HC Deb 26 April 1928 vol 216 cc1093-144

Question again proposed, That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with Finance.


I do not think I am exaggerating when I say that the present Budget marks the turning point in our post-War fortunes. For a considerable period, we have been struggling in a morass of misfortune, now and again striking better patches of country, but never really observing ahead of us a solid, hopeful path along which our essential industries could move towards a state of prosperity. In my belief, the Chancellor of the Exchequer has this year disclosed to us the beginning of the road out. I, for my part, would desire to congratulate him upon putting a new heart into many depressed industries and opening up much better prospects for them for the future. There are few indeed who could conceive a scheme of such great vision and pure skill, or who would have adopted a plan which has required so much courage to carry out. I believe myself with complete sincerity and a profound conviction that he has imparted a new spirit of encouragement to the country, and its results in the future will prove the value of his foresight and the wisdom of his judgment.

I do not think that my right hon. Friend will be unduly depressed by the speeches which were made in the Committee yesterday afternoon. I had not the privilege of listening to them, but I have had since the enjoyment of reading them, and the colour and the vehemence of the language which was used by my right hon. Friend the Member for Colne Valley (Mr. Snowden), as I judge, indicated the fear he has of the effect of this Budget upon the prospects of his party. As to my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George), it was indeed a reviving ex- perience to find again the good old catchword that any relief in agricultural rates would go into the pockets of the landlord. It recalled to me memories of the times of rare and refreshing fruits, and indeed bridged over the gap of years which have intervened during which the right hon. Gentleman not only discovered, but disclosed to an astonished world that the landlords of Great Britain were a very severely burdened class and that upon the whole they had not acted selfishly by the country.

What, in fact, is this Budget going to do? I should have said: What is its intention? Its intention is to carry out plans of tackling a problem, which, I should think, has been more often raised in this House by the right hon. Gentleman the Member for Carnarvon Boroughs and myself than by any other Members who sit on these benches. I think that, of all Members of Parliament, we have most often directed attention to the appalling burden of local rates and taxes upon industry. We did not meet with sympathy, and until now we have never met with success, but, for my part, I do not propose to reproach my right hon. Friend on that matter now, because I realise that he has produced a scheme which I could never have imagined, and which, I think, is conceived on broader and more comprehensive lines than any yet envisaged.

The right hon. Member for Carnarvon Boroughs is in an entirely different position. He cannot express the admiration which I am sure he must feel at the way in which the Chancellor of the Exchequer is dealing with this problem. He has been responsible for issuing a perfect rainbow of documents to his followers, brown, green, blue and yellow, instructing them upon the politics of the day. I do not know the colour of the document which deals with the rating question, but at any rate he was evidently oppressed yesterday when he was speaking by the fact that already that book has become a, back number and can now be sold only on secondhand bookstalls as a damaged volume. Before I deal with the main subject of this Budget I should like to say a word or two upon some of the smaller issues which are raised. In the first place, let me express my approval, for what it is worth, of the reduction in the Sugar Duty, which will not only benefit a large section of the population but also do something to retrieve the position of an industry which was fast going over the precipice. Of the additional reliefs which are given to Income Tax payers who have a number of children, I confess that I can only take a, detached view. I suppose it will involve me, with other bachelors like me, in paying a little more for other people's children, but I accept that fate not only with resignation but with a certain degree of sympathy and appreciation.

On the matter of the restatement of the nation's accounts, I think we owe a debt of gratitude to the Chancellor of the Exchequer. The insertion, for example, of the Past Office figures in the ordinary balance sheet of the year's working has tended towards confusion and has never really exhibited a true picture of Me revenue and expenditure of the country. We shall greatly gain in the future if we have the amount that is expended on the Post Office given separately from the rest of our expenditure, and also the amount of revenue from the Post Office.

I entirely agree with the course taken on the matter of the consolidation of the Note Issue, and I have none of the apprehensions which the right hon. Member for Carnarvon Boroughs expressed yesterday. It is greatly to the advantage of this country that this Note Issue should be consolidated and I see no reason at all why in the regulations which are made in regard to them there should not be adequate provisions for creating elasticity sufficient to servo all the needs of industry and commerce. The right hon. Member for Carnarvon Boroughs complained that the Government were giving away a weapon which they ought to hold for use as against the power of the banks, but I rejoice that they have done so. I cannot imagine any circumstances in which it would be an advantage to the Government to have that weapon ill their hands, and I can conceive many circumstances in which the interests of the country might easily be put in jeopardy by ill-judged action on the part of the Government against the financial institutions of the country. There is this last point, the question of the formation of a Debt Charge. I feel certain doubts on this question as to whether the Chancellor of the Exchequer has provided sufficient money to meet all the obligations he has undertaken. It may be that he has not, but I hope that his "luck will be in" in the years immediately to follow. At any rate, it is an excellent thing that the nation should know what are the obligations of these Debts and have before their eyes the happy prospect of their being paid off in the course of a period of time not too remote.

I turn now to what is after all the pièce de résistance of the Budget. The distinctions which were pointed out yesterday and the difficulties which were foreseen with regard to the definition of productive industries do indeed raise very troublesome questions. I do not propose to examine these questions to-day, as we shall have further opportunities to examine them on appropriate occasions, but I do not think they present any greater difficulties than were presented to the Government at the time of the 1909 Budget, and I have not the slightest doubt that similar ingenuity will drive away all these difficulties of definition. Let us look at the position of productive industries. People have often pointed to the prosperity of the distributing trades as an indication of the successful conduct of business. It seems to me that there is some slight confusion in the public mind as to why this is the case. The fact is that during these times of depression, when so many trades have been suffering severely, the distributing trades have not suffered nearly so acutely, and for this reason, that the State and local authorities have been spending something over £100,000,000 in the country each year which has gone into the tills of the shopkeepers of the country. The truth is that there has been much more money in the pockets of the people out of work during the last period since the War than at any time before the War and, accordingly, there has been much more expenditure in the shops of the country. The distributing trades are exhibiting a prosperity unknown amongst the other commercial industries of the country. The truth is that you are dealing with this position; that you have not to provide for the distributing trades in the same sense that you have to provide for the productive trades. The distributing trades have been indirectly subsidised by the Government and local authorities of the country.


What do they buy in the shops?


They buy all the ordinary things they would purchase whether they are in employment or not. No doubt their purchasing power is restricted, but not so much as in former days during periods of great depression. There has been much more money flowing through the country in the present time of depression than at any time before.


This is rather an interesting point. The point of the right hon. Gentleman is that the prosperity is in the retail and distributing trades. If that does not reflect the prosperity of productive industries, what is the money spent on?


There are all sorts of things purchased in the shops which are not at all the product of the great industries of the country. The hon. Member must realise that. There is sugar, and flour, and many other articles which are not at all the actual product of the industries of this country, and the money spent on them does not go in the payment of wages in this country at all. If the hon. Member reflects for a moment he will realise that what I am pointing out is fundamentally true; and there has been a bigger circulation in favour of the distributing trades during the years since the War than ever before during previous times of depression. I will leave the matter there for his contemplation.

4.0 p.m.

I pass now to the main problem of the Budget. Undoubtedly its great feature is that an attempt is being made for the first time to save the heavy industries of this country from a position amounting almost to disaster. The main way in which this is being done is by the relief of local rates, but I would beg the Committee not to think that these are the only or even the chief burdens on industry. There are many others which, I think, are being left out of account at the present time. There are, for example, all the payments which are made in respect of social services. When I talk of social services, I do not mean merely what is paid in Poor Law, but in national health insurance, unemployment insurance, workmen's compensation and the widows' and orphans' pensions. All these things are a vast burden upon industry, and, of course, do not come at all within the purview of this Bill. But reflect for a moment what that burden amounts to. Since the year 1914, that burden has increased by over £125,000,000 a year, and the great bulk of the money has to be found directly by industry. None of that is really being touched by the Bill, so that the case for the relief of industry is something very much greater than the presentation of this Bill involves.

Let me put it in another way. I find, from the Report of the Government Committee upon Industry and Trade, that the burden of social services upon industry in this country amounts to between 2 and 3 per cent. of the value of the output. Anyone who knows how very small is the margin for profits or new equipment for business in an ordinary industry will realise what the burden of that becomes. To put it in a still stronger light, let me remind the Committee that the burden we bear in this country in respect of those services is two and a-half times that which is borne by Germany, five times that borne by France and 20 times that borne by Belgium or Italy. The Committee will realise that those are our rivals in trade and during all this period of depression our industry has been meeting their competition in foreign markets burdened with these enormous imposts, which there was no way of avoiding, and which have had to be paid for by industry.

I turn now to the immediate problem of local rates. I do not propose to dwell long on this matter. The figures which were given by the President of the Board of Trade yesterday, I think, illuminated the whole topic as clearly as it could be possibly done, and while I have in my mind many other comparable figures, it would, obviously, be quite improper to delay the Committee with them. There is only one point in his speech to which I venture to draw special notice. He referred to the fact that the local rates in this country amounted on the average to a charge of 4s. a ton on steel. Although I suppose he has better means than I have of arriving at correct figures, I should have thought that that figure was low. At any rate, the Government Committee who sat upon this subject came to the conclusion that it was 6s. per ton which, I think, would probably be nearer the mark, But even if that be the true figure, it does not really exhibit the problem in its true light. It is the abnormal places that most require the help that is to be given by the Chancellor of the Exchequer. There are many places, for example, with mixed trade, where a particular industry has a certain amount of unemployment, and that is borne with comparative ease by the rest of the community. But in great centres, where everybody is engaged in the same trade, which is in a state of depression—and there are many in this country at the present time—then you realise that any unemployment means a large amount of unemployment, because they are all in the same trade, and, in the end, the burden grows and accumulates, and is borne more and more by comparatively few, whose costs are put up to a far higher degree than what the President of the Board of Trade described yesterday.

Take, for instance, Sheffield, where, as everyone knows, unemployment reached very severe figures, there the cost per ton of steel for local rates has been, not merely a figure of 4s. or 6s. a ton, but as high as 17s. 6d. to £1. Consider what happens. As unemployment increased, fewer people bore the burden. Others went down, and added to the figure, and still fewer industries were left to bear what is a cumulative burden. In fact, what we have been doing is that, finding a man drowning in the water, instead of throwing him a lifebelt, we have thrown him a sinker, with the result that many trades have gone out of business which, in other times, in better circumstances and with better organisation, would still be serving the country. I value the proposal under this scheme more on this ground than upon any other, because it is obvious that where the costs have gone up so enormously as I have described, if you give a relief of three-fourths of the rates, you will not only immediately help the people who have been worst hit, but, at the same time, you make it possible for other industries to come back, and you have a wider spread of the whole cost of local rates, with the result of not merely reducing the rate by three-fourths, but, in the end, by very much more.

The subvention to railway rates is also, I think, a proposal of very great merit. One of the greatest handicaps from which trade and industry have suffered in the last few years has undoubtedly been the very high railway rates, and the relief in respect of the carriage of raw materials in the heavy industries of this country will be of the greatest possible service to those industries. I pass from that to say that it is a mistake to suppose that the postponement of these reliefs until October next year, is going to have no immediately good effect upon industry. I am not now referring merely to the psychological effect of the encouragement given to people to keep going on longer than they might otherwise endeavour to do, but I am taking it from the sordid and practical aspect. Supposing persons in some difficulties want further advances from their bank. It will greatly affect the minds of bankers to know that by the end of next year, from figures which can he shown in a schedule, their business will greatly appreciate, and that the borrower will be able to carry on then in very much better shape than now. Or, again, take the case of people who want to raise capital, or get debentures on their business taken up. It is obviously what one would call in the market "a bull point" for the borrower that he is able to show that by the end of next year his business will he earning substantial profits. Accordingly it is an entire error to suppose that the postponement until October next year is going entirely to frustrate the supposed object of this Budget.

The fact that the taxation to provide the funds for this great scheme can only be obtained by a tax on petrol is in itself a misfortune. I do not think we can conceal from ourselves that it is a great pity we have to have recourse to a commodity which is more and more being used by very large numbers of people in this country for the purposes of their innocent enjoyment. I think, in other circumstances, if petrol were at the price it was at one time, it might be something of a tragedy to some of these people to meet this new impost, but I am sure that if they could have got rid of the power tax upon their cars, which, as the Committee must have gathered from a petition to this House, they very seriously grudge, and if it had been put in some other shape, I believe they would have been much more reconciled to the new burden which they have got to bear. The reason I say that is this: It is perfectly plain that the power tax upon motor ears is an inequitable tax. I am not now dealing with another matter, which is a larger one, and to which I shall come in a moment, but it is an inequitable tax, because if you take the man who is only able to use his motor car—as multitudes are only able to use their cars—really over the week-end, he is taxed much higher in proportion than the man who is constantly using the road. If that tax really is what it is meant to be, a method by which the revenue to keep the roads in order should be raised from those who most use the roads, it is perfectly clear that the tax is not operating at all according to the original scheme, and I remember a speech of my right hon. Friend the Chancellor of the Exchequer in which, I think, he admitted that very fact.

On the other hand, a petrol tax puts the burden exactly where it ought to be, because the petrol used is a correct measure of the use that is made of the roads. It applies both in the case of weight and speed, and also to the occasions of use, and, accordingly, it is the fairest way you can select for taxing the people who use the roads for the maintenance of the roads. But there have been objections stated to this change. One of the objections stated was that you could not administer a petrol tax without doing great injury to certain interests. How futile that objection was has been shown by what the Chancellor of the Exchequer has done, because he has just swept that all away, and he has proceeded to make a tax which he regards as fair, and he has done exactly, as I understand his proposal, what the preliminary Report of the Departmental Committee which sat in 1920 suggested, namely, that the tax upon petrol should be a flat rate. Again, objection is taken to the change from a motor-power tax on the ground that this tax afforded protection to the British-made car, without which the British-made car could not live as against the American importation.

That, I understand, was the view put before the Committee yesterday by my hon. and gallant Friend the Member for Chatham (Lieut.-Colonel Moore-Brabazon). Upon a matter of this kind, I should hesitate to offer any contradictory view to that which he holds, because he is a well-known expert on these matters, and has had considerable experience at the Ministry of Transport.

But I have authority for my opinions even more formidable, I think. I have the authority of Mr. Morris and Sir Herbert Austin—who, between them, I should think, make two-thirds of all the light cars in this country—to say in this House, that not only are they not against taking off the power tax upon cars, but that they would welcome it, and they would ask Parliament for it. Only a few days ago, Sir Herbert Austin wrote an article for the "Auto-Car," in which he made it perfectly plain that he regarded the present taxation of power as being a great handicap to the motorcar industry. These gentlemen do not believe they have anything to fear from taking off the power tax as against the competition of American cars in this country, and they see in it an absolute essential if they are to make any expansion in our Dominion markets.

I should like to explain why it is that the power tax prevents the British motor trade from making any advance, not only in places like Australia and NOW Zealand, but in all the new countries of the world. It is simply this: Since our tax is on power, the British car makers have devoted their efforts to making a car which would attract as little taxation as possible, and accordingly they have made a car which is suitable for British roads, for the easy conditions on British roads, but, which is very inadequate upon the rough roads of new countries. They have made a car which has a small bore and a long stroke, but all the cars which are operating in America and these other countries are cars with a large bore and a short stroke, which, they tell me, at once gives an easier running car, which may not be very important, but which, on the other hand, enables them to provide a car with much more power. Somebody says, Why does not the British ear-maker make a separate car for the Australian market? It must be obvious that, if he does so, he loses all the benefits of mass production and his entrepot charges are greatly increased, and competition, which is difficult enough already with the American car, enjoying an enormous home market, would become impossible in these circumstances. Accordingly, I believe, from my experience in the Dominions, that if we are to have any success in the motor car business outside our own country, we have to make an alteration in this form of tax.

It is surely an impotent thing to say to-day that we are going to be kept out of the markets of the world because of the particular way in which the Government put a tax on vehicles. We cannot be sure that we cannot find some other method of taxation which will enable us to enjoy as fair a chance in the markets overseas as our American rivals. Let me tell the Committee exactly what it means. Are these markets worth while? All I have to say is this, that in Australia last year they bought 104,000 motor cars, of which only 18,000 were British, in spite of the fact that we have a 20 per cent. preference in the Australian market. Go to New Zealand, and the story is the same. They bought last year over 13,000 cars, of which only 27 per cent. were British, although we have a preference in the New Zealand market of 25 per cent. And if you ask why this is, you will get the universal answer—you will also get some smaller things mentioned, that are easy to deal with—that the British cars are not equipped with sufficient power. I am sure that that has been the experience of all who have visited the Dominions, and the situation is one which it is imperative that we should remedy.

These American cars passing through the streets every day are the very best advertisements for American business. Not all the money we can spend in advertising British goods in Colonial markets is nearly equal to this advertisement of American ears constantly presented through the streets, living in the eyes of the whole population all the time. Everybody asks you—I am not exaggerating when I tell the Committee that everybody in these countries asks—Why is it that British makers cannot manufacture a car which will compete with the American ear? A British visitor to these countries feels it a positive affront that every day and all day this ostentatious demonstration of American superiority and efficiency should be going on before his eyes, but, believe me, the Australians and the New Zealanders, who are 97 per per cent. British, feel the affront even more than we do, and they much more poignantly ask that some remedy should be found for this quite abnormal situation. It has many repercussions. If you take our trade with these countries, you will find that they are our best markets in the world. I am not meaning per capita; I am meaning in the bulk. If you take Australia to-day, it is buying £65,000,000 worth of our goods in a year, and New Zealand is buying over £20,000,000 worth.

I see in certain brochures from the Liberal party that it is thought that the Colonial and Dominion markets may be neglected because they have not very large populations.—[AN HON. MEMBER: "No."]—Yes. It is pointed out that the populations are small, and we are directed to look to the great populations on the Continent, But let me point out that Australia and New Zealand, with only 7,500,000 people, buy from us in a year, in bulk, more than the 150,000,000 people to be found in Germany, France, and Italy all put together. Why should we pay attention to these markets in preference to those of our Dominions? This demonstration by America in the shape of motor cars is having a detrimental effect—I say it without question—upon our trading prestige, our commercial prestige, in these countries. I have given you the figures of what our trade was last year with Australia and New Zealand, but it is worth while looking at the trend of the trade, and you will find that during the last five years, while our share of Australian imports has gone down from 51 per cent. to 43 per cent., the share of the United States of America has gone up from 18 per cent. to 24 per cent. Exactly the same thing applies to New Zealand. While our share of New Zealand's imports has gone down during five years from 01 per cent. to 48 per cent., the share of America has gone up from 9 per cent. to l9 per cent. That trend, I am assured in my own mind, will steadily go on and grow unless we are able to demonstrate to our people overseas that we are as fit, and as capable, and as efficient as are our cousins in the United States of America.

What are we to do about this? hoped, before I heard the Chancellor's statement, that we would be able this year to get the tax transferred from motor power to petrol, but I should certainly realise, now that 4d. has been put on petrol for another purpose, that it is quite futile to ask that something more should be added in order to save this trade with our Dominions, at least just now, but I am glad the Chancellor of the Exchequer has not closed the door. Sir Herbert Austin, writing to the newspapers yesterday, suggested another method of taxation, which, he said, would help our cars in Dominion markets, to wit, that the taxation should lit upon the capacity of the engine instead of upon the power. He suggested indeed that instead of 21 per horsepower, the taxation should be £1 per 10 cubic inches capacity of the engine. I do not know whether or not this is a good method of taxation, I do not know whether it would be better than the present method, but at least it is put forward by an expert on motors and one whose whole interests in commercial life are invested in this motor car business.

But I say this, that it is the duty of the Government, in view of the circumstances which I have presented to them, to discover whether there are other ways of levying this taxation, in order to avoid the vast loss from which we are suffering at the present time. It is not merely a present loss, because if any of us were asked what is the most promising trade for the immediate future, should we not all say the motor car trade? It has much more infinite possibilities than any other trade of which we know, and if you think of all these young countries which are growing up, which require motor transport, and which indeed are requiring it as rapidly as they can get it, you will see what a tremendous market there is awaiting us if we only take advantage of our opportunities. If we do not do something to alleviate the position, then we shall undoubtedly arrive at the disastrous condition which we shall deserve. Of one thing I am certain, and that is that just as the strength of this country ultimately rests upon the united power of the British Empire, so, in the long run, the trade of this country is going to depend upon the reciprocal relations which we establish with our Dominions.


The right hon. Gentleman the Member for Hillhead (Sir R. Horne) has dealt at some length, and quite properly, with the effect of the new imposition upon the motor trade in this country, both internal and external. I do not propose to follow him into a discussion of that subject, but let me assure him in disposing of two purely party points which were quite gratuitous in his speech—one an inaccurate statement in regard to the Liberal party's attitude to trade in general, and the other with regard to a publication that came from a Committee of Liberals, out of which, by the way, the Government have not found it improper to make some very valuable extracts—that we heartily agree with him, and I think with all those who have spoken in this Debate, as to the great importance of relieving the rating burdens on our producing industries. He and the right hon. Member for Carmarthen (Sir A. Mond) are not the only persons who have brought this question up again and again in the House of Commons. I would remind the Committee that our colleague the late Mr. Trevelyan Thomson used to repeat it once a week. He used the illustration of Middlesbrough over and over again, and there was no more striking illustration to be found in the country. I myself have drawn attention to the effect on some of the producing industries on the North-East Coast, and I do not wish to repeat to the House some of the illustrations I gave, but on more than one occasion I pointed out that the increase of rates since the War has represented in the building of tonnage on the Tyne, on the Wear, and on the Tees, no less than 7s. per dead weight ton—very often enough to put our shipbuilders out of competition with those who build in Rotterdam, Stettin, or Scandinavia.

There is no doubt that the great burden on the producing industries, in its increase, synchronising as it has with the great slump which came during the period of deflation, has had more to do than any other external cause with the depression in the great manufacturing areas of this country. That depression is local, not general. The right hon. Gentleman pointed out, quite truly, that in the distributing trades there has been a remarkable degree of prosperity, but I doubt very much whether he has given a full explanation of that prosperity. It is not only prosperity in the multiple shop companies and among the small shopkeepers and the merchants who distribute to the wage-earning classes, but there have been amazingly large profits made in establishments that never see a working man or woman. I need only refer to the re-building of Regent Street and to what has happened with all the companies up there to draw attention to the fact that the profits of the distributing trades have not depended on the distribution of the dole or upon any of those ancillary assistances to the wage-earners or those who are not able to earn wages.

The full explanation of the profits in those industries has yet to be disclosed, but I think there is one explanation to which we certainly need not shut our minds, and that is that in the distributing trades there has been a process of amalgamation going on with great success all over the country. There is, first of all, the gigantic amalgamation in the cooperative organisations. Then there are the multiple shops with their outposts in every town of any importance. They have, by superb organisation, by skilful buying, and by being free to purchase what they require in any of the markets of the world, without import duties, been able to stock their shops cheaply and to make their goods attractive to their millions of customers. The effect of this Budget upon those distributing trades will not be small. I think it will be extensive, and I propose to point out the directions in which it will fall most heavily.

Let me, in the first place, say that, while we are all agreed that the rate burden is too heavy for the productive industries of this country, we are not all agreed as to the best method of relieving those industries. What is in controversy over this aspect of the Budget is how you are to do it. The Government have chosen one way, which we believe to be wrong. We think that by picking out, as they have done, certain specified industries they will undoubtedly do injustice to other industries and other interests. It is impossible for them to think of relieving these picked industries without thinking where the money is to be raised. Where is the three-quarters relief in rates to come from? It must come from those industries which are not within the productive class. It must come very largely from the householders, the shopkeepers and the general taxpayers of the country. I am quite sure that none of the right hon. Gentlemen opposite would for a moment use the loose language in regard to the Exchequer paying, which one hears so frequently on the platform. When the Exchequer pays, it means that the taxpayers pay. It does not mean that the Chancellor of the Exchequer provides the money out of some mysterious fund. It means that he has to impose taxation. The very tax to which the right hon. and learned Member for Hillhead has referred is an example of the way in which somebody is having to pay for the relief which is to be given in these productive occupations.

Who are the people who will have to pay? A great deal will be obtained at the cost of the motorists. The right hon. Gentleman referred to the motor industry as though it were one which depended purely upon those who enjoy motoring at the week-end to get fresh air and refreshment, who go to and fro between their own homes and more attractive places, who visit golf courses and the like, and who find an entirely new amenity added to their lives because they have at their disposal motor cars of the light type. That is where the main increase is coming from, but it is not the only source. This impost falls upon the owners of 274,000 commercial vehicles. It means really that this duty, this oil tax, or whatever it is to be called, falls upon some very important sections of commerce. These 274,000 commercial vehicles are not owned merely by companies who trade, say, between Manchester and London and advertise themselves like liners or cater for the carriage of goods and pick up where they can like tramps. They belong to very large numbers of companies, organisations and concerns which are just as much entitled to the benevolence of the Chancellor of the Exchequer as any of the great productive industries. This is going to be a tax upon their raw material of motive power. The Chancellor of the Exchequer knows perfectly well that there is no impost which does more harm than an impost upon raw material. He would not for a single instant think of putting an impose upon raw cotton, raw wool or iron ore. Motor carriage has now become just as essential to a very large number of concerns as the raw materials which I have mentioned are to their respective trades.

The money has to he found somewhere. Where is it to be found? The right hon. Gentleman is going to get most of this money by way of a tax upon oil, and he is also going to add to his funds for the purpose by diminishing his Sinking Fund; by taking some other sources of national income which are not annual revenue, in order to swell the amount which he can distribute. I should like to discuss the means by which he attempts to do this. He does it not with the idea of giving direct benefit at the present time to these particular industries but of giving a postponed benefit. For 18 months at least there will be this taxation in operation without any immediate benefit being given to the productive industries. It is true that the prospect of that relief being given in October, 1929, will undoubtedly weigh heavily in the minds of those who have been financing many concerns which are in a precarious condition at the present time. I wonder whether the right hon. Gentleman has seen the statement which has been published this morning from the Monmouthshire and South Wales Coalowners' Association. They are pleading for some immediate assistance or for some immediate consideration of the plight into which their trade has fallen. They say: The loss on the working of the South Wales mining industry is at present at the rate of over £3,000,000 per annum. There are 70,000 men already unemployed, and the number is daily increasing. During the past 15 months nearly 60 collieries have closed down, several concerns have none into liquidation and nearly all are in the hands of the bankers. Whatever relief is to he granted should be immediate, and the urgency of such relief to the export trade brooks no delay. It is the immediate necessity of giving relief to these districts which the Government is postponing until some later season. Is it possible that in South Wales, on the north-east coast and in some portions of the West of Scotland these concerns will be able to survive for 18 months, without assistance? Surely, some consideration must be given to the immediate necessities which we know, in these great coal areas in particular, are so urgent. Unless assistance is to be given now, not only will these industries drop quite certainly into the hands of the mortagees, but even the great banks themselves, which are the most necessary agents in national enterprise are bound to be very cautious in their financing during the next 18 months, when reorganisation and reequipment are most necessary, and as a result real damage will be done to these industries.

I have pointed out that other trades and other commercial interests are going to suffer by the distribution of this new charge. I would not like to leave that aspect of the problem without pointing out that the way proposed by the Chancellor of the Exchequer is not the only way in which the local authorities can reduce their expenditure. These local authorities are great self-governing Parliaments. In many of our great towns they assume almost the dimensions of our own Parliament, and they have control of a considerable part of their own local expenditure. It is because the spirit of extravagance during the period of inflation somehow or other infected them, just as it attacked this House and private individuals outside, that a great many local authorities are having to go through the painful process of cutting down, economising, scraping and scrapping in their local organisations. If we are to deal with this problem we must not think of it only by way of giving block grants to these local authorities, because if that is done injudiciously it will tend to extravagance rather than economy. I would beg of the Minister of Health to devise some means by which to put a premium upon economy and not a premium upon extravagance. If the scheme of the Chancellor of the Exchequer does not meet with general approval, may I ask whether the Government have considered other means of relieving the burden upon the local authorities?

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

The burden upon the local authorities?


Yes. Have the Government considered making the charge for the able-bodied poor a purely national charge? Have they contemplated making a larger contribution to road expenditure? On the contrary, they have taken some of the available road funds for the purpose of providing this pool. Have they devised any scheme for rate abatement in those areas where industries, in order to keep going, in order to keep together their own workmen and their own organisation for external trade, are working short time? Cannot they devise the means whereby there can be an abate- merit in those short-time working industries? One, in particular, which comes to my mind is the cotton trade. If the cotton trade, by working short time in order to keep their men and women employed, are to be rated just as though they were working full time, it stands to reason that they cannot survive the period of depression without going deeper and deeper into the mire. I would ask the Minister of Health to see whether he cannot make the rates have some direct relation to this short-time employment, which is one of the best ways of keeping our workpeople together in times of bad trade.

I should like to offer some remarks on the Chancellor of the Exchequer's sympathetic reference to the railways. He, quite naturally, takes a lively interest in the preservation of that vast industry, in which about £1,000,000,000 of British capital is invested. All classes of the community hold railway shares and debentures, and there are a very large number of men who are directly dependent upon that industry for their employment. But if the railways cannot keep themselves alive on their merits, if they cannot by cheap carriage retain traffic, then the right hon. Gentleman will find it a very costly procedure to make up the difference by doles or artificial arrangements. I do not believe that he can do it, and lie ought not to try to do it. It. is a remarkable fact that when the right hon. Member for Hillhead was referring to the industries of this country and railway rates, he overlooked one rather startling feature. The most depressed areas, with the exception, possibly, of that immediately surrounding Sheffield, are quite near to the seaboard. Some of them are actually at the ports. It is not expensive carriage which has hit them hard. It is not railway rates which have depressed them. They are not dependent upon railway rates. They can get cheap sea rates, which are far too low. Let me give a few contrasts to show the difference in rates between seaborne and rail-borne traffic.


The dock rates are also high.


I want to point out the difference between the cost of car- riage on the railways and by sea. I looked up only this week the cost of the carriage of sugar to the United Kingdom from Mauritius, 6,700 miles, and I find that it is carried 24 miles for every penny of freight. A railway company at the cut rate between Bristol and London only carries it three-quarters of a mile for one penny. What chance have those who manufacture in Bristol in competing in the London market with those who carry on a certain degree of refining in Mauritius when there is that vast difference in the cost of carriage? The right hon. Gentleman cannot get over that. It is one of the facts of nature, and it is no use struggling against it. Powerful as he is, he cannot alter it. Take flour. Flow-which is milled in Lincolnshire can be brought by rail 107 or 110 miles at a cost of 11 lbs. for one penny, while flour milled in the United States of America comes by ship at the rate of 10 lbs. for one penny. Take coal, and you will find almost exactly the same contrast between sea-borne and rail-borne charges. From some of our best coal areas the cost of carrying coal by sea is about one-tenth the cost of carrying coal a short distance by rail. Take iron ore, the raw material of the very industries which the right hon. Gentleman aims at helping. Iron ore can be brought from Algiers to West Hartlepool, 1,900 miles, at a cost. of 6s. 6d. a ton, while iron ore carried from West Hartlepool to Darlington, only 15 miles, by rail costs exactly one-half of that, and if it has to be taken on to Leeds it costs 6s. 2d. These contrasts explain to a large extent why it is well nigh impossible in the inland areas to keep alive the industries which depend upon the cheap carriage of raw material.

There is one direction in which the right hon. Gentleman will help the seaboard areas if this scheme goes through. There will be a reduction of their dock dues. That will be of some assistance. I do not know how much it will be, but it will have to be a very considerable drop if it is to enable a port like London to compete with a port like Antwerp. May I be allowed to commend to the Chancellor's consideration the enormous advantage which comes from a big turnover even in a port? The port which has a very large transhipment trade can obviously do business far mere cheaply than the port with a small transhipment trade. I beg the right hon. Gentleman, when the occasion arises, to prevent some of his colleagues from destroying our transhipment trade in the Port of London.

I would like to say, with regard to industry, that these artificial arrangements made by Parliament, whether by way of altering our tariff system or making a change in the incidence of local rates, or by the imposition of taxes, of themselves are of comparatively little moment—I do not say that they are to be despised; far from it, for they are of great importance—compared with one or two things which can be done within these very industries themselves. Let us be quite frank in dealing with some of them. Take the iron and steel trade. With the exception of cotton there is probably no industry in this country which was so inflated during the boom period. The very painful process of squeezing out the watered capital has to be gone through, and unfortunately a great many people will suffer severely in the process. But until we get on to a rock bottom capital basis, we shall not be able to return to prosperity.

Then a large number of our big staple industries require new plant. They will not be able to get new plant unless they can get cheap money. They must be able to borrow on an economical basis. They want more capital, both in the sense of money and in the sense of machinery. They must be able to buy the best and the latest, wherever they can get it, whether at home or abroad. Above everything they must have the best management that the brains of the country can supply. The time when the old proprietors can fit in their sons because they are their sons and not because they have the capacity to run great concerns, has long since passed. A more drastic clearing out of incompetent men at the head of great concerns will be of boundless benefit to the trade of this country. There is no room for incompetence in any walk of life.

Finally, anything that can be done to add not only to the skill of workmen, but to their contentment and the feeling that they have an equal share and an equal degree of knowledge in the industries in which they are engaged, will have a boundless effect for good in nearly all our great staple industries. One of the things essential for the expansion of our industries and the improvement of their condition is that they should be able to obtain cheap money; the rate of interest imposed on them should not be too high. Some of them will require assistance during the next 18 months or two years. What have the Government done in that respect? There is nothing that they have done with regard to rates which will be of such wide-reaching benefit to the whole of the industry and commerce of the country as a lowering of money rates. The Chancellor of the Exchequer had it within his power to do it. I hope that he will not resent my now criticising somewhat freely his dealing with our redemption of debt.


I hope my right hon. Friend is going to tell me how. That is what I am anxious about.


I shall not shirk that task for a moment. I shall point out the directions in which, by his policy during the last four years, he has failed to lower our money rates. Unfortunately for him and for us, he had a deficit at the end of his first year. He had a deficit at the end of his second year and at the end of his third year. In every one of those cases that diminished the Sinking Fund which was available for redemption of debt. The effect of that was very marked. I do not hold the right hon. Gentleman responsible entirely for the first year, as he was a residuary legatee, but the others he was directly responsible for. What happened? In those first two years—


There have been only two deficits. In the first year there was a surplus which my right hon. Friend the Member for Colne Valley (Mr. Snowden) has been boasting about. In the second year there was a deficit owing to the coal subsidy, and in the third year a deficit owing to the coal strike. This year there is a surplus.


I do not agree that there was a surplus in the first year, for the right hon. Gentleman took into his revenue account a good many capital sums which had come into his pocket but ought to have been used for redemption of debt and were originally paid for out of capital. In the second and third year the figure was very much larger than was admitted. This year, I venture to say, the right hon. Gentleman has not a surplus, and for the very same reason. He has not a surplus out of current revenue, but only because he counts as current revenue some of the capital realisations which he has been able to indulge in in the last 12 months. They ought to have been used for redemption of debt. Now he has a record of a series of deficits. He wants to know how he could have altered it. I shall give two instances. One was the coal subsidy. Who was responsible for that? His Majesty's Government; the Opposition were not and His Majesty's Government were. They could have said "No," and if they had said "No" there would have been no more evil consequences in that autumn than there were in the year following.


We would have had the strike a year earlier.


If the right hon. Gentleman regards a strike as inevitable, I have nothing more to say on that point.


The Liberal party would have stopped it, of course?


I do not agree that all strikes are inevitable.


It was a lock-out, not a strike.


Really the right hon. Gentleman does not dispose of the thing by merely saying that it would come a year earlier. Suppose that it had, we should have been £23,000,000 in pocket, and that is not a stun which we can afford to despise. The right hon. Gentleman had as much responsibility as any Minister of the Government for the fact that the strike came when it did. I do not say that it was entirely unavoidable at that moment, but if it had come a year earlier and without the expenditure of the subsidy we should have been £23,000,000 richer to-day, even if the strike had lasted as long. Whatever the causes are, let us go through the figures. The right hon. Gentleman must not smart under this examination, because I do it with the coolness of an auditor. This is what actually happened. In the first two years he had £110,000,000 of nominal Sinking Fund—that is adding the two years together. There were two deficits to be deducted from that—I think there ought to have been three—of £50,000,000. That left him with, roughly, £59,300,000 in Sinking Fund. While that made an apparent net debt reduction, he had not allowed, as he admits now, for the interest on Savings Certificates, which were not provided for out of revenue in the course of the year. That ought to have been provided for and it is going to be provided for. He admits the error and is going to make up for it.

Then there was the sale of assets in those two years. [Interruption.] I am not saying who was responsible for it. I am giving an analysis and the reason for it. No one need be uncomfortable about that. There was in those two years a sale of assets, £40,000,000, leaving in all a deduction to be made from the net apparent debt redemption in the two years of £71,000,000. In other words, we work out at £11,000,000 on the wrong side in the matter of redemption. Actually we were £11,700,000 more in debt at the end of the year. I am taking the real debt, not the nominal debt, the artificial debt which my right hon. Friend the Member for Colne Valley (Mr. Snowden) referred to. We were over £11,000,000 worse. That is not the only thing. Owing to the way in which the accounts are drawn, the capital portion of the United States debt redemption, which is naturally not available in the London market for us here, came to £10,000,000 and is included. There were Trade Facilities guarantees of £20,000,000 issued during that period. There was Local Loans Stock issued of over £40,000,000 during that period. So that the total, when you allow for additional guaranteed loans for Ireland, provided you with a sum absorbed by the Government in these various ways and for these various purposes, drawn largely from the gilt-edged investor, of no less than £93,000,000 more than the sum which we had anticipated he would be able to repay.

Take the next year, the year just closed. I take exactly the same figures in the same classification, and what, we find is this: Deducting the deficit of these two years and not interfering with the controversial deficit that I think I see in this year's figures, but only the admitted deficits, there remains £65,000,000 net apparent debt redemption in three years. But then we have to provide once more for the Savings Certificates interest not provided for, £40,000,000; sale of assets, about £15,000,000, as far as we know. We have not had the exact figures yet. Perhaps the right hon. Gentleman will give them to us. Then there are some other items represented, which come to no less than £35,000,000. In other words, during the last year, instead of there being a reduction of £65,000,000 in the National Debt, or the redemption of debt by that amount, the total amount is only £1,000,000. What has been the effect of that when you take these other things into account? It has had a direct effect on national credit.

Do not let the right hon. Gentleman imagine that it is easy to dismiss these matters lightly. You can measure them by the actual quotations on the. Stock Exchanges here in London and in New York. I am sure the Committee knows that if there is a larger amount of money available for investment in gilt-edged securities than the amount of securities on sale, they naturally bring a larger price. In other words the rate of interest paid by the Government is lower. The higher Government stocks are, the better it is not only for the rate of interest in which they are involved, but for all the industries which are dependent on new money for the extension or re-equipment of their enterprises. In fact, nothing could be of greater benefit to the industries of this country than a lowering of the interest rates for the money which they require. The right hon. Gentleman leads the way on that. These real markets are not political. After all, the Stock Exchange and banks of London are not political, and the Stock Exchange in New York is not political; it values these things as it finds them; it goes to the root, and says, "What are they worth?" and pays accordingly. Sellers have been fairly free lately. What is the result?

We are able to see what has happened in the last four years. During the last four years the credit of nearly every country in the world has improved. There are exceptions. China is one, Chile is another and New South Wales is a third. They can all be accounted for in their own several ways. But with these exceptions there has been an improvment in the credit of all these various countries. The country enjoying the finest credit in the world now, according to the quotations on the Stock Exchange, is the United States of America, and very naturally, for that country is overflowing with wealth; there is a great demand for gilt-edged securities and a limited supply, and a very active and potent Sinking Fund.


A protected country.

5.0 p.m.


It is only recently that Americans have begun to invest outside their country. They have recently invested in the Funding Loan. They have done so to the extent of about £5,000,000, with the result that the Funding Loan has gone up three points. What would have been the result if the right hon. Gentleman had gone on the market to buy £50,000,000 of Government stock? The right hon. Gentleman must be well aware that there are many illustrations of that kind and they ought not to be lost on the high authorities who are in control of our national finance. I have said that you have the United States of America at the head of the list. They have been able to reduce the yield on loans which they have floated by 95 per cent.—a very considerable improvement. Then take the case of Holland and its internal loans—Canada, Switzerland, Sweden. All these have improved their credit. They have reduced the rate of interest on their Government stock. They have been able to make their flotations on better terms than ours and they have been able to do it at a better rate than the United Kingdom.

Mr. CHURCHILL indicated dissent.


The right hon. Gentleman shakes his head. I am bound, therefore, to read the figures to him. I take first Canada. The reduction of the yield in the case of Canada is 55 per cent.—a very considerable sum. The improvement in the credit of Switzerland may he measured in the yield of their stocks—1.45 per cent. Sweden is 8 per cent. and United Kingdom 45 per cent. If the right hon. Gentleman thinks these figures are not accurate, let him employ the Financial Secretary to the Treasury to check them before the Debate closes and let us see if they are correct. He knows perfectly well that they are reliable. They cannot be disputed. They are taken from the quotations of the leading stocks of these various countries and there is not one which does not show that United Kingdom credit has not improved as rapidly as the credit of the other countries which I have quoted.


Does the right hon. Gentleman take into account in arriving at this credit basis, the net yield on securities? Does he take into account the fact that the United States have been able to reduce taxation and, therefore, the net yield on their securities is higher than in this country? He must not compare gross yields with net.


Certainly, we are bound to compare like with like. That is the only way to do it, but if the hon. Member goes into the figures he will find that what I have said is correct. There is no controversy about the facts. The one thing which is clear is that the credit of this country has not improved as rapidly as the credit of the other countries I have quoted. That is the really important fact. I go further and say that you can if you like run down the whole list—Denmark, New Zealand, India, Spain, Argentina, Siam, Norway—large and small, take them all alike and you will find that the same thing is true. With the exception of China, Chile and New South Wales, the improvement of our credit has been slower than the improvement in the credit of any other country. It is no satisfaction to me to point out that the credit of our country is not as good as it might be but we are bound to draw lessons from that and we are bound to draw attention to the fact that unless the Sinking Fund is made operative and effective, unless these neutralising influences are brought to an end, the credit of the country will continue to wane. One of the best things which the right hon. Gentleman could have done, would have been to have lowered expenditure. The means of doing so were perfectly open to him. By spending less, by entering into commitments in a much smaller degree, by getting rid of such absurd subsidies as the sugar beet subsidy—running away with nearly £5,000,000 a year—and a good many other things which have been pointed out to him from time to time, the right hon. Gentleman could have made his revenue exceed his expenditure. That is the only way in which the Sinking Fund can do any good.

It is only right that the Chancellor, in reforming the accounts of this country, should take the trouble not only to take out two or three controversial figures like the Road Fund and the Post Office, but that he should, if he is reforming the accounts, show in the accounts what is capital expenditure, and what is annual expenditure and what is capital income, or return of capital, and what is annual income. I beg of him to consider this matter and I have no doubt that before the next Budget he will be able to let us see clearly what is to he done, and that his revenue is not swollen realisation of assets but is, without exception, revenue raised in the normal way through the taxing authorities. If the debt is not reduced, the cumulative effect of that Sinking Fund which the right hon. Gentleman announced on Tuesday will be reduced. He is actually reducing its effectiveness below the Baldwin Sinking Fund level. If he has to pay more for his Treasury Bills, that will reduce it still more. He is making a gamble on rates of money in the next few years. If he is going to make that £355,000,000 fund entirely effective, he will have to succeed, by hook or by crook, in making his revenue exceed his expenditure. All other measures which he may suggest as Chancellor of the Exchequer for the alleviation of our depressed trade, are mere palliatives. The savings which are made by him will constitute an addition to the credit of this country, and the way in which he can best increase the savings of our people, on which alone we can depend for the extension of our industry and commerce, is by the reduction of the National Debt.

Major LONG

I rise to address the Committee for the first time, and, in the circumstances, I trust that I may receive the indulgence which is usual on such occasions. The Division which I have the honour to represent is 60 per cent industrial and 40 per cent agricultural, and I take the opportunity of congratulating the Chancellor of the Exchequer upon the relief which he has been able to give to agriculture. Speaking as I do on behalf of the farmers and cultivators in my Division, I am convinced that this measure of real and practical aid will receive the approbation of all agriculturists and the gratitude of all farmers. At the same time, may I, with due humility, ask that this relief should be extended to the great industry of agriculture with the least possible delay? Further, may I ask that a proportion of that one-fifth which will eventually be allocated for the use of agriculture should go towards meeting the demands of the English farmers for their share of the meat contracts and other contracts in connection with the Services in this country? I have had the opportunity of meeting many farmers, and I am convinced that if, in addition to this proportion being granted to them, there were closer co-operation between the Government buyers and the farmers, the question of price would be more readily and easily met.

With regard to the Petrol Duty, I do not believe that any hon. Member on either side of the Committee can quibble about 4d. a gallon on petrol, but, speaking for the wage earners in my Division, I desire, again with due diffidence, to point out what I believe will be a great hardship to the working masses. That is the difference in the price which they will have to pay for kerosene oil. In my Division great quantities of this oil are used for fuel and light. It is used mainly by agriculturists, but I believe, to a certain extent, is used as well by industrialists. The proportion of this extra 4d. per gallon which will probably be paid by the petrol users is far lighter than that which would be paid by the wage earners of this country in the way I have just mentioned. If it be not too late, I suggest to the Chancellor of the Exchequer that some rebate might be given to those who use kerosene oil for household purposes.

The question of safeguarding has been debated here many times. I am one of those who regret that, apart from the button-making industry, no industry has been safeguarded on this occasion by the right hon. Gentleman. I desire to bring to the notice of the Committee two definite cases of safeguarding in connection with my own division—the cases of gloves and of tyres. I would first recall to the memory of hon. Members the fact that my Division has been for the past 30 or 40 years mainly Liberal, and that the leaders of industry in it are largely of the Free Trade school of thought. Prior to the last General Election the position there in regard to the glove industry was very serious. The industry was practically at a standstill and unemployment was growing day by day, week by week, and month by month. I am sure that hon. Members of the Socialist party who represent great mining areas, and who live among such despair and despondency as that which is created by unemployment, will agree with me that on all sides our one desire is to see this great problem relieved.

I have lived among my people all my life and it was with the one desire of relieving unemployment in my Division that I advocated a policy of safeguarding, a policy from which I have never swerved. From the moment that the glove industry was safeguarded the position became one of hope for every man and woman employed in it. The figures for the first year showed that unemployment had decreased to an extent which passed even the most sanguine expectations. The commodity itself has not risen in price and in this connection I should like to point out that hon. Members of the Liberal party, at a by-election, took the opportunity of going from shop to shop in an endeavour to prove that there had been an unfavourable variation in the price of leather gloves, but in not one single instance was such a variation found. On the contrary, in every instance it was found that the price of leather gloves in my Division had decreased, and, since my election, the price of gloves is being further decreased. Within the last two months a new glove factory has been started in the Division, which shows that those Who are going into the industry are not alarmed for the future, but see hopes of prosperity for the industry and of employment for the unemployed.

If I may turn to the question of the tyre industry, I would point out that, previously, this industry was not in such a bad way, but was at a stage in which a certain amount of work could not be guaranteed week by week. The employers in the industry were not satisfied nor was the lot of the employés a good one. From the moment the industry was safeguarded, however, they have been working to full capacity, and an old factory which had been derelict for many years has been purchased and re-equipped with new machinery, and will, within the next three months, be producing tyres. I should like to say a few words with regard to the question of exports. I have, I think, proved to the House that safeguarding of industries has indeed relieved the unemployment question. It has not increased the price of the commodity, but decreased it.

I have said little about the exports. During the past three or four months, the exports from my Division have risen by leaps and bounds. The glove industry has a great connecting link with agriculture, for, in the past, it was the custom for the wives of agricultural labourers to come in week by week, and to take away so many pairs of leather gloves which, at their leisure, and when it suited them, they were able to make into hand-sewn gloves. To-day, that link has been re-formed, and they are earning as much as 30s. a week. This is indeed an augmentation of the labourers' wages every week, and is a fact to be taken into consideration. A hundred years ago, farmers and their wives had their own little industries, whether it was the ladies with their spindles, or the men with their brew-houses. To-day, these small industries have gone, because of mass production and other reasons, but here is an example of how the safeguarding of gloves has actually helped the industry of agriculture. The greatest country at the present moment in regard to the export of leather gloves is that hard-headed country, Germany. They are taking our gloves in greater volume week by week. I maintain that this trade is a definite link between agriculture and the industry itself, for these gloves are made by the wives of agricultural labourers.

Hon. Members of the Socialist party claim that they alone have the right to represent the views of the working-classes. Their policy of opposing safeguarding and the giving of employment shows only too clearly how hollow are their pretensions. I submit, as a very junior Member of the House of Commons, that this great scheme, which the Chancellor of the Exchequer has brought before Parliament, probably the greatest scheme of modern days for the relief of rates, is for the year 1929, and not for the year 1928. It is for that reason that I submit to His Majesty's Government, that this policy of safeguarding can be summed up in a few words, "It is never thus; it is never now"; and that, if it were right in the days of Cobden and Bright to adopt the policy of Free Trade to alleviate the conditions of that day, surely it would have been far more expedient on the part of the Government to have adopted the policy of safeguarding more industries, and to have done that in conjunction with this great Budget. Therefore, if it be necessary, as I believe it is, to re-submit the White Paper in which the pledges of the Prime Minister and the Government were made, the sooner that White Paper is re-submitted to this House, the better it will be for the unemployed in this country. In conclusion, may I say that the few brief remarks that I have made, it may surprise the House to know, have given me grave consideration, for had my father been alive and sitting in that Gallery, my sole idea would have been to have made my maiden speech worthy of one bearing his name.


I am sure the Committee will desire me to offer congratulations to the hon. and gallant Member, who has just sat down, upon his remarkable maiden effort. I am far from agreeing with him, but we on this side are always charitably disposed towards an hon. Member making his maiden speech, and, whatever we have to say to him in respect of the controversial issues which he has raised with us, can be said on some other occasion. It is an amazing admission of incompetence on the part of those who have been associated with British industry for so long that they should require to come to the British Government and ask for a measure of relief for British industry. That is the issue now before the Committee. In that respect, both the right hon. Gentlemen who have contributed to the Debate on this Budget are in perfect agreement. The right hon. Gentleman the Member for Hillhead (Sir R. Horne) said pretty much the same thing as the right hon. Gentleman the Member for West Swansea (Mr. Runciman). One, it is true, spoke for a variety of interests—banking, steel, iron, coal, and, as I gather from his observations, motors. The other spoke, as he usually does, with great lucidity for the ship-owning interest. One might have imagined, when both right hon. Gentlemen were deliberating one with the other that we were present at a directors' meeting; and I wondered, as they spoke, what is the contribution that is to be made by the proposals embodied in this Budget to the hulk of the working-class population. That is the sole test of a good Budget.

As I understand the orthodox conception of national finance common to right hon. and hon. Gentlemen on the other side and on the Benches below the Gangway on this side, they believe that the purpose of national finance is to reduce taxation, or, if it cannot be reduced, to manipulate it. We on this side hold an entirely contrary view; we believe that the primary purpose of national finance is to improve the standard of life of the working-class population. There is nothing in this Budget, not a word, not a clause, not a line, that in any sense can be regarded as contributing to the well-being of the workers of this country, unless it be, as I assume from the speech of the right hon. Gentleman, that the workers are likely to become enthusiastic about the relief in the form of a farthing off the pound of sugar. The normal consumption of sugar in a working-class household is about 4 lbs. a week, so that this may be regarded from the working-class standpoint as "the penny-a-week Budget." The penny may not be forthcoming; it is highly speculative. What is quite definite is that the shares of prominent sugar-refining companies in this country are rapidly rising. The shares of Tate and Lyle have gone up by 1s. 6d. to-day. Something is passing into the pockets of speculators, and, obviously, there must be something in the offing for the sugar-refiners, but for the workers there is a promise of a farthing in the pound off sugar—perhaps, and perhaps not.

Much might be said on that head. For example, reference might be made to the relief accorded to the agricultural industry. I am far from desiring to withhold any relief from an industry which has become depressed in more recent years, because of the neglect and incompetence of Tory and Liberal Governments; but whatever measure of relief can be afforded should be granted quickly. We desire to know whether any portion of that relief is to pass into the pockets of the agricultural labourers. Under that head, no assurance is forthcoming from the other side. Moreover, if agriculture is to be assisted. something must be done in respect of the character of food pro- duction, and some assurance provided that the landlords will not ride off with the bulk of the relief. Upon that point, hon. Members on the other side are strangely silent. These are matters which we can discuss at greater detail at a later stage.

In respect of the promise of relief to the depressed industries, there is a matter of common agreement in this House. We on these benches have always desired the Government to come to the assistance of depressed British industry. The Government are now converted, but it is a belated conversion. What have they said in the quite recent past? It is not so long since the Prime Minister himself declared that it was not the business of a British Government to interfere in industry. He was fortified in that view by the right hon. Gentleman the Minister of Labour, whose absence we all deplore, and who, we hope, will soon again be with us. He said, quite definitely, that the Government had no intention of interfering in British industrial affairs or operations. That is the orthodox view. We have always taken the view that it was the function of the Government, as it is now the function of this Government, to interfere in industry where the national well-being is concerned. However, the Government have now responded to that appeal; they are coming to the assistance of British industry, but in what fashion!

I listened with concentrated attention to the speech of the right hon. Member for Hillhead. As I understood him, he said, "I thank the Government, speaking, of course, on behalf of the business interests of this country with whom I am associated"—and his devotion to business is well known—"for their promise of relief to British industry, but I do ask the Government not to impose taxation for such a purpose; at any rate, if taxation is to be imposed, it must not be imposed on those who are to receive this measure of relief." In other words, the right hon. Gentleman wants it both ways, which is quite characteristic. Business interests have always wanted it both ways. They will take what they can get from the Chancellor, reluctant though he may be to satisfy them, but they will steadily, constantly and persistently evade, by means well within their power, any attempt to fasten further taxation upon them. I ask the Chancellor, now that he is in his place, to note the challenging declaration made by the right hon. Member for Hillhead. He said to the Chancellor, who, I hope, took note of his words, "The Government must not antagonise the financial interests of this country. The Government must be careful. Financial interests are all powerful." I should have thought the right hon. Gentleman had no occasion to mention that to the Chancellor, for the whole purpose of the Budget is to avoid a clash with the financial interests of this country.

At all events there is this measure of common agreement. We are all agreed now—the benches opposite, the benches below the Gangway, and we here—that the Government must come to the assistance of British industry. In what manner is that assistance to be afforded? By a subsidy—plainly and bluntly put, by a subsidy. Right hon. Gentlemen opposite have persistently declaimed against subsidies. They had their experience of a subsidy in 1925—to which reference has already been made—unscientifically provided, with no regulations whatever. We on this side regard subsidies as economically unsound; in the main we should prefer to avoid them; but in the existing circumstances of British industry it is necessary to resort occasionally to artificial respiration. We do not oppose some measure of relief, but we do ask, just as we asked when the previous subsidy was provided, that it should be scientifically regulated and not distributed over a wide field to the good and the bad, the white and the black spots, the flourishing industries and the depressed, because that is not a scientific method of providing relief. In any event, whether the relief will be provided is hypothetical.

I listened yesterday with great respect to the right hon. Member for Carmarthen (Sir A. Mond), who dilated at some length upon the relief which is likely to be afforded to the coal industry. There is common agreement on this head, that if there is one industry requiring relief it is the mining industry. The right hon. Gentleman said the rates now levied upon coal amounted to something in the region of 6d. per ton. Personally I think that is too high an estimate, but for the purposes of my illus- tration I will concede that 6d. is right. I will turn to the loss per ton on coal in South Wales, and I hope the Chancellor will for a moment give me his attention. In January of this year the loss per ton on coal in South Wales was rather more than 1s. 7d.; we need not trouble ourselves about fractions. I hope the Financial Secretary to the Treasury, when he replies, will tell the Committee how taking away three-quarters of the rates now levied upon every ton of coal can assist this impoverished industry, now sustaining such severe losses? It cannot be done in that way. Moreover, as has already been pointed out, this relief is not to be afforded until October, 1929.


It will be operative later than that.


As to that, I do not pretend to have any more knowledge than the Chancellor himself, but the point at issue is whether such a small measure of relief can be of the slightest assistance to this impoverished and depressed industry. In my belief it will be of no assistance. I should like to have said more on this head, but my time is limited, and I wish to say something upon a matter which is, from my point of view, much more substantial, namely, the oil industry and the petrol duty. I hope I may have the ear of the Committee for a few moments longer. I yield to no one in my desire to secure a measure of relief for the shale oil industry, but while I agree that relief will be afforded by the imposition of a duty on petrol with exemption for shale oil, I feel there are other means, less dubious, which might have been employed to secure that relief. But to enable me to come to my point I require further enlightenment as to the intentions of the Chancellor. I gather from the Parliamentary report of the Chancellor's speech that he proposes not only to exempt imported crude oil, but to exempt the derivative of crude oil from the duty. If that is the position, then, clearly, shale oil will not benefit to the extent indicated by the Chancellor, for it will be in constant competition with refined oil. If, on the other hand, he proposes to impose a duty of 4d. on refined oil, then in all likelihood the existing oil concerns, other than the Anglo-Persian Oil Company, which already has established refineries and undertakes refining operations here, will tome to this country and establish such agencies, and to that extent the Chancellor will suffer a loss of revenue. He cannot have it both ways. On that point I think the Committee are entitled; to further information, because in discussions with hon. Members I gather that the point is obscure.

I said a moment ago there is a less dubious expedient which might be employed to relieve this depressed industry. I indicated that remedy the other day in a question I put to the First Lord of the Admiralty. If he could guarantee that the shale oil produced in Scotland were purchased by the Admiralty in larger quantities, it would be unnecessary to provide this exemption. The total annual production of shale oil at the present time is in the region of 60,000,000 gallons, and the amount of relief from taxation afforded by its exemption will be something like £100,000. I think it would be quite possible for the Admiralty to purchase larger quantities of shale oil. It would, of course, be more expensive, but the additional cost would not be more than the relief from taxation provided by the Chancellor's proposal. In any event this is another form of subsidy. I am far from objecting to it in this particular instance because, quite frankly, I recognise that the Scottish shale industry, which is interlocked with the Anglo-Persian Oil Company's undertaking, which is largely dependent upon the prosperity of the Anglo-Persian Oil Company and, to some extent upon its charity, would go under if a subsidy of some kind were not provided, and that expeditiously. So while I offer my objection to the method of taxation imposed by the Chancellor, I recognise that in the absence of reorganisation in the shale oil industry and having regard to world prices, it is essential to provide some measure of relief.

There is one further question I wish to put to the Chancellor. I am sorry to weary the Committee with these details, but I must ask it for the purposes of enlightenment. I gather he proposes to exempt the oil supplies of fishing fleets. I offer no objection whatever to that. The fishing service has suffered considerably in recent years; I shall not enter into the reasons for that, because this is not the proper occasion; but the fishing fleets, particularly in Scotland, have purchased their oil supplies from the Scottish Oils Company until in recent months, perhaps in the past year, they have ceased to purchase Scottish shale oil because of the reduced prices obtaining elsewhere. If the fishing fleets are still to be exempted and are to he permitted to purchase imported oil at lower prices, it will obviously confer no advantage upon the shale oil industry, and I ask the Chancellor to consider that aspect of the matter. I am not asking that the oil used by fishing fleets should be made chargeable in respect of this duty, far from it, but I do ask the Chancellor to direct the attention of the Government to the desirability of purchasing larger supplies of Scottish shale oil for naval purposes.

I must come now to my conclusion, but, before doing so. I invite attention to this point. The Chancellor has introduced four Budgets. In every one of those Budgets new taxes have been imposed. I have a list of them beside me, but I shall not trouble the Committee with them. The Chancellor of the Exchequer is the most prolific tax imposer the Treasury has ever known. I do not care to suggest that the Chancellor of the Exchequer himself is perhaps the worst tax that has been imposed upon us. That suggestion has been made elsewhere, but I do not share it entirely. This Budget is about as good as the previous Budgets which were introduced by the. Chancellor of the Exchequer and as bad. So far as the bulk of the working-clam population is concerned, it affords no measure of relief; in fact, they are exempted from relief. The business community is to benefit and the right hon. Gentleman the Member for Hillhead advises us that the banking interest will benefit. Those people with incomes of over £400 per annum are also to benefit, but the working classes of this country will receive no benefit whatever. Applying that test, we on these benches regard the Budget proposals of the Chancellor of the Exchequer as of no value whatever to those who in existing circumstances require whatever relief can be afforded by this House.


I think I ought to congratulate the last speaker upon the skill in which he has attempted to extricate himself from the position in which he finds himself in relation to his constituents. I never heard a more ungracious way of showing his gratitude in my life; and the one thing for which he ought to be thankful is the date at which the by-election for Linlithgow took place. All those who have listened to this Debate must have been struck by one peculiar fact. Here we have the introduction of a Budget which, whether we agree with it or not, or whether the proposals made in it will have the sympathy or opposition of a majority of the Members of this House, is admitted to be one of the most important, and I would say the most comprehensive and the most daring and the most progressive series of proposals that have ever been put forward by a Conservative Government in office. No other Budget can rank equal to it in regard to its importance and effect upon the system of government and upon the whole industrial system of the country.

The right hon. Gentleman the Member for Collie Valley (Mr. Snowden) surprised the House by making practically no reference to the main proposals which characterised this Budget. It is true that the right hon. Gentleman made a series of criticisms in his usual somewhat pedantic style and his favourite role of financial purist. We all appreciate the powers of criticism and the great knowledge possessed by the right hon. Gentleman the Member for Collie Valley, who is a kind of mixture between a sort of Grand Inquisitor of political economy—a kind of economic Torquemada—on the one hand and a political Mrs. Gummidge on the other. The right hon. Gentleman is always "thinking of the old' un"—of the year 1924; practically the whole of his political life has been and will be devoted to proving that the administration of public finance in that year was better and more effective than it has ever been under any Chancellor of the Exchequer. When it came to the question of the reconstruction of local government and our rating system and the important issues involved, the right hon. Gentleman had only a few sneers and a few prophecies to make of equal unimportance.

The late Chancellor of the Exchequer is fond of making prophecies, and last year he made two. One of them was that there would undoubtedly be a deficit, and in that he was wrong. He also said that there would undoubtedly be a great international strike owing to the introduction of the Trade Disputes Bill, and there again he was wrong. His prophecy on this occasion is that the proposals in the Budget will not meet with the approval of the country at the next election, and I think time will show that once more he will be wrong. The method in which the right hon. Gentleman the Member for Colne Valley treated this subject was not worthy of himself or the importance of the proposals which have been put before us. I can only attribute that to the fact that the party opposite have not made up their minds what they are going to say about the proposals of the Budget.

We have had very little criticism from hon. Members opposite of the Budget proposals, and I should like to make a reply to what seems to me to be the important criticisms which came from certain speakers on the Liberal benches. The right hon. Gentleman the Member for West Swansea (Mr. Runciman) who spoke. this afternoon made a rather more sympathetic criticism of the Budget proposals than were made by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George). But unlike the late Chancellor of the Exchequer the right hon. Gentleman the Member for Carnarvon Boroughs at least took the initiative. He did not wait until there was a party meeting before making a definite series of criticisms and counter-propositions; and I will therefore venture to examine one or two of them. The great plan put forward by the Chancellor of the Exchequer deals with the whole rating situation under two heads. First of all there is the finance required for it and then there is the method chosen of carrying it out. Hon. Members may criticise the finance and the method of providing the money which will be necessary. On that point the right hon. Gentleman the Member for Carnarvon Boroughs practically reverted to the old policy of the taxation of land values.

We have had an interesting controversy between the leader of the Liberal party and the right hon. Gentleman the Member for Carmarthen (Sir A. Mond) as to the exact way in which that policy was dropped, hut I do not suppose that we shall ever discover the truth of that episode until we have a further instalment of Lord Beaverbrook's memoirs. At any rate if there is one right hon. Gentleman who has no right to talk about the taxation of land values it is the right hon. Gentleman the Member for Carnarvon Boroughs because it was he who abandoned this great engine of finance, this formidable fiscal weapon. What is more, the right hon. Gentleman abandoned it not during the period of the War but after the War. Therefore if there is one person who is precluded from advancing that argument it is the right hon. Gentleman the Member for Carnarvon Boroughs.

The Leader of the Liberal party agreed that it was very important that there should be some relief given to the local rates and referring to -the scheme of the Chancellor of the Exchequer he really stated a single tax policy. He said there would he no relief to rates and that the system proposed by the Government must necessarily prove in the long run merely an addition to rental values. As regards the right hon. Gentleman's own policy of lowering rates by the nationalisation of certain services surely the same must be true and it will prove according to his theory to be a mere sop to the landlords. The result is that the right hon. Gentleman is a single taxer when he is dealing with our policy and he adopts an orthodox economic attitude when presenting his own policy. The only way in which the right, hon. Gentleman differed from our policy was that we had not chosen the right method for the relief of the pressure of the rates, and that the sector of the front upon which we had chosen to make our attack was not most useful for the purpose. We had also a series of detailed comments made upon the Budget proposals, some of them not altogether happy in their illustration. We heard that the tithe is paid by the tenant and that the coal mines arc rated upon a rental value basis. That illustration was singularly inappropriate to the argument which was presented to us as neither of those statements is accurate; in fact, the right hon. Gentleman then made a series of important criticisms of the effect upon local government of our proposals.

What they really came to was this. The right hon. Gentleman said that by the change which is now proposed in local government we are not going to confer any real benefit and we are going to inflict a hardship. He also tried to show that by increasing the area we were going to increase the rates. He told us that by throwing non-county boroughs in with counties we should be sure to get an increase of rates. I think the right hon. Gentleman completely missed the main part of the statement made by the Chancellor of the Exchequer. The scheme for the enlargement of local areas and the reimbursements to local taxation in order to compensate the people is not to be an absolutely equal reimbursement. There has to be a reconsideration of the whole position of the area, and, I quote the speech, a gradual and continuous adjustment of the resources of individual local authorities to the needs and character of the population for which they are responsible. Under that very important proposal we have got for the first time in our system of the relation between local and national taxation a very powerful and flexible instrument to achieve the removal of burdens upon those areas where they are now pressing so hardly. The main argument that has been advanced, especially by the Liberal party, was in fact an argument consisting of an appeal to the selfish interests of those who were not directly beneficiaries in this matter. We have been asked what is a trader and the workmen going to get out of these proposals? What does the workman want? He wants wages and employment.


He will not get them under these proposals.


Oh, yes, he will! What does the shopkeeper want? If a town is prosperous and the men are earning good wages the trade of the shop keeper is all right. What the right hon. Gentleman the Member for Carnarvon Boroughs said was merely an attempt to revive the Liberal party upon the basis of the selfish interests of the middlemen and the rentier class. We have had presented to us a great and important scheme, and I think all hon. Members on this side of the House will be ready to congratulate the Government for their courage in presenting a Budget of this character for our consideration. No doubt there will be immense difficulties found in making the necessary adjustments, and carrying out the great task of reconstruction to which we have put our hands.

The criticisms which have already been directed against these proposals do not seem to me to have shaken them to their foundation. I do not think the appeal which has been made to selfish interests will transcend the desire to see that the basic industries on which our happiness depend are given a chance of doing their best for those who are engaged in them, and which we all want them to do. Wages, employment, the whole chance of getting our fellow-countrymen upon a more prosperous and better basis, and raising the whole social life and character of our people—surely that is going to be a better appeal to the men with the motor car who has to pay a few pence more for his petrol, or to those who may not be direct and immediate beneficiaries. I am sure that all those who really are prepared to support these proposals with fervour and faith will be able to rally the finer instincts of the people in support of the main underlying principles which have gone to make up this important and progressive scheme, which constitutes, to my mind, a landmark in the history of Conservatism.

6.0 p.m.


The Budget statement may be conveniently divided into two parts, the first of which concerns the ordinary run of our public finance, and the second of which is devoted to the important scheme of rating reform and its consequences, whatever they may be, which the Chancellor of the Exchequer outlined in his introductory statement; and I make no apology fur devoting the whole of what I trust will be a comparatively brief speech to the rating plans which the Government have suggested. I entirely agree that it is extraordinarily difficult to make a great party controversy of rating reform. The subject is very often left to the experts—wrongly named—or it is regarded, historically and otherwise, as so complex as to be altogether inappropriate for the purposes of discussion on a public platform, or even on the Floor of the House of Commons. There is, however, a very great deal in the scheme of the Government which, even in a kind of Second Reading Debate, lends itself to fundamental criticism, although I trust that it will be possible for us, here and there at all events, to suggest alternative schemes.

We on these benches have repeatedly, in recent years, drawn attention to the enormous increase in the burden of local rates. For some time now that aggregate burden has settled down at a figure between £160,000,000 and £180,000,000 per annum, or, roughly, double the pre-War total. A certain school of thought suggests that that is a very much smaller increase than the great increase which has taken place in the burden of national taxation, and that, on paper at all events, ratepayers appear to have gained at the expense of taxpayers in the obligations which have settled upon us following the War. There is no real validity in an argument of that kind, because great blocks of the expenditure fall inevitably to the State—the burden of our National Debt and other contributions—and in any event the effective reply would be that our national taxation does approximate more nearly to the principle of ability to pay, especially in the case of direct taxes, than anything resembling a local rate can ever achieve. Broadly and generally, therefore, this has been a very heavy burden for the great masses of our people, and we have constantly urged that either certain services should be overtaken wholly, or at all events more largely, from national funds, or that, at the very least, no additional obligations or burdens should be heaped upon the local authorities.

By way of preliminary discussion, therefore, there is a certain difficulty in taking a purely party line, because I imagine that the Government would suggest that the object of their scheme is, in assisting these productive industries, also to assist the local authorities, although many of us are satisfied that that result is by no means what will be achieved. The Committee must observe, in the next place, that all this plan is, so far, of the nature of a subsidy; it is an attempt, from resources provided mainly in this case by motor car users, to give assistance to certain productive industries in necessitous and other areas, whose condition the whole House of Commons frankly recognises and admits. I will not waste any time in debating the desirability of a subsidy, or the ordinary economic merits of any such plan, because, whatever view we take, there is a large element of subsidy in the whole scheme of taxation in this country, and all kinds of concessions have been made in the past to specific interests, for reasons and objects which were defended in the House of Commons and elsewhere at the time. We on this side, however, suggest very strongly that, before any kind of further contribution is given, Parliament should be satisfied that it is strictly required, and that it is going to work out in the direction of maximum contribution to our industrial recovery and the employment of our people.

A preliminary to that end is to be perfectly sure that we have got the facts of the situation. Let us take the illustration of the removal of what remains of local rates payable by the agricultural or farming classes in Great Britain. We do not dispute that agriculture has passed through a very difficult time. I have no claim to speak in any sense as an authority on that problem, but, having heard agriculturists and others, I have always understood that a very large part of their difficulties lay in price stabilisation and a claim for Protection which the Government could not concede; and many of them have said that, while local rates are important., they are not by any means, in many districts, a vital part of the problem through which they are passing. If, however, the Government propose, at the end of next year, to sweep away all that remains of local rates on agriculture in Great Britain, surely their first duty would be to apply some of the recommendations of the Royal Corn-mission on Income Tax in 1919, and find out exactly the position in which the farming class stands. That can only be found out when the agricultural community is on the ordinary basis for Income Tax contribution.

At the present time, as the House is well aware, the basis for Income Tax purposes is one time the annual valuation or rent, and the Royal Commission, which included people who were very sympathetic to British agriculture, unanimously recommended that that should be replaced, after appropriate notice, by the ordinary profit basis, and that agriculturists should be asked to make that return and to proceed on a method which is capable of complete defence, in that, if profits are not earned, tax will not fall to be paid. It is perfectly true that the option exists under present conditions, but I have always been impressed by the markedly limited extent to which the option of transfer to the Schedule D basis has been exercised, even in times of agricultural depression, and it seems fair to suggest that at least some part of the agricultural community is doing well enough to continue to make payment on the basis of one time the annual valuation.

Here is a contribution which sweeps away all that remains, as at the end of next year, of agricultural rates, and I do press upon the Government very strongly this consideration, that, before that step is taken, justice should be done to the taxpayers, and, in fact, to other ratepayers, by applying that unanimous recommendation of the Royal Commission —a recommendation with which no farmer could quarrel, since he is merely placed on the same basis as all other industrial classes in the land. That is the first line of suggestion in this controversy; but another preliminary point of great importance arises. Part of the Government scheme is to give assistance to these productive industries by certain reliefs in railway charges. The railway amalgamations will benefit when these proposals are introduced, and they are to pass on that benefit to selected industries in the form of a reduction of the charges which they make to them. But the Chancellor of the Exchequer went rather beyond an argument of that description, and seemed to suggest that it was the duty of the Government to hold the balance between railway transport in Great Britain and the growing competitive power of the motor transport system, or road transport in general.

Broadly, of course, that is true so far as the House of Commons is concerned, but the Chancellor of the Exchequer and the Government cannot overlook the practical revolution which has taken place in the whole railway structure in Great Britain under the Act of 1921, because, even if we make the largest allowance for the argument as to what the traffic will bear, it remains true that a specific direction has been given to the Railway Rates Tribunal so to fix rates and charges as to yield, with efficient working, the standard revenue, that is to say, the net revenue of 1913, the last pre-War year. In other words, this industry has been made a regulated industry, and, moreover, under the Rates Tribunal, certain allowances have been given on the capital expenditure of these amalgamations. It has been argued, even by friends of the railway companies, that they have been placed in that regulated or, if you like, sheltered or so far preferential position. The road transport of this country, however, is not on that basis at all. All kinds of comparisons may be made in regard to the respective burdens of the two great forces, but Parliament has just passed by an overwhelming majority the Second Reading of Bills designed to give to the railway companies road powers. I entirely agree that that is an economic development which this country could not possibly avoid, but we must be very careful that the Government, in the scheme which they are now proposing to apply, do not, so far from holding the balance, push matters very far in favour of four great amalgamations which, after all, have certain preferences as compared with ordinary road transport in this country.

The view that we on these benches take, until our economic principles are applied, is that at all events the two services should be regarded as complementary, that is to say, they must work to one another's hands, and I am by no means satisfied that that is going to he the effect of the Government's proposals. Even if we remember that the railway companies are a channel for this contribution, they must gain to some extent in overhead and other charges by the increased volume of traffic which, presumably, they will be able to carry, and so, in the second place, I ask the Government whether they have taken that legislation into account, and whether all these factors have been kept in view in the differential treatment of railway charges. These are preliminaries, and I am afraid that, for reasons connected with an interruption which will come almost immediately, I must summarise rather more briefly other parts of this speech. We come now to the actual plan of the Government for the relief of the productive industries. The Government propose to pay three-fourths of the local rates on what they describe as productive industries, as distinct from the distributive trades. That involves them in a preliminary ascertainment, to extend over the next year, as to what parts of the undertakings are productive in character, and therefore entitled to this relief.

This method is going to involve the Government in very great technical and even administrative difficulty, and I cannot for the life of me believe there are not ready and convenient alternatives to hand even if the Government proposal is adopted. First of all, of course, the attempt to draw a distinction between a productive and a distributive trade is notoriously hard, and the problem will increase when you come to individual factories and establishments, and seek to say which part exactly belongs to its productive side. Over and above that, you have a whole year of this valuation ascertainment, with, presumably, a good deal of effort by the central authority and other bodies which could have been avoided. I cannot help thinking there is an alternative already in the differential rates that are, in fact, now imposed on certain classes of public utility and other business undertakings. For example, in the Scottish Rating Act, 1926—I have no hesitation in pleading my native land, which leads in all technical and financial matters—there is a Schedule under which certain undertakings are rated for the purposes of local assessment on a proportion of the annual valuation, for reasons which were defended at great length by the very Government that is now proposing this remarkably complicated scheme. Is it possible for the Government to proceed on that basis and not to embark on this valuation ascertainment, but to work out some scheme of relief in terms of a Schedule of that description, which, after all, operates with apparent success in the kind of public utility and other undertakings to which I have referred?

I observe, going beyond that, that the Government do not propose to draw any distinction at all in relief between industries of a productive character which are quite successful and those which are admittedly not. The Government reply might be that it would be practically impossible to establish any such distinction, and that they had far better run the risk of spreading the contribution over a wide field where it may not be particularly required, than endeavour to separate particular undertakings or concerns. There are the difficulties, as the Chancellor of the Exchequer remarks, of picking and choosing, but from the very start this is a very, complicated and highly technical matter. The difficulties along that line are very likely greater than the difficulties of certain other proposals in which some kind of differentiation might be introduced. After all, if the contribution is put at £15,000,000, £20,000,000 or £25,000,000 per annum, I do not dispute that that is important, but it is only a part of a great rating field covering between £160,000,000 and £180,000,000, and the declared object of the Government is to give the assistance particularly to those exporting concerns which most urgently require it. If that is the state of affairs, what is the position of many of these exporting businesses to-day? When we make an analysis, from purely official returns, we find that they are confronted with exchange difficulties in their export trade; they are confronted also with the depressed labour and employment conditions in other countries with which they compete; and they are exposed to a whole mass of external problems upon which a contribution of this kind, spread over a wide field, including those who do not require it, will make probably in many cases only a faint impression. I am not disputing that a large percentage of the people employed are covered by these industries; but if the object of the Government is to assist the export trade, let them make a bee line for those people in the export trades who undeniably require the help, and not distribute relief to those who do not require it at all. After all, if we must have subsidies in our national taxation and rating system, it should be on that basis. I suggest to the House of Commons, and even to business men, that that argument would be supported by an analysis of a great deal of the material supplied by the Department of Overseas Trade and by other authorities.

May I pass to the position of the local authorities under the financial and administrative proposals that are in the mind of the Government. This scheme makes no direct appeal to the necessitous areas. Their position has been discussed at great length within recent years. All kinds of formulae for the express assistance of such districts have been considered, but they have been systematically rejected. The Government will con- tend that indirectly the scheme is designed to assist such localities, but, for all we know, they are to trade on for at least another year and a half or nearly two years in their plight, subject perhaps to some trade modification of the position in which they find themselves to-day. The last analysis of the Public Accounts Committee for the complete year of the Appropriation Accounts shows debts to the Ministry of Health by these local authorities of approximately £7,000,000, and that, of course, is only a fraction of the burden resting upon them in existing conditions. Directly, therefore, under this plan they get no contribution. They are left precisely where they were, in spite of all the Debates we have had on this subject. Then as regards the local authorities, the Government indicate that they propose to introduce some system of block grants, by which we understand as a rule a fixed contribution, and that within this block grant presumably the existing percentage system will operate. The question that immediately arises is whether in the stabilisation of a block grant for five years covering all local authorities, you may not take away with one hand such assistance as you propose to give with the other.

Some most awful rubbish, I am bound to say, is. spoken on this question of the percentage grant system in much of our public Debate. If the Committee will forgive a personal word, some of us spent two years in the Meston Committee on a detailed analysis of this great controversy in the relations between national and local finance. The right hon. Gentleman the Member for West Swansea (Mr. Runciman) argued to-day that these local authorities have been misled by inflationist conditions following the War into a great deal of expenditure, hardly visualising the burden that would rest upon them in a time of depression. That is a very misleading statement of the case. By far the greater part of the task of these local authorities was forced upon them by legislation initiated in the House of Commons, and more particularly certain services were, if I may use the word, nationalised, such as police and teachers' remuneration and the rest, in this sense, that representative Committees laid down the terms which these local authorities were to observe. They were, therefore, deprived of any kind of local initiative or control. I am not disputing the principle. I believe it was essential. But let the House of Commons be perfectly just in this problem in analysing the percentage grant system. Of course the local authorities were influenced by the enormous rise in prices, a state of affairs which continues now, and with which many of them are fighting to the very best of their ability. But we gain nothing at all in the proposals of the Government if by any chance they involve the institution of a block grant system. such as will, in fact, place a larger burden upon local rates, although, as I gather from the Chancellor, that is not the intention which he, at all events, has in mind.

Let us look into this question at rather closer quarters. If by any chance a block or fixed grant is to be introduced, I am going to argue that it should be introduced under very definite conditions. The House of Commons has had the advantage since 1896 of the proceedings of at least three representative bodies, the Royal Commission on Local Taxation, the Committee that reported in 1911, many of whose proposals were embodied in preparatory legislation but abandoned because of the War, and at least the experience of the members of the Meston Committee, although their document has not been formally presented to the House of Commons. What is the kind of case that emerges from the three investigations? First of all, there is the very powerful argument against increasing the burden of the local authorities, and, in the next place, we must do everything in our power, not to encourage them to waste money—none of us would suggest that—but to develop social services. There are vast problems in social progress still to be overtaken, and it is no economic gain to the country for the moment to undermine a contribution of that kind. But, beyond that, I am going to suggest that there are steps that can be taken. The State admittedly should know the limit of its liability, and I believe in a, quite ready and convenient way it can know the limit of its liability.

In the next place, some definite effort must be made to deal with the whole ques- tion of administrative areas, and, above all, with what I may describe as units of cost. Many of these administrative areas are far too small in existing conditions, and they lead to a great deal of overlapping and waste and unnecessary competition, even in the financial field. They operate against the best interests of the ratepayers in these localities. So prima facie there is a very strong case for larger areas, although I am not sure the Government intend to cover the whole field, because, as I understand the speech of the Chancellor of the Exchequer, at this stage, at all events, he has specified only two services. It must apply to all services. The very best effort must be made to apply to these areas the kind of principles which are every day being applied in the industrial community. Whatever we think of the industrial future of the country, amalgamation, rationalisation, larger scale production, all these are perfectly inevitable forces, and I have found it difficult to understand why our local administration should not march in step, especially in view of the loss that the existing system entails. But if you are going to apply a new method of this kind, you must insure that you are getting the best value for your money. If these larger areas are enforced, you get a kind of basis of comparison, and your basis must become effective.

Whereupon, the GENTLEMAN USHER OF THE BLACK ROD being come with a message, the Chairman left the Chair.

Mr. SPEAKER resumed the Chair.

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