§ 4.0 p.m.
§ The CHANCELLOR of the EXCHEQUER (Mr. Churchill)The General Strike and the seven months' stoppage in the British coalfields produced the following effects upon the finance of 1920–27: Customs and Excise revenue fell short of the Estimate by £9,250,000, and of that about £8,000,000, principally on Beer and Spirits, is attributable to the strike or stoppage. 60 The Post Office lost about £500,000 from the same cause. The receipts from Stamp. Duties were diminished by £1,500,000 on account of the stoppage, although a windfall of a special kind reduced this loss to £250,000. The effects of the stoppage on Income Tax and on Super-tax have influenced not only 1920 but 1927, and, to a lesser extent, will influence 1928 and 1929. In 1926 we lost for ever £3,250,000 through having to remit or repay tax on account of trading losses. The melancholy results of the trade of 1926, without any mitigating average of three years, forms the foundation of the Estimates of 1927, and inflicts upon our reasonable expectations of a year ago a loss which in the current year will amount to £18,000,000. There are further irrecoverable losses of £7,000,000 in 1928 and £1,750,000 in 1929. The injury done to our trade has been deep, deeper than many of us were willing to persuade ourselves was the fact. An examination of the trading results of 1926 shows that the profits of the year were £150,000,000 below the original expectation. The resultant loss in Income Tax and Super-tax spread over this and future years amounts certainly to not less than £30,000,000. That is one part of the irrecoverable loss due to the coal dispute, but that is not all. Last year, the grievous injuries inflicted on so many industries made it impossible for the Exchequer to collect from embarrassed taxpayers the expected revenue. A loss of £4,250,000 in Income Tax alone is attributable to the in-evitable retardation of collection, though we hope to recover this loss in 1927; if we succeed, this £4,250,000 will merely he deferred from last year to this year.
The decision taken last year to base the Income Tax upon a single, year, instead of an average of three years or in some cases more, would, if 1926 had taken a normal course, have given a revenue advantage to the Exchequer of perhaps £2,000,000 in the Budget of the present year. As things have turned out, I am. instead, confronted with a loss from this cause which may well amount to £6,000,00 or £7,000,000. It is a loss to the revenue, but. it is a relief to the taxpayer; and it is a relief to those very taxpayers who need it most, those businesses and industries, especially among the heavy industries, 61 which were brought to a standstill for many months, and which have no profits to declare and no income to tax. If we had designed last year to give a special and timely relief to the employers in the basic trades to enable them to restart again as quickly as possible, and to offer employment in districts where unemployment is most rife, if that had been our intention last year, we could have found no better method of achieving that object. It is a merciful relief; it is a timely relief; it may be a fruitful relief, but, although I do not regret it, so far as I am concerned it is an exceedingly inconvenient relief. So much for the loss of revenue caused by the Strike.
I now come to the additional expenditure. First of all, we have had to raise more Treasury Bills to meet the shortage of revenue and the extra expenditure. The disturbed conditions throughout the country prevented the fall in money rates which we anticipated at the beginning of the year. These factors forced us to pay nearly £6.000,000 extra in interest on more and dearer Treasury Bills. The pressure of civil strife on the savings of the people led to exceptional encashments of Savings Certificates, and, as these certificates when cashed are repayable with accumulated interest, the public charge on that account has been raised by £5,000,000, of which £3,000,000 is directly attributable to the industrial dispute. The direct expenditure upon the Supply Services in consequence of the dispute amounted to over £5,000,000, of which relief on unemployment and distress amounted to £4,325,000, and the emergency Vote amounted to £400,000, including £10,000 for the expenses of the "British Gazette." Those expenses might easily have been greater, but the deft and thrifty manner in which the President of the Board of Trade and his advisors conducted the complicated purchases of imported coal saved us from loss on that head.
In summing up the effects of the General Strike and the Coal Stoppage upon last year's Budget, it may be said that in 1926 there was a decrease of revenue of about £17,500,000, and an increase of expenditure of about £14,500,000, or a total loss to the Exchequer of approximately £32,000,000. This is the overwhelming cause which has involved 62 us in a deficit of £36,500,000 upon the finances of 1926, and which confronts us with a severe additional loss in 1927. That loss, as I have said, is subject to some recoupments, but it cannot be estimated at less than £18,000,000. It further involves us in losses in 1928 and 1929 amounting to nearly £9,000,000. These are the direct effects, and the direct effects alone. As to the indirect, they cannot be computed, but certainly they have played their part and will long play their part in delaying the reduction of the contributions to the Unemployment Insurance Fund, in aggravating the difficulties of our conversion operations, and in withholding from the public a portion of these reliefs which they might reasonably have expected to receive.
But these figures, so serious and decisive when related to the annual Budget and to Exchequer finance, acquire an altogether different value and proportion when they are compared with the strength and resources of the nation. When we reflect on what happened last year—the prolonged paralysis of all our basic trades, the very large part of the population, about 3,500.000 wage-earners and their families, living in one way or another, I purposely choose a non-controversial phrase, living in one way or another without discharging any productive function—when we reflect on the highly artificial and delicate character of our commerce and on our dependence beyond that of any other State, ancient or modern, on world-wide credit and on foreign imports and foreign markets, the marvel is, not that we have suffered so much, but that we have not suffered more from last year's shocking breakdown in our island civilisation.
The revenue, though mauled and wounded, has the main survived. The immense number of miscellaneous and secondary manufactures and businesses, so many of which have established themselves in the southern half of England, the fecund processes of banking, brokerage and insurance, the vast sums brought into the country annually as the result of British investments abroad—these have enabled us almost to keep the even tenour of our way. The basic industries, those which were most smitten by the stoppage, were those in which the employers and the employed alike were hardest pressed before. Consequently, 63 they were those on which the Exchequer counted least. The non-basic industries and businesses have been able to sustain the self-stricken areas, and to supply the main revenue for the State during the stoppage. One part of Britain, capable, as I pointed out last winter, in some degree of geographical definition, has been tearing itself to pieces, and the other part, although injured, has been strong enough to bear the extra strain.
If the revenue has in the main survived, the exchange has stood like a rock. Two years ago, when we returned to the Gold Standard, there were many predictions and counter-predictions, just as to-day I have no doubt there will be many assertions and counter-assertions on that subject. But few, I think, would have believed that the Gold Standard could have been maintained through all these convulsions with a Bank Rate never higher than 5 per cent., with a reserve of gold larger now than it was this time last year, and without the slightest need to touch those large precautionary American credits which were brought into existence to safeguard the operation of the return to Gold Standard. I may mention here that we never at any time during their existence thought of using these credits, and I have given notice that on the expiry of the original term next month, we do not propose to renew them.
I come to the consuming power. Certainly a study of the consuming power during 1926 is one of the most significant and important features which could be presented to the attention of any assembly. Under our humane laws, without parallel in any community, ancient or modern, the consuming power of the masses, as far as can be judged from the Treasury standpoint, has been little affected by the troubles through which we have passed. Even during the long-drawn coal stoppage, tea showed only a trifling decrease, while the consumption of sugar and even tobacco actually increased. Bread and meat. I am informed—although they do not affect the Revenue—have shown no decrease in consumption on the year; beer and spirits alone among the main items of indirect taxation have reflected to the Exchequer the results of the social and 64 industrial struggles in which so many millions have been engaged.
Most remarkable of all, the trade of the country has flowed on in a manner scarcely conceivable. Apart from coal exports, which naturally ceased altogether, our trade has rivalled closely through many months during the Coal Stoppage the corresponding months of the preceding year. Undoubtedly, it has suffered. The balance of exports and imports has turned still further against us. We are clearly not advancing among the people of the world at the pre-War rate; we are not advancing as rapidly as some other people of the world are advancing to-day. But we are still advancing, and, even in this wretched year, we have still saved. We have still augmented our capital and still retained our position, whether War debts are included or excluded, as the greatest- creditor nation, and still maintained our position as the financial centre of the world. Our economic vitality and financial strength are not yet impaired; they have been cruelly and needlessly strained, but they are still intact. Our fortune is still in our own hands to make or mar.
Viewing the scene as a whole, it must be said that our loss, though grievous, is incomparably less, and that the resiliency and resources of Britain, though stricken, are incomparably greater than anyone a year ago would have dared to predict.