HC Deb 22 July 1927 vol 209 cc725-44

Order for Third Reading read.

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


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

I think anyone who speaks on the Third Reading of the Finance Bill may claim the indulgence of the House, because the subject has been so much discussed that it is difficult to find anything that has not been touched upon in previous Debates. I desire to draw attention to a few of the larger interests which, it seems to me, concern the Finance Bill in its relation to the country. In the first place, I should like to refer to one passage in the speech of the Chancellor of the Exchequer in introducing the Budget dealing with the question of economy. I notice with some interest that the question of economy, which was rather prominent in the newspapers in the earlier days of the Finance Bill, seems to have disappeared. We were favoured with reports that a committee had been appointed from some of the back benches opposite and that certain gentlemen had appointed a chairman. The next information was that a deputation had gone to the Minister, and then that the committee was in its last stages. Another committee appeared and passed through a similar process. Possibly the effect upon these committees of the Chancellor's speeches may have been exceedingly damaging, because he pointed out, quite rightly, that those who are responsible for economy are first the Ministers, then the House, and finally the special Committees, like the Estimates and Public Accounts Committees, which have these matters referred to them, and that these unofficial advisory committees are almost an impossiblity. As a matter of fact, I think they serve no better service than tendering the names of gentlemen who would be willing to fill the position of Ministers. One of the Conservative papers has advised the Prime Minister during his voyage to Canada, which we hope will be a pleasant interlude, to consider the removal of the incompetents from the Cabinet and replace them by others, and possibly the names of these committees will afford a useful nucleus. Beyond that I do not see any hope for the committees in regard to economy.

Mr. Asquith, four or five years ago, said that there could be no greater or more fatal mistake in the abnormal conditions in which we are now living than to take a short view of finance. It is rather from that standpoint that I should like to draw attention to the whole question of the Finance Bill and the attitude adopted by the Government towards the country on the question of finance. The first point that occurs to me is whether the Chancellor really has any principles at all in connection with finance. Very few men have had an opportunity in the history of Parliament of presenting three successive Budgets. It ought to have given the right hon. Gentleman an opportunity of laying down certain broad principles. If we look at his various Budget statements, as far as I can see, there are only two that emerge. The first one, in which I certainly, and I think most of my friends support him, is the question of the reorganisation of the law in connection with Income Tax and Super-tax. We certainly recognise the extreme advantage of this form of tax, and we are only too anxious to see anything done that is going to make it impossible to evade payment, or to improve in any way the administration of the tax. I cannot congratulate hon. Members below the Gangway who have been responsible for the opposition on this matter. Quite apart from possible fears which may have been justified until the question was more fully looked into, certain amount of criticism was justified. One of the most ill-balanced speeches on the question was that delivered by the right hon. Gentleman the Member for Hillhead (Sir R. Horne), and I should certainly have given him the palm, but for the fact that it may be said to have been won by the right hon. Gentleman the Member for West Swansea (Mr. Runciman). In describing the pitiful condition of those responsible for private limited companies, you would have imagined that everyone of them was in a state of mind bordering on lunacy as the result of the introduction of these proposals. As a matter of fact, it is a gross exaggeration. Where the right hon. Gentleman got his information from, I can only imagine.

The only other underlying principle that I can find in the whole of the Chancellor's Budget speeches is an implicit belief that the great thing to do is to reduce the Income Tax. That appears to be his sheet anchor. I do not know if hon. Members have looked at the two last Budget statements and at the Chancellor's proposals when he wanted to get fresh taxation. In 1926, there was the Wrapping Paper Duty, the Road Fund, Motor Taxes, the Betting Duty and Brewers' Credits, and there was a windfall from the French Government in the settlement of the French Debt. You come to 1927, and you find wines and tobacco down. Once again the brewers' credit is brought in. Then Schedule A, of course, comes as a windfall to the Chancellor of the Exchequer, films come in, and matches are asked to give their return. The Road Fund is once more brought in. I ask hon. Members whether they can see, in any way, what is passing through the mind of the right hon. Gentleman, except that he seizes upon anything that comes to him and uses it in order to get himself out of his present financial difficulty. At any rate, the policy of not only the hight hon. Gentleman but of the two Conservative Chancellors of the Exchequer who preceded him has always been an implicit belief that if you can only reduce Income Tax you are going to find yourself in a better financial position.

I venture to suggest that the present financial position of the country does not prove that, although we have had a reduction in Income Tax from 6s. to 4s., the reduction from 6s. to 5s. being made in the Budget of 1923. Although we have had these reductions, we cannot really prove from any figures that the country to-day is any better financially for the fact that the reductions in Income Tax have taken place. Many hon. Members and others outside this House always talk about these reductions as it their effect was a matter that was beyond dispute. As a matter of fact, if we look at the recommendations of the Colwyn Committee—the very interesting report in the Appendix in which they go into the whole question—although there is a certain amount of benefit from a reduction in Income Tax, it probably more largely depends on what is going to be done with the money. The net income for assessment in the years following the first reduction of 1s. in Income Tax hardly showed any change. As a matter of fact, it was slightly smaller in 1925 than in 1923. It is very interesting to see what the report of the Colwyn Committee says: The burden of direct taxation, while we do not wish to belittle it, is less crushing than is frequently represented. They go on in another place to say: In our opinion, the present taxation, even in conjunction with the loss of material wealth due to war expenditure, which lies behind the National Debt, is not one of the main causes of industrial difficulty. I lay stress upon the question of Income Tax, because it is an important question. Some people believe that the one great thing to do is to reduce the Income Tax, and that then we should see the end of our difficulties I wish to make it plain that we on this side have very great grounds for doubting whether the reduction in Income Tax has the effect declared by hon. Members opposite, and we wish to challenge the position. Having challenged it, we turn to a different standard of finance from that followed by the Chancellor of the Exchequer and by hon. Members opposite. It is a misfortune for the country that the Conservative Chancellor of the Exchequer did not take a long view. There is one very important factor which in the last few years has had a most important bearing upon the question of finance, namely, the adoption in, I think, the year 1920, largely initiated by the banks, of a policy of deflation. We were never informed how far it had the support of the Government. What was the effect? One of the chief effects was to consolidate and to make far more advantageous the position of what is often called the rentier class, the large number of people living on fixed incomes. The result of that policy was to make their capital represent as income of greater value than they had enjoyed before. The whole effect of this policy is one of extreme interest, and many people took it for granted that that financial policy was correct and sound. I think that what we are seeing in Italy and France to-day is of supreme interest to us, when we consider our policy and the speed with which it was carried out. That is a point upon which I wish to lay stress. It is very interesting to read in an article on Italy in the "Times" to-day that the Italian Prime Minister, who has been deflating in the way which we did in this country, has decided that it has to come to an end. The French Government are in exactly the same position, and they may make a move later. At any rate, both Governments have made tremendous efforts in this matter, and that has been the reason for our difficulties in the City recently.

We are told that the Government must not intervene in these secret matters of finance. I would point out to hon. Members opposite who are cheered by the growth of Fascism that the Italian Prime Minister is doing the very thing that we say ought to be done here. We Socialists say that control of finance should be in the hands, to a certain extent, of the Minister. Here we are at one with Fascism. My right hon. Friend the ex-Chancellor of the Exchequer may be said to be at one with this. I therefore appeal to hon. Members opposite, who always look to Italy to consider this point. I always notice that the Chancellor, when he comes to deal with high finance, proceeds with very faltering footsteps. During the days of the War on the battleship or on the battlefield he never faltered, but high finance seems to be something which makes him hesitate. He seems to think that it is something like a sacred shrine and he is afraid to enter it as if it were some old temple where you must not question the ritual of the religious services and must do everything the priests of that ritual say to you. I suggest to the Financial Secretary of the Treasury that he should endeavour to encourage his right hon. Friend to a little greater boldness when he approaches the question of high finance. I refer to France and Italy because we in this country are suffering from the fact that the financiers in the City have carried out a policy of deflation. We can only presume that the Chancellor of the Exchequer was in some way in agreement with that policy and that it had his approval, but we are not allowed to know anything.

It brings up the old question of the disadvantage of having a central bank entirely in private hands. The whole tendency now-a-days is that that should not be so. I pointed to Italy and the control that the Prime Minister there has over finance. In France the Government have a say in the appointment of the governors of banks. We have in Australia a State bank, and the Bank of New Zealand has directors nominated by the Government. If we take the banks of the United States, which we have had held up before us as being an ideal system, the Government have a very large say in the matter. I lay stress upon this, because we on these Benches are really standing on very strong ground when we claim that there are great disadvantages owing to the Bank not being much more than it is under the control of the Government. The need for a State bank is no mere Socialist ideal. It is a very practical question, and one which is recognised in other countries by men who have no claim to Socialism or anything of that kind. Our system is behind-hand, and that is all that need be said on that point. I wish to lay stress upon the point that when this policy was carried out the Government did not recognise what the effect of it was going to be on the country. A report presented by one of the Departments of the Board of Trade dealing with the position in France gave a very good account of the monetary problem there, and it pointed out: If financial restoration is urgent and in dispensable, it will be vain to deny that it will evoke a grave economic crisis, temporary of course, and one that all countries have experienced in carrying out their currency reconstruction. That was a report by a Committee of the French Chamber. The policy of deflation affects the home market, and it affects the question of unemployment. I challenge the present Government that when this policy was decided upon, for better or worse, that their policy was not backing up the financial policy of the City. The policy of the Government ought to have been to have looked at the problem and to have seen what would be the effect of the policy upon certain sections of the people, and, having done so, they ought to have considered what was best to be done in order to alleviate the hardships that would be thrown upon those sections of the people by their financial policy. Instead of doing that, no regard whatever was paid to the condition of the people adversely affected.

If we turn to the Budget of the right hon. Member for Hillhead, which was brought in about the time that the policy of deflation was being initiated, we find that, with a pathetic devotion to the Income Tax paying class, he devoted some £52,000,000 in relief of Income Tax. In so doing, he was making a gift to a large number of people, the rentier class, who were having their capital saved by this particular financial policy, and were receiving a further addition to their wealth by relief in Income Tax. In that way he was helping a section of the community who did not need it. The same section of people in Germany had the whole of their property ruined. In France, the rentier class have also been heavily hit, with the franc standing at 125 instead of 25. In Italy it is not so bad. But in all these countries the rentier class have been and are being heavily hit, whereas the English rentier class are exceedingly fortunate in the financial policy that has been carried out in this country. The right hon. Member for Hillhead gave them £52,000,000 in regard to Income Tax and then, feeling that he must do something for other people, he made a reduction in the Tea Duty to the amount of £5,000,000. Undoubtedly, of the £5,000,000 relief which was given in the Tea Duty advantage goes to the poorer people, but it will be noted that ten times that amount was given to the Income Tax payers.


What year is the hon. Member quoting?


I am speaking of the year 1922. In the Budget of 1923, when the present Prime Minister was Chancellor of the Exchequer, exactly the same thing was done in regard to the Income Tax payers. The present Prime Minister did not recognise in any way the position created by the deflation policy. He at once gave £26,000,000 to the Income Tax payers and, not being perhaps so ardent a temperance reformer as his predecessor, he gave £16,000,000 to beer instead of to tea. That is about the height to which Tory finance can rise in the greatest financial emergency of recent years, certainly since the war. When we come to the present Chancellor of the Exchequer, no one would suggest that he has in any way appreciated the special emergency through which we have been passing and are passing to-day, as a result of this financial policy.

Who are the people who have been affected? The figures of unemployment went up from 500,000 to 1,000,000 soon after the policy was initiated. No one disputes that fact.


What date was that?


1920 or 1921. If we do deflate, then things follow for a certain time, and those who justify deflation say that, in the end, it is better to have it. One of the things that follows deflation is unemployment. That being the case, the Government ought to have concentrated in doing all they could to help those who were unemployed. One of the things which I challenge in connection with the Chancellor of the Exchequer's policy with regard to unemployment is that he has raided the Road Fund. That Fund could have been used, and should have been used, in giving work all over the country to large sections of people who are out of employment. The £19,000,000 which have been taken out of the Road Fund should have been used for the purpose of finding employment.

The Chancellor of the Exchequer might also have considered a matter which is often discussed, and which is supported by those who are connected with his party, and that is the question of family allowances. He might have considered the condition of the poorer families suffering because of the fact that when the deflation policy was initiated, it was followed by a very large fall in wages. A policy of family allowances might have been considered by the Government, but nothing of the kind was done. When we come to consider the question of the fall of wages, that would have justified a reduction in the taxation on tea, cocoa, coffee, sugar, matches, entertainments and medicines. These taxes might hove been reduced, not because we should have been discussing the question of direct and indirect taxation, but for the simple reason that the financial policy of the Government was pressing most heavily upon the people, and would have justified a reduction of these taxes whilst leaving the taxation upon a large number of those who had benefited by the Government's financial policy. Those reductions in taxation would have meant that £36,000,000 would have been placed on the Estimates for 1927–28. Some hon. Members may think that the cost of those concessions would represent a large sum, but I would point out that the right hon. Member for Hillhead gave over £50,000,000 in the reduction of Income Tax. Two Conservative Chancellors of the Exchequer together have given away £75,000,000 to £80,000,000 in relief of Income Tax. If hon. Members argue that that would be entirely lifting the burden of taxation from one class of the community and placing it on the shoulders of another class, I would point out that of the taxation on beer, spirits and tobacco from which revenue of £200,000,000 is raised, the working classes are certainly bearing a large share. If the Chancellor of the Exchequer ever had a text over his bed, I suggest that an appropriate text would be "Unto him that hath, shall be given."

If the working classes were not to be considered in this respect one would have thought that the Government would have considered the manufacturers. It is a most amazing thing that the Chancellor of the Exchequer's policy has been absolutely against the manufacturers, but the manufacturers being good Tories, they do not rebel, and it does not seem to matter very much. The Chancellor of the Exchequer has made no attempt to assist the manufacturers, beyond relieving them in regard to Income Tax; but in many of the great industries there are no profits on which Income Tax can be charged, except perhaps the money that is going to reserve, and certain other payments on the three years' average. Generally speaking, the right hon. Gentleman has made no attempt to help those who are worse off by reason of the Government's financial policy. He could have helped industry in one form of taxation which, obviously, falls upon industry, and that is in regard to rates, instead of which, the policy of the Government and of the Chancellor of the Exchequer has been, if anything, to throw men off the Unemployment Insurance Fund on to the Poor Law. We know of the enormous increase in the numbers of those receiving poor law relief. In the year 1920, when the deflation policy began, I think the number totalled half a million; in 1925 it had increased to 1,100,000, and in 1926, which was an unusual year, it stood at 2,400,000. No attempt has been made to give any assistance in regard to rates which press so heavily upon the manufacturers and the business community.

Let us look to other directions in which relief might have been given to the business community. If it came to a question of £5,000,000 being given in relief of Income Tax; or a return to the penny postage, the return to the penny postage would have been far more beneficial to the business community. A reduction of the Stamp Duty on cheques to 1d. would have been more helpful than a reduction in Income Tax. When the Tory Government became philanthropic, and introduced widows' pensions, again they missed the opportunity of assisting industry, because they did not throw the cost upon the community, where it would have been borne out of national taxation and, therefore, would largely have been borne by the Income Tax and Super-tax payers. It was borne by the manufacturers and working people. No consideration has been shown by the Chancellor of the Exchequer towards the manufacturers and the working classes, who have had to bear the full brunt of the financial policy initiated by previous Tory Chancellors of the Exchequer and supported by the Governments of the day.

That is the condemnation of the Finance Bill which we have before us to-day. That is where the financial policy of the Chancellor of the Exchequer stands condemned. He has no vision, no conception of the great needs of the country at the present time. His financial policy does not show that he has any idea in financial matters beyond the one thing I have mentioned; the re-organisation of the Income Tax and a pathetic devotion to the belief that if you can get Income Tax reduced somehow things will be better. We on these benches challenge the whole conception of the financial arrangements, just as we challenge the views of hon. Members opposite about Income Tax and their views with regard to the great need of always keeping your central bank in the hands of private individuals. We challenge the conception of finance. We say that the Chancellor of the Exchequer has failed to alleviate the burden of those who have suffered from the financial policy of the present Government. Those who have been fortunate enough and have had their capital saved by the policy of inflation ought to have been asked to bear a far heavier burden. Nothing is done. This is Tory finance, and if the country likes it, it is for the country to decide. The Chancellor of the Exchequer, in those parts of his speech which were more poetic and picturesque, talked about climbing a mountain. At the end he said: We have now reached the summit which we set ourselves out to scale. Perhaps the House has now reached the summit of the mountain. I had an experience of climbing a mountain on one occasion. It is not a pastime in whim I like to indulge. I do not like to hang over precipices to the danger of my life. I went up a mountain in Norway and I found at the top a yellow fog which I could have equalled any time in London, and a snowstorm in the middle of July. At the top of the mountain which the Chancellor of the Exchequer asked us to climb I am lost in a Tory fog, and the atmosphere is as cold and as chilly as it was on that mountain in Norway.


I beg to second the Amendment.

My hon. Friend the Member for Finsbury (Mr. Gillett) has dealt comprehensively with the policy of the Chancellor of the Exchequer in its larger issues, and if he will allow me to say so, I think he has given us a most interesting and thoughtful speech and brought his rich knowledge of financial matters to bear upon the larger issues which underlie the finances of this country. I only wish the Chancellor of the Exchequer had honoured us by remaining to hear his speech.


I do not know whether the hon. Member intends that observation as a reproach on my right hon. Friend. but, if so, I should like to assure him that the Chancellor of the Exchequer would be here at this moment had he not been called away on very important public business.


I am pleased to hear that, and I accept unreservedly the explaration. I desire to associate myself entirely with the larger point of view which the hon. Member for Finsbury has put forward, but naturally I do not propose to repeat the case he has made. It rests with me to deal with the Finance Bill piecemeal, and that is a proper method of dealing with this Bill, because it undoubtedly is a thing of shreds and patches. It is made up of a number of small bits, and I do not think the Chancellor of the Exchequer himself, even in one of his most exuberant moments, would describe this Bill as a great work of finance. At best it is only a humdrum and drab Budget. I propose to select a few provisions of the Bill for special treatment. In the first place, there is the Tobacco Duty. That illustrates the point brought forward by the hon. Member for Finsbury as to the nature of the policy of the Chancellor of the Exchequer and the Tory party as a whole. That is quite nakedly an attempt to put on the bulk of the common people of this country the burden which has been rendered necessary by an attempt to relieve the larger taxpayers. It is quite in accord with ordinary Tory policy that they should select one of those things which may possibly be called a luxury, but which is in fact to-day a necessity of the common people, for the imposition of additional burdens.

The second item is one which, of course, will be regarded from a different point of view according to one's standpoint. There are in the Conservative party a large number of Protectionists, and they demand that the Chancellor of the Exchequer from time to time shall pay them homage; and so we find in each Budget, and in this Budget in particular, that there is what they will regard as this year's "good deed" of the Chancellor of the Exchequer. In the year 1925 there were the McKenna Duties and the Lace Duties, and other examples of Protection. Last year we had the Wrapping Paper Duty, and this year's good deed is to be found in the pottery proposal. Nominally it is classed as a Safeguarding Duty, and is said to fulfil the compromise, which was a compromise between the Prime Minister and the country and a compromise between two sections of the Tory party. As a matter of fact, the Pottery Duty is not really a Safeguarding Duty at all, and it has never been defended as such by the Chancellor of the Exchequer who has always absented himself when it was being discussed because he knew that he could not defend it, being in fact a Free Trader. He announced it, and he left it at that, and in all the Debates he has left the Duty to be defended by out-and-out Protectionists. We who have criticised this Duty throughout the whole of the proceedings take up the position that this is really a piece of trickery. There are three articles in question. There is the British-made Longton bone china, the foreign Felspar china, and the British earthenware.

The pretence was that the foreign Felspar china was in competition with Longton china. The actual fact was, and is, that the only article with which foreign Felspar china was in competition is earthenware. The earthenware manufacturers could not have brought forward a claim under the Safeguarding of Industries Act because they could not prove their claim, and therefore the Longton china manufacturers were put on to do the running. I do not think they are going to obtain any advantage out of it. The people who gain are the earthenware manufacturers; they will gain by the duties which are put on the foreign felspar article. Then we have the hon. and gallant Member for Bournemouth (Sir H. Croft) getting up during the Debate or the Report stage and saying that even if it protects the earthenware people is not that all to the good? That is, of course, the protectionist point of view. If you are going to defend these Duties from the protectionist point of view you are perfectly entitled to say that it is a good thing, but it is not commended to the House on the ground that it is part of the general policy of protection. It is commended to the House not on the ground that it is part of the general policy of protection but that it is in accordance with the Safeguarding of Industries Act—and as such it is a petty piece of trickery. It is an entry by the back door of protection. It only increases the difficulty of trade, and as we saw last week in the case of the Lace Duty it injures the entrepôt trade and puts a burden on the poorest classes of the community. I do not propose to say any more about this Duty.

I come now to the question of Schedule A Income Tax. That is frankly a device to get three things out of two. I remember, when I was at the University and competing for a prize, that I was rather short of time, and I adopted the method of trying to get three days' work out of two. In that way, I got a little more time in order to do the work I had to do.


Did you get the prize?


Yes, I did. This proposal is a device which reminds me of what was said by a school-boy about a lie. It may be put in this way. It is an abomination in the sight of the landlord, but, from the Chancellor of the Exchequer's point of view, a very present help in time of trouble. At first it seemed to me that there was a great deal to be said for the proposal, but, on reconsidering it, I have come to the conclusion that it creates a. great deal of hardship and inconvenience. A large number of small people who have not got great quantities of ready money will be very much injured by the proposal. The adoption by the Chancellor of the Exchequer of taxation on some of the lines indicated by the hon. Member for Finsbury would have been much better than this device.

Now I come to the Super Tax. We on this side of the House have been very much amused by what went on on the other side of the House with regard to the provisions relating to Super-tax We had all the sound and fury of hon. Members behind the Chancellor, but as soon as the bell rang they all trooped into the Lobby in support of the Chancellor's proposals. After all, that was to be expected, because, as one hon. Member told us, however much they may object to King Log they had no intention of turning out King Log in order to instal King Stork in his place. The real fact is that these Clauses with regard to Super-tax are, in effect, departmental Clauses. It is true, no doubt, as the Chancellor of the Exchequer told us, that they were initiated by criticism inside this House and outside with a view to avoiding evasion, but all the same the Clauses, at any rate in their form and substance, are departmental Clauses and any Chancellor of the Exchequer of any party who intended to stop evasion would have had to adopt this or somewhat similar means. Recognising that, we on these benches supported the Chancellor of the Exchequer, putting aside all petty party advantage, in his proposals to stop evasion. On the merits of these Clauses I say this. From the first I thought that all the bother made by hon. Members on the other side of the House has been largely worked up.

I believe, in the main, that these Clauses will work quite smoothly, and so far as honest taxpayers are concerned that they will inflict no hardship whatever. I believe they will stop, or go a long way towards stopping, some of the disreputable methods of evasion which have undoubtedly taken place, and, in so far as they do this, all honest taxpayers should be grateful because a certain amount of revenue has to be raised and as long as people avoid paying their fair share by evasion it means that all the more has to be paid by those people who do not attempt to evade their responsibility. All honest taxpayers who try their very best to meet their obligations ought to be grateful for these clauses. We have a high reputation in this country in this matter. Most of the taxpayers really try to deal fairly with the revenue authorities and pay the taxes which they ought to pay. Speaking for myself I am grateful for any attempt to stop the leakage in the case of those people who do not take this view of their responsibilities in the matter of the payment of income tax. At the same time I am sure that if the Labour party had introduced similar provisions the remarks of hon. Members on the other side would have taken a very different tone. They would not only have abused the Labour Chancellor of the Exchequer but they would have hinted that his instructions had come from Moscow. I am not quite sure what epithets the Home Secretary would have used outside this House with regard to a Socialist Chancellor of the Exchequer had he introduced the identical clauses we are passing in this Finance Bill to-day, and I am not quite sure what sort of threats the Postmaster-General might not have put forward had we taken this same line. But because a Conservative Chancellor of the Exchequer brings them forward, these clauses, in spite of all the fuss and fury, are going through this House to-day.

I only want to touch quite shortly on two other matters. First of all, I want to say a word about the taking of the reserve of the Road Fund. I have never made up my mind as to what are the actual facts in that regard. It has been commonly represented in the House that this is robbing the Road Fund and that money which would otherwise have been available for the roads is not going to be available in future. There may be something in that, and in so far as that is the case, I, in common with other Members, regret it, because I feel that, however much we are spending on roads, it is so important for the prosperity of this country that it is a pity to diminish in any way the amount of money available for that work. At the back of my mind, however, I do not believe that it is anything of the kind. What I really believe is, that this is a piece of shoddy finance. When there are two companies which want to present to the public a very rosy picture of their affairs, they arrange matters in this way. One takes its balance-sheet up to 31st March and the other up to 30th June. On 31st March there is a deal with shares, so as to represent Company A as having a large cash balance. Between 31st March and 30th June there is a re-shuffling of the pack, so that you get a very large cash balance in Company B; and that sort of thing goes on each year, so as to deceive the public. I cannot help thinking that this taking of the reserve of the Road Fund by the Treasury, and presenting apparently each year a better picture on 31st March, is something of the same kind. The reserve of the Road Fund was always in a sense available for the finances of the country, and whether the actual balance is in one name or the other makes no difference. I am not sure that it is not largely a paper transaction in order to make the Budget balance for the moment.

Finally, with regard to the Sinking Fund, the Budget of 1925, when the results came out, did not balance. The Chancellor said he was very sorry, and he pushed forward some of the deficit into the following year. Then the year 1926 did not balance, so the right hon. Gentleman pushed forward again into the year 1927, and he hopes that we are going to produce a balance this year. It is a sort of jam to-morrow, but never jam to-day, when it comes to balancing the Budget. I cannot help feeling a little doubtful whether this present Budget is going to balance. The other two Budgets failed to do so for reasons which the Chancellor of the Exchequer considers to have been acts of God. There was the subsidy which the Government gave to the coal industry, of which somehow the right hon. Gentleman washes his hands and says it was outside his control. Then there were the whole of the coal stoppage and the national strike. There again the Chancellor of the Exchequer appears in a clean sheet and says that those were not his doing, but I am not quite so satisfied about that.

I am not at all sure that the return to the gold standard had not a good deal to do with the difficulties in the coal trade, and certainly a distinguished man like Sir Josiah Stamp, whom the Government themselves appointed, took that view. There are many other reasons, such as the failure of the Government to deal with matters in time, which contributed to, if they did not cause, the trouble which resulted in these deficits, and when we come to the current year. I am not at all sure that we are not going to see some of these things again. We have the situation in China and the very great expense in the movement of forces, and so on, to which the Government are being put, and for which they are making no allowance so far in this year's finances. It may be that before the year is out some other affair of the Government will cost the country money. I do not know, but I shall be more pleased to see a balance when it actually appears than I am when it is a paper balance promised by the Chancellor of the Exchequer.

12 n.

I know that the right hon. Gentleman may say that, after all, we have this large Sinking Fund and are paying off debt at an enormous rate, and that it only means that we have not paid off quite as much debt as we anticipated. That, in fact, is not true, because in reality the Sinking Fund is not the amount by which we are paying off debt. Owing to a large number of matters into which I am not going again at this stage, such as matters relating to Savings Certificates, to the premium on redemption of War Loans, to conversions, and other matters, the amount which appears in the Sinking Fund has no relation at all to, and does not represent, the amount which we are paying off the debt. I think it can be clearly demonstrated, taking the two years which we have had under the régime of the present Chancellor, that there has been no reduction whatever of the capital amount of the Debt, quite apart from additional borrowings for special purposes, so that shall look with some anxiety, at the end of next March, to see whether this balance materialises or whether it is once again a case of no jam to-day, but jam to-morrow. Those are all matters of detail. The main point about this Bill embodying the Budget of the right hon. Gentleman is that it is a makeshift scheme, a number of odds and ends brought together in the hope of making a Budget. It loses sight altogether of the larger issues which my hon. Friend the Member for Finsbury has so clearly put before the House, and it attemps to meet the difficulties of the year by these makeshift means. For that reason I heartily concur with my hon. Friend in asking the House to postpone the Third Reading of this Bill for three months.


I cannot agree with the hon. Member for West Leicester (Mr. Pethick-Lawrence) when he states that for the last two years the Budget has not balanced. I quite realise what he says in regard to the Sinking Fund, and I will deal with that question in a few moments. I will not follow him as far as the Tobacco Duties and Protection are concerned, but I am sure that everybody on each side of the House will agree that if Clause 31 does away with the evasion of Income Tax and Super-tax and will allow the honest taxpayer to get possibly some relief it will be a great asset in our finance. The hon. Member for Finsbury (Mr. Gillett) challenges all the Tory finance. There is nothing like doing things properly, and I agree with him in certain respects. I agree with him, for instance, in regard to the policy of deflation. Deflation is very difficult, and I have said many times in this House before that I thought we deflated too rapidly. May I point out the case of India? India to-day is deflating too quickly. There has been presented a report of the Financial Committee which fixed the rupee at 1s. 6d., but up to now the rupee has never touched 1s. 6d. That is deflation, and I contend that the trade of India to-day is suffering from deflation. The hon. Member for Finsbury also said that all the finance of the country should be in Government hands, and he referred to France and the Bank of France, but if he looks back two or three years to the time when a Socialist Government were in power in France, I think he will find that the figures even of the Bank of France were not quite what they should have been in regard to correctness. He is anxious for a State Bank, but there, I think, he must differ from the right hon. Member for Colne Valley (Mr. Snowden), who, I think, signed the Dawes Report, which took away the State Bank from the German Government and handed it over to private enterprise.


I believe the hon. Member is not correct there.


I thought the right hon. Member for Colne Valley was the Chancellor of the Exchequer at the time, and I thought the Leader of the Opposition was the Prime Minister. If I am wrong, of course, I apologise, but I understood so. Anyhow, the main thing is that we, on this side, do not agree with State banking, and we feel that if politics get mixed up with the credit of the Bank of England, it will be a bad thing for this country. This is the third Budget of the present Chancellor of the Exchequer, and it is a unique Budget. I think everybody who has studied it must realise that it is unique in technicalities and in various other matters. There are many arteries in finance, but there is one that has not been touched upon, so far as I am aware, and that is our ability to lend money. In the old days we were the great lending Power of the world, together with France, Germany and Holland. It was part of our financial curriculum that we should be that lending Power. To-day we are in a very different state, for we have the United States of America superseding us in almost every way in regard to the ability to lend.

I take the figures only from January to the end of June this year, and the total new issues in this country were £159,000,000, compared with £854,000,000 in the United States of America. Why are we lending less? The reasons for this are, War, depression, external debt and that our overseas balance of trade showed a debit of £12,000,000 in 1926. Anybody who follows British capital for the last 25 years will see that the story is not so much where it went, but how it got there. Our ability to lend comes from savings, and the more trade we have the more we reduce our unemployment. But although one wants to encourage this overseas lending, one difficulty to-day—and it is a real difficulty—is that e must not overlend overseas. If we over-lend, and the money is spent out of this country, our exchange will go against us and our gold will gradually go from this country. The international basis of our international finances is the New York exchange. The New York exchange is weak for this time of the year—in fact, it has not touched par since June, 1926—and although ability to lend overseas is necessary, at the same time it must be done with a great deal of caution, and no lending can be done unless it works in with savings. The estimated national income in 1924 was about double what it was in 1911, and the amount saved in 1911 was about 15.84 per cent., and in 1924 only 11.40 per cent. That is one thing which is wrong with this country. That is one thing which is affecting the number of men and women we have out of-work. I heard the hon. Member for Dumbarton Burghs (Mr. Kirkwood) say the other day that Scotland was on the decline. That will interest my right hon. Friend the Member for Central Edinburgh (Mr. W. Graham). I took a cutting out of a paper the other day headed