Sir A. (Eng. Universities)	Morrison, H. (Wilts, Salisbury)	Skelton, A, N.
Hopkinson. A. (Lancaster, Mossley)	Morrison-Bell, sir Arthur clive	Slaney, Major P. Kenyon
Horlick, Lieut.-Colonel J. N.	Murchlson, C. K.	Smith, R. W. (Aberd'n & Kinc'dine, C.)
Horne, Rt. Hon. Sir Robert S.	Nail, Lieut.-Colonel Sir Joseph	Smith-Carington, Neville W.
Howard, Captain Hon. Donald	Nelson, Sir Frank	Spender-Clay, Colonel H.
Hudson, R. S. (Cumbert'nd, Whiteh'n)	Neville, R. J.	Sprot, Sir Alexander
Hunter-Weston, Lt.-Gen. Sir Aylmer	Newman, Sir R. H. S. D. L. (Exeter)	Stanley, Lord (Fylde)
Huntingfield, Lord	Newton, Sir D. G. C. (Cambridge)	Stanley, Hon. O. F. G. (Westm'eland)
Hurd, Percy A.	Nicholson, O. (Westminster)	Storry-Deans, R.
Hurst, Gerald B.	Nicholson, Col. Rt. Hn W.G.(Ptrst'ld.)	Stott, Lieut-Colonel W. H.
Hutchison,G.A.Clark(Midl'n & P'bl's)	Nield, Rt. Hon. Sir Herbert	Streatfeild, Captain S. R.
Illffe, Sir Edward M.	Nuttall, Ellis	Stuart, Crichten-, Lord C.
Inskip, Sir Thomas Walker H.	Oakley, T.	Stuart, Hon J. (Moray and Nairn)
Jacob, A. E.	O'Connor, T. J. (Bedford, Luton)	Styles, Captain H. Walter
Joynson-Hicks, Rt. Hon. Sir William	O'Neill, Major Rt. H in. Hugh	Sueter, Rear-Admiral Murray Fraser
Kennedy, A. R. (Preston)	Oman, Sir Charles William C.	Sugden, Sir Wilfrid
Kidd. J. (Linlithgow)	Ormsby-Gore, Hon. William	Sykes, Major-Gen. Sir Frederick H.
Kindersley, Major Guy M.	Owen, Major G.	Tasker, Major R. Inige
King, Captain Henry Douglas	Perring, Sir William George	Thorn, Lt.-Col. J. G. (Dumbarton)
Kinloch-Cooke, Sir Clement	Peto, Basil E. (Devon, Barnstaple)	Thompson, Luke (Sunderland)
Knox, Sir Alfred	Peto, G. (Somerset, Frome)	Thomson, F. C. (Aberdeen, South)
Lamb, J. Q.	Plelou. D. P.	Thomson, Rt. Hon. Sir W. Mitchell-
Lane Fox, Col. Rt. Hon. George R.	Pilcher, G.	Tinne, J. A.
Leigh, Sir John (Clapham)	Power, Sir John Cecil	Titchfield, Major the Marquess of
Lister, Cunliffe, Rt. Hun. Sir Philip	Pownall, Lieut.-Colonel Sir Assheton	Tryon, Rt. Hon. George Clement
Little, Dr. E. Graham	Preston, William	Vaughan-Morgan, Col. K. P.
Lloyd, Cyril E. (Dudley)	Price, Major C. W. M.	Waddington, R.
Locker-Lampson, G. (Wood Green)	Radford, E. A.	Wallace, Captain D. E.
Locker-Lampson, Com. O. (Handsw'th)	Raine, W.	Ward, Lt..-Col. A.L.(Kingston-on-Hull)
Loder, J. de V.	Ramsden, E.	Warrender, Sir Victor
Lowe, Sir Francis William	Rawson, Sir Cooper	Waterhouse, Captain Charles
Luce, Maj.-Gen. Sir Richard Harman	Rees, Sir Beddoe	Watson, Rt. Hon. W. (Carlisle)
MacAndrew, Major Charles Glen	Reid, D. D. (County Down)	Watts, Dr. T.
Macdonald. Sir Murdoch (Inverness)	Remnant. Sir James	Wheler, Major Sir Granville C. H.
Maedonald, Capt. P. D. (I. of W.)	Rhys Hon. C. A. U.	White, Lieut.-Col. Sir G. Dalrymple
Macdonald, R. (Glasgow, Cathcart)	Rice, Sir Frederick	Williams, A. M. (Cornwall, Northern)
McDonnell, Colonel Hon. Angus	Richardson, Sir P. W. (Sur'y, Ch't'y)	Williams, Com. C. (Devon, Torquay)
Maclntyre, Ian	Roberts, E. H. G. (Flint)	Williams, C. P. (Denbigh, Wrexham)
McLean, Major A.	Roberts, Sir Samuel (Hereford)	Williams, Herbert G. (Reading)
MacMillan, Captain H.	Robinson, Sir T. (Lanes, Stretford)	Wilson, M. J. (York, N. R., Richm'd)
Macnaghten, Hon. Sir Malcolm	Ropner, Major L.	Wilson, R. R. (Stafford, Lichfield)
McNeill, Rt. Hon. Ronald John	Ruggles-Brise, Major E. A.	Winby, Colonel L. P.
Macqulsten, F. A.	Rye, F. G.	Windsor-Clive, Lieut.-Colonel George
MacRobert Alexander M.	Salmon, Major I.	Winterton, Rt. Hon. Earl
Maitland, Sir Arthur D. Steet	Samuel, A. M. (Surrey, Farnham)	Wise, Sir Fredric
Makins, Brigadier-General E.	Samuel, Samuel (W'dsworth, Putney)	Withers, John James
Malone, Major P. B.	Sandeman, A. Stewart	Wolmer, Viscount
Manningham-Buller, Sir Mervyn	Sanders, Sir Robert A.	Womersley, W. J
Margesson, Captain D.	Sanderson, Sir Frank	Wood, E. (Chest'r, Stalyb'dge & Hyde)
Marriott, Sir J. A. R.	Sandon, Lord	Wood, Sir H. K. (Woolwich, West)
Merriman, F. B.	Sassoon, Sir Philip Albert Gustavo D.	Wood, Sir S. Hill- (High Peak)
Meyer, Sir Frank	Savery, S. S.	Woodcock, Colonel H. C.
Mitchell, S. (Lanark, Lanark)	Scott. Sir Leslie (Liverp'l, Exchange)	Worthington-Evans, Rt. Hon. Sir L.
Mitchell. W. Foot (Saffron Walden)	Shaw, Capt. Walter (Wilts, Westb'y)	Young, Rt. Hon. Hilton (Norwich)
Moore, Lieut.-Colonel T. C. R. (Ayr)	Sheffield, Sir Berkeley
Moore-Brabazon, Lieut.-Col. J, T. C.	Shepperson, E. W.	TELLERS FOR THE AYES —
Moreing, Captain A. H.	Simms, Dr. John M. (Co. Down)	Colonel Gibbs and Major Sir
		Harry Barnston.
NOES.
Adamson, Rt. Hon. w. (File, West)	Cowan, D. M, (Scottish Universities!	Hartshorn, Rt. Hon. Vernon
Alexander, A. V. (Sheffield. Hillsbro')	Crawfurd, H. E.	Henderson. Right Hon. A. (Burnley)
Ammon, Charles George	Dalton, Hugh	Hirst, G. H.
Attlee, Clement Richard	Davits, Rhys John (Westhoughton)	Hirst, W. (Bradford, South)
Baker, J. (Wolverhampton, Bilston)	Davison, J. E. (Smethwick)	Hore-Bellsha, Leslie
Barnes, A.	Day, Colonel Harry	Jenkins, W. (Glamorgan, Neath)
Barr, J.	Dennison, R.	John, William (Rhondda, West)
Batey, Joseph	Duncan, C.	Johnston, Thomas (Dundee)
Beckett, John (Gateshead)	Fenby, T. D.	Jones, Henry Haydn (Merioneth)
Benn, Captain Wedgwood (Leith)	Gillett. George M.	Jones, J. J. (West Ham, Silvertown)
Bowerman, Rt. Hon. Charles W.	Gosling, Harry	Jones, Morgan (Caerphilly)
Bromley, J.	Graham, D. M. (Lanark, Hamilton)	Kelly, W. T.
Brown, James (Ayr and Bute)	Graham, Rt. Hon. Wm. (Edin.,Cent.)	Kennedy, T.
Buchanan, G.	Greenall, T.	Kenworthy, Lt.-Com. Hon. Joseph M.
Cape. Thomas	Grenfell, D. R. (Glamorgan)	Kenyon, Barnet
Charleton, H. C.	Griffiths, T. (Monmouth, Pontypool)	Kirkwood, D.
Clowes, S.	Grundy, T. W.	Lawrence, Susan
Cluse, W. S.	Guest, Haden (Southwark, N.)	Lawson, John James
Clynes, Rt. Hon. John R.	Hall, F. (York, W. R., Normanton)	Lee. F.
Collins, Sir Godfrey (Greenock)	Hall, G. H. (Merthyr Tydvil)	Livingstone, A. M.
Compton, Joseph	Hamilton, Sir R. (Orkney & Shetland)	Lowth, T.
Connolly, M.	Hardle, George D.	Lunn, William
Cove, W. G.	Harris, Percy A.	MacDonald, Rt.Hon.J.R. (Aberavon)

Maclean, Nell (Glasgow, Govan)	Short, Alfred (Wednssbury)	Varley, Frank B.
March, S.	Sitch, Charles H.	Viant, S. P.
Montague, Frederick	Smillie, Robert	Wallhead, Richard C.
Morrison, R. C. (Tottenham, N.)	Smith, Ben (Bermondsey, Rotherhithe)	Walsh, Rt. Hon. Stephen
Murnin, H.	Smith, H. B. Lees- (Keighley)	Watson, W. M. (Dunfermilne)
Naylor, T. E.	Smith, Rennie (Penistone)	Watts-Morgan, Lt.-Col. D. (Rhondda)
Oliver, George Harold	Snell, Harry	Webb, Rt. Hon. Sidney
Palin, John Henry	Snowden, Rt. Hon. Philip	Wedgwood, Rt. Hon. Josiah
Pethick-Lawrence, F. W.	Stephen, Campbell	Westwood, J,
Potts, John S.	Sullivan, Joseph	Wiggins, William Martin
Richardson, R. (Hougton-le-Spring)	Sutton, J. E.	Williams, David (Swansea, E.)
Runciman, Rt. Hon. Walter	Thomas, Sir Robert John (Anglesey)	Williams, Dr. J. H. (Lianelly)
Sakiatvala, Shapurji	Thorne, G. R. (Wolverhampton, E.)	Wright, W.
Salter, Dr. Alfred	Thurtle, E.	Young, Robert (Lancaster, Newton)
Scrymgeour, E.	Tinker, John Joseph
Scurr, John	Townend, A. E.	TELLERS FOR THE NOES.—
Shaw, Rt. Hon. Thomas (Preston)	Trevelyan, Rt. Hon. C. P.	Mr. Hayes and Mr. Charles Edwards.

Question put, and agreed to.