ECONOMY (MISCELLANEOUS PROVISIONS) BILL.

HC Deb 16 March 1926 vol 193 cc273-395

Order for Second Reading read.

The CHANCELLOR of the EXCHEQUER (Mr. Winston Churchill)

I beg to move, "That the Bill be now read a Second time."

I had occasion a fortnight ago when was speaking at Belfast to make it clear that this Economy Bill was not a revolutionary Measure, because I did not wish to encourage extravagant expectations which would only be attended by a reaction of disappointment. At any rate there is one Member of the party opposite who cannot complain that he has been. disappointed. It was only last week that the right hon. Member for Colne Valley (Mr. Snowden) blandly informed the House that he was sure that the savings resulting from this Bill would not in their aggregate exceed the £4,000,000 or the £5,000,000 which he estimated and over-estimated would be the cost to this country of the Northern. Ireland Unemployment Insurance Bill. At any rate, it is a matter of great pleasure to me that the right hon. Gentleman is not included among those who will be disappointed on this occasion, because the savings which will result from this Bill, if it is accepted by the House, will, over the same period of four or five years, amount to at least ten times the total which the right hon. Gentleman scornfully assigned to it only a week ago.

There are two main questions before us this afternoon. The first is: Are the proposals of the Bill right?[HON. MEMBERS: "No!"] I said it was a question. The second is: Why are there no more proposals for economy? I should find it quite impossible to do justice to the issue before the House unless I surveyed the whole field of national expenditure, and I gather that it is your ruling, Mr. Speaker, that it will be open to the House on the Second Reading of this Economy Bill to consider each question and issue in the Bill in relation to other suggestions which may have been made for economy and in relation to the general problem of public expenditure. I propose, therefore, first to deal briefly with the main proposals of the Bill and, next, I propose, if the House will bear with me—and this, after all, is a most important subject with which we have to deal—to survey the whole field of State expenditure.

The proposals of the Bill are, naturally in a Measure of this kind, disconnected. They deal with different topics which have been assembled within the scope of one Measure, but with one object. Each of these topics will be dealt with by the Minister whose Department is concerned, and, of course, they will be dealt with in the Committee stage, where each particular subject can be treated exhaustively by itself. The Navy and Army and Air Force Insurance Fund proposal will be dealt with by my right hon. Friend the Secretary of State for War. The Home Secretary will deal with the electoral register proposal, calling to his aid, no doubt, the Secretary of State for Scotland when the important issue relating to the Orkney and Shetland Islands—or, as I believe it is correct to say, the Orkney and Zetland Islands—is discussed. Then the President of the Board of Trade, the President of the. Board of Education, and the Postmaster General will deal with their respective Clauses.

Mr. W. THORNE

Where do you come in?

Mr. CHURCHILL

I come in at this moment, and, as the hon. Gentleman may anticipate, I will deal specially with the Health Insurance proposals and the Unemployment Insurance proposals, which will, of course, also be defended at the proper time by the Minister of Health and the Minister of Labour. Take the first proposal to reduce the State contribution to Health Insurance from two-ninths to one-seventh for men, and one-fifth for women. This effects a saving of £2,750,000 a year. What are the facts which justify this change? The most recent and powerful fact is the passage of the Act of last year conferring pensions on widows and old age pensions at 65. This scheme, to which the State contributes about £5,750,000, substantially reduces the liabilities for which the Health Insurance system is responsible, by taking off, as from the beginning of 1928, the responsibility for sickness and disablement benefits to every contributor between 65 and 70, that is the very contributors for whom the liability to sickness is at a maximum. This relieves the funds of a responsibility which is actuarially computed at upwards of £37,000,000. That is the first main fact which justifies the change.

The second main fact is the rise in the rate of interest which has attended and followed the convulsions of the Great War. The Cabinet originally responsible for the Health Insurance scheme which will for ever be associated with the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George)—that Cabinet of which I was a Member, contemplated that the interest on the investments under the Health Insurance system would be received at 3 per cent., whereas the rate which is now being received is between 4½ per cent. and 5 per cent. This increases the regular income from the invested funds by nearly £2,000,000 a year, and this £2,000,000 a year is free of tax. This very factor which has so greatly benefited the Health Insurance system has, as everyone knows, operated enormously to the detriment of the State, which used to pay 3½ per cent. on the National Debt, or rather borrow 3½ per cent., but now has to pay 4½ per cent, or more on a National Debt multiplied ten-fold. Moreover, this contrast in fortunes between the State and the Insurance Fund is emphasised by the fact that the additional income of the Health Insurance Fund arising from the depreciated credit of the State is itself a cause of attracting still larger grants from the depleted Exchequer which are applied to the payment of increases in benefit. That is the second fact which justifies the change.

The third fact on which we rely is this. Ever since the beginning of Health Insurance the State has followed the practice of meeting every liability which arose, in excess of the original actuarial calculation, out of public funds, but, at the same time, we have followed the practice of leaving every unforeseen advantage which occurred on the figures, to enure to the benefit of the insured community. In the 14 years during which Health Insurance has been in operation the sums thus added by the State have aggregated upwards of £24,000,000. Surveying these three substantial and important causes, there is no ground for suggesting that the contributors to the fund will be unfairly treated by the proposals of the Bill, or that there is any breach of faith in the new relation which is being established between the individual contributor and the national Exchequer. The contributor will receive, not only all he was led to expect, but far greater advantages than the authors of the scheme ever contemplated, and he will receive these from causes which, in their general operation, have proved in a great measure extremely detrimental to the State.

4.0 P.M.

In consequence of the advantages which the Health Insurance Fund has reaped from these causes and from other minor causes with which I do not now trouble the House, the scheme is now in an exceedingly prosperous condition. The surpluses to-day are estimated at no less than £65,000,000. £30,000,000 of this is due to be spent over the next five years in additional benefits; that is to say, benefits beyond the contractual provisions. The Royal Commission which has just completed its examination of the whole system has shown that, after providing these large additional benefits, and after meeting the cost of medical benefit, for, which this Bill now before the House also makes provision, there will be a surplus of over £2,000,000 per annum. Of course, it would be very agreeable to apply this surplus in still further extending the benefits, and it would be easy to unfold many very desirable plans for spending the money. Such plans, however, in their operation would automatically attract additional State grants of over £500,000, and therefore the increasing prosperity of the Insurance Fund would from that very fact throw an ever-increasing burden upon the over-strained Exchequer.

The Government have therefore decided, on a general review of the financial situation, that the time has come when the State contribution to National Health Insurance can, both in justice and in prudence, be reduced as provided in the Bill. That part of the Bill which deals with Health Insurance contains a number of Clauses expressed in language only intelligible to those who are masters of this intricate and highly specialised subject, but their main purpose is to make sure beyond doubt or question that the reduction in the State contribution will be effected in such a way as not to prejudice in the slightest degree the solvency of any part of the system or of any individual society. On that point, the Report of the Government Actuary must be studied by all who desire to take an effective part in the discussion of the Clauses.

I would say this generally on this question of Health Insurance. We have to think for the duration of this Parliament. We are, as I shall presently show, confronted every year with steady cumulative, increases in expenditure and, in particular, in social expenditure. At the same time, there will certainly arise in this Parliament new needs and new services, and, unless we gather up where it is possible and proper the resources at the disposal of the central Government, the closing years of this Parliament will see us utterly unable to meet any new needs without re-imposing harsh and harmful taxation. The only levers which the State possesses to set in motion great national schemes are financial levers. They are not so numerous, and they are not so strong as they were. When, therefore, some great work or organisation has been successfully set on foot and is rolling forward prosperously and is in an expanding condition, common foresight demands that some of the levers which have played their part successfully in initiating the movement should be withdrawn and kept available for further enterprises.

I now turn to Unemployment Insurance. There is an apparent inconsistency in legislating to reduce the State grant to the Unemployment Insurance Fund only nine months after we have legislated to increase it; but in the interval the circumstances have changed They have changed partly no doubt through a stricter administration of the Unemployment Insurance Acts. They have changed mainly through the improvement in trade conditions. [Interruption.]. I am trying to state the facts fairly, and I stated the first fact although I knew it would excite the derisive applause of hon. Gentlemen opposite. They must also apply their brains to facts which are not entirely congenial to them, such as the improved conditions in the trade of this country being one of the causes which have led to a decline in the total number of the unemployed. [Interruption.] I have a long way to go, I am afraid, and I hope hon. Gentlemen will not draw me from my beaten track.

In July last, when we passed our Bill, we contemplated an average live register for the 12 months from June, 1925, of 1,300,000, and on that basis the. State contribution was raised at the same time that the employers' and workpeople's contributions were reduced by 2d. In fact, however, and as it has turned out, the live register at the period in which the peak of the year is usually reached was only 1,150,000. The fund is therefore in a much better position than we expected in July last. In spite of all the unemployment of last year, it has practically balanced. It has been necessary only to draw upon the statutory borrowing powers, which amount to £30,000,000, to the extent of £2,000,000 in the whole of last. year, and the debt of the fund is now only about £7,500,000, having fallen to that figure from the highest point which it reached of over £17,000,000. For a fund whose statutory borrowing powers are £30,000,000 and whose annual income exceeds £50,000,000, such a deficiency is certainly not a serious burden and is indeed absolutely in keeping with the intentions of Parliament in giving this margin of borrowing powers to the fund.

What then are the prospects of the year 1920? I exclude altogether the possibility of a vast collapse in industry due to a great cessation of work on the coalfields. Such an event would rupture all calculations. It might throw in a few weeks 2,500,000 workers on to the fund; it would absorb the whole of the borrowing powers of the fund; it would derange the whole structure of the national finances. Therefore, I exclude altogether from these calculations that possibility, not because it is not a possibility, but because it is relevant to an entirely different set of calculations. On the assumption, then, that there is no industrial catastrophe, we estimate for an average live register for the financial year 1926 which will not exceed £1,030,000. That is our estimate, and I could give the House at length the very elaborate mathematical calculations which were made in relation to the course of unemployment in different years to show how that figure was arrived at. I will only say that no question of a surprise improvement in trade was taken into consideration in arriving at the figure. It is not based on a speculative assumption. But, since the calculation was made, there has been a fall of 80,000 in unemployment, and this fall has manifested itself over the whole of the general trade of the country. In consequence, our confidence in our estimate is confirmed.

Mr. WALLHEAD

Is that a genuine fall in unemployment?

Mr. CHURCHILL

I do not suppose that anything would convince the hon. Gentleman that a fall in unemployment could be genuine. One of the principal planks in his platform is that unemployment is getting continually worse, and I suppose no tide of facts would ever induce him to abandon so valuable a foothold for levelling his onslaughts on the existing structure of cur economic civilisation. I only endeavour to show the basis on which we considered that the reduction of the State contribution as proposed in the Bill can prudently and properly be made. Here let me say that, just as in the case of Health Insurance, the solvency of the Fund should be in no way affected, the benefits will be in no way reduced, and the administration will not be altered from what it was under the Act passed last year by the House. The only people who may have a ground of complaint are the employers who were hoping, and who were led to expect as I must frankly admit, that they would receive a reduction of ld.—the next reduction of ld. that was possible—to bring their contribution down to 8d., level with the 8d. contribution of the workpeople. There is no doubt whatever—I do not disguise the fact—that the proposal which we make in this Bill will contribute somewhat to postpone this relief unless there is some unexpected forward move in the general trade of the country.

I cannot leave these two reductions of expenditure on Health and Unemployment Insurance without one reference to the general contribution which His Majesty's Government is making to the maintenance of the insurance and old age pensions services in 1926. In spite of these reductions, which between them may amount to nearly £8,000,000, that contribution will be greater in 1926 than it was in 1925, and greater than it was in 1924 when a Labour Government was in office. In 1924, under the Administration of the right hon. Gentleman opposite, there w as provided from the Exchequer for Old Age Pensions, for Health Insurance, and for Unemployment Insurance a total of £46,500,000. In 1926, for the same services and for the new widows' and improved old age pensions schemes, £52,000,000 will be required, even after this reduction of possibly £8,000,000 has been assented to by the House.

Moreover, is this not the year of all others when we are entitled to ask for help and assistance generally from all parties in the House? This year and next year we are providing over £2,23,000,000 for the coal industry in the hopes of averting—hopes which certainly have not diminished in the nine months that the subsidy has lasted—a stoppage which, if it occurred, would throw a crushing burden on the Insurance Fund and sweep away at a stroke all these calculations of reduction of contribution and so forth to which we have been looking forward. Fair-minded men will bear that in mind, and will bear in mind the problem which the Government have to face in their earnest effort to promote the general well-being of the country as a whole. I have mentioned these figures of what we are proposing to spend next year compared with what was spent in the days of the Labour administration, not at all for the purpose of bandying recriminations. I have only mentioned them because I think it is desirable that the facts should be before the House, and I do hope that the right hon. Gentleman who is going to reply, and to whose speech we are all so looking forward, will not allow these facts to cramp his style in any way, especially when he comes to that moving passage, with which we are getting rather familiar, but which is always put by him with such happy force, about the wicked, dastardly, mean inroads of a reactionary Government upon the vital social services of the poorest of the poor.

Now I come to the second part of my remarks—to a far larger question than those with which I have been dealing: Why is this all we are able to do this year? I have studied, as is my duty, many public criticisms which are made upon the expenditure of the day, and particularly those which are made by the Press, which, with praiseworthy perseverance, continues to ingeminate economy. I hope it will continue. It is an assistance to me and an assistance to the Government in our task, arid, for the sake of the advantages which these criticisms and this agitation bring to the public interest, we are certainly quite prepared to put up with a very respectable flow of vituperation and disparagement. It. has, however, become necessary—and this is, I think, the best occasion—to place this controversy on a sensible and accurate basis, so that it may continue with unabated vigour, but so that those win, take part in it may be free, if they wish to be free, from ignorant misapprehensions and vulgar errors. Therefore, I will proceed, if the House will bear with me, to survey the whole field of expenditure, and to say how the proposals of this Bill fit in with the general policy of the Government, with our economies in other directions, and with the general needs of national finance at the present time.

For this purpose, I have ventured to classify the total expenditure of the country in a somewhat different and simpler form from that in which the Estimates have for a long time been franked. The figures which I shall, give are necessarily round figures, and the classifications which I make are intentionally broad classifications, but, in order to facilitate the study of the argument, I have arranged that a White Paper, in which the exact figures that I use this afternoon will be set forth in a series of tables, shall be available, at about six o'clock, in the Vote Office, The expenditure in 1923 and in 1924 and the original Estimates for 1925 were almost exactly £800,000,000—within a very little of £800,000,000. It is riot usual to disclose, until the Budget is opened, the exact total of the Estimates for the forthcoming year, but I shall depart so far from the usual custom as to state, what everybody by this time is probably aware of, namely, that the estimated total expenditure of 1926–27, comparing like with like, will probably be in the neighbourhood of that figure. All this controversy turns around the figure of £800,000,000. That is the figure which the public have in their minds; that is the figure, as I say, of the last three-years of expenditure or Estimates; that is the figure which, formidable and tremendous as it is, I take as the starting point of my examination.

I take this figure of £800,000,000, or, to be accurate, £799,400,000, as set forth in the Estimates for the year 1925–26, the present year, as the basis of my examination, and I classify expenditure in the following four broad categories and in the following sequence: First, Obligatory Services, in which I include debt and pensions of all kind, taken from every branch of the Estimates. The second category consists of Grant Services, by which I mean grants of all kinds, almost entirely to local authorities, in regard to which the money is found, in whole or in part, by the Exchequer on the basis of a, given percentage, and the spending of the money is entrusted to other authorities than the national Departments concerned. The third category consists of what I call, for want of a Letter name, Self-supporting Services, such as the Road Fund and the Post. Office, both of which have a larger revenue attached to them than their growing expenditure. Lastly, in the, fourth category, I include what may be called National Administration Services, that is to say, all that has hitherto been regarded as the field for controversy between the economists and the expenditure, advocates—the whole area of Defence, the Insurance Funds, the foreign and Empire Departments, trade expenditure, agricultural expenditure, all the cost of tax collection, all the cost of the central administration of all the Grant Services and all the other Civil Services. All that is comprised in the fourth category. Here, then, are four perfectly clear divisions of expenditure, which are governed by quite different conditions, and are capable of being dealt with in different ways.

I take, first of all, the Obligatory category, debt and pensions. The debt charge is approximately £355,000,000 in the present year. The pensions services of all kinds, including old age pensions, war pensions, the ordinary pensions charge of the Fighting Departments, teachers' pensions, the State share of police pensions, Civil Service pensions, entail an expense to the State of over £121,000,000 a year, so that the obligatory charge for debt and pensions, put together, amounts to £476,000,000, of which £433,000,000 is a net increase since pre-War times. I think the House will be astonished at this pensions figure of £121,000,000; I do not think it has ever been stated in that complete form before. Now, I ask, does any serious or responsible person deny that these charges are obligatory, deny that they are beyond the control of any Government which refuses to repudiate contractual or statutory obligations to its creditors, to its pensioners, or to its servants? Of course, if we embark on the policy of repudiation, immense reductions are possible in this field, although it might mean that, along with the immense reductions in the burden, would come a still greater reduction in the strength to bear the remaining burden.

It has been suggested—I have seen it suggested, not in one quarter only, but not, I think, by any responsible politician—that we ought to repudiate a portion of the interest on our War debt. [HON. MEMBERS: "Hear, hear!"] I said so. I said I had heard it suggested, though not in any responsible quarter, that we should repudiate a portion of the interest on our national War debt, and that, instead of paying the interest at the rate contracted, we should pay 1 per cent. or 2 per cent. less Such a proposal is not only dishonourable, but needlessly, stupidly unfair. Why should those who lent money to the State be the only class of capitalists, part of whose property is to be confiscated? Why should a man who has invested in War Loan, or in Consols, or in any of the other national securities fare worse and have a large proportion of his property confiscated, while all the other subjects of the Crown, who have invested their money in banks, railways, industrial shares, gold mines, oilfields, rubber plantations, real estate, or any one of the thousand other forms of capital, get off scot free? We have repeatedly stated that we are opposed to a Capital Levy, but a Capital Levy, at any rate, is even-handed and falls upon the nation as a whole. However injurious to credit and disastrous to the creative processes by which new wealth is produced, it is to be preferred to such a disastrous, unjust, and indeed fraudulent expedient as arbitrarily reducing the interest on national securities while leaving all other forms untouched. Therefore, I say that the debt services are obligatory, and that they cannot be diminished except by regular processes of conversion through improving credit, or, of course, by largely increased taxation for the more rapid extinction of the liability. I do not gather that anybody seriously disputes that assertion.

As to pensions, the War pensions are declining with the deaths of the pensioners—[HON. MEMBERS: "And reductions"]—but all other pensions are increasing, and will continue to increase year after year for the best part of a generation. One great increase is due to the original Old Age Pensions which Lord Oxford inaugurated in 1908. It was not then foreseen how enormous the charge would he that would ultimately come from this cause upon the Exchequer. It is only in the last two years that the steady onward march of the non-contributory old age pension figure has been brought home to the House, first rather tentatively by the right hon. Gentleman, and last year fully by me in bringing forward the Budget. It is due, of course, to the fact that we are now entering upon the period 70 years away from the great expansion of the population in mid-Victorian times. The teachers' pensions and the State share of the police pensions are already £4,500,000 and £2,250,000 respectively. They are advancing each year cumulatively by over £500,000. Unless faith is broken, and public servants are deprived of what they have contracted for, looked forward to and earned, these pensions will continue to advance at this rate for the next 10 or 15 years though at a less rate thereafter. Lastly, there are the ordinary miltary and Civil Service pensions, amounting to £21,250,000 a year, all fixed by Statute, or guaranteed by Royal Warrant, or protected by covenant, and all steadily growing. It is open to Parliament at any time to name new conditions for new entrants, but no relief will come to the Exchequer from such a decision during the lifetime of anyone who is here this afternoon. It is open to Parliament, if it chooses, to reduce the rates of non-contributory old age pensions: every shilling a week reduction would save about £2,500,000 a year. I hope, for my part, and I am sure I express the views of the Prime Minister also—we hope that we shall be in Opposition when such a suggestion is made. It was open to the Government, in consequence of the fall in the cost of living, to reduce on 1st April next the pensions to the wounded soldiers of the Great War, and in this case there could have been no charge of breach of faith, because power was explicitly reserved to make such a reduction should the cost of living fall. We decided, however, that our financial situation, however difficult, in no way justified such a harsh step, and the Minister of Pensions was accordingly authorised by the Cabinet to make the announcement for which he had so earnestly pressed, and which he so ardently desired. That is all I have to say about this first category of debt and pensions. It is obligatory, and beyond the control of any constitutional, law-respecting Government, but remember that together debt and pension aggregate £476,000,000 per annum, and constitute an increase of £433,000,000 upon the pre-War figure.

I come to the second category—the grant services. They are not all obligatory in the same sense as the pensions or debt are obligatory. They are not all obligatory in the sense that it would be dishonourable to abandon or reduce them, but they are nearly all fixed by law, nearly all concern the local authorities, and they nearly all affect the rates. This group, as I say, affects the local authorities and the rates. They are in nearly all cases fixed by Statute, and comprise grants for education, grants for health services, the housing annuities—the Addison annuities alone cost over £8,000,000 a year and are virtually a debt charge—and grants in aid of local taxation. I have included in this group Irish services, grants to special industries on the faith of which capital has been invested, such as the beet-sugar industry—all these grants which we pay and others spend, are on a percentage basis or related to the scale which certain services attain. All of these grants are under the effective control of the House of Commons. The House can, by legislation, reduce most of these grants, but, of course, at every stage they will encounter the opposition of the local authorities and the powerful interests— perfectly honourable interests, but marshalled and organised interests, which are accustomed to benefit by these grants, which would rally to their defence. At every stage too we are confronted by the argument that a reduction in the Exchequer grant means a transference from taxes to rates, and the laudable desire of Members of Parliament to effect economy crimes very often and very early into collision with that scarcely less respectable resolve to keep their seats.

The grant services under all headings amount to over £90,000,000. This is a very unsatisfactory field for the Exchequer. The grants are, as I say, mostly based upon the percentage system. More than half the money is supplied by the Treasury in accordance with Acts of Parliament. Nearly the whole administration is in the hands of the local authorities, subject to Government regulation, inspection, audit, etc. In consequence, the expenditure, apart from legislation to alter the scale of grants, is largely uncontrollable. The local authorities call the tune, and it only remains to calculate the percentage upon which the Exchequer pays the piper. I think I am justified in saying it is a very unsatisfactory field. It is the considered policy of His Majesty's Government to convert the system of percentage grants into a system or block grants, that is to say, to pay definite sums instead of percentages to the local authorities, to give those authorities increased discretionary powers, to make them responsible for any extravagance or any unduly bold enterprise to which they may commit themselves, and to give them 100 per cent. of any economies they may themselves be able to effect. That is our policy. But this policy can only be carried out gradually, and through complicated and, no doubt, controversial legislation. I see very little prospect, I may at once say and I wish the House to face the facts—we all have to face them, and nowhere do we have to face them more clearly than in the region of finance—I see very little prospect of any relief to the Treasury through a reduction of the present scale of Exchequer grants. But I am sure of this, that unless we move from the percentage system to a block grant system—I do not say a fixed grant system —based on other considerations than mere expenditure flowing out through the hands of other people, charges which are ever growing, and are of an indefinite amount, will automatically and irresistibly impose themselves on the national finances. Moreover, when one authority is spending money and another has to supply it, there is no adequate cheek—I will not say on waste or extravagance; that is the easier evil to grapple with—but on well-intentioned, inordinate expansion.

In present circumstances, this expenditure is quite uncontrollable. Look at what happened even in this year. when our finances have been examined and. combed with exceptional stringency —with a stringency I only once remember to have seen in all the 20 years I have served in the 'Government, in the period of the Geddes Committee—even in this year, when we have gone over the field and gleaned and scraped in every way we could possibly find open to us, we have found ourselves unable to refuse to assent to increases compared with last year of over £1,000,000 in education— — [HON MEMBERS: "Hear, hear!"] and over £200,000 in health grants— [HON MEMBERS: "Hear, hear!"]—including inter aliatuberculosis and venereal disease. I gather the House feels we have done right. I hope it will remember this when I come to add up the total figures. We have also had to give certain additional grants to agriculture, drainage for instance, which, incidentally, is one of those aids to employment which in other connections invariably attracts the enthusiastic applause of the party opposite.

To sum up. In this second category. where over £90,000,000 of expenditure is involved, there is no practical expectation of substantial reduction, and, upon the whole, I would say, nor ought there to be. If the mental, moral and physical welfare of the population is to progress, there is no effectual reduction to be made in this field whatever may be said by uninstructed critics or whatever abuse may be hurled at our heads afterwards by those who have already assented to this expenditure, and who would be the first to cry out were it diminished. No. Sir, the only aim which the Government have is to protect the Exchequer from an indefinite and an uncontrolled increase in the future in this sphere, and also to secure value for money in the spending of the immense sums involved.

I come to the third category, which I call the Self-Supporting services. There are two important State services which deal with internal communications by locomotion and by correspondence—the Road 'Fund and the Post Office. These two, excluding their pension charges. which I have already lumped in the pensions category, together cost £67,500,000 this year. But they differ from all other classes of expenditure in that they produce an immediate and large revenue to the Exchequer. The taxes on motor cars are at present assigned to the Road Fund, and they will this year produce over £18,000,000, or nearly £2,000,000 more than the estimate. Next year on the present basis the figure may well rise to over £20,000,000. The earnings of the Post Office, on a cash basis, exceed the expenditure by over £4,000,000. It is at present the duty of the road authorities, and of my right hon. Friend the Minister of Transport to spend the motor taxes on the roads as fast as they possibly can. The more they get the more they spend. But in spite of their very best efforts to get through the money they have had to accumulate a large surplus for which they are unable to find any practical use. That is the present system—which has so many supporters. As for our postal, telegraph, and telephone services they increase in scale and efficiency because they are more resorted to by the public, because the public are able to make greater use of their facilities, and because, therefore, they have to develop their plants and organisations.

On the present basis, the expenditure on these two services will probably grow by nearly £4,000,000 next year, and the revenue to a still greater extent. Is that a good thing or a bad thing? Is it a good thing that the large and increasing wealth of the country—for such is the undoubted fact—should permit of an increasing activity in locomotion and correspondence? Can anyone doubt that these increases are a proof of healthy progress? Why, then, should I be blamed because the total figure of national expenditure is swollen by £4,000,000 or, £5,000,000 through the natural and normal extension of healthy public activity? I may be blamed for other faults, but why should I be blamed for that? We must have some rational processes in these controversies. You may blame me, or the Government, of which I am a member, because of increases in the expenditure which is controllable, or which is unproductive, but increases of expenditure which come from the normal, healthy growth of services that pay their way, which produce corresponding revenue or a greater revenue—to blame a Minister or a Government for that is really an economy in mental effort which is hardly commendable.

I may have some proposals to make about the Road Fund when the Budget is opened, so I shall say no more about that now. But take the Post Office. Is it not really absurd to lump the revenue-earning expenditure of the Post Office in one general account with that of the ordinary spending Departments? Is there any business in the world in which it would not be a cause for rejoicing when the scale of operations and the balance of profits had increased simultaneously? To mix up the expenditure of a Department like the Post Office with the general national expenditure; to inflate the expenditure by a sum of £53,000,000, and the revenue by the sum of £57,000,000, is only to confuse the ignorant and darken the counsels of the wise. Internal efficiency and economy in the Post Office is a different matter, but it is not relevant to the argument with which I am now dealing It is general economy I am dealing with; and a rational method of presenting the Post Office Estimates to Parliament in relation to the general accounts would be, I think, only to show the profit or loss arising from these separate services. But it must be apparent that any such alteration would he a break in the continuity of oar statistics, and would make comparisons with past years difficult to follow. As these two Departments, communication and correspondence together, show an expenditure of £67,500,000, I have already accounted for the whole £800,000,000, except £165,000,000. That is what is left, and I await suggestions of reductions and economies over the whole of the vast area of expenditure which I have already covered.

I have now reached the field on which the usual battles about expenditure and economy have been fought. It is out of this remaining £165,000,000 that we have to provide the whole of the services of the Crown, the Army, Navy, and the Air Services, the so-called Civil Service, the tax-gathering departments, the National Insurance contributions, prisons, Judges, Civil List; everything has to be provided in this last category, which I call the national administrative services. Let me sum up this part of the argument. In categories one, two and three, there are the obligatory services, the grant services, the self-supporting services, to which are allocated £634,000,000. To the fourth category of ordinary national expenditure of defence and administration there is allocated £165,000,000. Let us compare those figures with those that existed in 1914–15. In those days categories one, two and three aggregated, not £634,000,000, but £108,500,000, while the expenditure on national administration—category four—aggregated £96,500,000 as compared with £165,000,000 at the present time. Therefore, since the War the expenditure over which the Executive Government has no effective control, and which to a very large extent no honest Parliament can reduce without repudiation—or which is revenue-producing expenditure—that class has as a whole increased by nearly 500 per cent., and, on the other hand the national administrative services have increased from £96,500,000 to £165,000,000, about 70 per cent. I ask the House to look at that-figure of 70 per cent., because it is almost exactly in the same ratio as the purchasing power of the pound sterling in those two periods. This has occurred in spite of the fact that the population has increased appreciably, that the number of functions discharged by the Central Government has been continually added to, that they have become more complex.

5.0 P.M.

Here is a factor—let me deal with it for one moment—I am afraid it is my duty to make a full statement on this subject, and I should very much regret if I were not able to make it in its entirety; therefore, I earnestly trust that the House will concentrate their attention upon this aspect of its public duties with zeal and assiduity. I want to say a word' about this factor of the decline in the purchasing power of money, as far as it may he of use in dealing with the estimates of the year for comparative purposes. It is not, as is sometimes suggested, a mere juggle of figures. It is the actual economic truth, because, after all, behind the money values which are only nominal, stand the basic facts—whatever they are—how many men are you withdrawing from productive industry; how much of the material accumulated by units of labour are you devoting to defence or official purposes? What proportions are these of national resources? These are the underlying realities of the case. The exchanges, which are the nominal expression in money terms of these realities, are not the truth, but only a varying factor. It is upon the limited field of this £165,000,000 of national administrative expenditure, already cleared four years ago by the energetic operations of the Geddes Axe, fortified by the will-power of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George)—it is upon this limited field, and only upon this field, that the executive Government can, in practice, effect proper economy. And very much further economies now are indispensable. For observe what is coming upon me. Before we reach the figure of £800,000,000 for 1926–27 I have to face very large increases of expenditure. These increases of expenditure are due to three causes. First of all, they are due to decisions for which the present Parliament and the present Government are responsible. Let us just see what they are. There is the new Widows' and Old Age Pension scheme, £5,700,000. There are increased State contributions to Unemployment Insurance which, if they are not altered by the present Bill may mean £3,800,000. There is the beet-sugar subsidy, an additional expenditure of £1,750,000. The right hon. Gentleman the Member for Colne Valley was the first to bring this child into the world. It is growing extremely well. He left it on our doorstep, and we have nourished it. It is growing in weight and in cost almost every hour. It is, in fact, a model of what a healthy and growing child should he. I hope the right hon. Gentleman, not content with saddling us with his burden, is not going to abuse me, and to abuse the Government for the care they have taken of his offspring. Now I come to an item which will a little excite his wrath. The new cruiser and construction programme added to our Naval Estimates, £3,724,000. The coal mining industry subvention will be £4,100,000 next year—that is the subvention we agreed to in August last. The Unemployment Insurance (Northern Ireland) Bill, which the House discussed last week, which was much criticised, although no party voted against it, will cost £875,000. There is the marketing of Empire produce, £500,000. Provision for increases in the pay and the strength of the police forces, £400,000. I am told there is in effect a city as large as Birmingham being built in Great Britain every year now; hundreds of miles of new streets are created; and it is almost inevitable that there should be an increase in the forces of the police to preserve order over these immense new areas which our housing programme is creating. Now here is something for right hon. Gentlemen and hon. Gentlemen opposite—provision of steel houses for Scotland, £368,000. There is the new drainage scheme for agriculture, £200,000. The Tithes Act of 1925, £150,000. The training of unemployed men—the younger men, £150,000; I am sure no one will object to that, no one will say that is not a thrifty form of expenditure.

Miss WILKINSON

What about the women? [Interruption.]

Mr. CHURCHILL

I have not followed that point, but obviously the argument covering men would apply, with whatever modifications were appropriate, to women also.

Viscountess ASTOR

It does not.

Mr. CHURCHILL

I am putting forward an Economy Bill. I am defending the Government, of which I am a Member, from reproaches which are hurled at us because we do not reduce expenditure enough. Has anyone heard anything during this Debate—there has not been much interruption I admit, I have nothing to complain of—but has anyone heard anything during this Debate except suggestions for additions to the expenditure? Then there is an increase of £2,730,000 in the Education Estimates, which is purely book-keeping, which involves no additional burden. It is due to the fact that the teachers' pensions contributions have been diverted to the Exchequer under the Teachers' Superannuation Act, 1925, instead of being treated as an Appropriation-in-Aid; that means to say, they go into our accounts and swell the nominal total by £2,730,000, without in the slightest degree affecting the realities of the case.

In the second place, these increases are due to decisions for which previous Parliaments have been responsible, and in this matter the party opposite have a full right to share in some of the credit. There is the Air Force scheme of expansion of four years ago, which was continued by all Governments until the present time, and would have entailed an additional expenditure of £2,500,000; the increase in old age pensions under Lord Oxford's scheme, £1,250,000; the increase in health insurance grants, apart from anything we are doing under this Bill, £1,925,000; housing subsidies increase, £570,000; land settlement revaluation, £560,000; teachers' pensions, £500,000; overseas settlement, £500:000—there is a move forward here; for a very long time we spent less than was taken in the Estimates, but developments have now really begun to bear fruit—Imperial War Graves Commission, £300,000; police pensions, £145,000. I made a mistake in saying that the increase of teachers' pensions and police pensions amounted together to £500,000. It is the teachers' pensions alone which amount to £500,000; the police pensions are £145,000 additional. These increases, for which previous Parliaments were responsible, total £8,250,000, and have to be added to the increases for which the present Parliament is responsible, amounting to £24,447,000.

The third class of increase is the normal growth of Post Office and Road Fund expenditure and the working of the incremental scales, which operate in the public service, and under which salaries increase at definite intervals, and there is also the normal growth of pensions of Government servants. These headings I estimate at £6,000,000.

If we add these three classes of increases together they will aggregate £38,750,000 of increase upon the £800,000,000 figure. That is not all a genuine addition to the national burden, for, as I have explained, the teachers' pensions are a book-keeping entry of about £2,750,000; of the beet-sugar subsidy nearly £1,000,000 is recovered in Excise; there is the growth of the Road Fund, £2,000,000, and the growth of the Post Office expenditure of about £1,750,000. These make a total of £7,250,000, which is either book-keeping or a non-burdensome addition. But even after excluding these, I am left with an increase of £31,000,000 to face. To achieve a figure of £800,000,000, £31,000,000 must be saved, not out of, as some people suppose, the £800,000,000, for £634,000,000 of this is, as I have shown, beyond control, but out of the £165,000,000 from which the whole of the national administration has to be maintained. A saving of £31,000,000 out of £165,000,000 is a reduction of just under one-fifth, and has to he effected in order that we may simply maintain our existing position; and its reduction has to be secured on the one branch of our expenditure which has shown the slightest percentage of advance since 1914–15. As I have shown, it has only advanced pari passuwith the devaluation of the pound sterling. To effect that reduction is a very difficult task. How will it be accomplished? I will show the House before I sit down how it will be accomplished—very nearly accomplished.

I will take first the Defence Services. This year they cost £120,500,000, and the Estimates for next year are £116,500,000, a reduction of £4,000,000. But that is the net reduction on last year. That takes no account of the increases due to the cruisers, or to the expansion of the Air programme with which we were confronted, and which we have had to absorb before any reduction can be effected which would show itself in our figures.

Let us first take the expenditure on the Army, because there is not much controversy about the Army. The right hon. Gentleman the Secretary of State for War made a small reduction in his Estimates last year, and a considerable further reduction this year, and has done so without substantially affecting the strength of the fighting forces. I have had experience as Ministerial head of all three combatant forces, and I know as well as anyone what a solid achievement this represents. I am far from thinking, however, that we have completed the task of economy in Army administration. It is imperative that measures should be taken, and if adequate time is allowed I am sure they can be taken. By making modern weapons and modern organisations substitutes for old weapons and old organisations, and not mere additions, as they too often are, it should he possible without reducing the national security in the future to make substantial diminutions in military expenditure. But, after all, we must not expect an impossibility. The British Army was not appreciably increased on account of the Continental menace before the War. It was never measured against that menace; it was measured against the needs of the British Empire as a whole. The Continental menace has disappeared, but the British Empire remains, it remains larger than before, and in some respects no more contented, no more free from dangers of a minor character, and, therefore, reductions in our military strength will necessarily be of a limited character. £42,500,000 is the sum for which my right hon. Friend is asking this year, and that compares with a pre-War sum of £29,000,000; that is an increase of £13,500,000. One cannot compare these or any other increases without making allowance for the inflation of money values since the War, in other words, the diminished amount of service and material purchasable by the pound sterling. Making allowance for that difference, the pre-War Army Estimates of £29,000,000 would be to-day over £50,000,000, yet the Estimates of my right hon. Friend are under £43,000,000.

The Estimates of £16,000,000 for the Air Force were passed without a Division. There would have been an increase of £2,500,000 in those Estimates if we had pursued the programme which the last four Governments have acquiesced in or approved. The scheme of air increases inaugurated in 1923 had been carried forward without a break until now. It has been left for the Government of to-day to impose upon that scheme a drastic retardation, in view of the improved international situation, and for the Secretary of State for Air to effect economies which have reduced Estimates definitely forecasted at £18,000,000 for next year to £16,000,000.

Lastly, I come to the Navy. Everyone is down on the Navy. [HON MEMBERS: "No!"] Every one of the economy critics is down on the Navy. Since the German submarine menace was overcome, and the German fleet destroyed, it has found no friends. After all, there is a, policy in regard to the Navy, and I should like to know whether that policy is challenged or not? There is a standard, which I am not aware has been seriously aspersed in any responsible quarter, and that is the one-Power standard. On the morrow of our greatest victory, and at the moment of our greatest power, this country consented to abandon the standard of naval supremacy which for centuries had been our lifeguard, and which we had, at any rate in the last 100 years, never used except to the benefit. of the whole world. We deliberately and voluntarily resigned it. If I had been told that I should have been, as I have been, and am, a consenting party to this great departure from our historic policy I would not have believed it, but I am convinced that we were wise and right in agreeing to adopt the one-Power standard—a standard not of supremacy to, but of equality with, any other Navy in the world. But there, Sir, we stop. The The one-Power standard must be maintained.. The people of these islands, who depend for four-fifths of their food on ocean trade, cannot accept a position of being definitely inferior in naval strength to any other people. The one-Power standard does not mean that we should be in a position to wage naval war in any part of the world at any moment, nor does it mean that in each class of vessel in our Fleet we should be at least equal to the Power with the largest number of vessels of that class, but it does mean that our naval strength as a whole should not be inferior to that of any other nation, however distant or however friendly.

We have been greatly hampered, and was greatly hampered, in pressing the necessary curtailment of the increase of naval expenditure by the attitude towards that increasing expenditure which was prevalent under the Administration of the right. hon. Gentleman opposite (Mr. MacDonald). He was confronted, as I was confronted, by a new naval construction programme set out year by year over a long period which proposed increases in every branch, and which went far beyond the reasonable interpretation of a one-Power standard. As far as; can make out, the late Chancellor of the Exchequer and the late Prime Minister did absolutely nothing during their tenure of office to analyse, canvass or modify by reasonable arguments this enormous programme of expansion. No doubt they were a minority Government and found the Estimates made out when they came into office. No doubt they protested.

Mr. SNOWDEN

We reduced them by £5,000,000.

Mr. CHURCHILL

That was a paper reduction which in no way reduced the services. The fact remains that the policy of the late Chancellor of the Exchequer, with his, no doubt, superior virtues of economy, did not react in any effective or appreciable manner against this immense programme. They accepted the first cruiser programme which was the first step on a rising scale planned for many years ahead and which, if consistently followed, would have placed the Navy Estimates, not at £58,000,000 this year, but at nearly £70,000,000. I do not wish to criticise the right hon. Gentleman, and I only mention this fact to show how little right he has in this matter to criticise us. The First Lord of the Admiralty and his naval adviser have succeeded in doing what in my recollection has never been done before, that is, to make a substantial increase in new construction, which is the vital element in Fleet administration, while at the same time producing a substantial diminution in the demand upon the taxpayers. No one who understands the scientific application of naval warfare will under-value the effort involved in this or the result which has been attained. For my part, I hope the First Lord of the Admiralty will not weary of well doing, and when he is considering his Estimates in future I hope he will accompany successive programmes of new construction with successive abatements of the public charge.

Now, Sir, to present the accounts. There are, first of all, certain administrative decreases which must be taken into consideration. I have spoken of automatic increases, but there are automatic decreases. The total automatic decreases amount to over £4,000,000 which represent the decline in War pensions and the completion of the training scheme for ex-service men, etc. That leaves a total of £27,000,000 to be found if I am to reach the £800,000,000 figure, and it is not possible to do this without reconsidering the decisions which have given rise to the increase. We are reviewing these decisions and making reductions where possible. The Defence Services I have just dealt with. But let us see what we are saving on them in regard to the expense which otherwise would have been incurred in consequence of the public decisions taken not- only by this Government, but by previous Governments. The Air Estimates reduction amount to £2,000,000. There is a reduction of £2,000,000 on the Army Estimates, and there is a reduction when you take into consideration the increase of the cruiser programme of over £6,000,000 on the Navy. Thus on the fighting services the reductions which we have effected by altering decisions, or making economies to pay for them, amounts to over £10,000,000. These savings on the Defence Services leave us with 217,000,000 still to find.

Next there are the reductions effected on Palestine and Iraq which amount to one-third of a million, and a reduction of nearly £750,000 on the Colonial Office services effected by the Colonial Secretary out of a comparatively small section of the Estimates and these together amount to over £1,000,000. The sum of £500,000 has been saved on the Estimates of the Office of Works, and £750,000 is accounted for by reductions in the Ministry of Agriculture. There has been over £2,000,000 saved by reductions over a. variety of departments, and so we get to over £4,000,000 altogether, leaving the balance I have still to find of £13,000,000, and that is where this Bill comes in.

From this figure we must take the economies of this Bill which effects a saving of expenditure of £8,000,000, and in addition provides certain additional revenues amounting to over £1,500,000, but even when all the proposed economies have been carried out, and after making all the allowances which I have explained, there still remains a net increase on the figure of £800,000,000 of £3,500,000, which is almost equal to the amount provided in the Estimates for next year for the coal subsidy. This is an expense which is entirely novel and, I trust, a completely temporary intrusion upon our expenditure. I have still to state what the expenses of other Consolidated Fund Services, such as the Debt Services, for 1926–27 will be, but that I am not in a position to do at the present moment with accuracy, and, therefore, I reserve my final figures for the Budget statement.

I thank the House for its indulgence in listening to me so long, but I desired to place the case before them for their consideration in order that it may be carried forward with the utmost advantage. I have tried to answer the questions, "Why do you do what you are now proposing, and how is it you are not able to do more?" I conclude by saying that the opportunities for economy are limited to the restricted field of £105,000,000. We have been confronted with increases of expenditure which were necessary, and have been approved, of £38,750,000. If the proposals we now make and our Estimates are adopted in their entirety, they will not involve any undue diminution of national defence nor any retrogression in the social services. They will enable new and important services like the widows' pensions to be initiated without appreciably increasing the total expenditure of the country, and together with the proposals which will be made in the Budget they will carry us through this difficult financial year without either the reimposition of burdensome taxation or any resort to unsound financial expedients.

Mr. SNOWDEN

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

The Chancellor of the Exchequer has many qualities which are admired alike by friend and foe. He has a remarkable facility for adapting his position and opinions to changes in political circumstances, but I doubt if his most intimate friends ever suspected that he possessed a gift for ironic humour. The Bill we are discussing this afternoon has been described by himself as making dastardly, mean and contemptible proposals. Therefore, the right hon. Gentleman has anticipated my description of this Measure, and he has done so with an eloquence and a vituperation which I could never hope to emulate. I have not the right hon. Gentleman's knowledge of the English dictionary, but I would remind him that such knowledge is no compensation or excuse for ignorance of the most elementary principles of national finance. If it were not that the right hon. Gentleman, apparently, regards this Bill as a serious proposal, I should think that it was the greatest joke that had ever been perpetrated upon the House of Commons. If this is the best the right hon. Gentleman can do, then I would respectfully suggest that he can best serve his own interests, arid certainly the interests of the country, by realising and admitting that he has not the competence to discharge his job. The right hon. Gentleman, in the greater freedom of political platforms, expresses his views quite freely about the intelligence and capacity of myself and my hon. Friends He describes us as softies and fatheads, and repeatedly states that we are not fit to govern. Well, if the right hon. Gentleman's proposal is the evidence of his capacity to govern then I am glad that we have not the capacity to govern.

I want to bring down this question to the facts of the case. The right hon. Gentleman spent three-quarters of an hour in making a most intricate and elaborate statement, intended, I assume, to prove and to justify the fact that there is to be no reduction of expenditure this year. What did the right hon. Gentleman tell the House 12 months ago? He promised the House at that time that we were to have a progressive reduction of £10,000,000 a year, and, in the hope of realising that, some of us hoped that the right hon. Gentleman might be permitted to hold his office for the next 80 years, when he would have succeeded in abolishing taxation altogether. That was not £10,000,000 for next year, but £10,000,000 every year. Where has that gone? The right hon. Gentleman has not only had his own ingenuity at work, and the assistance of the ablest staff in the Civil Service, but he told us in his Budget speech that a Cabinet Committee was going into this question of the reduction of expenditure. Not content with himself, not content with the assistance of his Cabinet, he appointed a third Committee or agency, the Colwyn Committee, which was to go over the whole of the national expenditure. The right hon. Gentleman tells us this afternoon that that Committee has gone over every item of national expenditure, has pruned if rigorously and examined it thoroughly; and what is the result of it all? Not a reduction, but an increase in national expenditure.

There is not a newspaper which generally supports this Government which has not expressed its keen disappointment at the result of the efforts of the right hon. Gentleman. Some time later in the year, when, apparently, it became evident to him that there was no possibility of redeeming the pledge he gave to the country 12 months ago, he put forward other ideas, and made certain excuses. The right hon. Gentleman made a great speech at Leeds a few months ago; what a contrast there is between that speech and the miserable exhibition the Tight hon. Gentleman has made today! Really I can hardly find it in my heart to be caustically critical of the right hon. Gentleman—I feel much more inclined to pity him. He told his audience at Leeds that the whole programme of Government economies, both legislative and administrative, would be seen. when he presented his economy proposals to the House of Commons. We have seen them this afternoon. Where is the economy? Furthermore, these economies, said the right hon. Gentleman at Leeds, would cover the whole field; no Department would escape from them. This afternoon the right hon. Gentleman has read out to the House a long list of Departments where, in the Estimates for the coming year, an increase in expenditure is recorded.

The Prime Minister repeated a state-meat that the Chancellor of the Exchequer has often made during the past 12 months—and this is important, in view of the selection the right hon. Gentleman has made for the reduction 'of Government grants—that everyone of every class will be called upon to make sacrifices. But three-fourths of the national expenditure, the right hon. Gentleman tells us this afternoon is obligatory, sacred, sacrosanct. Everybody, however, was to be called upon to make sacrifices. It is so much easier, said the Chancellor of the Exchequer, when everybody is making sacrifices. What is the standard that the right hon. Gentleman set himself 12 months ago? Let us see how far he has attained that standard in the proposals he has submitted to the House this afternoon. There was to be a progressive reduction of £10,000,000 a year, and it was to be an all-round reduction. Everybody was to make sacrifices and the purpose of this reduction—and this is interesting in view of the very last sentence the right hon. Gentleman uttered — the only thing he hopes from this dastardly, mean and contemptible proposal is to avoid re-imposing the taxes that he so wantonly squandered.[Interruption.]

The right hon. Gentleman has now abandoned all hope of a net reduction of expenditure. Taxpayers in the country, and particularly his own friends who are groaning under the burden of heavy taxation which the right hon. Gentleman promised to mitigate 12 months ago, will not read with much satisfaction the Chancellor of the Exchequer's speech in the papers to-morrow morning. All that he is trying to do now, he admits, is not to reduce expenditure, but to prevent the automatic increase of expenditure. It has only dawned upon the right hon. Gentleman in the last few months that there is such a thing as an automatic increase of expenditure. Up to that time he appeared to think that we could go on improving social services, meeting the need for a higher social condition of the people, without any expenditure being involved; but all that the right hon. Gentleman now hopes to do is to stop what he calls this automatic increase of expenditure. On every one of the grounds which the right hon. Gentleman himself laid down 12 months ago he has failed miserably. He has failed to reduce expenditure; he has failed to make equal sacrifice from all; he has failed to mitigate the hardship of taxation.

I never like to give the House of Commons figures, but figures are the crux of this case, and I hope, therefore, that hon. Members will forgive me if for a moment I give them a few figures, which I will try to make as simple and as clear as I possibly can. I will take first the Civil Service Estimates—that part of the national expenditure in which, according to what the Chancellor of the Exchequer tells us this aftrenoon, economy is alone possible. May I say that I quite agree with him in what he said as to the undesirability of including the revenue and expenditure of the Post Office in the aggregate of national income and expenditure? I think that hon. Members may perhaps recollect that on many occasions in days gone by, when dealing with national income and expenditure I always excluded these items, and I shall exclude them now, dealing only with the Estimates of expenditure on the Civil Services.

We were to have a reduction of £10,000,000 in expenditure. Excluding coal, the new total Estimates come to £ 296,500,000, while the revised Estimates for last year were£294,000,000. Therefore, on these Services, where, says the right hon. Gentleman, economy is alone possible, there is an increase, excluding coal of£2,500,000. The Fighting Services show a reduction of just under£4,000,000 —not over£4,000,000, as I think the right hon. Gentleman said—and, therefore, we get upon the Fighting Services and the Civil Services, a net decrease of£1,413,000. But the so-called economies proposed in this Bill are included in the Estimates for next year, and, therefore, in effect, we get an increase of just under£10,000,000 a year. Let not the right hon. Gentleman misunderstand my position; I am dealing with his figures, not with mine, in regard to economy and expenditure. Of the separate heads of the Civil Service Vote— there are 13 of them— seven show an increase and six a reduction. The seven show an aggregate increase of£14,600,000. Everyone must make sacrifices, said the right hon. Gentleman. That apparently has not been applied to seven of the 13 heads of the Civil Service Vote.

Mr. CHURCHILL

What are they? Head them out. Education.

Mr. SNOWDEN

The right hon. Gentleman has already forgotten what I said a moment ago. I am dealing with his position and not with mine. If I were in his place I should be prepared to justify many of these increases under the seven heads of the Civil Service Vote, but he told us a year ago he was going to make a reduction and everyone was to make sacrifices. But where reductions have taken place they are not, on the admission of the right hon. Gentleman himself, permanent reductions. He has been striving might and main in order to make a temporary reduction of expenditure in certain Departments this year. The Navy and the Air Force tell us that we must look forward to an increase of expenditure in these Departments in the years to come. The First Lord of the Admiralty said that in the Estimates for the past two years a special overhead reduction is being made in the provision for contract work in Votes 8 to 10 to discount in advance possible delays in the progress of such work. If the delays do not in fact occur, the deficiency will have to be made good. The Air Minister says in this statement that he is looking forward to increased expenditure in the future.

What has the right hon. Gentleman done? Instead of equal sacrifices, out of hundreds of items of expenditure in the various Departments he selects national health, unemployment and education. I remember the right hon. Gentleman saying it was the definite policy of the Government to stop the increase of Exchequer grants for these services. The percentage grant is to be abolished and a block grant to be instituted of an arbitrary amount. The Bill gives power to the Board of Education to fix practically what grants it likes to the local authorities. These are the three services the right hon. Gentleman has selected for what the "Times" calls "so-called economy." There is no economy in them, as I shall show in a moment, but at any rate the right hon. Gentleman's intention is undoubtedly to rob the sick, the disabled, the unemployed and the children. That action well deserves his own description of his Bill as dastardly, mean and contemptible. The Chancellor of the Exchequer would not give the slightest countenance to any suggestion that there should be any reduction in regard to the interest upon the War Debt. That was a sacred obligation. But health insurance is a contract into which the State entered with the millions of people who were compelled to go into insurance. Is that contract any less sacred? These societies were given a solemn undertaking that if they managed their affairs diligently, carefully and efficiently all the advantage of their diligence and efficiency should accrue to themselves and that the members should reap the advantage of it. Ah, says the right hon. Gentleman, there is no reduction of benefits. Here we have an illustration of the right hon. Gentleman's financial capacity. He is going to reduce the income of these health societies by£3,000,000 a year and now he tells us because they have£3,000,000 a year less income they will be able to give greater benefits.

The consequences of a policy of this sort are very far reaching and disastrous. The effect of this robbery of insurance will be that the approved societies will lose confidence in the good faith of the Government. They will naturally say to themselves, "What is the good of efficiency? What is the good of saving? What is the good of being economical, because if we pile up reserves the Government will come along and rob us of the results." The Minister of Health practically admitted the same thing yesterday in a speech he appears to have delivered to the Association of Approved Societies. The right hon. Gentleman was right. Perhaps it was an oversight on the part of the Chancellor of the Exchequer that he did not include the right hon. Gentleman in those Ministers who were going to defend the Bill. This is what the right hon. Gentleman is reported to have said yesterday: He appealed to the societies not to refuse to do their bit, but, with such resignation as they could command, to accept sacrifices which did not impose any deprivation at present, but would contribute materially to the relief of national expenditure. Do not those words justify everything I have said to-day? The Chancellor of the Exchequer said a moment ago there are going to be increased benefits. The Minister of Health, who certainly knows a great deal more about this than the Chancellor of the Exchequer does, told them that there would be no deprivation at present, but he said the societies must make sacrifices with as much resignation as they could command. They, he said, must do their bit. But they cannot be making sacrifices. They cannot be doing their bit unless they were called upon either to make an additional financial contribution or to suffer the loss of some contribution which they have hitherto received from the State.

The Chancellor of the Exchequer said it certainly appeared to be somewhat illogical that last year the Government proposed to increase the contributions to the Unemployment Fund, and now he comes forward proposing a reduction. What is his justification? He is gambling on an improvement of trade. He got no justification for that hope, at any rate, from the deputation he met last week from the Federation of British Industries, who gave him a most dismal story, not only of the present condition of trade but of the immediate prospect of an improvement. With the figure of unemployment at what it stands to-day there will be an increasing deficiency upon this fund. If I understood the right hon. Gentleman aright, he said the fund has been drawn upon to the extent of£2,000,000 during the last 12 months. According to the actuaries' calculation, when the figure drops below, or to, 1,030,000, the contributions will just pay for the outgo, and therefore, under this proposal, unless unemployment falls to a figure which I think no one expects, there must be an augmentation of the deficiency upon the fund. But there are ways and means available to the Government, and they certainly have utilised them during the last few months. There has been a reduction, we are told, in the number of unemployed. If the Government impose a few more restrictions of the character of those they have applied during the last few months they might bring down the number of unemployed to 800,000. Then the fund will become solvent. I do not think for a moment the Government will hesitate to do something of that kind. At any rate, whether they do or not, their proposal means that there is no likelihood of the present unfair and unjust restrictions being removed. Persons who are entitled to standard benefit will continue to be denied benefit, and extended benefit will continue to be refused in deserving cases.

6.0 P.M.

May I refer to a sinister paragraph in this Bill dealing with education. The interpretation I was prepared to place upon it has been confirmed by the statement of the Chancellor of the Exchequer. It is in Clause 14 and it gives the Board of Education arbitrary power to refuse to sanction certain expenditure of local authorities. Circular 1371 and Memorandum 44, we are told, have been withdrawn. Clause 14 of this Bill has been introduced to take their places, penalising the sick and disabled, penalising the unemployed, and robbing the little children. These savings are not savings at all. There is no economy in this Bill. There is no reduction in expenditure. What the right hon. Gentleman is doing in effect is this, he is simply manipulating figures in order to create the impression of having made a reduction, and when he is doing this he says it is the policy of the Government. He is transferring the cost of certain social services from the Exchequer to the local authorities. That has been done already in regard to unem- ployment. The cost of Poor Law relief is increasing week by week. Now, the right hon. Gentleman has foreshadowed a raid upon the Road Fund in the approaching Budget. He is relieving the national Exchequer and adding to the burdens of the local authorities.

This, says the right hon. Gentleman, is the policy of the Government. I do not agree with the right hon. Gentleman that if economy is to be effected, if reduction in national expenditure is to be made, that it either can be made or that it ought to be made in the categories which the right hon. Gentleman has selected for that purpose. There are two others. There is the National Debt. The right hon. Gentleman referred to the Capital Levy. If our proposals for the Capital Levy had been adopted in 1919, when there was a large volume of public opinion in favour of such a levy—the late Mr. Bonar Law, without perhaps definitely expressing any enthusiasm for it, certainly did not disapprove of it—we could have reduced the National Debt by a very considerable sum, by paying it off at the devaluation at which the currency stood at that time. Any reduction of the National Debt to-day would cost us about 8s. in the pound more than it would have cost us seven or eight years ago. If the Chancellor of the Exchequer cannot do that, there is one thing that he can do.

Mr. CHURCHILL

Does the right hon. Gentleman agree that I cannot?

Mr. SNOWDEN

The right hon. Gentleman has no right to put that question to me. I am not in the dock. It is the right hon. Gentleman who is in the dock. Will he take a suggestion from me? If he cannot adopt that proposal, at any rate he can make the recipients of interest upon the War Loan contribute by Income Tax much more generously and much more justly than they are doing at the present time. The right hon. Gentleman and his Tory predecessors in the last few years have reduced the Income Tax by £120,000,000 a year. Tens of millions of that are received by the recipients of War Loan interest. Everybody is to make sacrifices, says the right hon. Gentleman. Everybody! But it is really only the working people who have to make sacrifices, and they have to do it for the benefit of the Super-tax payer. The right hon. Gentleman is robbing the Unemployment Fund and the National Health Insurance Fund by a sum the mean of which is just about equal to the sum that he handed over to the Super-Tax payers last year.

There is no economy in this Bill. I hope that hon. Members opposite will enjoy their dinners this evening, contemplating the relief, the mitigation of taxation, which has been offered to them in the speech of the Chancellor of the Exchequer to-day. On his own admission, there is no reduction of expenditure, but a transference of existing burdens to the local authorities, an increase of local rates, and no, mitigation of the burden of taxation borne by his friends. We ask the House to reject the Bill. In the whole history of Parliament, there has never been put before the House of Commons a more grotesque proposal.

Mr. CHURCHILL

"Dastardly."

Mr. SNOWDEN

The right hon. Gentleman has been in labour for 12 months, and he has brought forth this abortion. It is not even worthy of the maternity benefit.

Mr. ERSKINErose—

Mr. SNOWDEN

If the Chancellor of the Exchequer had taken the advice and sought the help of the hon. Member for St. George's, Westminster (Mr. Erskine), who, I believe, is a great authority on such matters as birth control and on the determination of sex, he might have produced a more creditable offspring. I ask the House to reject the Bill, and I do so because no more dastardly, contemptible, and, at the same time, ridiculous proposal has ever been submitted to this House.

Sir JOHN SIMON

We have listened to two very elaborate, eloquent, and, in parts, amusing speeches. I propose for a few minutes to take one or two points, not in any language of rhetoric, but in an endeavour to bring the House back to one or two practical questions which I am sure are pressing upon some of the interests touched by this Bill, as to which I think they will hardly receive much comfort from reading in the papers tomorrow either that the Chancellor of the Exchequer has been very amusing, or that a great deal of eloquence has been displayed. The first Clause of the Bill appears to me to be a perfectly deliberate attempt to go back on a Parliamentary pledge. There may conceivably be some circumstances when that might be justified, but it needs very plain and convincing argument to show that it is justified. It cannot be a justification for going back on a Parliamentary pledge, that the performances of the Chancellor of the Exchequer are so ludicrously different from his confident anticipations. There was a Parliamentary pledge to which the Chancellor of the Exchequer was a party, to which my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) was a party and with which in a minor capacity, I had something to do, when the National Health Insurance Act of 1911 was passed. When I heard the Chancellor of the Exchequer introduce this Bill in a few carefully chosen emphatic phrases about Clauses 1, 2, 3, and 4, and then treat us to a general disquisition on the difficulties of national economy, I know him well enough, and I know enough about advocacy to know that the reason he says so little about the Bill and so much about other things is because the actual proposals of the Bill will not really bear reasonable justification.

Let me put the position as it seems to me. When one reads the first Clause of the Bill, and takes the trouble to look at the different Sections to which it refers, and then one turns to the Report of the Government Actuary, it is clear that this is a proposal to change the law of National Health Insurance, with the result, as it is anticipated, that the State in the year coming will be required to find less by£2,800,000 than in the present year it would have to find. One, therefore, needs, and I think every hon. Member needs, to say this, "Can you justify that reduction in the State contribution?" Before one can answer that question, one has to ask oneself how came it that there was a State contribution, and was the arrangement that there should be a State contribution the result of a bargain? There was a State contribution because when National Health Insurance was started and a certain scale of benefit was enacted—sick benefit, maternity benefit, disablement benefit, and so forth—the whole scheme depended on this: that as to the money needed for benefits and administration, seven-ninths would be provided by the con- tributors, whether employers or employed, and two-ninths would be provided by the State.

Here is a Bill which, to try to meet the Chancellor of the Exchequer's extremity, proposes to strike out two-ninths, and to substitute for it a smaller fraction. However eloquent and interesting the Chancellor of the Exchequer may be, has he really offered to the House any justification for that action? He began by saying that in 1911, when the approved societies were counting on the British taxpayer finding two-ninths of the sum that would be, needed in order to pay benefits, the rate of interest that could be earned on money was less than it is to-day, and, therefore we are given to understand by the Chancellor of the Exchequer that gives him reason for cutting down the contributions. Let us examine that position. In the first place, as everybody knows, and as the Chancellor of the Exchequer knows, this two-ninths is not a sum of money which is handed over in advance by the State to the societies, in order that the societies in their turn may do this and that with it years afterwards. It was one of the essential principles of national health insurance that it would he absurd for the State to hand money over in order that it might come back again. The truth is the State does not actually provide its contribution until the expenditure comes to be met. If in any given year, in reference to any given case,£9 is needed,£7 of the£9 will be provided from the contributions of employers and employed and the other£2 is not something which the State provided long ago; it is something which the State provides now, and it is not true, therefore, that changes in the rate of interest have anything whatever to do with the subject of this Parliamentary bargain.

In the second place, the Chancellor of the Exchequer suggested that one of the Sections of the Widows' and Orphans' Pension Act of 1925 afforded him an excuse. What a curious time to have found that out. If it was the case, when the Minister of Health was carrying this Act through the House, that one of its results was to relieve the State from a liability to the approved societies under the National Health Insurance scheme which would justify the cutting down of the State contribution, what a pity it is that someone did not say so then. It is curious it should be found out not in connection with an examination of the finances of old age pensions, but long afterwards when the Chancellor of the Exchequer has utterly failed to fulfil his confident predictions and when, as he says, he is scraping in any corner he can find for something in order to make his Budget balance. The argument is without any foundation. If I follow it rightly, it seems to stand like this. When national health insurance was established it was contemplated it would bring in people between the ages of 16 and 70.

It is quite true that the Widows' and Orphans' Pensions Act and the reduction of the age in the future for old age pensions has made it probable, nay has made it certain, that a great many people will not be required to get their health insurance benefits after the age of 65, although formerly they may have had them until the age of 70. That is true, but inasmuch as the State does not actually hand over money for benefits in advance, but only provides the money for benefit as and when it is needed, the only result is that the State will not have to provide money for people when they reach the age of 65, and to a certain extent will be saved in the amount it might otherwise have to find. This advantage is the automatic consequence of carrying the Widows' and Orphans' Pensions Act, but it is not a justification for cutting down the statutory contribution as and when it is required. The result of carrying the Widows' and Orphans' Pensions Act, I agree, will be that a number of old people in the community will not be calling upon their Approved Societies in old age for benefits which they might otherwise get, andpro tantoit means that the contributories will not have to find so much, and the State will not have to find so much; but, as it appears to me, that is no justification whatever for saying in this Bill that you are going to cut down the fraction of two-ninths to something smaller and something different. Whether I am right or wrong, it is a matter about which we are entitled to have information from the Chancellor of the Exchequer, and it is no sort of consolation to those who are interested in national health insurance to be favoured with a disquisition, however forcible and wide-reaching, as a kind of preliminary edition of the Budget statement.

There is another aspect of the matter. Everybody who has paid any attention to this subject—I was one of the Ministry who helped to carry it through—knows that when we started National Health insurance in 1911 or 1912 the scheme was one which was to give benefits, in response for a fiat contribution, to people who were, of course, of a very wide range of ages. There were some people who were to contribute at the age of 17, and would go on paying contributions during the whole of their working life. Therefore, such a person as that was an entrant at the age of 16, and was a person who would have made an immense number of contributions, his employer would also have made an immense number of contributions, and in his case, therefore, the scheme would be at once and completely actuarily sound. On the other hand, there were a great many people who were new entrants at the beginning of the scheme who had lived 30 and 40 years of their life, and, therefore, unless special provisions were made in the form of reserve values, you would have to get these people to pay bigger contributions or give them smaller benefits—neither of which arrangements would have been satisfactory—or else, as the only other possible way of doing it, you would have to begin by contenting yourself with benefits which really did not represent the whole 9d. but represented in the case of the younger people not more than 7d. or less than that.

That was always understood in the scheme, and what was said— I remember the Debates perfectly well—was this: It is quite true that the contribution which you are calling for to begin with seems a large contribution: it is quite true that for the younger members of the Fund you will he able to do more for them with this contribution than you are doing; you will be able to give the benefits under the scheme with a smaller contribution, but if you want to start this scheme with a flat benefit and a flat contribution for old and young alike, you must, for a period of years, calculated at one time at 15 years and at another time at 18 years, be content with benefits which are not really as a matter of fact absorbing the whole Fund; you must keep a certain portion of the Fund in order to provide a reserve value for the older entrants. That will work out in the course of a generation or less, after which the societies will have this advantage: it will be possible for them to give bigger benefits, or additional benefits, or reduce the contributions of their members, or otherwise adjust the scheme.

But see what has happened. The scheme was set on foot in 1912, and these reserve values in respect of the older entrants were distributed to this society and that. They would not have taken these older people if they had not had these reserves values with them. All this time the benefits for the younger people have been less than their contributions would justify, but all that was none the less to be defended if you had a national scheme on a flat benefit with a fiat contribution for all ages. Now this first generation has exhausted itself. The Approved Societies were told that if they accepted, these older members as original entrants with their reserve values a time would come in the course of 15, 16 or 17 years when it would be possible for them out of the accumulated reserves, once the first strain on the Fund had been exhausted, to increase the benefits and pay additional benefits to their members if they administered their society well. That was part of the original scheme. I have looked up the Debate, and I have here one quotation which shows this clearly. The then Attorney-General, my colleague, the present Lord Reading, on the Second Reading of the Bill said: Those who are managing the society, as well as the members of the society, have every interest in administering well, because to those members the society will give the additional benefits which may be payable out of the surplus attributable to mat particular society."—[OFFICIAL REPORT, 25th May, 1911; col. 452, Vol. 26.] The whole scheme has gone on that basis ever since, and if we put it in plain English you are not here interfering with the original statutory benefits—I do not suggest that—but the real effect of Clause 1 of this Bill is to postpone the day when the Fund will be in a condition to contribute these additional benefits. That is the plain English of the position; and what is the good of coming to the House of Commons and giving a lecture, fascinating as it was, on the difficulties of economy and the general position of British finance if, in truth, what you are doing is to break a perfectly plain Parliamentary pledge to which the Chancellor of the Exchequer himself as a Member of the Government at that time was a party. One must not speak on these matters with complete confidence, because they are so complicated, but, subject to correction, as I understand it, that is the effect of what is here proposed, and I say that the first Clause is one which is contrary to the whole basis on which national health insurance was founded, as it deprives the scheme of the contribution which the State as a partner in the enterprise promised to make. The result of that is that you are postponing the day when the reserve values originally provided will be no longer needed, because the Whole population will have passed its life under the head of national insurance as far as the workers are concerned. You are doing that and putting forward reasons to defend it which have no logical foundation whatever. I have not the faintest idea why it should be supposed that because the State is relieved from having to meet claims when certain numbers of persons reach the age of 65 under the head of national health insurance it is any justification for cutting out the fraction of two-ninths and substituting a smaller figure.

As for the argument that the funds of the societies were invested at a time when investments may have brought in three per cent. whereas now they may earn four per cent. and five per cent., the Chancellor of the Exchequer has been lecturing us this afternoon about the folly and iniquity of repudiating the National Debt. He has been pointing out that it would be most inequitable as well as a most foolish thing to say to people who hold a particular form of investment that although they might be entitled to such and such a rate of interest, you propose to reduce it by Statute. What on earth is he doing here except exactly the same thing, with this difference, that he is not doing it to persons who are holding blocks of Governmental securities but to a class of people who are, speaking generally, of a much humbler order. I am quite unable to see how the arguments of the Chancellor of the Exchequer have anything to do with the point. Until some explanation is offered which shows why these considerations are wrong, I shall continue to think that this really is a proposal to break a Parliamentary pledge, to go back on a bargain which was struck at the time on the faith of which National Insurance was carried through and established in the country, and that, not in the least because these things are justified in the realm of good sense or fair play, but simply because the Chancellor of the Exchequer is at his wit's end to find another million or two.

Take Unemployment Insurance, a subject about which I am willing to admit that I am better informed than about Health Insurance, because I did have, in the old days, a direct responsibility for carrying the Bill and dealing with its details. I always understood that the basis of the scheme of Unemployment Insurance really was that the employer and the employed should make equal contributions. It was so in the original Bill and it has been so in mast a the Bills since. Quite recently, in view of a temporary emergency, there was an increase in the employer's contribution of a penny compared with that of the man. At present, the employers pay a penny a week more than the men. When that was done it was done on the most distinct assurance and assertion that it would be the first object of Parliament to get the two halves of the contribution equal again as soon as possible. That was the thing which was aimed at as the principal object of the Bill. You can see it quite well in the actual language of the Act which was passed only last year. The Act of 1925 continued this inequality, but it contained, as far as any Act of Parliament can, a formal Statutory statement that this was intended to be quite temporary. Section 4, Sub-section (1, d), provides (d) If at any time during the extended period the amount of the outstanding advances, together with interest accrued thereon, does not exceed the amount of the 1925 debt, and the Minister is of opinion, and the Treasury concur therein, that, having regard to all the circumstances of the case, the amount of the advances which will at any time during the next succeeding insurance year be outstanding, together with interest accrued thereon, is not likely to exceed the amount of the 1925 debt "— Then what?— the Minister may in respect of contributions payable for that next succeeding insurance year by Regulations reduce the rate of the contribution payable by the employer by one penny in the case of the contribution payable in respect of a man or a woman and by one halfpenny in the case of the contribution payable in respect of any other person. Indeed, when that was carried, the colleague of the Chancellor of the Exchequer, the present Minister of Labour, in explaining the object of the whole thing, said in July of last year: The principle of equality" (between employer and employed) "has been accepted" (by someone opposite). "It is in harmony with the principle of the Bill, and really in harmony with the principles laid down by the hon. and gallant Member, that both sides should be treated on a parity, and that they should be equal. For that reason I hope the arrangement of the Bill will he allowed to stand. I am not in the least accustomed in this House, or out of it, to suggest that people in one part of the House are solely interested in the employer and that there are others who are solely interested in the employed. I do not believe it is true. But this is only in the first instance an employer's grievance, because it ultimately reacts on the community as a whole. If it is true, as the Chancellor of the Exchequer led us to suppose, that the fortunes of this Unemployment Insurance Fund are going to improve, it is perfectly certain that the first object which ought to be carried out as a consequence of that improvement is to reduce the employer's contribution by that penny. Instead of that, the Chancellor of the Exchequer says, "Oh, let the employer go on paying his penny, and then in the sacred name of economy I will raid the Fund and balance my Budget." It is the Chancellor of the Exchequer who says that we must always try to regard these financial questions from the broad national point of view, and must not put either special burdens or special favours in the way of some particular class. How much economy is there in telling the employers of the country that they must continue to pay and stamp cards for a larger weekly sum than they ought to pay, and which they are quite certain to see is a sacrifice shared between them and the trade, and then at the same time say that you are relieving the burdens on industry because, forsooth, of a Bill in favour of economy? It is a perfectly grotesque position. Again, I am not in the least surprised that the Chancellor of the Exchequer spent the minimum time in referring to it to-day, and talked for an hour about the principles of national finance.

When one comes to the third member of this trinity, the difficulty of avoiding using the sort of language which the Chancellor of the Exchequer suggested in advance, becomes almost overwhelming. The Minister of Education, I say boldly, at the bidding of the Chancellor of the Exchequer and because the Chancellor of the Exchequer was telling the Cabinet that otherwise he could not see how to introduce his Budget as he wished this year— the Minister of Education produced his Circular 1371. It raised a storm, not only on one side of the House, but in all quarters of the country where the interests of education are regarded as a thing that cannot be jeopardised because of the embarrassment of a Chancellor of the Exchequer. It raised a storm. The Noble Lord (Lord E. Percy) for some time attempted to defend this instrument. There was not a single syllable in Circular 1371 about efficiency in education. It was not an education circular; it was an attempt to cut down the amount which the State might have to provide for education, not in the interests of education but in the interests of economy. If it could have been said that it was going to secure that we spend less by getting better service, by getting more efficient results, there would have been a great deal to be said for it. But there was not one syllable in the Circular which suggested anything of the kind.

There was a second Debate about the Circular, in which I happened to take some part. The Noble Lord, I will not say defended it, because it was not quite clear to me how much of the Circular he regarded as remaining and how much had already begun to evaporate and disappear, but at any rate within the last few days it has been quite evident that the Noble Lord abandons and cancels his Circular in terms, and he says so. The reason why he says so is that in one of the Clauses of this Bill is to be found a proposal which in principle is exactly the same. I congratulate the Noble Lord on one thing. This time, at any rate, he has made apparent what was not clear at all, that this is not education, but that it is the Chancellor of the Exchequer who is doing this. At any rate, the Noble Lord has succeeded in throwing on someone else the burden of justifying it. What is the proposal? It is a proposal to give the Board of Education, and the Minister as the head of the Board, a much larger discretion in refusing or vetoing expenditure even under approved heads than he ever had before. The Noble Lord has a history and a past about this. He made a speech on the Economy Bill in this House in 1922, and I rather think that on that occasion he had something to say on this exact subject. Let me read his words in the Debate on 10th July, 1922. He said The gravamen of the charge against the Government is that under this Bill the Home Secretary, the Minister of Health, and the Minister of Education take into their hands complete power to make economies where they can make them, and to regulate as they like the grants to local authorities. That is, undoubtedly, putting into the hands of those Ministers a power which this House, in ordinary circumstances, would be very reluctant to grant."—[OFFICIAL REPORT, 10th July, 1922; col. 979, Vol. 156.]

The MINISTER of EDUCATION (Lord Eustace Percy)

Read on.

Sir J. SIMON

I am sorry that I cannot. Is there something more?

Lord E. PERCY

My recollection is that I proceeded to say that I was in favour of the proposal.

Sir J. SIMON

If I had the quotation I would read it immediately. The Noble Lord may be in favour of the proposal, but the question is how many other educationists favour it. We know that the Ministry of Education, under the present dispensation, is squeezable in the matter of reductions when some other Departments are very much more difficult to squeeze. We know that the Noble Lord was prepared to put forward Circular 1371 and Memorandum 44. We suspect that, although he put them forth, the influence which really brought them about was the influence of the Treasury. I doubt very much whether educationists of any school will think that it is a very good plan. The Noble Lord, I am afraid, has found himself rather constrained to put forward proposals in the interests of reduced expenditure rather than of education. I do not think it in the least follows that the Noble Lord ought to be given a free hand in these matters. I adopt as my own argument the comment made by the Noble Lord two years ago, though he now says that on that occasion he actually agreed with the proposal.

Lord E. PERCY

As far as I remember.

Sir J. SIMON

I shall have something to say to the one who gave me that quotation if there was any such statement in the next sentence. The Chancellor of the Exchequer who, a year ago, told us so confidently that he saw no reason why we should not be able to get a reduction of£10,000,000 a year in the supply services, year after year, after, I am sure, straining every nerve and using all of his powers and ingenuity and eloquence, ultimately lands us with this wretched little Bill. The first Clause, which proposes to raid or to reduce the State contribution for National Health Insurance, is a thing without the smallest justification on any of the grounds that the Chancellor of the Exchequer gave. It is, in fact, departing from a bargain on the strength of which the whole scheme of National Health Insurance was set up. It is postponing the time when additional benefits might be given. It is quite true that it is not invading the original statutory benefits, and there is really no ground for any of the reasons that the Chancellor of the Exchequer gave.

As regards unemployment insurance, it is a raid on a Fund which only eight months ago was declared by the Chancellor of the Exchequer's colleague to be earmarked, in the first instance, for another purpose. As regards education, it is an attempt to revive in a different form, under the championship of the Chancellor of the Exchequer, the proposals which the President of the Board of Education was induced, first, to put forward over his own name, and which only two or three days ago he declared to be officially dead. My submission is that, while the Chancellor of the Exchequer may be quite right in pointing out how difficult it is to fulfil his cheerful anticipation of a reduction of £10,000,00 a year, the fact that it is so difficult and the fact that you may analyse an expenditure of£800,000,000 so interestingly as the right hon. Gentleman has done to-day, supply no reason on earth why you should break faith with the approved societies, misuse the Unemployment Insurance Fund and announce a definite—or, what is still worse, an indefinite—setback in the educational policy of this country.

Mr. DUFF COOPER

About a year ago the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) de- fined a peroration as that portion of a speech in which a speaker said things that he could not prove. Every peroration made by the right hon. Gentleman since that occasion has been designed, I think, to prove the truth of his own definition. This afternoon, however, he did not confine himself to his peroration but loaded his speech with statements which he could not prove. He indulged, as we all expected he would indulge, in the bitter words which he is always so ready to produce and, if I may say so, he did harm to the case which he was endeavouring to present—did harm to the cause of the attack upon this Bill—by over-representation. When he speaks about the absolute ignorance of the elementary principles of finance as being demonstrated in a Bill which has been produced, not solely by the Chancellor of the Exchequer but by the Cabinet and the Treasury officials and which is a serious and sensible effort to diminish our national expenditure, though it may provoke a thoughtless cheer and often a still more thoughtless and vacant laugh from his own supporters, in the long run it does more harm than good to the cause which he is endeavouring to advance. He said the Chancellor of the Exchequer had foretold the kind of speech he was going to make and had displayed a power of eloquence and vituperation which he himself did not possess. So far as the eloquence is concerned I am prepared to agree with the right hon. Gentleman, but so far as the vituperation is concerned, I think the right bon. Gentleman stands in a class by himself.

He attacked this Bill as one which was designed to take money from the sick, the unemployed and the children. He did not prove that it would take one single penny from one single sick person or from one single unemployed man or woman, or that it would do any harm in any way to the cause of education. He gave us no other proposals of any value to put in its place. He harked back to the capital levy, and I was glad to hear of it again. I was beginning to wonder whether or not hon. Members opposite had forgotten all about the capital levy. The right hon. Gentleman says if only we had had a capital levy all these difficulties would have been avoided. Why did he refrain from saying a word about it at the last General Election? Had he and his party been returned to power at the last General Election, they would have had no mandate whatever to bring in a capital levy. However, I do not want to do the right hon. Gentleman any injustice. He or his party have produced their Economy Bill. We, to-day have presented our Economy Bill which saves the State£8,000,000 a year, A little more than 10 days ago, the party opposite produced what was described by the hon. Member who introduced the Bill from the Front Opposition Bench as the Labour party's Economy Bill. What did it do? It set up a new Government department, and gave that department£10,000,000 a year to spend on anything it could think of. That is their idea of economy—to create more officials, to give them money in the hope that they may find some way of spending it, and in case the department could not find any way of spending the money they inserted a clause enabling the Minister of Labour to invest the unexpended balance. If ever a Bill exhibited complete and fundamental ignorance of the elementary principles of finance it was that Bill, for which the right hon. Gentleman the Member for Colne Valley voted 12 days ago.

Mr. WALLHEAD

Now what about this Bill?

Mr. DUFF COOPER

Yes, I will now deal with this Bill and take its principal Clauses one by one. The principal Clauses are three in number. The right hon. Gentleman the Member for Spen Valley (Sir J Simon) dealt at some length with the question of national health insurance and his first ground for abjection to this Clause of the present Bill was that it involved a breach of a Parliamentary pledge. I am not much moved by that argument. In the first place it was a pledge given by a Parliament of which very few people here were Members. It was a pledge given by the last Liberal Government, of which the right hon. and learned Gentleman was a member, a pledge given by a Government that did not command a very large majority and a Government which was in charge of a Bill which was bitterly attacked. It should be a lesson, I think, to Governments that they cannot pledge their successors for all time. Surely, it is against every principle of Parliamentary and constitutional Government that because a party for a short time commands a majority in this House, they can therefore give a pledge which no other party can ever break in all history. The right hon. and Learned Gentleman went on to argue ingeniously that the justification which the Chancellor had given for this Clause was not sound because he said the demand on the State from the people who are now safeguarded by the new Pensions Act would not be made on the State, owing to the fact that they were getting widows' pensions an therefore the State was automatically reaping the benefit. I think that was the argument. Surely, if we follow that argument it leads to this conclusion—that a demand is not going to be made either on the State or on the fund and the fund is therefore, also going to benefit.

Sir J. SIMON

The State pays when the benefit has to be paid. If the benefit has not to be paid, of course, the State does not pay.

Mr. DUFF COOPER

The State does not pay the whole of the benefit coming from National Health Insurance. The fund will also benefit and that fund which is already swollen beyond all expectations, which is already enormous, will benefit still further by an Act introduced by this Government. The contention is that the State which has produced this Act, under which the National Health Insurance Fund is going to benefit, is entitled to reap some further benefit from that and to reduce its contributions to the fund. I sometimes think that hon. Gentlemen opposite above the Gangway are very poor Socialists. They seem to have a rooted affection for vested interests and for allocated funds. The idea that any fund which has ever been devoted to one object should be turned into a different channel for the benefit of the State in general, seems to shock them—although in my opinion that is one of the more sensible principles of Socialism.

The next principal Clause of this Bill deals with the Unemployment Fund. Can it be argued that a single unemployed man or women is going to suffer by it? [HON. MEMBERS: "Yes!"] No, they will not suffer but will continue to reap exactly the same benefits as they reaped before. [HON. MEMBERS: "You are shoving them off!"] No, hon. Members say we are turning them off under the Unemployment Insurance Act, but we are not debating that Measure to-day. Under this Bill no harm will be done to a single unemployed person. As has been argued by the right hon. and learned Gentleman, the only people who will be the sufferers to a certain extent will be the employers—those wicked, cruel, tyrannical employers, those whom hon. Members opposite, when it suits their book, are apt to hold up to public ignominy as the cause of all evil, and for whom they are so anxious to substitute State officials. These are the people who, it may be, are going to suffer to a certain extent but really it is too much for hon. Gentlemen opposite to come down to the House one day as protagonists of the employés and the next day as defenders of the wronged and slighted employers.

In regard to the proposals on education, there are two contained in Clause 14. The first paragraph of that Clause is the one upon which the right hon. and learned Gentleman has dilated. That proposal is merely one to define the existing vague position. I may say, with all due respect to my Noble Friend the President of the Board of Education, that if there is one thing which we desire mare than another in education at the present time, it is to know where we are and to be spared the confusion which at present exists in that Department. As a contribution to defining the position and making it clear to everybody, I welcome that part of the Clause. I would also point out that the Bill does not anticipate that any economy is going to be effected under it. In the Estimate nothing is allocated to that part of the Clause whatever. If, on the other hand, in the days to come we were to find a Government taking advantage of that Clause to introduce Measures of which all educationists would disapprove, then I think we could rely upon the strength of opinion in this country in favour of education to look after the interests of education. The remaining part of the Clause, under which£70,000 a year is going to be saved to the State, has not been attacked by any of the previous speakers, and it seems to me an obviously sound, sensible and just provision, that money which is being given to certain authorities for certain purposes ought not to be given to those authorities unless they use it for those purposes. That, surely, is just. If people are progressive and are at present building training colleges and spending money for the purposes for which it was voted, they should not be penalised for the benefit of those who are taking no action in the matter but are availing themselves of the energy and progressive spirit of their neighbours, are sending their own teachers to those colleges, and, all the same, are taking the money and spending it just as they like. That seems to me an essentially sound economy in the right direction.

So far as all the other parts of the Bill are concerned, I can find very little to criticise. The importance of economy at the present time cannot in my opinion be over-estimated. We are all ready, at all times, to give lip service to the general principle of economy, but when one single practical economical proposal is brought forward, immediately the voices of criticism become innumerable, and the voices of praise are silent. More and more as education progresses and as the power of the Press increases—as it must do under a system of increased education —Governments are apt to be reduced to court popularity to a greater and greater extent. We all know that in private life the man who is careful of his money and spends sparingly, is not a popular or attractive person, and we all know that the spendthrift has about him a, glamour which the strongest-minded cannot always resist. It is unfortunately true of human nature. No one will deny that the saving man is a better citizen, but nobody gives his admiration and friendship so readily to the sparing, the careful or the miserly, as he does to the spendthrift. Every proposal a Government brings forward now is subject to a tremendous volume of public opinion, and every Government has more and more to court that public opinion and more and more to hope for that glamour which attaches to the spending rather than the saving man or Government, so that the incentives to saving are becoming less and less, and the incentives to spending are becoming greater and greater.

7.0 P.M.

It is so easy always to make out a case for the Government spending a little money. You have got a good ease, a sound case, a case of hardship where real good could be done by a comparatively small expenditure. "A few hundreds of thousands of pounds, or a few millions pounds—what is it out of £800,000,000," you say. You can always argue that case. A man who puts his hands in his pocket and says, "we cannot afford it," is taking up such an unpopular and detestable line. Unless more and more people are prepared to take that line and to back the Government in taking up that line, we are heading for national bankruptcy. At the present time, it. is suggested we should spend less on the fighting Forces. This Bill is only part of the Government's economy proposals. They are saving£4,000,000, half as much again as is envisaged in this Bill on the Army and Navy in the present year. No real substantial drastic saving on armaments is ever going to be effected until you have a successful Disarmament Conference, and you are never going to have a successful Disarmament Conference until you get behind it the spirit of good will and peace in general throughout Europe for which some of us are working so hard, Although the right hon. Gentleman the Member for Coins Valley is no longer here, nobody is a greater enemy of that spirit in this country to-day. Ten days ago he was reported to have said in an interview that the question of the effect upon the negotiations at Geneva of the fall of the French Government—

Miss WILKINSON

On a point of Order. Are the negotiations in Geneva included in the Economy Bill?

Mr. SPEAKER

Certainly not. It is not right in this Debate to divert to that question. There seems to be enough in the Bill.

Mr. DUFF COOPER

The argument was—if the hon. Member had been listening, she would have followed me—that to get real economy you must get disarmament. To get disarmament you must get peace in Europe. And just as the real solution of the unemployment question depends on peace in Europe and settled conditions throughout the world, so does economy depend on peace in Europe and settled conditions throughout the world. The right hon. Gentleman the Member for Colne Valley, who so bitterly attacked this Bill, has within the last few days, I was going to tell the House, by words which he should have restrained, done much to injure that cause in which so many of us believe. He said on that occasion, when asked what the effect of the French Government's fall would be on Geneva, that it did not matter what Government was in power in France there would always be French conspirators at Geneva. That sort of statement if it had been made by a back bench Member or by an anonymous journalist would be deplorable, but made by an eminent statesman, a representative statesman of this country, it constituted nothing less than an outrage on international decency.

I would implore the right hon. Gentleman to keep those taunts and gibes and bitter sayings of which he is such a master, and reserve them for the House of Commons, and not broadcast them throughout Europe, where they can do irremediable harm. We who believe that you can make far greater economies in the fighting Services in the times to come if you get that new spirit working throughout Europe, none the less welcome this Bill as a first instalment, as a step in the right direction, as a day's march on the right road. We are grateful to the Chancellor of the Exchequer for having introduced it, and we would encourage him to continue upon that narrow, difficult, and unpopular path to that desirable goal.

Mr. COVE

I join with the previous speaker in saying that there is need to clear up the confusion which seems to exist as far as the policy of the Minister of Education is concerned. Undoubtedly, the continued changing of policy, the issuing of this circular and that memorandum, the withdrawing of that circular and this memorandum, and then following with a Bill of this kind, does not clear up the confusion at all, but makes it worse than ever it was before. There is in this Clause, so far as education is concerned, no certainty for the authorities up and down the country. One of the great needs of the moment is that educationists should know exactly what revenue they are to receive from the Exchequer. At the moment, they are not certain. There is confusion, and this Clause will make the financial position of the authorities even more uncertain than at the present moment. This is followed by a great danger for the educational system of our country.

What have we in this Clause 14 as far as education is concerned? The proposal, in the first place, emphasises the existing powers of the Board of Education with regard to their approval of the expenditure of the local education authorities. Then it sets up three criteria. First, the Board is to say "We are going to take the circumstances of the area of the authority into consideration"; secondly, "We are going to take the general standard of expenditure of other authorities" arid, thirdly, "We are going to take into consideration the expenditure which unreasonably exceeds the Estimate." No one will quarrel at all with the third. We do not say on this side of the House, and I do not think any educationist would say, that grants should be paid on expenditure which is greatly in excess of the Estimates. But we do object to the second part of this. The second part says that "We will take the general standard of expenditure of other authorities into consideration." That, if applied by the President of the Board of Education and by a Government or by a Chancellor of the Exchequer who is reactionary, will mean simply that progressive educational authorities are to be held back to the level of the reactionary authorities.

Let us take an authority which is interested in expenditure upon health services. A progressive authority has said, "We desire to develop our health services." Surrounding authorities will not give health services to that extent. As I see it, the President of the Board of Education would be able, under this Clause, to say: "My general level of expenditure, as far as health services are concerned, is the level of expenditure of those authorities that have not developed health services, and you as a progressive authority must lower your expenditure to the general level of those reactionary authorities." Take the question of staffing. An authority has been liberal in its expenditure on staffing. It has had better qualified teachers; certificated teachers have taken the place of teachers who were not certificated. Classes have been reduced in size. It was all to the benefit, and it was under the guidance and inspiration of the Board of Education. This Clause, as far as staffing is concerned, gives the President of the Board of Education power to take as his standard the reactionary authorities. If we take any of the items of expenditure on education, we shall find that this provision in the middle of this Clause gives the Board of Education—and not so much the Board of Education as the Treasury— power to hold back educational expenditure throughout this country as far as those authorities with progressive intentions are concerned. I think that this Clause will need careful watching and careful safeguarding.

We take the same attitude towards this Clause as the President of the Board did in his speech which the right hon. and learned Gentleman the Member for Spen Valley (Sir J. Simon) quoted this afternoon. I quite admit that the President of the Board in his speeches can prove that he said almost anything. It is quite possible to take out of his Circulars certain clauses and certain phrases which appear to support educational progress. It is quite true that even out of his answers in the House of Commons a number of various meanings might be taken. It is quite true in a particular speech he might approve one position which is diametrically opposed to another position. The fact remains that he did not vote against that Bill—not, as I take it from the speech, so much that he was opposed to its provisions, but that the vote at that time would have been a vote of censure on the Government. He ended up his speech by saying that "any vote on this Bill on the Second Reading will not on this particular provision, but will be a vote of confidence or a want of confidence in the particular Ministers and the Government as a whole who will have to administer this Act. On that ground, I do not think there is anything we can do, except support, the Second Reading of this Bill. In two other parts of his speech, I think it is reasonable to infer that he was opposed to rationing. After opposing rationing, he went on to talk about the power of the Board, not merely to cut down expenditure which had been approved, but even to alter in the middle of the year programmes which had already been agreed to by the President of the Board. "You," said the right hon.

Gentleman, speaking to Mr. Fisher, who was then the President of the Board, "will have powers under this Economy Provisions Bill, absolutely to break through even the contracts with authorities up and down the country." Mr. Fisher then intervened, and said, "I have that power now."

Lord E. PERCY

Hear, hear!

Mr. COVE

What did the right hon. Gentleman say in reply? The president of the Board of Education intervened to say that the appalling powers which I have mentioned are in his hands at present. This Bill as now brought forward gives more appalling powers than were provided in that Bill. The provisions were definitely headed, as far as that Bill was concerned, as being temporary. They would pass away, The percentage system of grants would remain in order that progressive local authorities might be assured of a definite percentage income. This Clause, coupled with the intentions of the Government, is worse than a temporary provision in the Economy Bill of 1922. Here you have a permanent provision. There is a long vista of oppression opened out before the educational system of our country. Not only is the percentage system of grant which was maintained before now gone, but you have besides the curtailment of the lump sum of expenditure on which the grant will be paid. As far as I am concerned, and I believe as far as the Members of my party are concerned I do not want to indulge in rhetoric this afternoon we regard this Clause as a breach of faith with the whole spirit and position that has animated the Board of Education in the past.

I am not one of those who put the fault merely on the Chancellor of the Exchequer. The responsibility is equally that of the President of the Board of Education, and it is useless for anyone to try to cover the right hon. Gentleman with the overmastering power of the Treasury and of the Chancellor of the Exchequer. He himself is in favour of this. He himself has instituted policy which means restriction and reaction as far as education is concerned. You cannot have improvements on education, after the starvation period of the War, with all the need for development, as far as the schools are concerned, and for new buildings, which the right hon. Gentleman has admitted, the reduction in the size of classes, and the extension of our secondary system, unless you are prepared to spend money. During the whole of the War period the educational system of our country was literally starved, and now the right hon. Gentleman comes along with a policy of which he seems to be heartily in favour, a policy of restriction of finance as far as educational services is concerned, a policy which has thrown confusion into the ranks of the local education authorities and has caused them to distrust the right hon. Gentleman and to watch him most carefully, a policy which in the end, as I have said before, will do more to overthrow this Government than almost any other single thing that they have done since they have come into office.

Mr. HARMSWORTH

Those of us who, since the War, have watched with great interest the efforts of the House of Commons to economise listened to the speech of the Chancellor of the Exchequer with perhaps a feeling that, although we hoped that through the years to come there would be a gradual decrease of expenditure, the only hope in front of us at the moment is that in the future we are, to look forward to a Budget of approximately £800,000,000, and that there is no possible means for hon. Members on any side of the House to endeavour not only to economise, but to put a future before trade and industry in which they can bear the burdens put upon them. There is no hon. Member who will get up and suggest that economy is not necessary or that a continuous reduction of expenditure is not necessary for the well-being of the country if we are to hope for prosperity and a revival of trade and industry in future. In what way can the House of Commons help the Government to economise? The speech of the Chancellor of the Exchequer was unquestionably a great oratorical triumph, but when it is read to-morrow morning I think it will leave hon. Members with a feeling that the economic position is even worse than it appeared before.

The hon. Member for Oldham (Mr. Duff Cooper) pointed out that so many hon. Members of this House, although in general desiring economies, have no wish to see them put into practice. Although they wish for economies on some par- ticular service which they have not themselves at heart, when it comes to their own particular form of expenditure which they have either been brought up to believe in or in which they consider their constituents are interested, immediately they say "No. Economise on any subject you like, but do not touch this one that is going to agitate me personally." If that be the line which hon. Members are going to take, if that be the line of the country as a whole and of its representatives, I cannot see how the country can hope for any form or kind of economy in the years to come. I think all hon. Members welcome this Bill, and although I listened with care to the speeches of the ex-Chancellor of the Exchequer and of other hon. Members on the benches opposite, I still feel that nothing has been said against this Bill. It is obvious to me that if the contributions from the Exchequer to these particular Insurance Funds happen to have landed the funds into a surplus, small or large, the Exchequer is entitled to take back that surplus and not allow any money to lie idle. This is not a day when we can allow a single penny of money to lie idle in any fund, and when it comes to a great number of millions of pounds lying idle in surplus funds, it is essential for the Chancellor to utilise it to some purpose, and whether it is done by reducing the contribution of the employer by a penny, or whether it is done to relieve the Chancellor of the Exchequer from imposing fresh taxation in the next Budget, it is obvious that the right hon. Gentleman is perfectly right in taking this surplus and utilising it for the Government purposes.

In going through this Bill very quickly, it seems to me that the real economies, apart from this taking of surpluses from funds, only amount to about£320,000. There appears to be£70,000 saved on education, and I think it is£250,000 on the registration of electors. In regard to advertisements on letters, that cannot be put as an economy. It may he an excellent proposal, it may be a means of collecting additional revenue. but it can never be put down as a direct saving or economy, and most of these proposals, not only of this Government but of all Governments since the reductions made by the Geddes Committee, have been far more in the direction of shelving some form of expenditure and putting it on the public in some other way than of actually reducing the current expenditure of the country. I have never heard from any hon. Member of this House, apart from those on the Government Benches, any real suggestion as to how these economies can be brought about, and it seems to me that you cannot hope to economise in one particular Department. I have always considered that the only possible way to get economy is not to tackle the question by economies in one or two Departments only. If you endeavour to economise on some social service, you immediately get hon. or right hon. Members from opposing benches rising in their places and saying: "Why do you take only the social services when you wish to economise? Why do you not take other Departments?" If you try to bring before this House at different times one piece of economy in one Department and another piece of economy in another Department, you will have hon. Members getting up and proving without a doubt that that particular form of expenditure is absolutely necessary for the well-being of the-country.

Gradually in this House, as Bill after Bill has passed since the days of the Coalition, you have had growing up a series of what are called essential services, which are apparently to be saddled on the taxpayers and the ratepayers of this country, in regard to which, if any economy is suggested one by one, we are immediately told: "You cannot touch this. It is an essential service, a service which must last for ever." It does not matter what the Income Tax is, nor what the trade figures of the country are, nor what is the condition of industry at the moment, this service, whether it be for armaments, for education, or for health, is absolutely essential for the well being of the country, and so, gradually, as Bill after Bill has passed through this House, you have got a series of vested interests growing up in the country outside which refuse to be done away with, and which will gradually grow far more powerful than hon. Members of this House. They are growing more powerful at the present moment than hon. Members of the House. You have vested interests in health, in education, in every single one of the national services, and I venture to suggest that these services gradually, through their power in the constituencies, through their organised power through different associations, can bring such pressure to bear upon individual Members of this House that even if a Government itself dares to, suggest an economy, the Members receive so many telegrams, letters, and deputations that they immediately say to the Chancellor of the Exchequer, "You cannot manage to economise in this way, for, if so, we shall lose our seats at the next general election."

If that be a fact, it is a very grave fact, far more grave than is realised at the present moment, because if democracy reaches a state of affairs where bureaucracy becomes greater than democracy, you are going to have a fight between these two powers, and either the bureaucracy wins, in which case it is little good our coming here and protesting against expenditure, or you are going to have, which I believe is still possible, a victory for this House over the bureaucracy. It is only possible if we endeavour, not to have a Geddes Committee, but to fortify, the Chancellor of the Exchequer to ration the Departments, not necessarily by the ordinary scheme of rationing, but by coming to a conclusion as to what it is possible for this country to spend and still be economically prosperous. Having discovered what is the possible amount of money that can be raised in this country without damaging trade, then let that money be divided in proportion amongst the different Departments.

It should not be possible for any Department to say to the Chancellor of the Exchequer: "We have got to have£50,000,000 or£60,000,000, because otherwise these essential services will not be able to be carried on." It should he possible for the right hon. Gentleman to say to that Department: "You can have£30,000,000 or£40,000,000, but you cannot have£50,000,000 or£60,000,000, because it is not in my power to raise it. If I do that, I shall be killing the goose that lays the golden eggs, I shall be damaging trade and industry, and the only result will be that I shall endanger the very services that you regard as essential and are trying to support." Those of us in this House who really believe in these matters believe absolutely that if the condition of this country remains as it is, if the wealth of this country does not rise in proportion to the amount that we spend annually and in proportion to the amount by which we are indebted, we shall have to see a very great reduction in the services of this country, in every single Department, including those which are regarded as essential, even such services as debt and pensions. Otherwise, the only result will be that progress, as understood not only by hon. Members opposite but by hon. Members all over the House, will be put back two or three generations.

It is useless for hon. Members opposite to imagine that progress can be carried on except in obedience to the laws of economy. It cannot be done. You cannot pay, and, after all, it is the power of money which provides all these things. It is only the rich businesses that can afford these social services that some of the great businesses have instituted. It is not the poor businesses that can afford to give their workers as much money as they would wish to give, and the various social services they would wish to give. It is only the rich businesses that can do that, and it is only the rich countries that can give their workers and their inhabitants the things which we all desire that every member of the population should have. It is only while this country is prosperous that these people can have these essential services, and they have got to be educated to realise that, unless this country by increased work and increased output manages to compete successfully against foreign countries, the standard of life will have to be lowered very considerably in this country, and many of the things that we consider essential will have to be turned overboard in order that this country may be put on a proper economic footing. It is useless to pension the people, to doctor the people, to educate the people, or to arm the people for defence, unless the economic position of this country is completely sound. If the position be not sound, the armaments you provide will be merely a mockery, and you will be educating the people to get used to things which will be rudely taken from them by the economic influences of the world.

Miss WILKINSON

It is rather interesting, in listening to the speeches that have been made from the Back Benches on the other side, to discover to what wide grounds the speakers have addressed themselves, and how they have managed to avoid coming down to the facts of the Bill. I congratulate the hon. Member for Oldham (Mr. Duff Cooper) and the hon. Member who has just sat down on their Oxford Union dexterity in avoiding the issues in this Bill. My chief objection to this Bill is its Title— "Economy (Miscellaneous Provisions) Bill."

Mr. CHURCHILL

"A rose by any other name—"

Miss WILKINSON

At any rate, it is well to be accurate when you are dealing with a law which has to be administered, and I suggest that a very much better title would be, "Economy (Transferred Burdens) Bill," because it is not that the money is actually saved; it is not that there is actually going to be less debt. What the Chancellor of the Exchequer has been concerned in, not merely in this Bill, but steadily in his policy ever since he took office, has been to see to what extent burdens which, over a long period now, have been growingly regarded as national charges, can be placed upon the local rates and upon the localities concerned. May I point out how thin works? Take, for instance, the provisions of this Bill relating to Unemployment Insurance.

The hon. Member for Oldham said that the policy with regard to unemployment insurance coming under the Insurance Act has no connection whatever with this Bill. He listened, if I may say so, very inattentively to the words of his own Chancellor of the Exchequer, because the Chancellor of the Exchequer made it perfectly clear that the reason why he felt it was possible to put into the Bill the provisions dealing with unemployment insurance, was because the Minister of Labour had been so successful in reducing the number of unemployed by that very Unemployment Insurance Act.. What does that mean?

May I take one instance? In the area of Middlesbrough which I represent in this House, it has been pointed out to me that since that Insurance Act came into operation, the actual increase of the amount paid in Poor Law relief is£1,000 a week. This is not an extravagant area so-called. It is an area which is paying its relief on the very bare scale now, and by the operation of the Insurance Act it is paying£1,000 more per week, that is to say, in order to make it possible for the Chancellor of the Exchequer to justify the fact that the unemployment situation has improved, and therefore he can reduce his grant under the Bill.

The Prime Minister this afternoon, in reply to a question in regard to the iron and steel areas, admitted that the position in those areas was extremely bad, and said he was sorry for those men who had been out of work for years. Yet, under the very provisions of that Act, these men are turned off unemployment insurance benefit, and, therefore, are part of the economies proposed under this Bill. What is going to be the effect? You turn off these men. They become a tremendous burden upon the local rates, and then, by the application of the block grant, you are going to make those areas, where distress is greatest, where the burden of unemployment is severe, the standard for the health services or for the education services in that area. The very poorest, those who are most heavily burdened with rates, will be the people who will decide how education or health is to be dealt with in that area.

Let me explain a little further what I mean. The President of the Board of Education will say to an area like this, "You are to have your block grants: you are to have your expenditure cut clown. On the other hand, you may take the fullest advantage of your economies." The temptation to that area, to cut down will be overwhelming. You cannot blame them. It is not only the unemployed themselves, but it is the small traders and shopkeepers and everybody who is dependent on trade in a town. Those are not the men who can take a broad, national view of education. Those are the very people who ought not to be the deciding factor as to how much is to be spent on education. Those are the people who ought to be helped to take a broad view of education. This opportunity is to be seized to cut clown the education grant. Then comes along the Minister of Health, and by this block-grant system they are to be encouraged to cut down health services. The Chancellor of the Exchequer himself said that you must not have inordinate expenditure, even if it may be wise expenditure. But it is in those very areas where health services are most needed. Not many of us here will forget a Debate which took place a little time ago over the question of the Durham miners, and how small-pox was increasing among those people whose vitality was sapped by low wages and poverty. It is in those distressed areas that the Government ought to be encouraging them to spend money on health, instead of offering every kind of inducement to reduce their health services. Is this economy?

We are going to find ourselves in a completely vicious circle. The local authorities have not got the means of raising money. They have an antiquated rating system. In fact, the rating system is antiquated to the last degree, which, I am sure, the Minister of Health will be the first to admit. We have seen £10,000,000, which is more than the amount to be saved by this Bill, given back last year as a free gift to the Super-tax payers of this country. That is a fact that ought to be rubbed in with salt to every Member on the other side. They speak as though we were demanding huge expenditure on schemes that do not matter. The hon. Member who spoke last said we could not even arm or educate our people if there were not money—that it would not be an economic position. But there is money in the country, and it is his class that has got, it, and it is his class that is taking very great care that its luxuries are not to be interfered with. Its Income Tax and even its Super-tax must be relieved. Then the Chancellor of the Exchequer has to cut down the health services, and the education services, and to turn out of unemployment benefit the very poorest men. The money is there, but it is now going to be raised by this antiquated rating system, instead of by the scientific taxation—national Income Tax and Super-tax.

I know hon. Gentlemen opposite sneer at it as "sob-stuff" when we point out the differences between the rich and the poor, but I would like to ask quite coldly, without any passionate peroration whatsoever, whether hon. Gentlemen on the other side who are well dowered with this world's goods can really justify in their own hearts voting for the£10,000,000 remission of Super-tax, and then go to areas, like I have to go in my own constituency, where men have been turned out of unemployment benefit when on the waiting period, when trying to get money from the guardians, and their children are crying for food. If this were a national emergency, if there really were not the money in the country, we might be prepared to support them. But can anybody go into the West End of London to-night, and say there is not the money in the country, when you see the amount of money that is being flaunted by the richer people of this Metropolis before people who are starving? You, in London, do not realise, as do we who come from the North, a whole area blasted by unemployment, because if you realised it, I do not think even hon. Gentlemen opposite could have regarded the remission of the Super-tax with such joy. It is really a desperately urgent question, and I would urge the Front Bench opposite to realise what they are doing in the name of economy, and to stop before it is too late.

Sir FREDRIC WISE

I do not propose to follow the hon. Lady the Member for East Middlesbrough (Miss Wilkinson), who, apparently, endeavoured to bring class hatred into the question. We all sympathise with the Middlesbrough unemployed, and I sincerely hope that the, reduction in the amount of Super-tax to which she referred will help them in some way to get employment. [HON MEMBERS: "How?"] I do not propose to follow her, but she may not realise that the hon. Member for Keighley (Mr. Lees-Smith), a Member of her own party the other day presented a Bill for the Prevention of Unemployment, and called it the "Labour party's Economy Bill,"

Mr. GRIFFITHS

For productive work.

Sir F. WISE

Yes, to increase expenditure by£ 10,000,000. Whatever may be said in criticism against the Bill with which we are dealing to-day, it does not increase expenditure, and if there is one thing this country must see to, it is that expenditure is reduced. I cannot help thinking that anybody who reads the Bill must agree that it is very complicated, and almost unintelligible to anybody who has not the various Acts to study, and does not look up the references which are contained in the Bill. I, like many back benchers on this side, stand by what appeared in His Majesty's Most Gracious Speech, in December, 1924, in which appeared the following paragraph: Economy in every sphere is imperative if we are to regain our industrial and commercial prosperity. We are pledged to that. I feel that these problems must be solved somehow. We talk a lot about economy. What is economy? My hon. Friend the Member for Bow and Bromley (Mr. Lansbury) would do away with the Army and the Navy. That would in a certain sense produce economy. To be certain of what economy is I looked up "Webster," and it is there defined as follows: To avoid all waste and extravagance, and apply money to the best purpose.

Mr. LANSBURY

Out of the£800,000,000 that we are expending, if it is reckoned up, it will be found that£530,000,000 of it has been spent on past wars and in preparing for future wars. I would economise in that direction. I do not think that money is spent properly.

Sir F. WISE

I am not certain where my hon. Friend gets the£530,000,000 from?

Mr. LANSBURY

There is£120,000,000, the cost of the Services, and there is£60,000,000 for war purposes.

Sir F. WISE

That is£180,000,000. But that point, Mr. Speaker, I will deal with in a minute or two. The main point is this: The Chancellor of the Exchequer divided his speech into two heads. In the one he asked a question, "Are these proposals right?" and in the other he asked, "Why are there not more?" I hope he will consider that I am endeavouring to be constructive in my criticism. I feel certainly that there are great difficulties in this matter of economy, but I must say one is disappointed when one listened to the right hon. Gentleman, especially in the second half of his speech. The right hon. Gentleman gave various figures and so on, but he had no suggestions or proposals so far as I could gather, and I want humbly to put certain suggestions before him which may be of help to him in the emergency.

The cost of running our country is£800,000.000 per year judging from the last three years. In pre-War days it was£200,000,000. Compare that with the United States of America, a continent which is nearly as big as Europe, and you will find they are spending there£700,000,000 a year. Why is it that ours is so much? We talk a lot about Germany Yet the German expenditure is£389,000,000 per year against our total of£800,000,000, showing that our expenditure is too large, and that we must at all costs have further reductions.

Mr. D. GRENFELL

That is owing to inflation.

Sir F. WISE

I quite agree with the hon. Member. The Chancellor of the Exchequer dealt with four subjects. One he called the obligatory services. That included the debt payments and pensions. I cannot quite see why he altered our ordinary method of showing our national finances. They are shown in the ordinary way as Consolidated Fund Services and Supply Services. He altered them into categories 1, 2, 3 and 4. Number 1 he called the obligatory, which included (1) debt and pensions, (2) grants, (3) self-supporting services, (4) national administration. Before I deal with that, let me refer to defence, which costs the nation this year£117,000,000. Before the War the figure was£81,000,000.

Captain BRASS

Yes, in pre-War times.

Sir F. WISE

In pre-War time, certainly. What I want to bring to the notice of the House is the enormous cost of the Defence Services in the seven years following the War against what they were in the seven years prior to the War. Previous to the War, when we had the menace of war hanging over us, the cost was in seven years£467,000,000, compared with the seven years following the Armistice of£1,580,000,000. We cannot afford to spend that amount; it is too much. I have heard, and I think Ministers have also said, that they do not anticipate another war for 10 years, and we sincerely hope there will be no war then. What, however, I want specially to draw the attention of the House to is what I call the Consolidated Services, and what the Chancellor of the Exchequer called the obligatory Services. That deals with the National Debt Services. The interest on our debt, leaving out the Sinking Fund, is£305,000,000 per year, which is three-eighths of our total expenditure of£800,000,000. That is what we have to see if we can reduce. That was a point in the speech of the Chancellor of the Exchequer, but he did not make any suggestions about it. The total of our National Debt is£171 per head, and, if you take the interest and management expenses, it comes to £6 15s. per head of the population. This£305,000,000 compares with Germany's£14,000,000. We. cannot live in trade unless we can get that reduced in some way or other. I should think that the whole House is against any real consideration of repudiation of our National Debt or of a Capital Levy.

What happened 100 years ago? Our ancestors had to deal with a matter like this. They carefully kept their credit intact, and converted the National Debt. Why cannot we endeavour to get our National Debt and interest reduced in that way? But you can only get your interest reduced if you keep your credit good, and if you keep your credit good Government stocks will rise. I am sorry to say, although we had a reduction of 6d. off the Income Tax since the Conservative Government have been in power, there has been no actual rise in Government stocks; is fact there has been a fall in price. Until there is a rise in Government stocks, we cannot have any conversion. Why is this imperative? It is imperative because of our large Government maturities of debt becoming due within the next few years. From February, 1927, to November, 1929,£938,090,000 of internal debt will fall due. There will also be£6,000,000 of external debt, making a total of£944,000,000. I am excluding the£2,000,000,000 of War Debt. It is imperative that we should keep our credit up, and endeavour to convert our loans into those of a smaller interest rate with a longer period of redemption.

The first thing I contend the Chancellor of The Exchequer ought to do is to stop handing out millions and millions of credit. In his speech to-day he gave various credits he has handed out. I suggest he should at once state in regard to the Trade Facilities Bill that, after it has passed the Third Reading, the Government will not grant. any more money for trade facilities beyond the total of£75,000,000. We want no more export credits. either. In 1925 the Conservative Government passed 16 Government Bills which showed an increased expenditure. All that interferes with our credit, and until the right hon. Gentleman stops giving these credits, these millions upon millions, you cannot hope to convert your loans to the benefit of the taxpayer. That is my first point.

My second point is this: I contend that there should be some alteration in the Trustee Act. The history of the Trustee Act is that previous to 1889 the only investment allowed to trustees were Consols. In 1893 the Act was altered to include Indian loans, Indian railways, Bank of England stock, Bank of Ireland stock, debentures, guaranteed and preference stocks of English railways subject to certain conditions. The Act was extended to allow trustees to invest in these particular securities. In 1900 the late Mr. Joseph Chamberlain brought; in the Colonial Stock Trustee Act, and allowed Colonial stocks registered in the United Kingdom to become Trustee stocks. I contend that if we are going to have cheap money, there must he some alteration in the 1900 Act and that future Dominion and Colonial stocks ought not to he Trustee stocks. The investments in these Trustee stocks are over£1,000,000,000. We have assisted our Dominions and Colonies with cheap money. I contend if it were put to them in the right way, they would understand the position, and would realise that, with our maturities and big national debt, it is desirable to do what I suggest, when the only difference it would make to them would be that they would have to pay, perhaps, a half per cent. more for their money.

How would it affect us? It would, perhaps, to a certain extent, affect our-exports. We must realise that there are only two money markets in the world for overseas investment. The one is ourselves, and the other the United States. We have not a great deal of money to send abroad at the present time. I feel that with our position as it is we have to conserve our resources and the money which we send abroad. Will it drive the Dominions to the United States of America? I do not think it will really affect the Dominions. Canada. floated a loan only a few days ago at£4 12s. per cent, in New York. Canada recently has used the New York market, and securities of Canada have not come to London. I must remind the House that a few months ago the Chancellor of the Exchequer put an embargo on foreign investments—a voluntary embargo. It is true that the Commonwealth of Australia was sent to New York for a loan of£15,000,000, and that it was only a conversion loan. It was to convert money which they had expended in London, and, really, sending it to New York undoubtedly in this way helped the payment of our debt to the United States. I feel confident that the Chancellor of the Exchequer will consider an alteration of the Trustee Act which would help tremendously in the conversion of our loan.

8.0 P.M.

But I have one very black spot in regard to the Chancellor of the Exchequer. I am sorry that he is not here to know what I say. His last conversion loan was in September, and it was laughable to anybody who understands finance. I refer to the conversion loan offered on 23rd September and closed on 29th September. On 1st October, although the Chancellor of the Exchequer has really no control over the Bank rate, this was reduced from 4½per cent. to 4 per cent. I contend that the taxpayers of this country lost from £3,000,000 to£4,000,000 over that transaction. I say again I quite agree that the Chancellor has not control over the Bank rate, but I know enough about finance to know in what close touch the Bank of England is with the Chancellor.

There is one other point I would like to mention which may possibly interest the Chancellor of the Exchequer, and that is the amalgamation of the Income Tax and Super-tax. To questions pet to him in this House he has always replied that, it cannot be done. It can lie done, it would reduce expenditure, and I sincerely wish he would look into the question. Then there is another point which does not come into any of the Categories 1, 2, 3 or 4 which he has mentioned. It is a subject mentioned in the King's Speech in Ottawa about two months ago. In that Speech the Governor-General announced: The consolidation of certain Departments, involving reductions in the number of Ministers. I see in the "Times" this morning a cable from Ottawa, dated 15th March, stating that: Mr. Mackenzie King, the Prime Minister, who took his seat formally to-day, announced that the Cabinet would be reduced to 14. The Chancellor of the Exchequer has not mentioned that at all, but I think it is worth his, consideration. He might make a Category 5, and go into that question. An interesting White Paper was issued—I think it was asked for by the hon. and gallant Member for Eastbourne (Sir R. Hall) in reference to Government officials who have£2,000 a year or over. I have been adding. up the various appointments, and I find that in 1913–14 there were 98 officials with£2,000 a year or over, as compared with 311 at the present time. Surely there can be some reduction there. I put these points forward in a constructive way. I feel that we must have efficiency, as we must have a reduction of expenditure, and if the Chancellor would only consider some of the points that are put to him by humble backbenchers, it might possibly he better for the country at large.

Dr. DRUMMOND SHIELS

It. would be very interesting to follow some of the hon. Members opposite in their discussions of what is and what is not economy. I agree that there is a distinct difference in the conception of its meaning on opposite sides of the House. Our view of wise expenditure also is different. We believe that wise expenditure, in a national sense, is expenditure that results in happiness and in a decent standard of life for the great mass of the people of the country. However, I want, rather, to say a few words to night regarding the national health insurance aspect of this Economy Bill. As has been pointed cut, the scope of the National Health insurance Act was very much wider in 1911 than the actual scheme in operation at present. The Preamble of the original Act says it is: An Act to provide for insurance against loss of health and the prevention and cure of sickness, and for purposes incidental thereto. We are increasingly recognising the importance of prevention in regard to sickness, and the importance, in that connection, of environment and conditions of life, such as housing, good feeding, and so on. Even with all that, however, the complex human machine is bound at times to break down, this being especially likely to happen in the later years of life, and under the present-day working and home conditions. The capital of the ordinary worker is his health and strength and skill, and it is of the first importance to himself and to the State that, if his health does break down, he should be restored again as completely and as quickly as possible. His financial resources are very small or non-existent, and when he is sick he has to fall back for assistance upon insurance, trade union or public funds. The first assential, therefore, in a good social health insurance system is a complete medical scheme, not only a general practitioner's scheme, as the, present service is. The proper scheme would give all expert advice, both medical and surgical; all remedial and curative agencies, such as dental and optical treatment; and all kinds of institutional treatment, with skilled nursing and the help of such adjuncts as X-rays, massage, light-treatment, and so on, which cannot be given in the miserable homes in which so many of our workers live.

The original Insurance Act of 1911 did not limit the kind of medical system which might be set up. The limitation was made by Regulation under the Act, and was doubtless a result of difficulties with the medical profession as well as of financial and administrative difficulties: it was not, at least, from any desire to limit the scheme to a general practitioner one. Just before the War proposals were actually brought forward by the Government of that day for an extended medical service, but these had to be dropped, like many other things, on account of the War. Since then we have been hoping for and expecting the new developments of the extended medical service. The Act has proved its soundness by being able to carry on during the War. It has gone through two Actuarial examinations, and is now regarded as financially sound. We have had a series of amending Acts in connection with the War and for other reasons, and these were followed by the Report of a Royal Commission which has sat for two years. It has thoroughly investigated this Act, and has just submitted its Report. Inter alia, this Commission states: The various medical services organised by the State will continue to expand both in their scope and in the range of the persons to whom they apply.… Medical benefit has been a valued and successful element in the scheme of National Health Insurance. And, further: That while it has been inevitable hitherto that medical benefit should he confined to a general practitioner service, this limitation has detracted from the value of the benefit, and its removal is urgently desirable. This extension of treatment which the Commission considers urgent should be made, they say, if and when funds are available and in the following order: (a) Expert medical advice and treatment for persons who can travel to meet the specialist: (b) expert advice and treatment for persons unable, to travel; and (c) laboratory services. These. recommendations were arrived at after very careful investigation of the finances of the scheme as based on the present arrangement and the present ratio of payments by workers, employers, and the State. The proposals of the Government in this Economy Bill are therefore made in face of the examination and against the findings of an impartial Royal Commission which recommends the continuance of our health insurance service on the present system of contribution partnership and with its present ratio of State grant. This important recommendation was given not only with a full knowledge of the finances of the scheme but after a full consideration of the financial state of the country. I would remind hon. Members that the gentleman who is responsible for the White Paper explaining the provisions of this section of the Economy Bill, the Government Actuary, was actually one of the personnel of the Commission which made this recommendation. It was therefore given with a very full knowledge of the fact that a reduction of the State grant would prevent the extension of the medical benefits which in the opinion of the Commission is very desirable and urgent and which, as the hon. arid learned Member for Spen Valley (Sir J. Simon) has pointed out, was implied in the original bargain made with the insured.

The MINISTER of HEALTH (Mr. Neville Chamberlain)

Will the hon. Gentleman allow me to interrupt him? I am sure he does not want to mislead the House. I think he will recollect that the report of the Royal Commission while recommending the extension of medical benefit pointed out and indeed recommended that that extension should be financed out of the surpluses and it therefore does not depend upon the continuation of the present State grant.

Dr. SHIELS

At least I think the right hon. Gentleman will admit that the Commission never contemplated that, in any rearrangement. there would be any reduction of the present rate paid by the State, and which is needed for the extensions we wish.

If the provisions of this Economy Bill, then, are accepted in respect of the reduction of the State grant it means several things. First, it means an alteration of the original terms of the partnership and a dislocation of the finance of the scheme. It means thrusting some societies into deficiency. It applies a new guarantee of solvency by the State so far as the payment for the present treatment and minimum cash benefits are concerned. It also means the postponement of the extended system of dental, optical, specialist, and other medical and financial benefits. I would submit that this so-called economy by the Government is an evidence that they do not realise or are careless of the importance of this great health system to the workers of the country.

In conclusion, I would like to say a special word or two about the effects of the proposals in Scotland, because Scotland is very much interested in the Insurance Acts. The population of Scotland, as estimated down to the middle of 1925, is 4,891,300. One-third of these, about 1,700,000, are in the health insurance scheme, two-thirds of that number being men and one-third women. There is a considerable irregularity of distribution of population in Scotland, for geographical and geological reasons. No fewer than 28.3 per cent. of the population are resident within 10 miles of the city of Glasgow and 37 per cent, are in the four cities of Edinburgh, Glasgow, Dundee and Aberdeen. On the other hand, the Highland and Northern counties, covering 56.7 per cent. of the total area of Scotland, have only 9.7 per cent. of the total population, and have also a much reduced proportion of insured people. These conditions have added very greatly to the difficulty of the efficient administration of the Insurance Acts in Scotland. They also make the hospital problem of Scotland a very important one and, in this connection, these is a very definite link with the Insurance Act. A Committee was appointed in June, 1924, to inquire into the state of the hospital services in Scotland and to make recommendations. That Committee has recently reported, and they report,inter alia as follows: Our problem arises out of the fact that there are many persons in Scotland who, mainly because there are not enough hospital beds, are unable to get at the proper time the hospital treatment which they need. For all those persons the shortage of beds means a prolonging of their suffering; for some it means that treatment is delayed beyond the stage when effective treatment me possible; and for a few it may mean that they die before they can he admitted to hospital. They point out that even the waiting lists do not give all who ought to be placed upon them. But, as it is, in the six teaching hospitals of Scotland at the end of 1925 the waiting lists were as follows In the Royal Infirmary, Edinburgh, with 963 beds, there was a waiting list of 2,076;in the Royal Infirmary, Glasgow, with 665 beds there was a waiting list of 759; in the Western Infirmary at Glasgow with 600 beds, a waiting list of 1,862;in the Victoria Infirmary, Glasgow. with 260 beds, the waiting list was 450;at the Royal Infirmary, Dundee, with 441 beds. the waiting list was 339;and at the Royal Infirmary, Aberdeen, with 327 beds. the waiting list was 368. The total accommodation in these six Scottish hospitals is 3,256 beds, and there was a total waiting list of 5,854.

Detailed recommendations were made of the number of additional beds required in each area, and the total new beds necessary, in the opinion of the Committee, was 3,600. The Committee made certain recommendations to help the voluntary hospitals to carry out a task beyond their own resources. One of those recommendations was a Treasury grant of£900,000. Judging from the reception given to a similar recommendation by the English Voluntary Hospitals Commission, the prospect of that grant being given is not very hopeful.

The point I wish to make, however, is that the Committee found that about one third of the beds in the Scottish hospitals are used for insured persons, and therefore one-third of the deficiency, amounting to over 1,000 beds, is required for the needs of insured persons.

This Committee definitely recommends that a contribution to the voluntary hospitals should be made from the National Health Insurance Funds to help to solve the terribly serious problem of hospital accommodation in Scotland. As I have said, one-third of the whole accommodation of the hospitals is required for insured people. Obviously, to get the specialist benefit required for certain cases, and for other treatments of a complicated kind, the co-operation of the voluntary hospitals is required. It is only fair, then, surely, that at least a contribution, bearing a rough relation to the services rendered to insured persons, should be made from Insurance Funds. These hospitals reduce the average time of treatment, and the loss of working time is reduced also. And so, both tip humanitarian and economic grounds, the extension of medical benefits to specialist service and to institutional treatment is in the best interests of the country. Treatment of dependents and increased maternity grants are also urgent questions.

It is just at this time, when these various Committees and Commissions have shown how much all the money the Fund can produce, under the present scale of contributions, is needed, that the Chancellor ruthlessly breaks the bargain which has been made, and destroys all hope of an extension of the Serviced and benefits which are so much required by the insurance contributors of the country.

Captain BOURNE

I think the most remarkable thing which has occurred in this Debate is the statement of the Chancellor of the Exchequer that even if all the economies which this Bill proposes to effect are carried out we shall still be saddled with an annual expenditure of £800,000,000. These proposals are necessary to prevent certain automatic increases which are taking place in our expenditure. For this I think we ought to be grateful, and all those who look upon this huge total of our expenditure should be ready to do everything they can to reduce it. I ask the House to seriously consider this question of economy, because if our expenditure is not checked we are getting appreciably nearer the day when we may have to accept far more drastic economy not only in our national services but also in regard to our fighting line all round. Hon. Members seem to have forgotten that every penny the Government raises has got to be taken out of industry.

The hon. Member for East Middlesbrough (Miss Wilkinson) seems to think that there is a vast sum which a Government can draw upon any time in order to find taxation, but I wish to point out to the hon. Members opposite that all taxation must in the end come out of the surplus or margin which exists between the cost of production and the price at which the goods are sold. Now we find ourselves faced with a keen struggle in our competition in the world's markets, and we must set our house in order so that we may be able to provide the necessary foodstuffs for our own people. We cannot feed more than half of our own population from the products of our own soil, and if we want our people to live, we must sell our goods overseas. In any discussion upon Government finance I think that is the first thing we ought to remember, and if we forget that fact then we are forgetting the real basis of our national existence. We must remember also that any expenditure, however desirable, which adds to the cost of industry is handicapping us in selling our goods, and we must sell our products if we are to thrive at all. We have either got to sell our goods or starve, and so long as we have got this immense burden of£800,000,000 expenditure annually plus the burden of local rates, we are putting a very unfair burden on our manufacturers and producers which handicaps them severely in competition with the world.

It is easy enough to be generous with other people's money. It seems to be thought in public affairs that because an object is desirable, therefore somehow or other the money must be found, and I for one want to register an emphatic protest against that idea. We must look after the finances of the nation, and it is our business and it has been the historic duty of this House to look at all our expenditure in a parsimonious way, and to sec that not one farthing more is extracted from the taxpayers but what is absolutely essential. If we say that once a thing is considered desirable we must raise more taxes, then we are only following in the path of the spendthrift. If in private life we regulated our expenditure by what seems desirable and not by what we can afford, then we should very soon be in bankruptcy, and what is true of the individual is equally true of the nation.

I deeply regret that this Bill does not go further. In his speech the Chancellor of the Exchequer indicated that what he called No. 2 Grant Services, amounting to£90,500,000, have increased by 131 per cent since the War. I cannot see why that class of expenditure should be more sacrosanct than any other. Personally, I would willingly see a reduction in every class, and I do feel that we are never likely to get any efficient reduction in national expenditure unless we are prepared to cut down Grants-in-Aid as much as anything else. It is no use arguing that this will put up the rates of the local authorities. They also have got to be economical, whether they like it or not: they have got to cut their coat according to their cloth, and not say that, because the Government has taken money away from them, they will put more on the rates. I feel sure that there is great ground for economy all round, once people realise that it is necessary, and I shall welcome any future action the Government may take to bring home to the people of this country the urgent necessity for economy. Because this Bill makes a start in that direction, I welcome it and intend to support it.

Captain GARRO-JONES

I congratulate the hon. and gallant Member for Oxford (Captain Bourne) on the splendid way in which he has followed the cue which was given to him by the Chancellor of the Exchequer in opening the Debate. There were long generalities, and statements that every item of expenditure must be carefully scrutinised in private life as well as in public life, that nothing must he expended which we can save. This went on for about three-quarters of an hour in the case of the Chancellor of the Exchequer, and, with equal vivacity, for about a quarter of an hour in the case of the hon. and gallant Member for Oxford but not once during the whole of his speech did he refer to the provisions of this Bill, and, after all, it is this Bill which we are discussing. We are all agreed that economy in the abstract is a splendid thing; what we are trying to decide to-night is whether these economies are justified, whether they are fair, whether they are substantial, and whether they are such as will make an effective contribution to the general problem of economy. The hon. Member for Oldham (Mr. Duff Cooper) stated, in reply to the speech which was made by the right hon. Gentleman the Member for Spen Valley (Sir J. Simon), that no Government could be bound by the pledges of all its predecessors. The hon. Member for Oldham, however, omitted to say that the present Chancellor of the Exchequer was a Member of the Government which gave those pledges, and, surely, although subsequent Governments are not bound, he might, for the sake of common decency, pay some regard to what was pledged by the Government which went before him.

I want to ask the Parliamentary Secretary to the Ministry of Health one or two very explicit questions about that part of the Bill which deals with the Navy, Army, and Air Force Insurance Fund. We had a Debate last night on the subject of soldiers, and who were the best champions of the Army and who of the Navy, but I should like to ask what regard has been paid by the Minister of Health to the welfare of the regular soldiers who are affected by Clause 5 of this Bill. There is an estimated surplus, in the case of the Navy, Army, and Air Force Insurance Fund, of£1,500,000, and the bulk of that is being transferred to the Exchequer. I desire to ask the House for a moment to examine with me the causes of that surplus in the ease of this fund, which is contributed to by regular soldiers. In the first place, I would like to remind the Parliamentary Secretary that the burden of the contribution falls with far greater rigour on the regular soldier, sailor, and airman than it does on any other member of the community who pays into the Insurance Fund. His contribution is in greater ratio to the small amount of his pocket money than the contribution of any other workman is to his wages. I do not think the hon. Gentleman will deny that. If he will take the trouble to refer to the Royal Warrant for Pay, he will find that in some cases the stoppages out of a regular soldier's pay mount up so heavily that in the long run he has nothing left at all. So much is that the case that it has been necessary for the Army Council to lay down a Regulation that stoppages shall in any case leave the regular soldier with 2d. a week. It is in these circumstances that we find that, out of these hard-earned and scarce pennies of the regular soldier—with a certain amount of the Government's own contributions, I admit —there has arisen a surplus of £1,500,000.

In their statement as to how that surplus arises, the Government say this: The surplus arises from a variety of causes, of which the following are the more important: (i) The rate of interest earned by the Fund has been substantially in excess of that assumed. I should like to ascertain how much of that surplus is due to this particular cause, because I strongly suspect that the real surplus comes from subsequent causes which I am about to read out now. Cause (ii) of the surplus is that: The cost of administration, in the case of serving men, has been much below the suns provided in the contributions. I respectfully submit to the hon. Gentleman that, in the case of a Service like the Army, Navy or Air Force, where the expenses of administration are so low, that is surely a factor which should operate to the benefit of the soldier when he comes to pay his contributions and claim his benefits; it should not be a reason why the Treasury should transfer these sums into its own pockets, to the total neglect of the soldier's interest. Cause (iii) is that: The contributions of soldiers, sailors and airmen contain a margin which, in the case of approved societies, is carried to their contingencies funds, but which in the present case has accrued directly to the principal fund. The contingencies funds of the approved societies are, I believe, available in some respects for special benefit. The same sums which, in the ease of ordinary contributors, go to the contingencies fund, are transferred, in the case of soldiers, to the principal fund, and thence to the National Treasury, again depriving the soldier of a sum which he is, in my view, entitled to receive.

This Memorandum cannot by any stretch of the imagination be described as a lucid document. It may be that that is because I am not so great an expert in these things as the hon. Gentleman is, but I think this ought to be made clear to those who do not claim to be ex- perts on this problem. There are six causes, and we ought to know how much of this surplus is derived from each of those specific causes. I submit that cause (i) is in the nature of, if I may use the term without offence. eye-wash, and that the real causes are to be found in (ii), (iii), (iv), (v) and (vi). There are two more causes which I must insist on repeating in the House, because think the House ought to know how this surplus has arisen. One of these is as follows: During the War the Fund received contributions which of necessity were paid by many men who had not been insured before enlistment, and a large proportion of whom ceased to be insured on their return to non-insurable occupations after demobilisation. Where a soldier was serving for five years, it might be in France, or at any rate overseas, he paid his contributions year by year, he was discharged from the Army, and those contributions counted for nothing. Now they are transferred into the pocket of the National Exchequer, and many of the men who paid those contributions are at present walking the streets in a state, if not of starvation, of dire want. I should like to ask the hon. Gentleman if he thinks that that is altogether fair to these soldiers, sailors and airmen, who, I believe, have fewer spokesmen in this House than any other class of the community—largely, it may be, because their votes are not of great material benefit at election times. It is true that those soldiers who are serving in home stations have what are called absent votes, but I have taken the trouble, in each election I have fought, of sending at the earliest possible moment a statement to each of them, and 75 per cent. of them have been returned because the men in question are serving out of range of the ballot box. I hope, to begin with, he will remedy that state of affairs. But that does not alter the fact that I am trying to put in a good word for those who have very few to defend them in this House. Clause 5 appears to me to be a little mean and a little taking advantage of a body of men who are unable to defend themselves, and are not as likely to kick up a row as other classes of the community are.

Now I am going to make a suggestion. I have previously put it forward, but not with the effect it deserves. It is not a bee in my bonnet or anything of that kind, but I should like to ask if it is not possible for us to do a little more along the line of voluntary contributions to the national Exchequer. I observe that when the Italian Government wanted to raise money to pay the United States, all they did was to take the hat round. They said "We owe the sum of£4,000,000. We do not want to impose it in new taxation. Who will pay something towards it?" and in less than a month they received the whole of that contribution. Are the wealthy men of Italy to outdo the wealthy men of England? I put a question a short time ago, asking what was the total sum that had been paid in voluntary contributions to the British Exchequer since 1914, and the maximum amount, including the period of the War when patriotism was supposed to run at the highest, was£981,000. If Italy can pay off this sum in voluntary contributions we ought to make something in the nature of an appeal. Are we afraid of offending the susceptibilities of rich men? Are we afraid to make it awkward for them to refuse? There are several people worth£1,000,000,£2,000,000£3,000,000,£4,000,000 and£5,000,000. If the Government are to be reduced to coming to the House to make these mean economies, they ought to see what they can do on a voluntary basis. I felt that before allowing the Bill to have its Second Reading I ought to add my voice to the indictment that was levelled so dearly, so forcibly and in such a damaging way against these proposals by my right hon. Friend the Member for Spen Valley (Sir J. Simon), and I shall listen with great expectancy to hear what answer the Government have to make to these serious arguments.

Mr. DENNIS HERBERT

I think from this Debate we have at any rate gathered that the Government are serious in the matter of trying to put the finances of the country in order as far as they can, and from the very exhaustive and wonderful statement the Chancellor of the Exchequer made, it will be obvious what very great difficulties there are in the way of reducing expenditure. I hope the effect of that speech will be to prove to the country generally that the extraordinary and irresponsible cries we have had of wicked waste on the part of the Gov- ernment in years past have had little, if any, justification. I include in that every Government that has been in power since the War. A certain amount of wasteful expenditure no doubt there may be. It is almost impossible in any business of any magnitude to prevent a certain amount of waste, and in a business of the enormous magnitude of the financial affairs of the country, of course there must be waste. I believe the Government for years have done their best to stop waste in little matters in the Departments, but after all anything that can be done for the general benefit of the finances of the country by merely stopping what is called waste in Government Departments, can amount to little more than a drop in the ocean.

The position really comes to this, that unless we are going to do something which is either, according to our views on this side, dishonest or a breaking of contracts, or a cutting down of expenditure which is thoroughly justifiable from the point of view of being either directly or indirectly productive, there is very little indeed on which expenditure can be cut down. But what we have to keep in view, if we are to restore the finances of the country, is that the real remedy, far more than cutting down to the very last that you can cut down, is to so act that the prosperity of the country may be increased, industry may be revived, and existing taxes, without being raised, can be made more productive.

When one comes to the opposition to the Bill, it seems to me that there is very little to answer. The arguments against it may, roughly, be put into two classes, one, a certain amount of what I might describe as niggling criticism of detail, and the other the cry one always has whenever any attempt at economy is tried, an attempt to ask for more expenditure, or at least for expenditure not to be cut down because the object of the expenditure is worthy. Then we have such arguments as that brought forward by the hon. Member for East Middlesbrough (Miss Wilkinson) in regard to the wealth that is in the country. Apparently her view was that there was no need to cut down expenditure as long as it was wise expenditure, because there was plenty of money in the country.

I should like to deal with that point of view. It is no use to disregard the human factor, or to disregard human nature. It is here, and we have to make the hest of it, and what we have to try to do is more than ever to increase the prosperity of the country and revive our industry, which has had such a set-back since the War. You are not going to do that either by taxing the wealthy or by abusing them because they happen to have more money than the poor. I want to speak perfectly frankly. No one who knows me will accuse me of being a wealthy person, and I have no particular sympathy with people who have so much money that they spend it on what I call wasteful extravagance, on their own selfish pleasure. But as long as the world continues you will have people of greater genius, greater ability, and greater industry than other people, who have a faculty for making money. They may be very disagreeable people, but I do not see how you are going to get on without them. After all, it is those people who can manage great industries and can succeed in making them profitable, who, much as you may dislike them personally, are really the backbone of the industry and the prosperity of the country.

When it comes to a question of paying their share. hon. Members opposite must not forget that the rich are taxed in this country—I think I am right in saying this—far more heavily than any class has ever been taxed in this or any other country. The Super-tax and the Income Tax, together with the Death Duties constitute a tax which is very heavy, and one of the evils of that tax, which in the end causes suffering to the poorer classes, is that, to a great extent it encourages expenditure, it discourages saving, and tends to the losing of capital which could he put into industry for productive purposes. I am sure that hon. Members opposite, and I know that the majority of the poorer classes among one's own constituents realise, that heavy taxation, when it gets beyond a certain point, is borne in the end by the class who have to spend practically the whole of their income upon the necessaries of life. We are, in spite of the reductions, in a position where the heavy taxation upon the rich tends to keep up prices, to cut down the investment of earnings and to lead to extravagant expenditure. This heavy taxation reacts far mere heavily upon those who can less afford it, and upon the poorest of the country, than upon those who are generally classed as rich people and extravagant people, who spend money on their own selves.

The hon. Member for Ilford (Sir F. Wise) made some suggestions which I should like, with all respect, to endorse very much. I hope that they will be reported to the Chancellor of the Exchequer and that he will consider them very carefully. I do not propose to go into those suggestions in any detail, because the hon. Member put them very clearly, but I do think they are well worth considering. I urge upon the Government that when they are cutting down or when they are trying to cut down expenditure which would be beneficial to the people of this country, they should impose a self-denying ordinance upon themselves and not introduce legislation during the next few years which will involve expenditure, more than they can possibly help. Some of us have somewhat serious misgivings as to the possibility of the Government interfering in business a little more than we think right. The more the Government interferes—I speak from the point of view of one who supports private enterprise—with business and private enterprise, the more they hamper trade, and, beyond that, the more they incur administrative expenses by the setting up of new Ministries, new boards, new experts and high-salaried people of various kinds, salaries which are not merely waste but tend to interfere with those who are likely to improve the prosperity of the country if they are left alone.

Difficult as it may be to cut down expenditure, I hope the Government will continue on the lines they have taken and try, whenever they can, to avoid expenditure of a kind which is not productive and can be done without. I am glad to notice that in this Bill there is one particular example of that kind, in the proposal to do away with two registers of electors in the year. There, we are making a saving which is doing no harm to anybody and which is a definite cutting down of expenditure. I hope that I shall not be going beyond the bounds of reasonable modesty if I remind hon. Members that that particular reform in the interests of economy was one which I urged as far back as 1920, when I introduced a Bill for the express purpose of providing for one register a year instead of two. I am glad to know that after four years the best Government that we have had since the War have taken the advice which I gave to the Government of four years ago.

I should like the Financial Secretary to the Treasury to do the best he can in one or two matters, such as the provision at the end of the Bill as to the cancelling of postage stamps. The Treasury, apparently, have an eye to making money in a small way, if it can, by advertisements which, no doubt, will do something towards the cost of the work of cancelling stamps. Not long ago, I asked a question in regard to advertisements. I am all for the Government making money, if they can, by advertisements, but I would urge upon the Treasury that if they are going in for making money by advertisements they should try to do it in the right way, and if they do not know the way, they should get someone acquainted with advertisement business to advise them. It is scarcely in the interests of finance in this country that inspectors of Income Tax, when they write to the taxpayers, should send out a letter with an advertisement on the back of it showing them how they can reduce the amount of Income Tax which they have to pay. It does seem to me that that is one of the most ridiculous things that any Government has ever been responsible for. I do not for one moment suppose that that advertisement would ever have been allowed by my right hon. Friend if it had been brought to his special notice.

I suggest that the arrangement which I believe is in force for dealing with advertisements on Government circulars and documents of various kinds is very unsatisfactory and that the Government should consult some of the big advertisement agents, of whom there are many well-known firms, and see whether they cannot make a deal with them. If they were to arrange for tenders for these advertisements from some of the big advertisement agents, they would make much more out of their advertising than they do at the present time. If they could do that—I am sure there are patriotic and unselfish men of experience in the advertising world who would give them a little advice as to the best way of controlling these advertisements—they would be able to avoid such a ridiculous kind of exhibition as the particular advertisement to which I have referred.

I congratulate the Government upon the attempt which they have made to reduce expenditure, and I hope they will bear in mind—and I am sure they know it better than anybody—that the real rehabilitation of the finances of this country can only come from a revival of industry. In order to bring that about, and in spite of any obloquy they may incur from Members of other parties I hope they will insist on doing their best to reduce taxation even if it means for a time refraining from giving social services which are very excellent and well deserved.

We are in the position, as a country, in which we are bound to deprive ourselves of things which we might well consider to be our right, if we are to get back to a state of affairs in which the country can properly pay its way. We had to deny ourselves a number of things during the Way; we are facing a danger now which, in a certain way, perhaps, in a different sense, is as big a danger as that of the War. In any business, or in any institution based upon finance, unless you can get a solid foundation upon which you can build up an income-earning business you cannot afford to spend the little money you have. In order to get prosperity in the finances of a country, or in a business, you must have capital to use. If you want to increase prosperity, you must increase the capital. This country is now in the position in which it has lost an immense amount of its capital, and far beyond having any right to spend more than its income if it is going to improve its position at all, it must underspend its income and put hack money to replace the capital which has been lost, so that taxation may be reduced and the hindrances to trade and business prosperity generally removed.

9.0 P.M.

Mr. RHYS DAVIES

The speech to which we have just listened was very interesting but it did not enlighten us in the least on the provisions of the Bill before the House. I would rather like to follow the hon. Member in his dissertation on the alleged virtues of the rich, but that is not the subject at the moment. I would not have taken part in this Debate were it not for the fact that I am particularly interested in the provisions of the Bill which relate to national health insurance; and I think the provisions to which I am going to refer are probably the most important of all in this Measure. I have endeavoured to make a calculation as to the amount which will actually be saved by the Government on the provisions relating to national health insurance. If my calculations are correct, the estimated saving will be about £4,250,000 per annum. To reduce that to common terms, it may be said that each of the 15,000,000 insured persons in this country will have taken away from him, as from January, 1926, the sum of 5s. 6.d. per annum. I should like to know whether the Government are united on these proposals. We shall be told, I suppose, when the Minister of Health speaks, whether he is carrying out the wishes of the approved societies in this connection; but I think I am right when I say that all the approved societies will resist these proposals as far as lies in their power. I shall be greatly mistaken indeed if there does not arise, as a consequence of these proposals, a great agitation against the Government. In fact, I would not like to be a member of a Government which intended to take away, as this Government does, so much of the prospective benefits of insured persons.

One point has puzzled me very much in this connection. This Bill must have been framed prior to the decisions reached by the Royal Commission on National Health Insurance. I cannot see how the Bill could have been framed since that Report was issued. I say that because part of this Bill is based upon the recommendations of the Royal Commission. It would be very interesting indeed to learn how the Government actually determined to carry out the recommendations of the Royal Commission when, in fact, they could not have known what those recommendations were. They were probably suggestions which the Government itself placed before the Commission, but that is quite a different matter.

One of the most important points that arise in this connection is that which I am about to mention. Up to the moment the Treasury has been able to walk into the offices of the approved societies throughout the country and audit their accounts, by virtue of the fact that the State contributed two-ninths of the cost of benefits paid and administration. If the Government. is now going to reduce its quota towards the cost of benefits and administration I want to know how much authority the Treasury will then have to audit the accounts of approved societies? At the moment the Treasury can disqualify an account or decline to pass an item, but I suggest that if this Bill is passed it will weaken the authority and the power, it will weaken the right, of the Treasury to go to approved societies and audit their accounts as they have done in the past.

The PARLIAMENTARY SECRETARY to the MINISTRY of HEALTH (Sir Kingsley Wood)

Why does the hon. Member say that?

Mr. DAVIES

Hitherto the Government have contributed, as I have said, two-ninths of the cost of benefits and administration, and, consequently, are entitled to do so by virtue of the fact that they contributed so much. Now they are cutting down their contribution to the funds of the societies, and I cannot see that their title will be nearly as strong as it was. In fact, we shall have something to say on that subject later on when the Bill is considered in Committee. Another point that seems to me important on that issue is that as the State is going to contribute less than hitherto to the funds of the societies, it also lessens the interest of the State in health problems. It was always a pleasure to see the State take an interest in the health of the community. So much has the State done in this connection through the approved societies of the country that the mortality of the people has declined very much in the last 12 years. The approved societies have done their work well. Now that the State are taking away a good proportion of their financial support from the approved societies, they are also taking away their title to say that they will continue to take an interest in the welfare of the insured population.

I believe I know what is at the back of the mind of the Government in this connection. It does not require very much insight to see that. I feel sure I am right when I say that this Government are determined that all these social insurance schemes shall ultimately become self-supporting; that the Government themselves will not contribute in the end a penny piece towards any of these schemes. Let me give as an example, the case of the last scheme we considered in this House. Last year this Government brought a scheme before us, the Widows', Orphans' and Old Age Pensions contributory scheme. The aim of that scheme was definitely and deliberately designed to compel all working people to pay for their old age pensions. It was intended by that Measure to wipe out all the commitments of the Treasury in respect of old age pensions. In fact, that is what is now happening.

The aim of the Government with regard to Unemployment Insurance also is, so to reduce their contribution to that scheme, that it will make it ultimately self-supporting. There are Members in this House now who will probably be here two, three, or even ten years hence to verify my assertion. If a Tory Government is in power then, unless a Labour Government has meantime been in power for five years or so, that Tory Government will continue this policy of trying to make all these schemes self-supporting. On the other hand I am hoping to see in this country in my time such social insurance schemes established that, when a man is injured, falls sick, is unemployed or requires hospital treatment, if he is in that condition through no fault of his own, he shall receive an income not less when sick or injured than when he was employed. That is the aim of some of us who take an interest in this problem. Strangely enough, while our Government are trying to reduce their grants towards these schemes to which I have referred, other enlightened industrial countries of the world are going the other way and contributing more and more towards such schemes.

The Chancellor of the Exchequer this afternoon made the statement that the approved societies would gain a great deal by the fact that persons at 65 years of age would come on the old age pensions contributory scheme, and, consequently, wield not be a liability for benefit on the approved societies. I have the impression that all persons at 65 years of age who fall out of Health Insurance will still be entitled to medical benefit throughout their lives. I am under the impression, too, that some of them will be entitled to additional benefits, in spite of the fact that they have reached the age of 65 years. Consequently, there is a liability on the funds of approved societies, though such people have reached 65 and are receiving old age pensions.

The Chancellor of the Exchequer made another very strange statement which I did not understand. I hope I am quoting him correctly. He said that to allow the funds of approved societies to continue to accumulate would be detrimental to the State. I believe that what he meant was that to allow funds to accumulate inordinately would not be good for the societies; that they could not use up all their surpluses. On that point I will ask the attention of the Parliamentary Secretary to the Ministry of Health. Hon. Members opposite have stated over and over again that the funds of approved societies are in a wonderfully good position, and they have talked of millions upon millions of surpluses. One bon. Member said that the surpluses at the end of the last valuation were£65,000,000,£30,000,000 of which is available for disposal as additional benefits. But the hon. Member forgot one fact—£ 30,000,000 sounds a lot: but it is not very much among 15,000,000 persons.£30,000,000 in the hands of an individual or a company or a corporation is a tremendous sum, but£30,000,000 among 15,000,000 insured persons is only£2 each, and over five years, which will be the valuation period, it amounts to less than 10s. each.

Approved societies have, however, only just commenced to pay additional benefits. There are, all told, in the consolidating Act of 1924, a schedule of 14 additional benefits. But there have been added about five more. The Royal Commission is inclined to suggest the reduction of the 19 to about 13. Out of the 14 that are included in the Act of 1924 approved societies in general have been able to deal with only three—dental treatment, optical treatment and appliances, and surgical appliances. The best approved societies, in spite of the fact that they have adopted only those three additional benefits, are able to meet the expense only up to 50 per cent, of the cost. Consequently, the societies have only just begun to deal with the payment of additional benefits. The societies are hoping that the day will come when they can adopt all the additional benefits in the Schedule, and pay them in the way that was intended in the first place.

As to the actual effect of this Measure, I do not know whether the Parliamentary Secretary has worked out for himself what this means in actual cash transactions to the approved societies. I will mention the case of an approved society with which E am quite familiar. The medical benefit payments of that society, at the moment with 33,000 members, is approximately£13,500 per annum. This Bill will mean that the society will be saddled in future with£20,000, an annual increase of£6,500 for medical benefit alone. That is the proportion. Clause 1 of the Bill will mean also this. Out of every £100 benefits now paid, the State grant amounts to£22, which is two-ninths of the total. But under the Bill, the grant of the State will be about £14 5s. in the case of men and£20 in the case of women. That is a very serious prospect indeed for the funds of approved societies.

Very little, if anything, has been said, except by one Member representing a Scottish constituency, with regard to medical benefit. I hope that the Parliamentary Secretary, when he replies, will tell us how the finances are dealt with, There are many able statisticians connected with approved societies, good financiers and capable accountants, who have never yet been able to find out exactly how the higher finances are dealt with in the Ministry of Health and the Treasury. Let me give a case in point. A little over two years ago it was decided, in agreement with the doctors, that the medical benefit should be increased, and the Government was compelled to find a sum of 3s. per insured member from some central fund. They took that amount from what is regarded as the Miscellaneous Receipts Account, derived in the main from proceeds connected with unclaimed stamps. I understand that that fund is now exhausted, and consequently the Government are now asking approved societies to shoulder the 3s. which was hitherto dealt with from the fund which I have named.

It would be interesting to find out the amount of money necessary to implement that agreement for 1924–25, in respect of the 3s., because this Bill is retrospective. It goes back to the beginning of 1926 in one respect; and I suggest that it would be more honourable to the approved societies if this Bill operated in respect of the two points I have mentioned, only as from the beginning of the next valuation period. We are now in the middle of the third valuation period. Some of the approved societies have not yet had the results for the second period, and it would be better for them, for their accounts and their books, for their members, and for everybody concerned, that this Bill should operate not at the beginning of 1926 but at the beginning of the next valuation period. We shall most probably ask the Government to take that point into consideration later on.

I think it is grossly unfair to call upon the funds of approved societies for the 3s. to which I have referred when the societies themselves have had no say whatever in arriving at the agreement in connection with that amount. the House will remember that successive Governments have had great trouble with the panel doctors in this connection. When the Act of 1911 was passing through this House the payment to panel doctors then proposed was at the rate of 4s. per insured person per annum. That sum has grown to 6s. 6d., to 7s. 6d., to 9s., to 11s., and now we are told that 13s. is required for medical benefit purposes.

These are other points of criticism which I feel sure the approved societies will desire to urge against the Measure; but the one thing above all else which I very much regret is that the State, instead of continuing its interest in this subject by also continuing the grants it has made to the funds of approved societies, will lessen its connection with a, matter which is of fundamental importance to the community, namely, our health services. I trust before the Bill becomes an Act we shall be able to convince the Government that, although it has been said to-day that it is not good for the State that these surpluses should continue to accumulate, yet in fact it is a great advantage to the State that the health of the community should be kept up at such a point that the men and women who have to work for their living should be in the best of health to perform their tasks.

Mr. GEOFFREY PETO

I must admit that. on first reading the terms of this Bill I was very disappointed, not because of any sins of commission in it, but because of the sins of omission which it displayed. The Chancellor of the Exchequer in his able speech has explained to us very clearly the difficulties with which he was faced, and one cannot help sympathising with the right hon. Gentleman. At the same time, I feel that more might have been done for economy in this Bill. We have here what are called the "Miscellaneous Provisions" in connection with which the right hon. Gentleman seems to have gone into the highways and hedges and even up to Orkney and the Shetlands, but I wish he had walked along the great thoroughfare of Whitehall. That is where I believe economics should be made. This Bill was heralded with too many speeches. We were led to expect a tremendous Measure, which was going to assist industry in real earnest to recover its prosperity. We were told we must be prepared to face great sacrifices, and so forth, and I think the nation was prepared to face sacrifices. Consequently, when we get to the terms of the Bill itself we feel disappointed, because we had hoped for a great Measure of economy, starting from the top. We had hoped, for instance, to see an economy carried out by abolishing with some Ministers, and some Secretaries.

We had hoped—or at any rate, I had hoped, to see some economy among the Members of this House—possibly in salaries or, at least, in a reduction of fares from the luxurious first-class to the somewhat harder third-class. That is a sacrifice which I think we should have been prepared to make. It is a small thing, I grant, but one cannot economise either in private affairs or in affairs of State, unless one is prepared to consider the small things and to pile up the small savings at every possible opportunity. Then we had hoped for great savings in Whitehall. We have seen savings, but they have been savings on the part of the very people who we were told were never going to save. The savings in Whitehall have been effected by the admirals and generals much more than by the Civil Service. I should like to know what reduction has taken place in the numbers of the Civil Service since the economy campaign started a year ago. We are generally told that it is difficult to get rid of civil servants because they have to be pensioned. No efficiently managed business would keep on any employé who was not required merely because the question of pensioning him arose. It is much better and cheaper to pay the pension and to be rid of a superfluous employé because when that man reaches the full age, he must necessarily be pensioned and will probably be replaced immediately, whereas if you get rid of him in advance, the question of replacement does not arise.

For suggestions of economy it seems to me we are thrown back on private Members' Motions and speeches from the back benches. I know it is easy to criticise and suggest when one has no responsibility, but it is the duty, of hon. Members MI the back benches to criticise and suggest and not to remain silent merely because we have never been in office. We started with a suggestion regarding the Air Ministry, but we were immediately called off that by both Front Benches, who told us that this was not a subject for economy. Then we raised the question of a Ministry of Defence. There is, I understand, to he a Debate on that subject, and I welcome that announcement. But I would much more welcome the appointment by the Government of an impartial Committee to consider and advise on the subject. In this forthcoming Debate it is to be expected that we on the back benches will raise the old suggestion as to the saving to he effected by the Ministry of Defence, without, of course, having the intimate knowledge of Front Bench Members and, probably, those on the Front Benches will have no difficulty in polishing off our suggestions and will tell us that they are impracticable.

That, however, will not satisfy me that a Ministry of Defence is not advisable, and as I say I should like to see the report of an impartial body upon the proposal. Then there is the Post Office. I agree with the Chancellor's suggestion that only the profit on the Post Office should be shown in the Budget, instead of both sides of the account; but it is to be remembered that only a part of the Post Office work shows a profit. What about the telegraph department and the telephones? They show losses. Would it not be better to take out these two departments and restore them to private enterprise? They pay all right in America—and it is merely because we have linked them up with a Government Department that they do not pay here. Coming to education, I am not satisfied with the position in that connection. It seems to me that we advance against this great fortress of bureaucracy, and blow the trumpets, but the walls do not collapse at the first sound and we then retreat again. We ought to insist upon Treasury control of educational expenditure. I dislike those percentage grants. I should like to see block giants and adequate control by the Treasury, and I hope the Government will insist upon this.

To turn to what we have got in the Bill, the main point seems to be National Health Insurance and particularly Clause 1. I welcome the fact that the present surplus remains intact The Government contribution should be reduced for two reasons;(1) because of the increased rate of interest to nearly five per cent., and (2) because the State will he taking over old age pensions at 65. Both those causes benefit the Fund, and both increase the burden on the State. I think the State is entitled to some relief and not only the contributor. I think the right hon. Gentleman the Member for Spen Valley (Sir J. Simon) saw no logic in that argument. Surely those two causes increased the surplus in the hands of the Health Insurance Fund, and those surpluses are paid out in additional benefits. As they are pa-id out in additional benefits, so does the State contribution become increased, and consequently the State will be paying twice over for those two reasons. After hearing the speeches of the right hon. Gentleman the Member for Come Valley (Mr. Snowden) and the right hon. Gentleman for Spen Valley, one would really think the national purse was bottomless and that it was only a matter of giving as much as we liked to everybody who might possibly want it.

That is very far from being the case. The funds available are very strictly limited. I would put it to hon. Members opposite as to whether they are acting in the best interests of the poorer section of the population in always trying to press for greater benefits to be paid to them by the State. I believe, from what I know of many working men, that they would far sooner see industry prospering, and have a secure job and a fair wage than they would see increased benefit from the State. Those were the two alternatives. By further increasing the burden on industry through the various insurance schemes we should not, to my mind, benefit the working man or the working woman at all. I do not think the present position of unemployment finance is at all satisfactory. It does not seem to me right that the State should be guessing in July the probable rate of unemployment and altering the rate of contributions accordingly, then finding that we are very much out in our calculations, and in March having to start guessing again. It seems that the ultimate balance has to be made up by the State, and we have to pay for it. I do not like these alterations in the rates of contributions.

Lastly, we come to a curious provision in the Bill. I cannot help thinking that the official who drafted it must have had his tongue in his cheek. We read every day in a certain section of the Press that if this taxation continues, industry will be driven to bankruptcy. The Chancellor of the Exchequer has seen this so oft-en and has looked into the figures, and so among the miscellaneous provisions we have a little Clause which will make bankruptcy profitable to the State. I have criticised the Government or at any rate I have expressed my opinion very frankly on this Bill and on economy. I should like to point out that economy receives no assistance or support from either the Opposition above the Gangway or the Opposition below the Gangway. I defy Members of either Opposition to mention a single Bill, a single Amendment, a single suggestion that they have brought in during the life of this Parliament which would tend to economy, which would save the money of the nation which, after all, is the people's money. It is no good thinking it all comes out of the pockets of the millionaires. It comes out of the pockets of the rich and the poor. The Oppositions never help us. They never give a single suggestion which would relieve the burden on the State and the general taxpayer.

Mr. CHARLETON

What about the Capital Levy?

Mr. PETO

The capital levy! If you get your Front Bench to confirm it, it will be a very interesting evening.

Mr. DEPUTY-SPEAKER (Mr. James Hope)

This is a Bill rather for reducing expenditure than suggesting other means of taxation.

Mr. PETO

I wish it were a much larger Measure. At the same time I shall vote for it on the principle that is good farthing is worth more than a bad 10s. piece.

Mr. CHARLETON

I listened with great interest to the Chancellor of the Exchequer this afternoon and was interested in his statement that no obligation to insured persons would be evaded. We en these benches are convinced that obligations will be evaded, in so far as our expectations of increasing the benefits under the Act are concerned. I was interested in the speech of the hon. Member for the Isle of Thanet (Mr. Harmsworth), who suggested that millions of money belonging to National Health Insurance were lying idle. The hon. Member is not here, but I suggest he is all wrong if he thinks millions lie idle. It may he that there are millions lying idle in India where people bury their gold. I should like to suggest to the House that these millions form the apex of a pyramid of credit which is assisting industry. It does not matter whether this money belongs to the working classes through their organisations or to the millionaire, the effect is just the same Hon. Members opposite always talk as though the only capital which would help industry is that in their names at their banks. If it is in the Post Office Savings Bank or in the hands of the trade unions and invested, it is the same thing. We never get that point out.

The hon. Member for the Isle of Thanet spoke as if those millions were Government millions, in the sense that they subscribed the money. They are nothing of the sort. The Government only subscribe two-ninths of the money spent, and the surplus is unspent money. The Government are not contributing a copper. They have simply amplified the administration fund. They have no right to it whatever. Every farthing of that money has been subscribed by the workmen and the employers. The hon. Member for Ilford (Sir F. Wise) deprecated us, on this side, fostering class hatred. So do I, but I suggest that this Bill, in so far as it attacks National Health Insurance and Unemployment Insurance, will foster class hatred to a degree we could never hope to do, because it is plunging into penury people who otherwise might be a little better off. We want more generous benefits.

We are always interested to listen to the hon. Member for Ilford on finance, but I am only an uneducated workman, and I take off my shoes in coming on to this holy ground of finance. The hon. Member for Ilford said that Germany had no War debt, but he was careful not to advocate reducing our War debt in the same way as Germany reduced hers. He would perhaps agree with me that Germany, having an aching molar, went to a blacksmith to have it pulled out, and perhaps the inflammation has not yet subsided, but still she has no War debt, and she has got rid of the aching molar. While the hon. Member is always talking about our War debt, he is very vague as to the way in which he wants it reduced, and it is only by looking into the dim future, and with many "ifs," that he suggests that it can be reduced. The hon. Member for Ilford also carried on the same strain as the rest of his colleagues in speaking about the capital they want. Suppose they get it. Will they ever tell us how much they want in any one year, so that we may have an approximate idea as to what they want? However much they get, they will not open shops where they are not needed, nor plant industries where they are not needed, but they will most likely do what the chairman of one of the banking concerns told them to do a few weeks ago, and that is, invest their money abroad. I suggest that we have no interest here at the moment in helping the Super-taxpayers and the Income Taxpayers to get a surplus to invest abroad. It may be all right for some industries, and it may be all right for the Super-taxpayers, but it is only well for the workers here in a very secondary sense, and we believe that it can best be spent at home.

The hon. Member for Frome (Mr. G. Peto) spoke in exactly the same strain, and urged us to reduce taxation to help the Super-taxpayers and Income Taxpayers, as the only people, apparently, who incest, but I suggest that much of this money that is wanted for investment is only to accelerate production, while, people are really suffering from Lack of consumption. While you will alleviate the taxation of those who have no personal need, you will still tax those who want what they earn for real personal needs. The trouble to-day, so far as I can see, watching the financial columns, is not the lack of money with which to help industry, but the lack of customers, and yet hon. Members opposite, in all their proposals so far as taxation is concerned, seek to accelerate the getting together of means of production and to retard the means of consumption. That is where we are bound to differ, and when hon. Members opposite throw a jibe at us to the effect that we do not believe in economy, it is because we approach this question from opposite angles. We say that the great fault with the world to-day is that the great mass of people have had their consuming power reduced, and, therefore, cannot consume the commodities which this wonderful age is able to produce. We produce with greater and greater acceleration, and we can produce very much faster than we can consume, but hon. Members opposite shill want to accelerate production, while what we are lacking in all over the world is consumption. One hon. Member opposite, whose constituency I forget, but who spoke from a Back Bench, went so far as to suggest that the Government should go into the advertisement business on a much larger scale. He is a super-individualist, but he qualified it by saying that. the Government should call in advertising experts to help them.

I would like to emphasise the argument of my hon. Friend the Member for Westhoughton (Mr. R. Davies), who spoke from the Front Bench below me, in emphasising that the Chancellor of the Exchequer did not tell the country in his speech this afternoon that the Widows' and Orphans' and Old Age Pensions Act was designed ultimately to relieve the Income Taxpayers and the Super-taxpayers of all responsibility so far as old age pensions are concerned, and that in a few years workpeople and employers will be bearing the whole of that charge. The rise in the rate of interest was one of the arguments that he was using for this onslaught on our funds. Well, when a suggestion was made that the interest of our War debt should be reduced, he appeared to be greatly shocked, and said, "We keep our pledges," but I will put this point, that since that money was borrowed we have returned to the gold standard, and many people have suffered, and it means that that War debt is worth about 50 per cent. more to the people who hold, it to-day than it was when they lent their money during the War.

Sir F. WISE

Not 50 per cent.

Mr. CHARLETON

The pound went down to about ten shillings in value.

Mr. WALSH

It went down to eight shillings.

Sir F. WISE

To about 13s. 4d. compared with the United States dollar.

Mr. CHARLETON

Well, I will accept that. It is near enough for my argument. We will say it went down a third. That is to say, if a man lent two motor cars at that time, he gets three hack, and the interest on three, and if we are in the parlous state in which we are said to be to-day, is it too much, seeing that we took men's lives, or took men to fight, during the War, to ask these people to come together and to say to them: "After all, your holding is appreciated by a third; cannot you help to hear the burden and help us over this difficult time?" But there is never any suggestion of that kind, and surely it would not hurt anybody if they were brought together in that way. As I said in opening, our insurance contributors were expecting to get greatly increased benefits after this valuation. The National Health Insurance members have already made some sacrifices and done something to help the country. When the National Health Insurance Bill was brought in, in order to get the Bill through the Government agreed that if the employers and employés would do their part, they, the Government, would provide two-ninths—and that has been confirmed from time to time—and then, If it was found that, with careful management, there was a surplus, we should have it and divide it among ourselves in benefits. It really is not Government money. The Government money has only been spent on administration and benefit, and if there was a deficit, we should make it good. The Government did not stand to lose either way.

From April, 1922, to December, 1923, the approved societies took over a liability from the Treasury of over£3,000,000 with regard to medical benefit, and again, in the years 1924, 1925 and 1926 a further sum of over£4,000,000 was shouldered by the approved societies, and we confidently expected that we should, in accordance with the Royal Commission's Report, raise the benefits to something like the basic rate of unemployment benefit instead of the present miserable pittance of 18s. that a man gets when he is ill and of 15s. that a woman gets. What is the position of a workman who, at the present moment, when wages are so low, is suddenly stricken ill with no savings with which to fortify himself, and a doctor comes in and orders all sorts of things? Most of us here, even on the Labour Benches, could get most of what a doctor cared to order, but doctors themselves cannot do justice to patients under national insurance, because they cannot order the things they need, because they know that if they did it would be a sheer mockery.

Take the case of the ill-paid workman with his miserable pittance of approved benefit. He is in a far worse state than we are nationally, and here you are going to debar him from getting any increase which would afford him proper provision when stricken ill. Inevitably his health fails. It is no wonder we are getting a C3 nation. The Army returns to-day show that about 60 per cent, of the young men who present themselves for recruitment are unfit. The Chancellor of the Exchequer to-day testified to the fact that the wealth of the country is increasing, and it would not seem, on the one hand, that he agrees with some of the hon. Members on the other side. He spoke about an overstrained Exchequer. It is rather a case of a disillusioned or distracted Chancellor of the Exchequer having made promises a year ago and being unable to keep them. When hon. Members opposite talk about increasing expenditure they never refer to the acceleration of production, and the almost hourly wonderful increase of our powers for producing work. Yet, so far as I am able to read the annual reports of banks and other firms, they have done very well during the last year.

The hon. Member for Oldham (Mr. Duff Cooper) made a most remarkable statement, coming from those benches. It might have come from Moscow. He referred to the National Health Insurance Act, and said we could not be expected to observe the sanctity of that Act, because it was passed through a Parliament of which there are few Members here to-day—a most remarkable statement. If that be true, what of the War debts, and what of the Czarist debts under a present Government which is two Governments removed from the Czar's Government? Yet hon. Members opposite hold the debts of the Czarist Government as sacred. It is really strange the arguments people will get up to in order to try to prove a case. Many of us have suffered rather severely from the introduction of National Health Insurance. I myself did. It wrecked a very good friendly society to which I belonged, and my superannuation. As an engine-driver of 38 years' service. if I go back to the footplate, I should not have a penny. because the railway company with which I was connected would not subscribe to the two funds. It used to subscribe to our friendly society, and when the National Health insurance was introduced they refused to subscribe to the society any longer. Hundreds of societies were ruined because of that, and we say that, having loyally carried out all the provisions and done all we could to manage our approved societies on a business footing, and waiting for each valuation to increase our position, it is a gross betrayal of all the promises to raid the funds in this way. For these reasons. we are opposing the Bill all through.

Mr. REMER

There is no Member of this House who is more strongly in favour of economy than I am. I feel very strongly upon the question of reducing the expenditure of this country, and one of the reasons why I have put my name down, in association with three Members of the Front Bench opposite, to oppose this Bill, is because I believe there is no economy whatever in the proposals which are put forward in this Bill. I would incur a good deal of unpopularity to support the Government in any proposal they put forward which was really going to reduce the expenditure of this country. I would support almost any economy proposed by the Government, however, unpopular it might be, but when I come to examine the provisions of this Bill, I find this Bill does not propose any economy. It does not propose any reduction of the expenditure of this country, and for that reason I am not able to support it. It is, in my opinion, adopting the policy of robbing Peter to pay Paul. It is passing on the expenditure, which has already been spent, to other people to pay for it. I think it can be described, in words which are well known in the City of London, as "kite-flying." For the information of the House, "kite-flying" means in the City of London that when two people are financially embarrassed nod have difficulty in meeting their engagements, they give accommodation bills to each other in order to meet their engagements, in other words, when that kind of transaction takes place in the City of London, it almost always happens that there is financial disaster at the end of it. There is only one end. Concerns which attempt that kind of financial transaction come to disaster.

The particular objection which I, personally, feel upon this matter has reference to the proposals of unemployment insurance. The right hon. Gentleman in the White Paper which he has issued states that the overdraft on unemployment insurance is£7,646,248. It was my privilege to put a question to the Minister of Labour and to the past Minister of Labour almost every month upon this particular overdraft. I put a question upon this overdraft just before Christmas, and I find that the overdraft on the unemployed insurance then was not £7,600,000, as stated to this White Paper, but£7,100,000. That figure is increasing at the present time. Let us look at the White Paper as it has been printed. It states that on the 1st March, 1926, the number on the live register was 1,107,100. It goes on to say: It is estimated that the income of the fund, with the Exchequer contribution reduced as proposed in the Bill, will be sufficient to meet expenditure, if the live register is on the average 1,030,000. In other words, they are gambling on the fact of the live register being 70,000 less than it is at the present time. Then there comes this: For each 10,000 by which the number on the register is on the average above or below the figure, the debt of the Fund to the Treasury will be increased or reduced by about£380,000 per annum. If you multiply£380,000 by 7, it surely means that the hold of the Treasury over the Unemployment Fund remains at the same figure as at present, and will be at the end of the next financial year something like £10,000,000. I join issue with the right hon. Gentleman upon this matter, and upon two grounds. I object, as a Member of Parliament, to passing an Act of Parliament in one year, and doing as we are now doing now, or as we are asked to do, repealing that Act of Parliament the next year. I object to that as a matter of principle.

The second thing to which I object is that, as far as unemployment insurance is concerned, we were promised, when the Pensions Bill was passed last year—and this Bill is a very serious charge upon industry—we were promised, in order to get that Bill through and to meet the objections to it, that, at the end of the period upon which the unemployment insurance became solvent, the contributions of employers, employed and the State should be reduced by a further 2d. What does this Bill mean? It means the postponing of the period when the overdraft is wiped out and the Insurance Fund becomes solvent. It means postponing the period when it is possible for these contributions to be reduced. We all know that it is most necessary to reduce the standing charges upon industry by every means we can.

10.0 P.M.

The Unemployment Insurance Fund is a very serious charge upon our industry, and one which is causing every manufacturer the loss of orders. It causes unemployment. It causes difficulties to every employer. The right hon. Gentleman, instead of taking, as he ought to have taken, the three partners in this national insurance into the scheme, wants to take all the advantage possible for the Treasury, and to postpone the advantage to the employers to as late a date as possible. I cannot agree to that. It is only after a very careful reading of the White Paper, and the Bill, that every Member of this House can understand that. Following that I yesterday put down a Motion to postpone the Second Reading of this Bill for six months. This Bill, in my opinion, is simply playing with the subject—and here may I say that, so far as the Treasury overdraft on Unemployment Insurance is concerned, that the Treasury actually make a profit out of that overdraft. They are charging interest at a higher rate than is charged and they actually have to pay themselves! For these reasons, much as I dislike to use words against my own party, I say that the right hon. Gentleman in this Bill is not practising economy, is not putting into effect any proposals which are going to -be an advantage to the finance of the country. I have no intention whatever of being hoodwinked in this matter. I have not the slightest hesitation in saying it is my intention to go into the Lobby against the Bill.

Mr. HARRIS

The hon. Gentleman the Member for Macclesfield (Mr. Remer) has just declared against this Bill, and he doubtless represents the views of more than one of his colleagues, for there comes a time when the most loyal and the most devoted follower of a Government which produces a Bill of the character of the present Bill must feel as he has done, when the Bill, as in this case, violates all sound principles of economy. The title of this Bill is a very attractive one. It is the Economy Bill. Those of us who appreciate the very heavy burdens the nation has to bear are perfectly justified in looking for every opportunity for economising and for the elimination of waste. If this Bill were really a courageous attempt to put our national expenditure on a sound basis, and to do away with wasteful expenditure, overlapping, and the like, I would do my best to assist its passage. The more one studies this Bill, however, the more convinced one must be that it is not an economy Bill at all. It is merely the burdens borne by the community from one shoulder to another, and the Bill has to be footed just the same.

The hon. Member for Macclesfield referred to the Unemployment Clauses of the Bill. Clearly these transfer taxes from the general taxpayer to one particular section of the community, and to that section of the community that has endeavoured to provide for unemployment. The hon. Member opposite was quite right in principle. Taxes on industry are not going to help the expansion of our trade, nor to help our manu- facturers who are engaged with the severe competition they have to face in all parts of the world. I want, however, to refer particularly to the Health Insurance part of the Bill. I remember the severe opposition to the Health Insurance Bill when it first saw the light of day. I remember the fashionable people of the West End who said they would not lick stamps. They were going to fight the Bill inch by inch. They prophesied all sorts of evil, and all sorts of trouble if the Bill became an Act of Parliament. It became an Act of Parliament, notwithstanding the efforts of hon. Members opposite who did their best to obstruct its passage.

In the light of experience it has proved a great success. That is recognised by the whole community. We have had a wonderful tribute to the good the Bill has done in the Report of the Royal Commission on National Health Insurance. The Report points out that now it is generally recognised as one of the principal contributions to the improved health of the community, the decreased death rate and the disappearance of some of the worst forms of illness. The report points out that there is need of improvement in many directions. As the right hon. Gentleman the Member for Spen Valley (Sir J. Simon) has said, the Bill erred in the early days on the side of caution. This was a great experiment, and nobody could tell what the calls on the funds would be, and therefore ample provision was made for reserves, and they fixed the standard of benefit comparatively low on the understanding that friendly societies, if they should have reserves, could extend the benefits.

Many of the rich societies have been able to give their members very substantial additions to the benefits fixed by Statute, but what the Royal Commission recommends is an improvement in the benefits laid down by Statute. To begin with, they say the benefits in cases of total disablement are totally inadequate. In paragraph 51 they point out that 7s. 6d. a week disablement benefit is not sufficient for the maintenance even of a single man. Of sickness benefit they say that 15s. is very near the margin for a single man and insufficient for a man with dependants. Compared with the benefits under the Unemployment Insurance scheme, it is absurdly inadequate. The Unemployment Insurance scheme provides 18s. a, week as standard benefit, with 5s. for the wife and 2s. for each dependant child. It is unreasonable that a man when sick should get less benefit than when he is unemployed and healthy and strong, because when he is ill he needs more for food and other comforts. As one of the first requirements they recommend an increase of benefit, particularly as regards provision for dependants, in the case of a man unable to work on account of illness. What they suggest is that 2s. should be provided for each dependant. That reform, however, is postponed indefinitely by this raid on the funds of the societies through the decrease of the percentage grant.

The Report also recommends that the insured sick should have the advantage of specialist treatment. At present this is provided only by a very few societies. They point out, also, that it is only a very few societies which are able to provide dental treatment, though anyone who knows anything about medical problems knows that bad teeth are one of the main causes of illness. Ophthalmic treatment is also urged by the Royal Commission. Some societies provide both dental and ophthalmic treatment; but the chance of such treatment being included in the statutory terms "Medical treatment" is indefinitely postponed by this raid on the fund. In other words, there is an attack on the whole system of insurance. It will drive people off the insurance fund on to the Poor Law. Even now, when it is necessary to have hospital treatment, the hospital in many cases has to bear the cost; and if the treatment is in a Poor Law inf[...]mary it is the Poor Law which has to foot the bill. If it were possible for hospital benefit to be paid for out of the funds accumulated by the societies, we should be going a long way towards sweeping away the whole of the Poor Law.

I have very grave suspicion also of Part 4, dealing with education. The President of the Board of Education again makes his bow in his attempt to please the Chancellor of the Exchequer. This is his third appearance on the scene. Twice he has come forward, and twice he has had to withdraw behind the curtain; but this time he hopes to creep through in the shadow of other Departments. I will be perfectly frank with him. I do not wish him success. This part of the Bill is very sinister. I do not take objection to the suggestion that where a proper Estimate is exceeded the Minister should be protected, that is a reasonably: proposal, but he actually suggests that he should be, vested with the power of rejecting expenditure if it should exceed the general standard of expenditure in other areas. He knows as well as I do that it is inevitable that standards of expenditure should vary. It would not be fair to expect the same costs in London as in a rural area or a small provincial town. Costs in London are inevitably higher; the costs of land, of buildings and of living are all higher.

It is dangerous to put in his hands the weapon of being able to say to authorities like the London Education Authority: "We cannot allow this particular expenditure because it exceeds the expenditure in some rural district in the West of England—say in Devonshire, Cornwall or in Wales." Unless some strong amending words are inserted I can guarantee that the right hon. Gentleman will encounter a good deal of opposition, not only from this side of the House but from London Members on the other side. A stiff tussle has been going on behind the scenes during the last few months. To do the right hon. Gentleman credit he is very stiff-lipped: he is determined to "deliver the goods" to the Chancellor of the Exchequer; and if he be beaten in one direction he will try in another; but we want to preserve the fabric of London's education, which has been built up by years of patient work—to preserve it from being, I might almost say, the prey of party controversy, and from being used by the Chancellor of the Exchequer in order to extort a small modicum of economy.

I do not wish to see either the present President of the Board of Education or any successor vested with these autocratic powers—the power of vetoing necessary expenditure on education on the ground that it exceeds the sum spent by a local authority in another part of the country. Actually, as the right hon. Gentleman knows very well, he has very large powers already, and if he does not approve of a particular proposal he has the power to veto it. Almost every week proposals come down to him that he is able to turn down with his present powers, and I am afraid that with this attempt to strengthen those powers he will become more autocratic and more in the position of being able to act as a dictator in regard to the kind of education to be carried out by the local education authorities.

There is, however, one pleasant feature in regard to this Clause and it is with regard to the percentage grant system. On this point the right hon. Gentleman seems to have learned wisdom during the last few weeks. I am glad that we have at last convinced him the percentage grant system is not a bad way of carrying on the work of the local authorities. I thought Clause 14 seemed to indicate that the Minister of Education was prepared to accept the percentage grant system because it provides that For the purpose of removing doubts it is hereby declared that the Board of Education shall not, for the purpose of Subsection (2) of Section one hundred and eighteen of the Education Act, 1921, he bound to recognise as expenditure in aid of which Parliamentary grants should he made to a local education authority any expenditure which, in the opinion of the Board, is excessive, having regard to the circumstances of the area of the authority or the general standard of expenditure in other areas. Are we to have fresh legislation in a few weeks' time in addition to the legislation which we are now asked to pass in the shape of this Bill? If so, that seems to me to be a very short-sighted and unwise policy. This Bill seems to be an attempt to collect a little money to swell the finances of a bankrupt Exchequer at the expense of those people least able to bear it, and it will cause grave discontent. It is a blow at education, it will not help unemployment, and it will make industry more difficult. It is anti-social in its spirit, and it is also bad finance.

Sir ROBERT SANDERS

I gather from the speech of the right hon. Gentleman who moved the rejection of this Bill that he thought it would provide for f he Labour party a very good electioneering cry. That I beg leave to doubt. With regard to proposals dealing with health insurance, it is a fact that not a single insured person will get any less benefit than he expected to get, and a good many of them will get a great deal more. The surplus by which this reduction is able to be made is really due to the higher rate of interest caused by the War, and the effect of this Bill on health insurance will prevent those who are insured under the scheme becoming war profiteers. I cannot help believing that no very great cry is likely to be made on that subject which will go down with the working classes of this country. After all, supposing that this Fund, instead of showing a large surplus, had shown a deficit; in that ease everyone realises that the Government would have been bound to make that deficit good. You cannot have it one way and not the other. If the Government would be bound to make a deficit good, surely, when, through purely adventitious circumstances, a surplus is realised, the Government are entitled to have some benefit out of that surplus.

With regard to the provisions as to Unemployment Insurance, it is difficult for one like myself, who comes from a country district, to put himself entirely in sympathy with those who, like the hon. Member for East Middlesbrough (Miss Wilkinson), come from urban districts, where unemployment is very rife. In my part of the country, my difficulty is to defend unemployment benefit at all. Objections are made to its being spoken of as the dole, but it is never called anything else in the country districts. They never speak of it as anything except the dole, and the point of view that is felt there is: "Here we are, getting low wages, but having no unemployment; why should we be called upon to provide a large sum of money through the taxes for those in ether districts, where wages are very much higher than ours, but where the amount of unemployment is considerable?" That is the line that is taken up, and that is the line one has to meet, not only in my own division but in a great many similar divisions all ever the country. After all, those who live in the country districts have to contribute, through the taxes, a sum of money somewhere between£12,000,000 and£15,000,000 towards Unemployment Insurance, and out of it they get no benefit whatever. A provision like this, which means that the amount contributed to Unemployment Insurance out of the taxes is less, will not be a factor that is likely to win any votes for the Labour party in the rural districts of the country.

What I particularly wanted to speak about in regard to this Bill is a question that has been very little dealt with in the course of the Debate, namely, the provision that is made in the Bill for having one register instead of two in the course of the year. That has been proposed once or twice before. It has been spoken of, but it has always been turned down up to now. I believe that that is a reform very much in the right direction. It will create no real grievance with regard to the number of people who will come on the register; for all effective purposes, if the period is reduced from six months to three months, with one register instead of two, there will be a practical gain. It is not much use being on the register when no election takes place, and, as a matter of fact, the second register, which this Bill proposes to abolish, is one on which very few elections take place at any time, and to get on the effective register a shorter period will be necessary under this Bill than has been necessary hitherto. Therefore, on the whole, the people who want to get on the register will gain rather than lose by the provisions of the Bill.

There is no doubt that by the provisions of the Bill there be a certain amount of saving to the Exchequer, but what will probably appeal to hon. Members more is that there will be a very considerable saving to local political associations. After all, attention to the register is one of the principal things with which local political associations have to deal. Careful attention to the register continued over a period of some years may mean at a General Election a difference of several hundred votes—when things are running close, no inconsiderable item. But that careful attention to the register costs a good deal of money, especially in country Divisions, where the number of polling districts has now been very much increased, where the agent has to travel to each of those polling districts, and where a visit to each polling district costs more money.

I remember saying when the last Franchise Bill was before the House, and being rather laughed at for saying, the effect of it was going to be to increase the cost of electioneering. That has been absolutely borne out. The necessary cost of political organisations to-day is considerably more than before the Bill was passed. A certain amount of the cost is attributable to the care that has to be taken of the register. Undoubtedly at present a good many of us have found that, although the cost is increasing, subscriptions from our supporters are rather more easy to get than they were some years ago. For that, I think, we have to thank the Labour Government. In some parts of the world it was impossible, before the actual advent of the Labour Government, to bring it home to the electors that such a thing was even possible. There are six divisions in my county, and in four of them at the last election the Labour candidate who stood forfeited his deposit.

Mr. SPEAKER

This is economy for the Exchequer, and not for candidates.

Sir R. SANDERS

I am simply trying to show that the provision to have one register instead of two will be of benefit to all those who have to contest agricultural and county constituencies. It will also considerably diminish the amount of work that is thrown upon election agents, a class who are very hard worked and are seldom overpaid. For these reasons, I most heartily welcome this provision that deals with having one register instead of two. Taking the Bill as a whole, it does mean substantial savings. The fact that the pensions policy and other policies approved by this House have led to increases of expenditure in other directions, makes this Bill not less, but more necessary. People outside are inclined to doubt that this House is seriously in favour of economy, and I very much doubt whether the public will ever be convinced on that matter until a Measure has been passed through this House to reduce the amount of the salaries of Members. The Bill, undoubtedly, is a step in the right direction, and as such I think it ought to have the support of all on this side of the House.

Mr. WEBB

I congratulate the hon. Member who has just resumed his seat on the fact that he has put his finger on what is, perhaps, the most potent part of the Bill from the point of view of economy. There is one provision in this Bill that effects economy, and that is the proposed abolition of the second register. The proposed abolition of the second day's polling in Orkney and Shetland—

Mr. CHURCHILL

Zetland.

Mr. WEBB

The saving on using seven letters in the name instead of eight is an economy which I think is too trifling, even for the right hon. Gentleman. These two proposals are, in my view, the only justification for the Title of the Bill. They only amount to something like 1-32d. of a penny in the£on the Income Tax. I do not say that that is an amount which is to be disregarded, because economy even in small things is necessary; but the public is asked to believe that this is a Bill for effecting economy to the extent of£8,000,000 or£10,000,000 a year, which would be 2d. in the £on the Income Tax, a substantial amount. There is little of economy in the Bill, but there is a real economy in the abolition of the second register. That proposal is not quite so unobjectionable as the hon. Member for Wells (Sir R. Sanders) suggests. It will mean that a number of people will find themselves not on the register when the election comes round, and those people will be of the class which is most migratory and, as a rule, they are of the poorest class. The second register was intended to minimise, as far as possible, the liability of that class of community being excluded from the register. That provision is to be undone.

What do we mean by economy? By national economy, in the true sense, we must mean a diminution in the proportion of the amount of the national income which is devoted to what one may call consumption purposes, maintenance or enjoyment, and an increase of the amount of the income which is what we call saved, that is, expended on objects which are durable, such as buildings, stock and so on. You are going to spend the whole income, in any case, but it makes a difference to the community and the employment of the community as to the class of things on which the income is spent. When we say that a man is a spendthrift, we mean that he is spending the whole of his income on objects of individual, personal maintenance or enjoyment, and when we say that a man is saving, we ought to mean and generally do mean that he is investing, that he is diverting some of his potential expenditure from articles of current consumption and maintenance to articles of greater durability.

The effect on the nation and the community depends on the aggregate amount, and there is no advantage, from this point of view, for one man to save and another man to spend. The question is as to what is the balance. It does not matter a great deal whether it is the Government which is saving or the individual, whether it is the Exchequer or the joint stock banks or the trade unions. The question is how much of the nation's aggregate income is diverted from current consumption to articles of permanent utility. Consequently there is not much advantage for the Government to diminish its expenditure by throwing the charges on somebody else. That is no economy at all, and will not do any good for the money market or in any way promote industry. It may be convenient for the Chancellor of the Exchequer; it may be something of a boon to the taxpayers who would otherwise have their Income Tax increased, but as regards the community as a whole the effect on the economic life of the nation of a mere transfer of expenditure from the national Government to local Governments, or from the national Government to the other contributaries to the approved societies, or any transfer of that kind, is not a real economy at all.

Observe the skill with which the Chancellor of the Exchequer dealt with this matter in his opening speech ! He incidentally reminded the House that he had had experience of each of the three fighting services in his time, and that he had learnt a lot there. I am not so sure he did not bring as much knowledge of military tactics to those offices as he learned: he certainly learned the use of the smoke screen. His speech was one dark smoke screen. It will fill the newspapers tomorrow with long reports of his lecture upon the various descriptions of national expenditure and national economies, with a great deal of which I agree except that it was out of place in regard to this Bill. It was a smoke screen which will fill the newspapers tomorrow. Only a very small portion of his long speech was devoted to a perfunctory and not quite accurate description of the Clauses of the Bill. That will not matter however in the comments on his speech at the hands of the newspapers.

Mr. CHURCHILL

They will all he unfavourable.

Mr. WEBB

And it will not matter to the people who read his speech on suburban railways. They will all be thrilled at his masterly survey of national expenditure with the regrettable result that they will not find any reduction in their Income Tax. The actual clauses of this Bill will be forgotten, in fact some Members of the House have not even now realised the effect of this Bill. I want to come to some of the Clauses and to consider the matter not from a national economy point of view, for there is no national economy in it at all but from the point of view of the Bill itself. All the rest of the Bill except the election changes is appropriation; in fact it is one long appropriation Clause. The expression "appropriation" was first used when the Government wanted to take part of the revenues of the Irish Church, and this long appropriation Clause is intended to appropriate part of the funds of other bodies. Such appropriation, or misappropriation, is not in itself economy.

Let us begin with Health Insurance. I do not pretend to be an actuary or even to understand actuarial language, though I shall have something to say about the language. I object in the strongest way to the Bill's proposal with regard to Health Insurance on the ground that it is a breach of faith. The scheme of Health Insurance was established, as has been said, as a tripartite partnership, in which each of the partners was supposed to contribute equally. The contributions could not be exactly equal, because the Treasury were shrewd enough to suggest to the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) that it would be far better that the employers and workmen should contribute a definite sum per week, and that the Treasury should not contribute a definite sum, that the Treasury should not put up any money at all, but should merely undertake to pay two-ninths of the expenditure. In addition to that, the Treasury were to bear the expense of stamps—a small amount—and of one or two other things. Roughly speaking, it was equal.

The approved societies were told that it was for them to administer carefully what was then an extremely dangerous scheme. They were given the incentive to strict administration, more strict than any audit could be, in order that they might have the advantage of the surpluses, and it was said that the surpluses would give them an opportunity of distributing additional benefits to the members. A great deal was made of that long list of additional benefits by the right hon. Member for Carnarvon Boroughs and others who advocated the scheme. They said: "The benefits are small now. We admit that the sickness benefit is very little and the disablement benefit very little, but think of the additional benefits that you will be able to get when the scheme is under way." There was a definite Parliamentary bargain with the approved societies, and through them with the 15,000,000 insured persons, that they were in the scheme as partners, and that the whole of the surpluses which they were able to make would be their reward for good and strict administration to enable them to give additional benefits.

I was very much struck by the wording of the Chancellor's definite statement that it would be quite wrong to repudiate the National Debt, in which statement I entirely agreed with him. It would be not only wrong but very foolish. The right hon. Gentleman said that he refused to contemplate the repudiation of the State's statutory obligations to its creditors, its pensioners, or to its servants. I like that phrase; it is quite correct. They are statutory obligations of the highest kind, and I certainly do not want to repudiate them. But the obligations to the approved societies are on exactly the same basis. Are they not statutory obligations? Is there anything higher than an Act of Parliament? Is this a new doctrine, that there are some Acts of Parliament higher than others? I oppose this Bill because I do not want the State to repudiate its statutory obligations.

Are statutory obligations to creditors, pensioners and servants more sacrosanct than statutory obligations to the 15,000,000 insured contributors? As a director of the Prudential Insurance Company has said, this is the most scientific robbery that has ever been devised. So carefully has this scientific robbery been wrapped up that hon. Member after hon. Member in the innocence of their hearts have pointed out that this Bill takes away nothing from any single insured contributor which he now possesses. No doubt they believe it. The hon. Member for Oldham (Mr. Duff Cooper) said my right hon. Friend the Member for Colne Valley (Mr. Snowden) has not shown that any single sick person would get less than he was entitled to at the present time under the existing law and that not one unemployed person would suffer anything from this Bill.

Mr. CHURCHILL

Hear, hear:

Mr. WEBB

The right hon. Gentleman approves of that statement. Surely he must know better; surely he must know that the large majority of the 15,000,000 insured persons will lose something which they now possess if the Bill passes. [HON. MEMBERS: "No!"] Obviously, there is some misunderstanding on one side or the other, so let me explain. It is perfectly true and it is an easy thing to say, that none of the benefits which are now being paid will be diminished in any way. That is quite true, and it is possible to say that none of the additional benefits which have been added after the first valuation and after the second valuation will be diminished by the passing of this Measure into law. I am quite certain that is obviously the case, and that it is just that very fact which obscures the issue. But neither the right hon. Gentleman nor the actuaries, nor anybody else responsible, has had the candour to point out that if the Bill passes it will diminish the benefits which will be paid in the future.

Mr. NEVILLE CHAMBERLAIN

"Benefits which they now possess" were the words used.

Mr. WEBB

What I said was that the statement had been made that this Bill would not take away from insured people anything which they now possessed, and if the right hon. Gentleman will allow me to finish, he will see my point. I quite candidly and frankly admit that it does not diminish the existing benefit now being paid, or the additional benefits which are already payable or in process of becoming payable, but it does diminish, and it must be admitted that diminishes and cuts away to a very large extent, if not altogether, the possibility of other additional benefits which have not yet been declared and are not yet divisible.

Mr. CHURCHILL

Which they do not possess.

Mr. WEBB

The right hon. Gentleman says these are benefits which the insured persons do not possess. That is an extraordinary view. If I have some property of my own and there is a reversion coming to me under the existing law, which is uncertain in amount, do I not possess the right to that reversion? I should like to see the right hon. Gentleman trying to explain to anyone who is entitled to a reversion of uncertain amount that he does not possess any right. Of course, he possesses the right to that reversion and could sell it on the Stock Exchange, and the aggregate present value of the chance of having these additional benefits is a considerable sum running into millions. This will all be taken away from the existing contributors and the future contributors, and the fact is concealed in the smoke screen which has been put up by the complications of the scheme. I take the Memorandum explaining the Clauses of the Bill, which states: The benefits provided will continue to be worth something more than the contributions paid.…thus preserving an important feature of the scheme on its present basis. We do not forget "9d. for 4d." The 9d. has now disappeared to something rather more than 4d.—4½—and then they say nothing is taken away by this Bill. All I can say is that it is not very creditable to a Government or to the candour of those who have expounded the provisions of this Bill that they should have so successfully concealed the fact that they are depriving insured contributors of this valuable thing. Even existing benefits are rendered insecure by the cut which the Government are making. The actuary says so. He contemplates that this cut will drive a number of the approved societies into actuarial insolvency to the extent of probably£1,000,000. Having driven the societies into insolvency, provision is made for making it up to them, so as just to keep them going.

The Government, having driven them into insolvency, are going to bring them back just into solvency, not by finding any money but by throwing the charge on one of those mysterious reserve funds of the Insurance Fund itself, which is the property of the insured contributors already—or at any rate it is partly their own property as one member of the partnership. I say further, that the Government, having driven certain societies into insolvency and jeopardised a great many more, are setting a very bad example to the friendly society world. Then the Government have the generosity to promise to restore to a sort of solvency those societies which it has made insolvent. It is all at the discretion of the Government. They may restore any one of these societies to solvency entirely at their discretion and even then not out of their own pocket, but by taking the money out of the Insurance Fund account and putting it to the credit of these particular societies.

That does not seem quite the right thing. The justification for this—I cannot say act of robbery, because it is not put forward as a justification for the act of robbery. The act of robbery is concealed —but the justification for the disturbance of the finance that the right hon. Gentleman is causing is apparently the rise in the rate of interest. The impression is given that that interest is being paid by the Government, and it is a great favour that the Government are paying so much interest. As a matter of fact, only part of it is being paid by the Government. Approved societies have the right of making their own investments up to a certain limit, and they do, in large numbers, make their own investments.

They get this rate of interest from the market without any favour from the Government. As a matter of fact, it is a great convenience to the Chancellor of the Exchequer to have a large part of his National Debt congealed in those quasi-public authorities and not free on the market. It greatly helps him in conversion operations. It is said here, as if it were a favour, that it is free of Income Tax. Well, of course it is free of Income Tax under the Income Tax law. It is not a favour that the Government are conferring by making it free of Income Tax. The right hon. Gentleman, who suggested we were war profiteers because we obtain in our investments the market rate of interest, was covering us with the same brush, which is hardly relevant. The surplus is largely due to the greatly diminished mortality and sickness, and also a falling off in the birth-rate.

The Government think they are entitled to take the proceeds of that, but, as a matter of fact, the Government are already taking the proceeds of that in the diminution of the benefits, because the Government contribution is reckoned on the benefits. It pays only two-ninths of the benefits, and in so far as sickness or the birth-rate has gone down, the Government are already getting the benefit to the extent of their two-ninths in that diminished benefit, and the whole of that part of the surplus to which the Government have made no contribution is surely equitably the property of the contributors. I have said that that surplus belongs to the scheme, to to the tri-partite partnership, but one of the partners, who happens also to be the supreme trustee for the whole proceeding, and also to have the arbitrary power, through his big majority, of doing what he likes, is coming forward, without consulting the other two partners or their representatives, and claiming to scoop the whole of this surplus, to which, even if he is entitled to it at all, he is only morally entitled to one-third. What should we say of h man in partnership with two others in a firm, who, if there were unexpected windfalls and profits, should say: "I will have the whole of that surplus," without consulting the other two partners? The right hon. Gentleman is not doing it in ignorance, like so many of his followers. The right hon. Gentleman knows that he is committing this misappropriation, shall we say, and he is doing it knowingly and shamelessly, because he is not even apologising for it. He is doing it, I will not say to save a penny on the Income Tax, but in order to pay a miserably small dividend on the enormously inflated hopes of reduced expenditure which his followers have been led to expect, not altogether without his having contributed to it.

I want to say a word about the Unemployment Insurance. There, again, it is said that no unemployed man will get any less, but as a matter of fact that is not true. As the hon. Member for Macclesfield (Mr. Remer) said, this cut puts off the repayment of the debt for which the fund is paying 5 per cent. interest to. the right hon. Gentleman. The contributions are to be reduced back to their former level when that debt is paid off, and the right hon. Gentleman is putting off that period by at least several years, and very likely a good deal more. That means to say in effect that he is asking the House to levy a tax on the future levies upon the insured contributors and employers in order to grab another penny on the Income Tax, and I suggest that the unemployed man is actually paying to-day for that, because he is paying the contributions that were enlarged for the express purposes of promptly repaying the debt and not getting the benefits.

I have said enough to justify, at any rate, our strenuous opposition to this Bill. It is, I believe, an opposition which will evoke an echo throughout, if not the 15,000,000 insured people, at any rate the 8,000 insurance societies, but it is much more serious than that. This is a thing which may be done, and it will not be found out for a bit, but it will be found out by the people as they awake to it, and it will leave a most bitter feeling of wrath. They will feel that they have been robbed, that their little investment has been taken from them by the action of the right hon. Gentleman, and I hope that when he or his colleague comes to reply he will deal with the point of view of the statutory contractual obligation of the Government which I have put forward.

Ordered, "That the Debate be now adjourned." —[Commander Eyres Monsell.]

Debate to be resumed To-morrow.