HC Deb 11 April 1927 vol 205 cc99-126

Motion made, and Question proposed, That the customs duty chargeable on tea until the first day of August, nineteen hundred and twenty-seven, shall continue to be charged on and after that date until the first day of August, nineteen hundred and twenty-eight, that is to say: Tea, the lb. … … fourpence. And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.


The Member who follows the Chancellor of the Exchequer on Budget Day is in the position of a man who moves a vote of thanks to the hero of an occasion. He is expected to say pleasant things, and to be bright, brief and brotherly. I can fulfil two of these expectations. I shall be brief and brotherly. I am afraid I can hardly promise to be bright. I have not the right hon. Gentleman's gift of seeing a swan in every goose and a silver lining to the blackest cloud. The right hon. Gentleman was faced by difficulties which would have been the despair of most men. The right hon. Gentleman is not like most men. Those who expected that he would come here this afternoon in a proper mood of penitence and humility, and appropriately dressed in sackcloth, did not know the right hon. Gentleman. He is not that sort. Excuses he may make, but apologies never. He lives in a realm of imagination. He glories in big figures. If he cannot have a big surplus, then he must have a big deficit. He is like Charles VII of France, of whom it was said, "No man ever lost a kingdom with more gaiety."

I am sure that the Committee will not withhold admiration from the right hon. Gentleman for the courage and audacity with which he has faced the situation. I shall not, at this stage of our proceedings, attempt to follow the right hon. Gentleman; I shall reserve that for a later date. But I am sure that I shall be expressing the feelings of every Member of the Committee When I say that we have admired the charm of the right hon. Gentleman's deliverance and the clearness with which he has put these very difficult matters before the Committee. The fact that the right hon. Gentleman has had a very difficult duty to discharge has not in the least moderated his eloquence or lessened his charm. He has spoken as eloquently this afternoon in facing a big deficit as he did two years ago when he so lavishly distributed surpluses which had been left by his predecessor. I shall detain the Committee now for only a moment or two just to indicate in a few words the line that the Opposition will probably take in regard to some of the proposals which have been submitted this afternoon.

First of all I would say that we shall contest the excuse of the right hon. Gentleman that his financial embarrassments are wholly to be attributed to the industrial dislocations of last year. He began his statement by reminding the Committee that he had said that if additional revenue were needed, both direct and indirect taxation would have to make their contribution. He has levied or proposes to levy a number of permanent indirect taxes, but he proposes no addition to the permanent direct taxes. If the right hon. Gentleman succeeds in getting more out of tobacco without an increase of price—which I very much doubt—if he can extract for revenue purposes some of the exorbitant profits of the tobacco monopolists, then perhaps on this side of the House there will be no great complaint about the proposal that he makes. I shall reserve a fuller consideration of these proposals and of the general financial position set forth by the right hon. Gentleman, and I shall conclude now by saying, I think in the name of every Member of the Committee, that we tender to the right hon. Gentleman our hearty congratulations not merely on the great physical effort of speaking for so great a length of time, but on the brilliancy with which he has laid his proposals before the House.


My right hon. Friend who has just spoken said that an ex-Chancellor of the Exchequer was always in the position, on the first day of the Budget, of one who was moving a vote of thanks, reserving criticisms and disagreeable things for the next day. I am in the position of another ex-Chancellor of the Exchequer seconding the vote of thanks which has been moved, and I do it with a feeling of gratitude for over two and a half hours of extraordinarily brilliant entertainment. I think that we ought, each and all, to contribute to the revenue by paying Entertainments Duty. The entertainment has been well worth a very high duty. The right hon. Gentleman is, I think, the merriest tax collector since the days of Robin Hood. He made us feel, all those who have been subject to these taxes and inconveniences, that it was really rather delight than otherwise to contribute to them. I do not propose to say anything with regard to the general character of the Budget. It is extraordinarily ingenious and extraordinarily audacious, but those qualities we always expect from the present Chancellor of the Exchequer. To what extent the proposals are sound—that is something we expect less from him than the other qualities. As far as I can see he has followed a very old device of those who are hard up—that is to anticipate next year's revenue. He has done that to a very considerable extent with regard to both beer and Schedule A. I am not going to say anything with regard to the desirability of those two expedients, but there was one thing which was not very clear. It looked at one moment as if the Chancellor of the Exchequer were going to resort to an expedient which Chancellors of the Exchequer many times have been recommended to adopt and that is to treat the revenues of corporations and companies as a whole, and charge them with Super-tax. My right hon. and learned Friend the Member of Spen Valley (Sir J. Simon) asked whether that would cover commercial corporations and I understood the Chancellor of the Exchequer to say that it would, but gathered from the way in which he summed up his revenue he did not intend to resort to that expedient. It is one which has been recommended by business men in the past—I am not going to say a word now with regard to it—that you should treat revenue of a company as if it were the revenue of an individual. I am not going to argue it; I only want to elicit information.


The right hon. Gentleman is quite right.


I rather gathered that the right hon. Gentleman was leading up to that expedient, but I could see from the way in which he summed up his receipts that it was not intended at all. That is all right, but I wanted to make it quite clear. There are one or two other questions which I should prefer to put to the right hon. Gentleman to-morrow. There are one of two things which we shall have to examine carefully with regard to indirect taxes, and with regard to the effect on the cast more particularly of matches and tobacco. Then I should say at once that I shall resist the annexation of the Road Fund, because the right hon. Gentleman assumes that all the purposes for which the Road Fund was instituted have been exhausted by the very limited programme which the Government have introduced. As a matter of fact, they have restricted the purposes for which that Fund was intended deliberately for the last two or three years with a view to annexing the Fund. The work which had already been undertaken by their predecessors—the Government of which I was a member, and the Labour Government,—has been slowed down deliberately with a view to creating reserves. We now know what the object was. However, I only want to give a general indication that this is a matter which will be resisted with the whole of my power and strength. I shall postpone my general criticisms with regard to the Budget and the Statement of National Finance until to-morrow, and conclude as my right hon. Friend the Member for Colne Valley (Mr. Snowden) did by another word of appreciation of the very fine speech delivered by the Chancellor of the Exchequer.


In the very brilliant speech to which we have listened this afternoon, the Chancellor of the Exchequer found it necessary to explain that the country was confronted with an almost unparalleled deficit, and he proceeded to lay the entire blame for that deficit upon the coal lock-out of last year. As this statement has been made, and as this challenge has been thrown down, I think it well, even at this early stage of the Debate, to take it up and carry this inquiry one stage further. If that inquiry be carried one stage further, and if we inquire what was the origin of the coal lock-out, we can prove, I believe conclusively, that the origin of that struggle was due to the financial policy of the right hon. Gentleman, and to that alone. In the year 1924, under a Labour Government, the mines were paying the then wage agreement and substantial profits to the owners in addition, despite all the defects of the existing system. In the year 1926, however, the mines were showing a very heavy loss, and the owners in many cases were revealing their books to show that loss, and the men were being confronted with a demand for wage reduction. What had happened in the interval? In the interval there had been no appreciable change in the world market for coal. There certainly had been no strike or is disturbance of any kind in the coalfield. There was no dispute of any kind until the men were confronted with a heavy wage reduction, owing to the ruin of the mining trade, and the only explanation ever given—the only explanation possible—for that extraordinary change, is the policy of the right hon. Gentleman.

In the interval, with the aid of credits—which he held in reserve, but did not use—in America, the right hon. Gentleman had restored the gold standard, for which performance he so warmly congratulated himself this afternoon. In the process our exchange was raised by artificial means to the extent of 10 per cent., and that, according to the estimate of competent authorities, meant a loss of some 1s. 9d. a ton on every ton of coal which we sold abroad. That was the estimate of Mr. Keynes, whose predictions in these matters were so uniformly correct. Even the Secretary of the Mine Owners' Association himself admitted a loss of 1s. a ton due to this cause. The argument is very simple. The rise in the exchange meant that we had to accept less per ton of coal, in terms of sterling, than we did before. We had either to accept a lesser sum for the coal we sold abroad in our own currency, or raise our price in terms of foreign currency, and that meant we could no longer compete. Consequently, to compete abroad, the coalowners found it necessary to reduce the cost of production in terms of our own currency, and, being coalowners, their only suggestion for doing that was to reduce the wages of the men.

At the time—I think it was in the first quarter of 1925—when the right hon. Gentleman was beginning his operation the average profit per ton of coal sold abroad was about 6d. By the loss of 1s. 9d. incurred through the policy of the right hon. Gentleman, that profit was turned to an average loss of 1s. 3d. per ton, and that policy, and that policy alone—which has never been defended in this House by the right hon. Gentleman—confronted us with the coal crisis, faced us with the ruin of the mining trade, and precipitated the industrial struggle, the dire effects of which the right hon. Gentleman has had to consider this afternoon. We are this afternoon paying the bill for the financial policy which the right hon. Gentleman initiated some two years ago. Yet he claims credit for the wonders and glories of the return to the gold standard. Why was that policy pursued? It seemed madness on the part of the Government to ruin, not only the coal trade, but every great export trade in the country and particularly such businesses as iron and steel. But the reason is not far to seek. Every producer by hand or brain was penalised, not only the workers, but also the productive capitalists, in order to benefit one economically useless section of the community, commonly known as the rentier class. They, and they alone, had their purchasing power increased through the policy which ruined the mines and confronts us with this deficit to-day.

The rentier class, it was estimated by Mr. Keynes, benefited to the extent of some £1,000,000,000, and I may say, incidentally, the burden of our National Debt, of which we have heard so much this afternoon, was raised by some £750,000,000 as a result of the same policy; and that rise in our exchange, that forcing-down of our internal price level and raising of the burden of our National Debt by some £750,000,000, at one stroke of the Chancellor's pen wiped out almost exactly the laborious efforts we made to redeem debt since the War. It is clear that this rentier class and this class alone, did not have its monetary emoluments reduced as a result of the Chancellor's policy. The profits of industry were reduced, the wages and salaries of workers were reduced, but the man who owned War Bonds had not his interest reduced. The man who owned house property continued to receive the same rent. Every fixed interest-bearing security gave exactly the same yield as it did before. And yet these people, being paid the same amount of money as they were before, as a charge on the productive community, commanded far more in goods and in services as a result of the policy of the right hon. Gentleman, because, when the internal price level was forced down, as a result of the right hon. Gentleman's policy of deflation, these people, receiving the same number of pounds as they did before, benefited when the right hon. Gentleman had made those pounds buy more. The rentier, and the rentier alone, benefited from that policy and he benefited at the expense of the wage-earner and the producer.

It is sometimes said from the benches opposite, "It is quite true that under a policy of deflation of this character wages are forced down, but shortly afterwards prices fall, so if only the workers are sensible and accept wage reductions, prices will soon follow, and then they will be in just the same situation as they were in before, with just as much read purchasing power, but the competitive position of industry as a whole will have been improved and the prosperity of the country will be assisted." That argument is fundamentally fallacious, and it is one of the most dangerous fallacies with which the working class is deluded. It would be true if the rentier class had their returns reduced to the same extent as the wage earner. It would be true if, in proportion to the reduction in wages, the interest on the War Debt and the other fixed interest-bearing securities were reduced; but it cannot be true when the yield of such securities is not reduced. I will take, if I may, a very simple illustration which I think should make this point quite clear to anyone with an elementary knowledge of the quantitative theory of money which is now almost universally accepted.

Supposing we envisage an economic community with a total currency of £100 and the number of 100 articles, let us say available for purchase. On the quantitative theory, velocity and other factors into which I need not enter, being equal, the price of those articles to the community would be £1 each. Supposing that currency to be in the hands of two classes (a) the rentier class holding £50 and (b) the producer holding another £50. Supposing by a process of deflation we halve the amount in the hands of class (b), while leaving intact the amount in the hands of class (a), the total currency is £75 and the price of the 100 commodities becomes 15s. each. Your rentier class, holding the same amount of money as before, benefits considerably because prices have cheapened, but the producer class has lost considerably. To make his wages buy the same that his previous higher wages bought, the price of commodities would have had to fall beyond 15s.; it would have had to fall to 10s. Prices would have had to be halved as well as wages, but the prices cannot be halved, because the emolument of the rentier remains precisely the same as it was before, and his actual purchasing power has been increased. The nominal purchasing power does not suffer an all-round reduction, and as a result the real purchasing power at the end of the transaction has suffered a fundamental alteration in its relations. Any policy of deflation such as that carried out by the right hon. Gentleman means an enormous transfer of purchasing power from the producer to the idle and the useless portions of the community.




Economically idle and useless. Surely, the hon. Gentleman sees no precise economic function for those who merely draw a rent or interest. My argument, which was developed before he came in, was this, that the useful man, whether by hand or brain, I will throw in the productive capitalist to please the hon. Gentleman, is penalised in order to benefit the one person, the one type, the one class which contributes no useful function of any kind.


Does the hon. Gentleman really suggest that the rentier contributes no useful function?


Most certainly I do.


Then I can only say that the hon. Gentleman is absolutely alone in his opinion.


I am afraid that outside the salubrious confines of Oxford there is an ever-growing body of opinion which supports this mistaken view, and which, I believe, at the next General Election, may take a rather drastic and unpleasant action in its support. The policy which I have just described has not been confined to the period in office of the right hon. Gentleman. That policy was initiated after the War by the present Foreign Secretary, and as a result of it the burden of our National Debt has been exactly doubled, and the holding of this idle rentier class has also been exactly doubled. When the right hon. Gentleman began his operations the pound was worth some 6s. in pre-War values. It is now worth some 12s. The real burden of our National Debt has been doubled by this policy. Then what a farce it is for the right hon. Gentleman the present Chancellor of the Exchequer to get up at that Box and to posture and make heroic gestures about maintaining the Sinking Fund at some £50,000,000 a year, when he and his party, in order to benefit one class, have doubled the burden of the National Debt by an esoteric banking policy, hidden and concealed from the view of the masses of this country. Now they obey the canons of sound finance by handing back each year £50,000,000 to these people who lent this money when money was worth exactly half what it is now. That is the great achievement of the right hon. Gentleman and his friends for which he claims so very much credit this afternoon.

I hold, and I believe it can be supported by facts, that this policy of deflation, this final return to the gold standard in particular, precipitated the greatest industrial crisis which this country has ever known and confronted us directly with the situation that the Chancellor of the Exchequer has had to describe this afternoon. If this argument be correct, and if these facts can be supported, is it not, if we may indulge for a moment in retrospection, an impudence to tell the miners that they should study and regard economic facts? The mining crisis was not some ineluctable cataclysm of nature. It was the direct and deliberate result of the policy pursued by the Government of the day. One class benefited to the tune of £1,000,000,000 from that policy. The miners, when they were confronted with a demand for wage reductions, asked for a further subsidy of £20,000,000 to enable them to tide over the crisis while the mines were reorganised. That £20,000,000 would have been paid by the rich tax-payers of this country. All that the miners asked was that those who benefited to the tune of £1,000,000,000 should hand back a tiny part of that colossal booty in order to ease the shock of that policy to the first victims whom it affected. Even that modest demand the Government refused, and they preferred to plunge us into a struggle which meant a loss of hundreds of millions to this land and has left behind a legacy of bitterness and of hatred in this land, I am sorry to say, more incalculable and more terrible in its consequences than any immediate monetary loss.

I hold that policy, and that policy alone, to be responsible for the budgetary situation which confronts the House this afternoon, and if I may, in a few words, I would like to examine the alternatives which rest upon the Chancellor of the Exchequer in the light of this difficulty which he has brought upon himself. The first alternative presenting itself to the right hon. Gentleman was to increase direct taxation. He would not do that. The groan which went up from the benches opposite when he even mentioned the Income Tax gave good evidence that no Tory Chancellor of the Exchequer can do the sound thing and the proper thing and, in a situation like this, impose a good, sharp and salutary dose of direct taxation. He might have raided the Sinking Fund. I would much rather that he imposed direct taxation than raided the Sinking Fund, but I would rather that he even raided the Sinking Fund than imposed indirect taxation, which in one way and another will come out of the pockets of the poor. What do these three courses mean in economic facts? Direct taxation means taking money from the rich classes of this country. It means taking from them what they are paying on luxury expenditure; if left to fructify in their pockets, very little of that money would be reinvested. If it is taken in direct taxation, and applied to the Sinking Fund, it means that we are taking money from luxury expenditure and applying it to purposes where it will find re-investment in productive industry. But at the moment is a great deal of re-investment in productive industry actually required? That re-investment means the production of more machinery, and at the present time, as is well known, the machinery which we now possess is not fully employed. It is not fully employed, because it cannot find a market far the goods which it produces, and it cannot find a market for the goods which it produces for the reason that the bulk of the population of this country are too poor to buy.

At such a juncture as that the Chancellor of the Exchequer claims credit for keeping up the Sinking Fund, which means the provision of more machinery; he refuses to impose direct taxation, which means the curtailment of luxury expenditure; and he looks principally for his new revenue to indirect taxation, which will fall on the poor and will in one way and another curtail the purchasing power of the working classes of this country. That seems to me the very last method which the right hon. Gentleman in such circumstances should have adopted. I would like to see him reserve the Sinking Fund at about its present level, but I would like to see him escape from his present difficulties by the application of direct taxation, and also provide further and greater direct relief to the working classes of this country by the taxation of the rich for the amelioration of the conditions of the poor. I am well aware that the mere redistribution of the national income by taxation is not a solution of all our difficulties. It means that, instead of money being spent on luxuries by the rich, it is spent on necessities by the poor, and that consequently people are employed in making necessities and employment is given in the great staple trades of this country, instead of people being employed in the fitful, changing and useless production of luxuries. But unless you can increase the total demand for the production of goods, you have not solved the unemployment problem, and it is one of the most foolish fallacies of our opponents to believe that the Socialist case begins and ends with mere redistribution. Redistribution is merely an elementary measure of social justice, pending the day when by wise measures we can increase the total production and distribute it for social uses.

With that point in view, I would ask the Government to consider a most remarkable speech made by a gentleman who is not usually considered an adherent of the Socialist faith—Mr. McKenna. Mr. McKenna pointed out a few weeks ago that in the obsolete banking practice of this country we find every normal expansion of industry checked, strangled at its birth, by the rule of thumb methods which the Bank of England, and consequently the other great banks, are now compelled to employ. I know that this Measure would be more appropriately discussed when the amalgamation of the Note issues comes up before this House, and I hope that it will then be very thoroughly explored. But really, at a moment when the right hon. Gentleman is looking in all directions for an escape from his difficulties, it seems to me time that weighty financial authority, emerging as it has done on this occasion on the side of progressive thought, should receive some consideration, and that the right hon. Gentleman should begin to realise that the real escape of the nation from its difficulties is the provision of a market at home which will absorb the product of present industry, and, in absorbing that product, will give prosperity to industry, which in its turn will benefit the revenue and afford him a sound and a proper escape from his present difficulties.

I have but very little hope in commending a policy such as this to the attention of the benches opposite. The Chancellor of the Exchequer, if left to his own devices, might possibly consider it, but the dead weight of prejudice on the benches behind him will infallibly prevent that. Those benches have in the past two years demanded a narrow class policy, which has ruined the export trade of this country and has brought industry to the verge of disaster, and I have no hope that in the comparatively brief time that lies in front of him any wiser or saner measures will be adopted from that side for dealing with the difficulties which now confront the nation. Therefore, to other hands, in my view, must before very long be consigned the task of reversing the class legislation of the past few years and of undertaking a long overdue and fundamental revision of our financial system in accordance with the dictates of modern thought and the elementary postulates of social justice.

7.0. p.m.

Brigadier-General Sir WILLIAM ALEXANDER

I have listened with all possible attention to the Debates on the Estimates for the spending Departments, and to-day for the third time I have heard the Chancellor of the Exchequer make his speech in introducing the Budget. In the circumstances, I think he is to be very greatly complimented on the magnificent way in which he has got us out of the trouble which unfortunately confronted this country. Figures prove anything; they can do anything. The question, to my mind, is whether the method is one of sound, commercial finance. I ask the indulgence of the Committee while I speak on the all-important, but sadly neglected, subject of economy, adding certain criticisms, not of men, but of methods. Every Government since the War ended, whether Coalition, Labour or Conservative, has led us and the country to expect a great deal, not only in the way of peace and reform, but emphatically of retrenchment. Each party has in turn made extravagant promises, and each in turn has failed signally to redeem its promises. The results achieved have been most meagre. Ministers responsible for individual Departments, and Chancellors responsible for the whole, have not only let themselves down, but they have let down Members who, full of the hope which triumphs over experience, have sought election on the ground of economies, not only possible, but to be achieved. Promises have not matured, and, what is the most serious thing of all, there has been an almost complete failure to assist our great national industries to get back to their one-time prosperity. This is largely due to the overwhelming burden of taxation under which these industries are staggering in times which, quite apart from this, are more than usually difficult.

During the latter years of the War, I held two administrative positions successively as Controller of Aircraft Supplies and as Director-General of Supply and Purchases, both directly concerned with supply, which gave me a unique opportunity of observing and studying at first hand the Government's system and procedure in the spending Departments. It may, therefore, be taken that I am going to speak with some little knowledge, and I have to say that I was appalled at the way in which commercial problems were attacked. The methods I found to be antiquated in conception, cumbersome in working, and almost making a virtue of redundancies and overlappings. Coming to the work from the world of active commerce, I felt so strongly that I expressed my views in the frankest way in an article I wrote on Demobilisation and Reconstruction on the 31st October, 1918, a copy of which I sent to the present Chancellor of the Exchequer when he was my chief as Minister of Munitions. I also expressed my fears and warnings as to the future if a more efficient system of administration were not introduced. I have patiently and silently watched the course of events since that date. The things I feared have come to pass, and the continued call for more and more taxation has justified my worst misgivings. May I quote to the Committee one or two sentences from the article referred to? The success or failure of the Empire as a world producer amongst energetic competitors win therefore depend upon two essential factors:

  1. (1) The speed at which Liquidation and Reconstruction takes place.
  2. (2) The balance which is held between capital and labour to ensure comfortable and fair economic conditions to the latter during the transition period; it will repay the Empire to make sacrifices towards this end free from any cheese-paring policy.
Drastic reorganisation and simplification of Ministry procedure and methods will require to be introduced if these vast, intricate and delicate problems are to be solved with despatch and efficiency. Nothing could be further removed from the principles of sound commercial practice than the ill-conceived, top-heavy and watertight compartment system existing to-day for dealing with questions of Supply and "Production. That was in October, 1918. We have heard in this House much criticism of responsible Ministers and Chancellors. We have heard innumerable suggestions for reducing expenditure. The most popular theory recently has been the introduction of a rationing policy. As far as I have observed, no suggestion has really gone to the root of the matter. Merely scratching the surface is a waste both of energy and time. Good cultivation requires deep digging, and before you can diagnose the situation with a view to a cure you must get down to the source of the vast expenditure and extravagance from which this country is suffering to-day. It is the system which produces the result which is fundamentally at fault. To curtail expenditure by rationing is only to prolong the life of an inefficient system and lead it to still greater inefficiency. If any evidence were required against Government control or Nationalisation, a survey of methods and procedure as they exist today in Government Departments would provide it in abundance.

Let us consider for a few minutes the working of the Government spending Departments. These departments are not worse than others, where the procedure in vogue is generations behind the times. Take the Navy, the Army or the Air Force. In each you have a Supply Department responsible for receiving the requisitions, issuing the specifications and providing the requirements of stores, etc. You have a Contract Department responsible for placing the contracts requisitioned by the Supply Department. You have an Accounts Department responsible for the bookkeeping and payment of accounts, and you have an Inspection Department responsible for accepting or rejecting the materials offered. Every one of these Departments is a little world of its own, self-contained, absolutely watertight, the offices of which dare not encroach, be it ever so little, on the preserves of the other three. A high sense of duty grafted on to human nature invariably leads one Department to look out for points open to criticism in the others, the nature of the system rendering impossible that pulling together which should be the chief characteristic of a commercial team. Nothing is more surprising and maddening for the newcomer than the way in which correspondence is carried on. This is invariably done by the passing to and fro of minutes, not only between Departments or sections of the same Department, but even between persons working in neighbouring rooms. Not hours, but days and weeks, are wasted owing to the interminable procession backwards and forwards through the establishment clearing-house. The instinct of self-preservation leads to the most elaborate system of protective mimicry, resulting in a riot of paper-work. Unrelenting system triumphs over efficiency, despatch and economy. Would any Member of this House engaged in industry believe that not until well on in the War was the system of bookkeeping altered from single to double-entry, and I understand even to-day the system could not do considered efficient. Cumbersome, if not obsolete, methods may be observed in other quarters. Let us suppose, as is the case, that the Army, Navy and Air Force all require supplies of one particular chemical. Without consultation, each Department will send out its own requisitions to its own specification, and subject to its own departmental inspection. Three requisitions, three specifications, three inspections for one material, and the supply which may be accepted by one Department may find itself rejected by the other two.

Speaking on the Navy Estimates in March, 1924, the Leader of the Opposition said that one of the finest services that could be done in this country was the co-ordination of its Defence Forces. My view is that one of the best services that could be done would be the reorganisation and co-ordination of the purchasing and supply Departments. Is it any wonder, then, that these and similar methods, slaves of system, create a position in which our burden of taxation is £15 per head against £6 in the United States and £5 in Germany? We are not even sure that the moneys voted for particular ends achieve their purpose. Notwithstanding the general curtailment of production and supply during the recent coal strike, the spending Departments do not seem to have any surplus on last year's credits. Why? I do not wonder so much over no surplus, as I wonder how on earth they managed to spend the credits. It is useless to trounce Ministers, who, as individuals, to whatever party they belong, are, I believe, entirely sincere in their efforts to achieve reductions. If they are powerless, it is due to want of commercial experience, to shortness of tenure of office, also to insufficiency of time, consistent with the discharge of Parliamentary duties, to do more than generally supervise their Departments and give opinions on major questions of policy. We have of late, as a result of taxation, extravagance and inefficiency, seen many samples of shipwreck amongst some of the large industrial concerns in this country.

I, myself, before joining this House, had the responsibility and experience of salving one of these industrial wrecks, the British Dyestuffs Corporation. If something has been saved from the wreck, it has been due to drastic reorganisation and the introduction in the highest places of a new and efficient personnel concentrating on the job every working day and hour. A similar policy will require to be adopted in Government Departments before tangible results can be achieved. The running of a Government spending Department, in my opinion, is not different in kind or in essential from the running of a very large commercial concern. A system which would bring ruin owing to its extravagance, to an industrial concern with a limited capital reserve, should not, and must not, be tolerated in Government Departments merely because the last financial resources of the taxpayer can be called upon. Economy is not even practised in this House, and many who shout the loudest are the worst offenders. Take, for example, the large number of daily Questions amounting to over 100. The bulk of these are obstructive and destructive and asked, perhaps, to show constituents that Members are doing something for the £400 which they receive, and yet they are costing the Government, if the taxpayers knew it, another £400 to provide the answers. I had in the two Departments, to which I referred, sheafs of these questions to answer daily, and it took large numbers of my staff from their regular work to sift out the information, 90 per cent. of which cut noice whatever in the constructive development or running of a Government.

I have spoken freely in criticism, but it would be useless to stop there. I propose to put before the House proposals of a constructive nature, and I shall do so very briefly. Follow the example of the largest and most efficient and prosperous commercial concerns for method, procedure, and routine. Place the administration and full control of Government spending Departments in the hands of a governing directorate of two, or not more than three, all-time men of undoubted ability, from past training and experience, one of whom should be an accountant of outstanding commercial merit. Pay salaries to these all-time men sufficient to attract the best. Similar directorates with full powers to reorganise and place on an efficient basis should be placed in charge of each spending Department, but if the whole or a number of these Departments could be co-ordinated under one Ministry of Supply, reorganisation and system would be common to all, and the savings correspondingly increased. If there be any individuals who feel contempt for these proposals, I can only say that the contempt is not of the kind bred by familiarity with commercial undertakings of magnitude. Under such reconstruction waste would be eliminated, personnel reduced to economic levels, jealousy and friction from water-tight compartments existing in the same organisation would disappear, procedure would be smooth, business would be transacted quickly, and millions would be saved annually to the country.


The occasion of the introduction of a Budget is not one for going into detail, and the remarks I propose to make will be brief and deal only with the larger issues. May I congratulate the hon. Member, who has just sat down, on having made a speech of great interest and produced proposals which are really substantially constructive. The Chancellor of the Exchequer made one of the most brilliant speeches in a difficult situation which has been delivered in this House for many years. He frankly stated that this Budget cannot be repeated. It is a Budget of expedients, and the larger sums are obtained from sources which will not occur again. The expedient of raising upwards of £14,000,000 by adjustment of Schedule A of the Income Tax means, of course, that the Income Tax payers will in this financial year, by one means or another, be called upon to pay 1½ years' tax. The Chancellor of the Exchequer has in the same way anticipated the collection of the duty on beer, and, although many Members think it is no burden to the brewing industry in this country it is in fact, a very substantial burden, which Will be felt everywhere, and which will be felt very hardly by those brewers who are in a less prosperous position. The other expedients for collecting and extracting revenues are those upon which the Chancellor of the Exchequer principally depends. There is the £12,000,000 from the Road Fund reserve which clearly will not occur again. All the revenue, which he is raising in this present year to meet the deficiency for which he has to budget, consists to the extent of some £22,800,000 of resources of that character. The revenue which he is raising from other sources amounts only to about £5,800,000 and of that a large part, £1,250,000, is an adjustment of the duty on wines and £3,100,000 is a tax upon tobacco. The other duties are the Safeguarding Duty on pottery, a very small matter, and the McKenna Duty on tyres, which will not raise any very large amount of revenue. The tax upon matches is the only indirect tax which appears to reach, in any appreciable form, the pockets of the poorer section of the nation.

This Budget is a Budget of expedients, an extraordinarily ingenious Budget, and on that ground the Chancellor of the Exchequer deserves the highest possible congratulation, but as a permanent contribution to finance, to the reform of financial methods in this country, and to putting our finance on a better and sounder basis this Budget takes us nowhere at all. It is not an industrial Budget; it is a bankers' and a financiers' Budget. That is clearly the view on which it has been founded. This Budget does little to encourage production in this country, to foster industry and trade, and so to cultivate those sources of income from which the expansion of the national revenue must ultimately be raised. After all, we are still a great industrial country. We see our greatest industries wavering and declining. They have not yet recovered from the serious blow of the industrial troubles of last year. There is nothing in the proposals made before the House which will tend to help them again to reach a stage of prosperity and full employment.

We had one little solace in a direction to which a great deal of attention has been rightly directed at the present time. The Chancellor announced that the Government had decided to take some steps towards economy and that they are throwing to the economists and sacrificing at the altar of economy three of the minor Ministries. This is not enough. The winding-up of the Ministry of Mines, the Ministry of Transport, and the Department of Overseas Trade will conduce little to direct economy in the present year. It is a step in the right direction. The multiplication of Departments and of officials undoubtedly leads to expenditure. Of course, the larger the staff, the larger the expenditure. That is a very sound and well-established axiom in industry. Far more is needed. The nation outside this House is determined that Parliament and the Government shall cut down this form of expenditure. Steps of a far more drastic nature than any that have been indicated in this House will have to be taken, or not only will disaster overtake the Government and this Parliament but it will overtake the nation at large. We cannot continue this colossal expenditure of over £800,000,000 indefinitely. Economy in the direction of expenditure must be brought about. I content myself with saying that this Budget, admirable as it is as a temporary expedient and device for getting over a difficult year, is no contribution to the permanent financial stability of this country. It is a financiers' and not an industrial Budget. Steps of drastic and courageous and rigid economy will have to be taken before our finances can be put on a sound and permanent basis.


I would like to pay my humble congratulations to the Chancellor of the Exchequer on his very able speech. I quite agree with my right hon. Friend the Member for Burton (Colonel Gretton) that this is not a moment for a financial survey. I shall have very little to say or to quarrel about on the revenue side of the account. If money has to be raised, the Chancellor of the Exchequer has raised it in by far the best way that can be suggested. At the same time the fact that that revenue has to be raised and that extra taxation has to be put upon the country at the present time—although it is not entirely the fault of the Chancellor of the Exchequer, because hon. Members opposite have to take a large share of the blame for that fact—seems to me to show clearly that the Chancellor of the Exchequer should have made a greater effort to make those economies, which so many Members of this House look forward to, than he has been able to show us to-day. At the same time, we ought to congratulate him upon announcing that three of the minor Ministries are to be done away with. That is a request that has been made by hon. Members of this House year after year since the War ended, and the fact that at last it has been given to us, I hope will not mean that just the Minister in charge of the Ministry will leave his post and the officials will be added to an already greater Ministry, but I hope it will mean that we shall see some diminution of the expenditure on some of the larger Departments. The point that will principally be taken up in criticisms of the Budget is the fact that, although we have had announced to us these economies in advance, at the same time, when we take a very quick glance at the figures for the estimated expenditure, we find that the estimated expenditure for the coming year is £2,000,000 more than the estimated expenditure for the past year. Therefore, excluding the strike, which was not accounted for in the original Budget of last year, we are expecting to expend £2,000,000 more in the coming year on ordinary normal expenditure of the country. If that is so, instead of economising to the extent of reducing expenditure gradually as the years pass, we are adding every year. We are adding £2,000,000—it may be more by the end of the year. We are adding something every year to the estimated expenditure. The Chancellor of the Exchequer has told us that the money that is being raised this year in excess of the ordinary amount will be applied to the reduction of debt, and I think it is extremely wise to raise that extra amount if the right hon. Gentleman cannot look forward to any considerable economies this year, because he has put aside no sum of money for emergencies, although that is the usual course of events. I think, in the minds of most hon. Members while the right hon. Gentleman was speaking, there were several emergencies that presented themselves where we might have to spend anything up to a very considerable sum of money during the coming financial year.

But the one sentence in the speech of the right hon. Gentleman with which I and I think a great number of hon. Members found fault, was when he was talking about the reduction of the officials in Government Departments. He said that if he were to cut these Government Departments and to expel the officials, they in their turn would be put—I presume he meant—to a great extent on the dole. They would be thrown out of work and, therefore, they in their turn would have to be found work and that would only lead to a general convulsion in the country. I thought that sentence was the weakest spot in the speech, and it was one of the weakest things that has been said on this question. If that policy were followed and if no Government Department of any kind had to be cut down because of the people who would be thrown out of work thereby, you would never get any economy at all. You will have to follow a policy that the Government Departments should be as large as they possibly could be in order to employ more people. You would ultimately follow the economic doctrine which is advanced from the opposite benches that so long as people are employed it does not matter whether they are employed by private enterprise or by the Government. Suppose that policy had been pursued in Italy. The Chancellor of the Exchequer bas told us that it would be a very different matter if he were tackling this problem from the point of view of a dictator and not as a Chancellor of the Exchequer. I suggest to him that if he studied the question in Italy before the revolution which led to a dictatorship, be would know that the number of officials that were in the Government Departments, the number of extra officials that were on the railways and in the different public services in the country, were rendering the country impossible to administer, and were clogging the whole wheels of the commerce of the nation. When those people were expelled from the Government Departments and from the Government-run industries, there was no convulsion in that country. There was no more unemployment in Italy. Those men were absorbed in the private enterprises and in the industries of Italy, and instead of there being a convulsion in that country the very opposite happened and the country was in a far better financial state than it had been for years before.

I realise the difficulties of attempting to economise unless it is done on a big scale. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) said that the Chancellor of the Exchequer always did things on a large scale. I suggest to him that if he is going to attempt economies he should attempt those economies on a big scale. I hope that in the coming year he will not only abolish three Ministries, but that he will attempt to put the whole of the financial administration of the country on a proper economical footing. Then the industries of the country, instead of looking forward as they are to-day and will increasingly look forward, if we are to judge from the Chancellor of the Exchequer's speech, to at least the present level of taxation being maintained—because there was no hope in any part of his speech that we were ever likely to see a reduction in the present taxation, but that we were rather to look to the contrary as the years passed—may look forward ultimately to a time when the level of taxation will be really reduced. And if they are to hope for that trade revival which was always so very much talked about but which never seems to materialise, I think the Chancellor of the Exchequer will have to come to that Box and will have to make a speech to this House in which he is going to formulate real policies of economies whereby he is not going to cut two or three Ministries out of the Government but he is going to put forward a policy whereby he can cut £50,000,000 £60,000,000 or £70,000,000 out of the yearly expenditure of the nation.


I have listened with interest to the speech of the Chancellor of the Exchequer, and I desire to express an opinion as to how the Budget proposals will be worked, and how the interests of the country will be affected by doing away with several of the Government Departments. I take objection to one of the proposals of the right hon. Gentleman, and that is the proposal for the abolition of the Mines Department. We in the mining world have looked forward to that Department becoming even more important than it is now. We think the mining industry is one of the chief industries of the country and that it ought to have a separate Department, and especially so just now when there is so much talk about new methods in that industry being put into operation. But if the proposals of the Chancellor of the Exchequer are carried out it will mean that the position of the mining industry will be worse than it is at present. It is bad enough now, in all conscience. Hon. Members on this side of the House will protest vigorously against the abolition of the Mines Department. I, for one, shall make a strong point of that and do what I can to urge my party to put up a fight on that point.

With regard to economy, I find in looking through the total amount of expenditure that about 43 per cent. cannot be touched. I am speaking now of the interest on the National Debt and the Sinking Fund. I do not see how we can do anything in that respect. We are, therefore, left with about 57 per cent. only in regard to which we can try to economise. I want to suggest to the Chancellor of the Exchequer that, for the purpose of finding out if economy can be practised, a Select Committee might be set up to go through the various Departments to see how cutting down can be obtained. It is useless for him to say to the head of a Department, "How much can you do without?" because every head of a Department tries to get his Department as busy as possible, and, of course, he wants to get as much as he can. I can give the right hon. Gentleman an example of a town council. Every time they put down the rates the heads of the departments are asked, "Now, how much can you spare?" When the replies come back from the chairmen of the different committees, they all tell the same tale—"We cannot, afford to have any of the allowances cut down." The same thing applies to the Government Departments, and unless we can get a Select Committee to go into the matter of whether there can be any question of saving in that direction, I do not think that the saving that will be effected will be very much. The Chancellor of the Exchequer may cut out some of the redundant parts, but that will not make very big figures.

We have, therefore, got to think how taxation can best be levied. I listened to the first speech of the Chancellor of Exchequer, when he came in with a flourish of trumpets, and when he was working largely on the balance left by the Labour Chancellor of the Exchequer. He did then one of the most foolish things that ever a Chancellor of the Exchequer could do. He brought down the limit of Super-tax and £10,000,000 was freed on that account. If anybody could afford to pay a tax it is the Super-tax payer. To my mind there are only two sources by which the Chancellor of the Exchequer can get the additional money he requires in the fairest possible way. One is by increasing the Death Duties and the second is by increasing the Super-tax. The £10,000,000 that he gave to those people in the first Budget of the Chancellor of the Exchequer ought now to be taken back and another £10,000,000, put on their shoulders. If the Chancellor of the Exchequer would do that, then I think that even those who sit on the opposite benches would say to the Chancellor of the Exchequer, "Well, at least we shall have to give you the credit for doing some good work while you were Chancellor of the Exchequer." But the right hon. Gentleman has not done that. He has taken £12,000,000 from the Road Fund, and he has adopted various other methods. He has put the burden largely on the shoulders of those least able to bear it. That is not the way to deal with a Budget of this kind, and I am making my protest. I say that the Chancellor of the Exchequer has been wrong in two of his methods; first, by the abolition of the Ministry of Mines and, secondly, by putting taxation on in the way he has done. We can promise him from this side that all the opposition possible will be given to him in the succeeding days in the discussion of the Budget proposals, because we believe that he has not tackled the Budget in the manner in which it should have been tackled and, therefore, it is impossible that we can support him.


I do not propose to keep the Committee for many moments. I should, however, like to add my meed of praise to that of previous speakers to the Chancellor of the Exchequer for the very brilliant speech with which he introduced his Budget this afternoon. But, brilliant as his speech was, he was not able to provide any great deal of illumination of what, after all, proved to be rather a gloomy tale. So far as I can understand the policy lying behind this Budget, it was introduced in the belief that last year was a year of very exceptional lack of prosperity and that this year is to be a similar year, but that in the future we shall have increased prosperity. The right hon. Gentleman endeavoured to lay most of the blame for the two years of which I am speaking on the unfortunate dispute which took place in the coal trade. Although undoubtedly that dispute has had a great deal to do with it, I cannot follow the policy which seems to suggest that once we get over that dispute we are going to have good trade for the new few years. In 1920 we had a favourable trade balance of £250,000,000 and that has come down in 1924 to £34,000,000. In 1925 the balance was all square, and last year even if we had had no dispute in the coal trade it is extremely likely that we should have been doing nothing better than living on our capital. Last year we were not making both ends meet, and on the top of that there was deficit in the expectations from the Income Tax of something like £20,000,000. Last year the returns could not have been affected by the dispute in the coal trade because they were based on the average of the three previous years. Therefore I cannot follow the principle which suggests that once we get over this year we may look for the future to normal years.

The Chancellor of the Exchequer has introduced several expedients. He has provided £12,000,000 from the Road Fund, £5,000,000 from the brewers' credits, and £14,000,000 from Schedule A. Undoubtedly this will lead to us getting over the immediate difficulties of this year, but what about next year? Can we look to next year with any expectation of having normal trade? We cannot do that unless real economies are introduced. Next year the Income Tax will be based on the actual income of last year, and as the Chancellor of the Exchequer has pointed out, the earnings will be very much less, and the revenue will be less. Our prospects of trade are not bright. In the staple industries which provide most of our employment the textile and the metal trades; although recovering from the depth of depression at which they were at the end of last year, are not showing great buoyancy, and unless we can have some measure of economy next year the Chancellor of the Exchequer will not find himself back to a normal year of trade. Therefore I would like to suggest that it is essential for the Chancellor of the Exchequer and for the Government to realise that we are a trading community, and that we are now living on our capital. We did this last year and we shall do it again this year, but we cannot continue in that condition, and unless real economies are introduced and unless we cut our coat according to our cloth we shall not be able to return to our constituencies feeling that we are carrying out those pledges of economy which are so essential to the prosperity of the country.


I think everybody both inside and outside this House will agree that in his speech to-day the Chancellor of the Exchequer has tempered the wind to the shorn lamb. Some hon. Members have complained of the lack of economies, but my complaint is the lack of taxation. I confess that great disappointment will be occasioned to a great many people because the right hon. Gentleman has not introduced a petrol tax similar to the tax on tyres. At the present time we have an over-abundance of oil coming from foreign sources. I quite agree with the view that the consumer should be our chief interest, but on the other hand when you have a great technical industry threatened with distruction from what may simply be a momentary overabundance of oil coming from abroad then one is bound to consider whether some action should not be taken to meet that possibility. A petrol tax should have been imposed on petrol from foreign sources and not on the native product. If you bring to a standstill technical machinery engaged in the manufacture of oil you interfere with the working of the mine, the water rises, and your works are very soon destroyed.

8.0 p.m.

The Scottish shale area is the only oil district in the country at the present time which is being worked, but throughout England there are large stretches of shale areas which are only awaiting development for the recovery of the oil from the shale. The same remark applies to the Dominions. Therefore the Chancellor of the Exchequer is pursuing a shortsighted policy in regard to this matter so far as our national or imperial interests are concerned. The previous speaker referred to future years. I also wish to refer to future years, and I think that the Chancellor of the Exchequer would do much to stimulate employment in the shale areas of Scotland if he indicated now that not this year but possibly next year the policy he proposes to pursue this year in regard to tyres will be pursued next year in regard to petrol. It has been said that this is too much of a bankers' Budget and that it contains nothing in the way of taxation which will lead to more employment or increased production. That difficulty could have been largely removed if a petrol tax had been introduced. I only raise this point now so that the Chancellor of the Exchequer when he comes to reply may be able to give us some indication that while he is not able to do what I ask for this year that next year he will be able to introduce some such tax as I have suggested, the result of which would be to intensify the development of the shale fields, and the creation of a larger volume of employment which is so badly wanted at the present time.