FINANCE BILL

HC Deb 05 June 1928 vol 218 cc37-159

Order for Second Reading read.

Motion made, and Question proposed, "That the Bill be now read a Second time."—[Mr. A. M. Samuel.]

Mr. SNOWDEN

I beg to move, to leave out from the word "That" to the end of the Question, and to add instead thereof the words: this House declines to assent to the Second Reading of a Bill which gives no relief in the heavy burden of taxation borne by the wage-earning class, imposes new indirect taxes, and proposes to raise revenue from national taxation for the relief from local rates of a particular class, irrespective of individual need, instead of promoting a fundamental reform of the rating system by levying rates upon site values which are created by the industry and enterprise of the community. I should like, first of all, to express my pleasure, a pleasure which, I am sure, is shared by every member of the House, at seeing the Chancellor in his place again. We have missed the right hon. Gentleman. The House of Commons is never quite the same when the right hon. Gentleman is not on that Bench. I hope, however, that the result of a recent regrettable experience may be a warning to him in future to avoid proposals which are likely to bring him into difficulties, and to have temporary serious consequences. An Amendment appears on the Paper to which my name is, attached, and I shall devote my observations almost wholly to the latter part of the Amendment, leaving to my hon. Friends behind me the earlier part of the Amendment, which deals with the injustices of the existing system of national taxation. There are many other important matters in this Finance Bill which, perhaps, can be more conveniently dealt with when we come to discuss them on the Committee stage. The outstanding feature of the Budget this year is the rating proposal, which was adumbrated at considerable length in the Budget speech of the Chancellor of the Exchequer; but the Finance Bill is only concerned with providing the revenue under this scheme to compensate the local authorities for the loss of rates by the de-rating of certain properties.

The Chancellor of the Exchequer stated that there were three stages in this scheme. The first stage was the provision of money in the Finance Bill, in anticipation of the later stages of the scheme being carried in the House of Commons. We are, I understand, to discuss to-morrow the second of these stages, that is, a Bill for the reassessment of certain property, and I think it will be more appropriate if we abstain from detailed considerations of that plan until we discuss that Bill to-morrow. Therefore, I propose this afternoon to confine my observations to the principles of local rating. I think there is general agreement, indeed, I think there are no differences of opinion, as to the need for the reform of our chaotic local rating system. It is out of date, and it is altogether inapplicable to modern conditions, especially modern industrial conditions. I also venture to submit the view, which perhaps will not he so generally shared, that it is not the a-mount of the rates which constitutes the burden, but the wrong method of assessment and the unfair incidence of the rates. The rating areas are quite unsuitable for present conditions, and the whole system is wrong in principle, because a very considerable part of the expenditure of local authorities to-day is not for what might be regarded as strictly local purposes and local services, but which are of a national character. We may agree with the Chancellor of the Exchequer as to the need for reform, or, as I believe he put it, we may agree on the diagnosis, but differ as to the remedy to be applied.

My purpose this afternoon, without, I hope, unduly encroaching upon what can be more properly discussed to-morrow, is to show that the revenue to be raised by this Finance Bill and to be handed over to the local authorities is not likely to lessen in the least degree, but is much more likely to aggravate, the existing evils, inequalities and injustices of local finance. This proposal means, simply, taking money out of the pockets of one class of people in order to put it into the hands of others. The proposal of the Finance Bill is to raise this revenue mainly by a Petrol Duty. I thought the Chancellor of the Exchequer, in defending this duty, and especially in defending its application for the purpose to which it is assigned, was singularly un- fortunate and contradictory. He said with very great truth that the industrial greatness of this country was built up on coal, but that oil is now to an increasing extent taking the place of coal. It seems a strange way of helping industry to put a tax upon what is the fuel of industry. It would be just as wise or just as foolish to put a tax upon coal. The only result of that would be, of course, to increase the costs of production, though the point which has been emphasised a hundred times in defence of this rating proposal is that it is introduced as a means of reducing the costs of production.

This relief is to be applied only to what the Chancellor of the Exchequer calls productive industry. That seems to be based upon the idea that you can make a distinction between the costs of production and the costs of distribution. What matters is the cost of the article which comes upon the market. The costs of distribution may be as important as, indeed in a great many cases they are more important than, the actual costs of production. Everyone is familiar with the wide margin between the price of an article when it leaves the place of manufacture and the price the consumer has to pay for it, and there is no doubt that it is the cost of distribution which adds so enormously to the cost to the purchaser. It has just occurred to me that the right hon. Gentleman himself said that the cost of the distribution of petrol is about one-half the price which the consumer has to pay. Anything which increases the cost of distribution increases the price of the article, and to that extent makes the sale of that article more difficult. There is no doubt that this duty upon petrol will increase costs of production.

The Chancellor tried to justify this Petrol Duty by pointing out that the price of petrol to-day is cheaper than it was a year or two years ago. Surely that is no reason why he should put a tax upon it and increase its price. He ought to have welcomed that decrease in the price of petrol as an aid to production and a stimulus to trade; instead, he has made the cost of the article dearer by this imposition. I have no figures as to the percentage of petrol consumed in this country which is used, not for pleasure but for trade, including in the word "trade." our public motor omnibus services. I should be very much surprised if less than one-half of the petrol consumed is not used for what we might call trade or commercial purposes, and therefore this justifies the statement I have made that when this relief is given to specially selected industries you are taxing one class of people for the supposed benefit of another class. The Chancellor of the Exchequer had a very unfortunate experience., and an experience which had temporarily regrettable results, in connection with the kerosene tax, but he ran away from that. tax even before a shot was fired at him in the House of Commons.

I am inclined to think that the petrol tax—or the part of it which has been retained—will be quite as heavy a burden on working people as the Kerosene Duty. I find that in many parts of the country this tax is being passed on to the consumers—I mean those who use public motor omnibuses. I have here a number of tickets issued by omnibus companies to their passengers, and what I am going to point out is happening all over the country. Here is one receipt for a halfpenny in payment of the Petrol Duty. Here is another ticket which is more candid. It says: Receipt for extra charge owing to the imposition of the petrol tax. Here is another ticket for a fivepenny fare upon which 10. is charged for the Petrol Duty. All these facts show that the Petrol Duty is not only being paid by the users of these public vehicles, but they also show that the omnibus companies are taking advantage of the Petrol Duty in order to make an extra profit on their fares, amounting to as much as 200 and 300 per cent. in some cases. It has been stated that the declared purpose of the plan of rate relief suggested by the Chancellor of the Exchequer is to encourage production, but you are only increasing the cost of production by such methods as those which I have described.

There are many other objections to the Petrol Duty which might be urged, but T think I have said sufficient to show that it is an unsound and an unjustifiable tax. It was stated last week at the annual congress of the Co-operative Societies that the Petrol Duty would cost Co- operative Societies £250,000 a year extra for the running of their vehicles.

An HON. MEMBER

What will they get by a reduction of the rates?

Mr. SNOWDEN

They will get very little by way of a reduction of their rates; their shops are not getting any relief because they are carrying on a vast distributive trade. Of course, they will have the satisfaction of knowing that they will have to pay £250,000 a year extra for petrol, while, according to a statement made by the right hon. Gentleman the Member for Carmarthen (Sir A. Mond), in the course of the Budget Debate, the Imperial Chemical Industries will gain some £200,000 a year. Therefore, the Co-operative Societies may find a certain amount of satisfaction from the fact that what is being done wilt add to the £4,000,000 profit made by the Imperial Chemical Industries.

The Rating plan proceeds on fundamentally wrong lines, and it does nothing to change the present archaic and unsuitable system of local rating. The changes which this plan will bring about will increase the cost of the production of houses, and surely that is a very important element. The cost of houses will be increased, because anything which causes increased rates is certain to add to the cost of the production of houses. Nobody knows better than the Chancellor of the Exchequer what is going to be the ultimate effect of the change which is proposed by this scheme. It cannot be more than a temporary relief, and this form of relief—it is no use denying it—must sooner or later pass on to the rent, and will therefore become an addition to the income of the ground landlord and those who take rent from property. You can have no relief of the rates so long as you allow land values to be appropriated by private individuals. All forms of relief of this kind go back to the landlords in the shape of land values. Every relief of this kind is ultimately passed on to the community and finds its way automatically into the landlords' pockets. If there is a rise in wages we are able to move forward a little because the worker is able to pay a little more for the things he wants. The opening of a new railway or tramway, the establishment of improved services for workmen, the lowering of fares, or a new invention very often confers a benefit on the workers in any district, and it becomes easier for them to live. The ultimate result, however, is that the ground landlord and the landlord, one on top of the other, are able to charge more to the community for the privilege for living there. I gather from the smile on the face of the Chancellor of the Exchequer that he recognises that quotation, and I can appeal to no greater authority; I certainly could not put my case to the House of Commons in a more eloquent form than the Chancellor of the Exchequer has done. The price that the landlord is able to exact for the use of these privileges is determined by a number of considerations. First of all, the price is determined by the extent of the need of the people, the amount of land they require, and the population. As a matter of fact, every child born adds to the rent of the landlord. The more people you have living on the land, the more the ground landlord is able to take from the community for the privilege of living on the land. Every scientific advance, every machine improvement, everything that adds to productive power, finds ultimately its place in the rent that the landowner is able to take.

It is the same with regard to transport. Every improvement in transport services raises land values. We see it going on everywhere, not only here in London and around London, but, now that motor omnibus services have covered the whole country, you find, alongside the roads on which you travel, on agricultural land which is at present relieved of 75 per cent. of its rates and which next year is to be relieved of the whole of its rates, these notice boards: Eligible land for building purposes"; and, if you inquire the price of it, you find that it is not the agricultural value of the land that is asked, but 10, 20, 50, or even 100 times the value that could have been obtained for the land a few years ago. May I appeal again to a high authority: It does not matter where you look, or What examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself. Everywhere to-day the man or the public body who wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it, not to an increased use, but, in some cases, to no use at all. That is the opinion of the Chancellor of the Exchequer.

These instances of land values created by public expenditure for the needs of the community are well known to everyone. Less than two years ago the Corporation of Liverpool, anxious to carry out a street improvement, had to pay at the rate of £1,500,000 an acre for land. Every penny of that value had been created for the population by the industry and enterprise of the City of Liverpool. Again, take Sheffield, a city which is groaning under the burden of excessive local rates to-day. They wanted land for a school, and they had to pay 820 years' purchase on the rateable value of the land. They wanted to widen a street, and they had to pay 846 years' purchase upon the rateable value of the land. With regard to housing, I have here a case from South Shields. There were 9 acres of agricultural land just developed for building purposes. Sixty houses have been put on that site, and they are paying in ground rent £432 a year, yet before that land was needed for housing purposes its annual income was £38.

I dare say Members of the House will recollect a speech made by a former Tory Minister, whom I remember very well. His name used to be Sir Albert Stanley, and he is now Lord Ashfield, the Chairman of the London Underground Railways. They recently made an extension, as hon. Members know, out at Edgware, and he was complaining of the difficulty of getting the population out there, because the landowners there were holding up the land until they could get a higher price for it. Let us have the views of the Chancellor of the Exchequer on that. Taking the case to which I have already referred, he said: There is the man who keeps a large plot in or near a growing town idle for years while it is ripening, that is to say, while it is rising in price through the exertions of the surrounding community and the need of the community for more room to live. I dare say you have formed your own opinion upon it. The Conservative party generally think that it is an admirable arrangement. They speak of the profits of land and the land monopolist as if they were the fruits of thrift and industry, and a pleasing example for the poorer classes to imitate. We do not take that view of the question. We think it is a dog-in-the-manger policy. We see the imposture upon the public, and we see the consequences in crowded slums, in hampered commerce, in distorted or restricted development, and congested centres of population, and we say here and now to the land monopolist who is holding up his land—you shall judge for yourselves whether it is a fair offer or not—we say to the land monopolist, This property of yours might be put to immediate use with general advantage. It is at this moment saleable in the market at 10 times the value at which it is rated. If you choose to keep it idle in the expectation of still further unearned increment, then at least you shall ho taxed on the true selling value. That is the opinion, that is the conviction, of the Chancellor of the Exchequer; and what is he doing? Is he saying that to the land monopolist? No. He is saying to him, "Well done, thou good and faithful servant. You are only paying 25 per cent. of a small rate on a very small assessment now. I will relieve you of rates altogether, and let you go on until this land has received an enormous further advance in value."

4.0.p.m.

By-and-by industry will go out into these areas. The Chancellor of the Exchequer made a statement in his Budget speech with which I do not agree, though I quite realise that there may be two sides to that question, and two quite proper views. He seemed to regret the migration of industries from the highly congested areas into the country. I do not regret it; I think that it is a tendency which should be encouraged, and it is certainly one that cannot be prevented. I believe it will be a very great aid to production. If factories can be removed to places where they can be much more commodious, and where the workers can be better housed, I think that a very considerable improvement in productivity will result. I remember that some years ago a friend of mine, an engineer in Manchester, told me this very interesting fact. They had, he said, removed their factory two years before from the centre of Manchester into the country, and such had been the improvement in the efficiency of the workers that, at the old rate of wages and at the old hours, there had been such an increase of output that the whole costs of removal and of re-equipment had been covered in two years' time. However, that is by the way. When these works have gone out, it means roads, sewers, schools, lighting and the like. The landlord has already, as the Chancellor of the Exchequer put it, 4.0 p.m skimmed off the cream, but, owing to the high price he has got for the land, the rates are higher, because they have to be based upon a higher assessment. These results percolate through the whole of industry, and they are reflected in the increased price of every article we buy. What is the value of the sites of this country? I do not know—no one knows. We have not even an approximate estimate, but, at any rate, we can form some idea from those countries where they have accurate estimates of site values. Take New Zealand. In the last 47 years, the site value in New Zealand has increased from £62,000,000 to £339,000,000; in other words, from £129 per head of the population to £241 per head of the population. I do not think the average in this country would be as high as in New Zealand. If it were, the land values in this country would be worth £10,000,000,000. Even if it were £5,000,000,000, hon. Members can do a little simple sum in arithmetic and estimate what the annual income would be if the site values were rated, say, at 4d. or 5d. in the on the capital value.

The City Corporation of Sydney, New South Wales, a few months ago raised a loan in the London market., and there were some very interesting statements in the prospectus. There the local rates are levied upon the undeveloped capital value of the land. This prospectus stated that the total capital value of the City of Sydney was £61,500,000, and the annual value about 8,000,000. All the local rates raised by the Corporation of Sydney are raised by a tax on site values. There is an addition of a water rate, and, I think, there is a drainage rate. The main services such as police and education are State charges in New South Wales, but a rate of 3½ in the £ raises the whole of the strictly municipal expenditure of the City of Sydney. What has been the effect? During the time that this system has been in operation, that is, during the last 15 years, the population of Sydney has risen from 500,000 to over 1,000,000. This system operates all over our Dominions, and in some Continental countries, particularly and very successfully in Denmark, and, as the right hon. Gentleman says, throughout Europe the systems of land tenure are far superior to our own.

Instead of the scheme for which financial provision has been made in this Bill, I wish that the Chancellor of the. Exchequer had had the courage of his convictions. I know that his views upon this question have not changed—his circumstances have changed. I wish he had, therefore, proposed the transfer of rates to site values, which, as he knows, and everyone knows, are not the product of individual effort but rather a collective product. It may be said that there are difficulties, but they have been successfully overcome in other countries, and, however great the difficulties may be, they are infinitesimal compared with the difficulties that will be experienced in carrying out the Government's scheme. This, as I said just now, is a scheme which is as I know, dear to the heart of the Chancellor of the Exchequer. He thinks about it day and night. He told us so quite recently. He said that it is never out of his mind. Now we submit this as an alternative proposal to the financial proposal which is embodied in this Bill. I have made no attack upon landowners. I do not blame them. They have a perfect right to take advantage of that of which the law permits them to take advantage. It is not they who are blameworthy, it is the State which is blameworthy, as long as it allows such a system to exist. I challenge the Chancellor of the Exchequer, and I challenge any Member on the other side to defend this system. Can anyone say that the fruits of local rates, the fruits of industry should not be retained by industry, but should go into the pockets of certain individuals who have contributed nothing by their labour or industry to the creation of that value? With confident belief in this we submit this Amendment to the House of Commons.

The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

No one could complain of the tone and temper of the speech of the right hon. Gentleman. It was the result of careful reflection; it was expressed in language almost entirely devoid of prejudice, and, for my part, as the result of that speech, I am only for the moment left with' one question to ask—Is that all you have got to say against the scheme of constructive rating reform which we have proposed? After six weeks of careful consideration, during which all the keenest and sharpest brains in the Labour party have been continuously applied to the immense field that we have opened up, with a target covering the whole horizon, this excellent, moderate, suggestive speech—a speech, I must say, largely borrowed—represents all that they have to say at the present time on this subject. I think they have shown a far sounder appreciation of the real importance of this scheme to the country and to its productive industries and its labouring masses, than has been shown by their much more precipitate allies on the Liberal Benches. I ask the House, and I ask the country, to note very carefully the attitude of scrupulous reserve which has been adopted by the Labour party upon these Budget proposals.

What are the two cricitisms which the right hon. Gentleman has been able to select for adumbration this afternoon? He says that the Petrol Duty will be a burden. That is the first criticism. I have never denied that the tax on petrol will be a heavy one. I am very sorry, indeed, that I have had to impose a tax at all, and only a much more grievous need in another direction has led me to make this demand upon the motoring public, in order to find the money necessary to take a forward step. After all, it must be remembered that I am proposing constructive policies on the morrow of the disaster of 1926. More than £80,000,000 has been taken from the revenues of four poor years. But for that, I could have proposed all that we are proposing now and carry it into effect without placing a tax upon petrol. But, in all the circumstances, I submitted to the House, when the Budget was introduced, the broad argument as between the struggling basic industries on the one hand and this buoyant motor traffic on the other., as between our railways with the great interests and labour interests involved in their reasonable treatment and the ever-expanding cost of our road system. There is also the contrast between the position of our coalfields and the ever-growing importation of foreign liquid fuel, and surveying these three groups of alternatives, I submitted to the House and the country the proposition that it was well worth while getting this considerable revenue from a tax upon petrol and petrol-driver, transport, and devoting it to the relief of the basic industries from the extremely onerous and invidious incidence of the rates. But I will never deny that it is an evil, or that I wish the revenues of the country had been such as to enable me to dispense with such a tax.

The right hon. Gentleman's second point, and the alternative which he suggests for the tax on petrol, I gather, is the taxation of land values—[An HON. MEMBER: "The rating of site values!")— the taxation of land values or the rating of land values. The right hon. Gentleman read a speech of mine of some years ago, and one which, I am bound to say, was familiar to me, because I have taken the trouble to re-read some of those statements quite recently, and I am bound to say that, leaving out what you may call the partisan gloss, which, in times of sharp political conflict is prone to be introduced into our deliberations—leaving all that out, I am not at all convinced that, among my arguments in favour of the rating of undeveloped urban land upon its true value, I employed ally which were lacking in lucidity or reason. In the years that have passed a good many things have happened, and we must take notice of these events. In the first place, a whole group of these land taxes were imposed. [An HON. MEMBER: "Never! A whole group of these land taxes were imposed by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) when he was Chancellor of the Exchequer—Increment Value Duty, Reversion Duty and Undeveloped Land Duty.

Mr. MacLAREN

Were these taxes on land values?

Mr. CHURCHILL

They were certainly taxes directed to absorbing what is called the unearned increment of the land. They were all imposed, and after 11 years the whole group of these taxes proved a total failure. They yielded in the 11 years only £1,300,000, and so disgusted was the right hon. Gentleman with the result of the taxes that he abandoned the whole policy when he was Prime Minister, in 1920. The right hon. Gentleman suggested that he was out of the country at the time the taxes were dropped, but I can assure him his memory has played him false. I have verified the records. I make not the slightest suggestion of want of candour.

Mr. LLOYD GEORGE

That these taxes were abolished without my know- ledge and consent is not what I meant to suggest. That would have been a very unfair insinuation against the chancellor of the Exchequer. If I conveyed that impression I can only express my regret. It not what I meant. It was in right hon. Gentleman the Member for Carmarthen (Sir A Mond) as to something he had said when the matter was being discussed. I was not there when the discussion took place, but I have not the faintest doubt that I was consulted and assented to it.

CHURCHILL

I am not making the slightest reflection on the candour or the good faith of the right hon. Gentleman. After all, the torrent of events that swept across us in these tremendous years through which we have passed must necessarily have made it difficult for any Minister who has played the part he has done and been concerned with such a multitude of affairs to remember exactly what the particular course was. The fact is that the right hon. Gentleman presided over both meetings of the Finance Committee of the Cabinet in 1920 which decided on the changes of taxation in the Budget of that year. This was before he went to the San Remo Conference and he presided over both those meetings at the beginning of April, 1920, and agreement was reached on all the changes in taxation.

Mr. LLOYD GEORGE

I certainly accept that.

Mr. CHURCHILL

And when the present Foreign Secretary, then Chancellor of the Exchequer, was challenged in the House of Commons by Members who said, when the repeal of these taxes was announced, that he repealed them while the Prime Minister was away, he said: That is a foolish observation. The lion. Member obviously does not understand Cabinet procedure. Does he think that a decision of this kind was taken in the absence of the Prime Minister or without his full concurrence or approval? We have unanimously come to the conclusion that the proper course to pursue is to repeal these duties. and again, speaking of the right hon. Gentleman: He has one great quality not given to every man, and that is that in middle age and after middle age he can still learn. He is no coward who fears to own a change of mind and admit altered conditions. He is no pedant who refuses to alter any views which he first took up when a case was first press sited to him. Apparently, the right hon. Gentleman is still continuing his course of instruction. I accept his statement that he was an assenting party to the repeal of these taxes. That is a very considerable thing, that the Minister and politician who put the greatest drive into this case that has ever been put into it should, at the summit of his powers, after 11 years of exhaustive experiment, not feel the slightest hesitation in being responsible for the complete repeal of these three taxes.

But about site values and land values—of course there is a lot of politics in them. Further, there are a lot of officials in them. When the valuation process was brought to an end by a later Government it was possible to retrench 4,000 officials, who would have to be replaced before this policy could be taken up again. [An HON. MEMBER: "Not at all!"]That is what I am advised. In addition to that., the right hon. Gentleman took into consideration the great disappointment of the yield. And so, though there may be a great deal of politics and a great many officials, and no doubt a great deal of litigation, as we have proved from what occurred, there is very little money in this policy. The idea that we could use the rating of site values as a substitute for this powerful, fruitful fiscal engine of the petrol tax is one of the great delusions. If we had to enter into a long discussion at present upon site values, that. would be the surest way of obstructing all practical creative reform in the direction of the relief of rates on industry, and the rest of this Parliament would be spent in very exciting but utterly sterile arguments on the subject of land values, and on the principles which you should apply to their rating or taxation, and we should not make the slightest progress towards the very solid, serious task we have set ourselves to accomplish. Therefore I do not intend to make more than one general observation upon the question of site values, except to say that it is the best method of stopping the rating relief of industry. But I will make this one further observation, and I will make it in an interrogative form. Why did Mr. Henry George fail? He was a great advocate of the single tax and he has one disciple, at any rate. Why did he fail, and why is it that his disciples are unable to carry on their political faith in modern times?

Colonel WEDGWOOD

Because people turn their coats too often.

HON. MEMBERS

What have you done?

Mr. CHURCHILL

The right hon. Gentleman spoke then with less than his usual courtesy and with more than his usual obliviousness of his own record. I well remember the time when no one was more scathing in his denunciation of Socialism than he. Now, by a perfectly natural transition of mind, by a steady process of regeneration, he has reached a certain conclusion. He has reached finality. He has got to the bottom, as it were. I do not in any way belittle the logic or the argument about the rating of land. What I say is that very great experiments in this field have been made and that they were found to have failed to such an extent that they were abandoned by their author.

Let me return to the question why Henry George failed in his single tax proposal. It was because he had been studying the world as it had been for generations and centuries, and arrived at certain conclusions on that basis, and the conclusion he arrived at was that land was practically the sole source of all wealth. But almost before the ink was dry on the book he had written it was apparent that there were hundreds of different ways of creating and possessing and gaining wealth which had either no relation to the ownership of land or an utterly disproportionate or indirect relation. Where there were 100 cases 20 years ago there are 10,000 cases now, and that is why radical democracy, looking at this proposition of the single tax—there are two enthusiastic single taxers left in this House—has turned unhesitatingly towards the graduated taxation of the profits of wealth rather than to this discrimination in the sources from which it is derived, and that is what we have done. Let me point out what has happened in the last 18 years. When this question of site values was being discussed in the Budget of 1909 the Income Tax and Super-tax together stood at the maximum, at 1s. 8d. in the £it is now 10s. Death Duties were 15 per cent. on the highest estates, whereas they now reach 40 per cent. There is not the slightest doubt that very vast changes have taken place in the whole of the methods by which taxation is raised, and those who wish to embark on any controversy upon the taxation of land values in the future must address themselves to the facts as they exist in this completely changed situation.

I leave the only two points the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) on behalf of the Labour Opposition has brought forward in connection with our rating scheme. I am very glad to know that is all they have to say upon the subject. Other criticisms have come from other quarters, and especially from the Liberal party, who have been extremely active in finding fault, arid who have placed an Amendment on the Paper with which I propose to deal, as it touches a very direct issue, and I propose to deal with it in detail. The criticisms which the Liberal Opposition have made in the country are mutually destructive. The first is that it is a very bad scheme and it ought to be brought into operation much earlier. Of course it all turns on money. I should he delighted to bring it into operation earlier, but we have to consider money and the necessary administrative and legislative steps that must be taken. I have not the money to bring this scheme, or any part of it, into operation earlier. I have said that £80,000,000 has been lost by the events of 1926. It is a great effort to do what we are attempting to do at a time so soon after those events. The excision of the Kerosene Duty from our proposals aggravates my difficulties. I do not, however, propose to suggest to the House any alternative taxation to make good the omission of kerosene. I count upon the expanding revenue of the country and upon further economies which must he pursued from year to year to bridge the gap. In any case, the finance is secure for at least three years, but I have nothing more to give in the present year, and the benefits, such as they are, must be awaited with patience. After all, 18 months is not very long to wait, and six weeks of it have gone already.

The second self-destructive criticism has emanated mainly from the right hon. Gentleman the Member for Carnarvon Boroughs. He has pursued a double line of attack. First of all, the relief ought to have been concentrated on the basic and unprosperous industries, much more concentrated than the Government propose. Secondly, and alternatively and simultaneously, he says that the relief ought to have been dissipated and spread over the whole area of the distributing trades and of ordinary residential ratepayers. You have the maximum concentration advocated in one breath and the maximum dissipation in the next. There is a very great deal to be said for concentrating the whole of the relief upon the basic industries, and we have done so in regard to the railway part of our proposals. We have been guided in the main policy by a fundamental principle. It is this, that the instruments of production ought not to be taxed but only the profits resulting from their use. That is our principle. We hold that it is economically unchallengable. Why should we fear to apply it boldly? I expect, if we had concentrated our relief upon the basic industries, the right hon. Gentleman would have been the first to rise in his place and to remark on the favours we were giving to a handful of trades at the expense of all the other producers. Under these circumstances, it is much better and much safer to follow a general principle which has been carefully selected to produce the results at which one is aiming and trust to the workings of that principle irrespective of the hard cases it may produce.

Does the right hon. Gentleman consider that it is practicable to pick and choose between the prosperous and the unprosperous industries? The Liberal Yellow Book suggested no such discrimination, and I am bound to say that it appears utterly impossible to make such a discrimination. The right hon. Gentleman has in many speeches he has been making about the country pointed to this and that hard case, this wealthy company which gets relief, this poor class of residents who do not get relief, this declining industry which ought to have more, and so forth. But I suggest that it is utterly impossible to pick and choose between these different industries. If, on the other hand, we were to extend the scope of the scheme to cover all the householders and all the distributing trades, we should dissipate the whole fruits of our proposals. We should reduce the relief to industry to one-fifth of what we are now giving. And what we are now giving amounts only to 4s a ton on steel on the average. In fact my whole doubt and misgiving has been that the levers at our disposal are not big enough and not strong enough. If they were three or four times as strong, I should be much surer and much more confident. The right hon. Gentleman complains that the distributors do not receive the relief and that the residential ratepayers do not receive it. This would imply a dissipation of the resources at our disposal which would render their employment utterly sterile. We should have spent our £26,000,000, but industry would not be able to appreciate that any change had taken place. We should have lost our money and used up the limited resources of the State and have not altered in any appreciable degree the evils with which we are seeking to grapple. If I had only been considering what I might call benevolent giving, the giving of easements or indulgences, a relief to the general mass of the population, to take one-fifth or one-sixth off the rates would not attract me at all. Long before I did such a thing as that, I would take the tax off tea and sugar which would cost just about the same and which, I have not the slightest doubt, would reach a much wider and lower level of society than the petty general saving over the whole area of the rates. Therefore, I submit to the House that it would have been a great error for us not to concentrate our relief upon the productive industries.

The right hon. Gentleman has gone further and said that we should pick and choose among those industries—Labour Members have confirmed this view—and leave out the prosperous and give all the relief to the unprosperous. It is utterly impossible to do any such thing. No doubt the right hon. Gentleman finds it very convenient to go about the country and hold up the right hon. Gentleman the Member for Carmarthen (Sir A. Mond) and Mr. Courtauld to public prejudice, and, no doubt, get loud cheers from those ignorant of economics and envious of wealth. But you could not pick and choose only between industries. You would have to pick and choose between different concerns in the same industry. The changing fortunes of these businesses from year to year would render it utterly impossible to frame any scheme of reimbursement to the local authorities on this basis.

The right hon. Gentleman not only suggested that you should pick and choose between industries according as they were prosperous or unprosperous, but he suggested other discriminations. Apparently, you are to pick and choose between them accordingly as they are industries the Liberal party like or industries which the Liberal party do not like. Beer, Tory beer, that is to be denied, but cocoa: "Come along my dear ! All is well. "I have been asking myself where the right hon. Gentleman has got this idea of picking and choosing. I think I have it. He got it from the 1918 election. It is the coupon system. It is an attempt to revive it for the benefit of British industries. I should like to ask the right hon. Gentleman this question: He contends that this proposal of the Government will put £400,000 year into the pockets of the brewers, because of the relief in rates. Who does the right hon. Gentleman suppose pays this £400,000 a year in rates on the brewing industry at the present time? Does he really suppose that it is the brewers who all these years have been making this sacrifice out of their own pockets in respect of what is admittedly a legitimate element in the cost of production? No, he is paying, I think, too great a tribute to their hearts and too little to their heads. We have another suggestion as to where the burden of the rates on beer has been thrown hitherto. Our suggestion is that it has been paid by the people who drink the beer, and our further suggestion is that a relief in the cost of production in a prosperous trade like this will infallibly make its way to the consumer by economic laws and the working of open competition.

Lieut. - Commander KENWORTHY

Have you any promise of that? Have you an undertaking?

Mr. CHURCHILL

I am not basing myself on individual promises, but on the work of inexorable laws. Of course, in businesses which are actually paying the rates out of their capital, or in businesses which are paying a portion of the rates out of their capital, or whose rate of profit is below the normal profit of competing firms, in such concerns the first use of the relief will be to stop the denudation of the capital funds and to enable industries to keep their doors open and their people employed. When you come to more prosperous trades which are in contact with competition, external and internal, world-wide and domestic, the only conclusion which any sound economist can draw, and certainly the only conclusion which any Free Trader can draw, is that the diminution in the cost of production will make its way back in quantity, in quality, or in price, through a thousand channels, traceable or untraceable, to the broad mass of the consumers and wage earners throughout the country. If you do not pick and choose, in the distribution of your relief, between one industry and another, then you must face the consequences of applying your general principle. Let us see what are the consequences of applying our general principle. Here we have a direct conflict of opinion. The Liberal party have placed an Amendment upon the Paper, in which an extraordinary statement occurs. It states that the scheme will give a greater measure of relief to flourishing industries than to those which are depressed. Let us examine this statement. Of course, the burden of rates is the result of two factors—assessment and poundage. These are mutually and reciprocally reacting factors but poundage is the dominant factor in the difference of burden between areas. Where the poundage is high you find the industries depressed and where the industries are depressed you find almost invariably that the poundage is high. A general revaluation of rateable property is proceeding at the present time and will be completed next year. This new valuation will, of course, be the basis upon which our plans will proceed. We are not using any earlier year or any incomplete valuation.

Having thus cleared the ground, let me now examine how the distribution will actually take place between the so-called flourishing and the so-called depressed industries. There is no actual definition of a flourishing or of a depressed industry. Any decision on that point must necessarily be arbitrary. Therefore, I select four main tests by which to tell what is a depressed industry or an industry which is not flourishing. Here they are. The first is that unemployment is abnormal; the second, that the ratio of rates to profits is excessive , the third that the profits are subnormal and the fourth that the profits have been decreasing in recent years. These are, I think, four very fair guides of a depressed or a not-flourishing industry, but there are three other factors which ought to be taken into consideration. The first is whether the industry provides wages for very large masses of manual labour, the second, is whether it is unsheltered, and the third is whether it is markedly concerned in the export trade. If all these seven qualifications are present, it will be agreed that the industries helped are the ones which we want to help. Let us see if we can find a group of trades which, broadly speaking, would fulfil all these conditions.

Last Autumn when I was studying this question and when I was anxious to find some criterion, some general principle which would enable me to carry relief to the basic industries, without invidious discrimination, the first set of figures which I examined was a statement of the ratio of rates to profits. Here I was able to rely upon the Inland Revenue. Every year for the purpose of Income Tax assessments a sample is taken by means of confidential returns of the whole trade of the country. Many thousands of concerns are individually examined and the results of this examination enables a forecast of the Income Tax yield to be made with what most people consider to be uncanny precision. For 1923 a specially detailed study was made into the profits, turnover, rates and reserves of industry, and their relationships. It was made by the direction of my right hon. Friend the Member for Colne Valley for the purposes of the Colwyn Committee. Therefore we have two sources of information—first, we have the annual sample of profits, covering the whole range of British industry, on which the Income Tax estimate is based and, secondly, we have the relation of rates to profits which was revealed, by this very detailed and special investigation relating to the year 1923.

The Inland Revenue classified the 30,000 samples of productive industry into 15 main trade groups, which cover the whole of productive industry, except transport, public utilities, and agriculture. These 15 groups comprise nearly 8,000,000 workers, and they account for more than 800,000 of the unemployed. The figures which I studied last autumn were calculated for 1925, which was the last normal year, 1926 having no relation to normal times. I noticed immediately that six of these groups stood out from the other:, in that the ratio of rates to profits was excessive; far beyond what it was in the case of the rest of the groups. I have now, of course, comparable figures for 1927, and the conclusions which I am going to put before the House are based upon the Inland Revenue figures which have been used to forecast the Income Tax revenue for the current year, similar to those which were used last year with an accuracy so great as to he within about 1 per cent. of the actual receipt.

The percentage of rates to profits throughout the whole of the 15 groups is 7.8; but the six trade groups which stand out have an average of 20 per cent, while the other nine trade groups, which we may call the less depressed or the more flourishing, have an average percentage of rates to profits of only 4.6 per cent. Here is a great line of distinction. Let us see which are the trades which fall on the higher side and which on the lower side of the dividing line. Mines; Wool; Cotton; Iron, Steel, Shipbuilding and Engineering: Bleaching and Dyeing; and Metals, excluding Motor Car manufacture, which for the purposes of the Inland Revenue calculations has been included in Metals, but which perhaps it would not be proper to include in the depressed group. In these six trade groups the ratio of rates to profits is four or five times as high as it is in the other nine. In the case of Mines the ratio of rates to profits in 1927 was 27 per cent; in Wool, 15 per cent; in Cotton, 23 per cent; in Iron and Steel, Shipbuilding and Engineering, 20 per cent; in Bleaching and Dyeing, 14 per cent; in Metals, 13 per cent. Look at the other nine groups—Building and Timber, 7 per cent: Leather, 7 per cent. Chemicals, 4 per cent; Food, 6 per cent.; Other textiles, 5 per cent; Paper, 4 per cent; Drink, 2 per cent; Tobacco, 2 per cent; Pottery, 5 per cent.

There is evidently a vast line of cleavage between these different groups of industries which is marked by the burden of rates upon them. Are not the groups which I first mentioned, together with agriculture, those industries which everyone would admit are the depressed industries of the country? I do not say that these are all of the depressed industries, but they are the major depressed industries of the country, and the average rate of unemployment in those industries was, according to the latest figures, 13 per cent., ranging as high as 23 per cent. in shipbuilding. That compares with the average rate of unemployment throughout the whole country of 9.6 per cent., and with the Blanesburgh figure of what might be considered normal unemployment of 6 per cent. These six depressed trade groups are all unsheltered. They all show a lower volume of profit than they had four years ago. They show considerably less profits than they had even so recently as 1925. Lastly, together, these six depressed trade groups constitute the main staple of our export trade, which is the most directly in contact with foreign competition all over the world.

If you look at the other nine groups you see that they include some trades with abnormal unemployment, like the large building trades, and other trades which would repudiate with indignation the suggestion that they were flourishing, like the glass and pottery trades, but, in the main, you may say of these groups as a whole that they are sheltered and holding their own. The ratio of rates to profits in these nine groups is 4.6 per cent. and the unemployment is far below the average of the previous class. Therefore, it seems to me that a perfectly clear line can be drawn between these depressed groups and these not depressed or flourishing groups. The average burden of rates to profits in the first group is 20 per cent. and in the second group 4.6 per cent. That is a terrific difference.

5.0.p.m.

Now let us see how the rating relief is divided between these two classes. Remember, that I am challenging the Liberal suggestion that a greater measure of relief goes to the flourishing industries than to those which are depressed. There are many in the second group which are not flourishing, but in the first group practically you may say that they are all depressed. Let us see how the money is divided between these two classes. The first group of the depressed industries made in 1927 much less than half the profits of the second group. You might almost say that they made little more than one-third of the profits of the second group. They made actually £67,000,000 of profits compared with £162,000,000 of profits made by the second group, although they employed just as many men. Just as many millions of labour employed, and only about one-third of the profits made, and the first group carry on their shoulders double the unemployment of the second group! See how the relief is divided between these two. Including the railway and canal relief, which will be passed on to the basic industries, £14,250,000 of our £26,000,000 goes to these depressed, basic, unsheltered, exporting and large manpower employing group of industries, and £5,500,000 goes to all the others, including the building trade and many industries which may be characterised as depressed. This group of industries which may be classed as depressed gets nearly three times as much as those which are classed as flourishing industries and this does not include the depressed industry of agriculture.

There remains the question as to whether this state of affairs will be sensibly altered by the new valuation which is now proceeding. When firms are doing badly they can claim at any time their rights at law to a reduction; and we have taken into consideration in our estimates the revision downwards which is taking place in the depressed trades. We have reduced our estimate of the cost to the Government of the relief from about £28,000,000 to £26,000,000 as a result of the changes which are taking place in the relative position of the depressed trades.

When you come to the less depressed or more prosperous trades they are waiting for the ordinary process of revaluation, because it is probable that, if they are affected at all, in the main the movement will be upwards and not downwards. I am advised that £1,000,000 would be a generous estimate of the increased net burden which would fall upon the whole of the not-depressed, the flourishing group, as the result of the revaluation, and this assumes that over the whole of this group, including the building trade, prosperous and non-prosperous alike, the increase in assessments will, after any reduction in poundage has been taken into consideration, increase their rate burden by as much as 20 per cent. If that is so, you will have to add £1.000,000 to the £5,500,000 which I mentioned as going to the not depressed group. But what is the effect of such an incident on the figures I have quoted? It does not in the slightest degree affect the validity of the argument I have used, and that argument shows that the Liberal statement that more relief is going to the flourishing than to the depressed industries is not true; that the exact contrary is the truth; and not only the exact contrary, but the exact contrary multiplied four or five times over.

I see the right hon. and learned Member for Spen Valley (Sir J. Simon) in his place, and I believe he is going to follow me or speak in the course of this Debate. I invite him to deal with this matter. He has committed himself to the statement that the bulk of the relief goes to the flourishing trades. In face of the figures I have given, which I am certain cannot be challenged, will he withdraw that statement and expunge from the Order Paper of the House of Commons one of the most grotesque falsehoods which any great party has ever placed upon it? I am astonished that such a statement should have received the responsible approval of the Liberal party. They always tell us that they have the intelligence of both the other parties put together. We know that they have great advantages in examining these matters, great resources with which to embark on research, and they have just. given us the Yellow Book with all their clever thinkers writing and studying these matters. It is most disconcerting to find such a grotesque error, such a, ghastly departure from actual facts, appearing in their responsible official Amendment. I have paid as much attention to the Liberal Yellow Book as anybody else, and, if this is the method by which it has been constructed, if this is the opinion which has animated those who have compiled it, my confidence in its pages is greatly shaken.

I am going to pursue this argument one step further. I have already said that the test by industries as to whether they are depressed or flourishing is not adequate, you must take account of the firms within those industries which may be depressed or flourishing. The resources of the Inland Revenue enable me to carry this probing one stage deeper. I am going to deal with trades in the depressed group. First, Iron, Steel and Engineering. We estimate that one-quarter of our rate relief will go to the firms which are making four-fifths of the profits in that trade and that three-quarters of the rate relief will go to the firms which are only making one-fifth of the profits, or actual losses. In Shipbuilding, 7 per cent. of our rate relief goes to those firms that are making three-quarters of the profits and 93 per cent. of the relief goes to those who are making only one-quarter of the profits, or making actual losses. In Metals, under one-half of the relief goes to those making nine-tenths of the profits and the other half of the relief goes to those who are only making one-tenth of the profits, or actual losses. In Cotton, one-fifth of the rate relief goes to those firms making seven-tenths of the profits, and four-fifths of the relief goes to those firms making three-tenths of the profits. In Wool, one-half of the rate relief goes to those firms making four-fifths of the profits, and the other half to those firms making one-fifth of the profits, or actual losses. In Bleaching and Dyeing, 56 per cent. of the relief goes to those firms making 85 per cent. of the profits, and 44 per cent. of the relief goes to those making 15 per cent.. of the profits, or actual losses.

When you pursue the distribution of this relief below industries and into individual firms, it is certain that the overwhelming mass of the relief is going to those who need it most. Not only are the less flourishing or depressed industries helped four or five times as much as the so-called flourishing trades, but the depressed firms in these industries are also helped in a multiplied degree compared to prosperous firms. Such are the facts deduced from a study of the Inland Revenue figures upon which the almost incredibly accurate forecasts are made from year to year by Chancellors of the Exchequer.

I have only one more observation to make; I leave the facts and come to the theory underlying the Liberal Amendment. Their facts are wrong. They have been completely demolished; not a single vestige or scrap of solid basis is left for them. They are the reverse of the truth. Even if their facts were accurate, it would be impossible in practice to apply them on account of the difficulties of machinery, and, if it were possible to apply them, the theory on which they rest is wholly fallacious. I ask, is it right to try and discriminate between prosperous and non-prosperous industries? It is quite true that we are giving £5,000,000 or £6,000,000 to industries which in the main do not fall in the category of depressed industries. Are we right in doing it? If this country is going to move with the times, if it is going to pay for its imports, provide employment for its people and provide revenue for the Exchequer it is absurd to develop a hostile attitude towards flourishing industries. The character of our industry is constantly changing. It is moving forward into the higher ranges of manufacture, and while we are seeking to relieve the main body which is lagging behind, and, particularly, the rearguard, it would be madness to hinder the advance guard of our in-industries, which is continually gaining valuable positions for the future.

I am sure the position which has been adopted by the Liberal party under the guidance of the right hon. Gentleman the Member for Carnarvon Boroughs is one which is entirely out of harmony with all their main doctrinal principles. The right hon. Gentleman has always been a man of expedients, never a man of theme and system. The great services which he rendered to the country were rendered by instinct and nimbleness in dealing with point after point as they arose, but they did not take the form of laving out a smooth and ordered scheme either in politics or in strategy. In this case, he has induced the Liberal party to take up a position which is absolutely subversive of the main economic creed of orthodox free trade. This attack upon prosperous industries because they are prosperous, this suggestion that they ought to continue to bear this invidious burden because they are doing well, is not merely unorthodox, but squalid in its character. This kind of argument which he uses, the attitude he adopts towards Mr. Courtauld, is exactly the same as that which the present Stalin Government in Russia are adopting towards the Kulaks or industrious peasants. This is their general attitude towards the mass of the peasants, and, incidentally, they have killed the son] of Russia and are now in a position where they can be made the target for political propaganda and abuse. I commend this ghastly error to the attention of Liberal doctrinaires. So far as His Majesty's Government are concerned, we repulse these crude and barbaric ideas. If any country harbours them it will cut itself off from all share in that general expansion of material comfort and enjoyment which scientific capitalistic civilisation, properly corrected by democratic institutions, has now to offer all over the world.

Sir JOHN SIMON

My friends and I feel vastly complimented that the Chancellor of the Exchequer, on the Second Beading of the Finance Bill, should have thought it necessary to depart from the usual custom of hearing what people had to say and then replying, that he should have dismissed the powerful speech of the right hon. Member for Colne Valley (Mr. Snowden) so cursorily, and that he should have devoted the whole of the rest of his time to the "ragged regiment "on these Liberal Benches. The right lion. Gentleman has many most remarkable Parliamentary qualities, and one of them, which those of us who sit opposite to him know very well, is that we understand when he is happy and when he is uncomfortable. In spite of his ingenuous ways, he has displayed to the House that to-day he is thoroughly uncomfortable. That being so, he has found it necessary to adopt what I believe is the quite unprecedented step of intervening before anything had been said in support of an Amendment, first of all to parody what it contained; secondly, to assert some things as in it which are not in it at all; thirdly, to give what he conceived to be an official answer to these criticisms; and, fourthly, to pronounce judgment that ,the whole thing was monstrous, crude, and barbaric.

We take it all in the most complete good temper as an exhibition of the right hon. Gentleman's most fascinating qualities. But at the same time it does not give very much satisfaction to a large number of people outside the House, and perhaps to some people who are entitled to be heard inside the House, who are proposing to respond to the right hon. Gentleman's appeal of six weeks ago, when he said that the one thing for which he was longing was really considerate co-operation and careful criticism. Humbly and briefly, I propose to offer a little now. I do not recognise the validity of verdicts and judgments passed and pronounced before anything has been heard in favour of the convict. In the first place, I put this question to the right hon. Gentleman: Do the Government really think that it is a small matter that their method of relief, whatever its merits may be, is a method which is not going to provide any relief at all for 18 months? I recall the language which the right hon. Gentleman used in his Budget speech. He painted a gloomy picture of collieries shut down, of factories on the verge of closing, of firms working at a loss, of depressed industries holding on by the skin of their teeth; and he has to-day actually had the Parliamentary audacity to say, "After all, 18 months is not very long to wait "That was the actual expression in his speech just now.

It reminds me of a delightful incident in the amusing story written by the late William Mallock, called "The New Paul and Virginia "Someone fell into water, and a philosopher, looking down on the struggling figure, insisted on conducting a long conversation on the nature of the soul and the probability of the individual's future state before he would condescend to offer a helping hand. Before he had finished his discourse the unfortunate victim was drowned. So, here is the right hon. Gentleman. He is perfectly satisfied with his scheme. He says in effect, "Here people are struggling from day to day to keep their heads above water. Their businesses are on the verge of closing down. Collieries have shut down and starvation is stalking through the depressed areas now. You ought to praise the Government because they can do nothing for 18 months."

The Government's system is this: They are taxing petrol to-day and every day at 4d a gallon. By their scheme for tax- ing petrol they estimate to produce in the next 12 months a sum of £14,000,000. There it will be. And then there is to be a General Election. Then, after the General Election, if all goes well with the Conservative party, the £14,000,000 will begin to be distributed. With great respect, I say it is not true, or I will take the right hon. Gentleman's own words and say that it is contrary to the fact for him to assert that in the present year he has no money for this purpose. The right hon. Gentleman imposes his 4d. a gallon on petrol, not in order to meet the burdens of this year, but in order that at the end of the year he may have that £14,000,000 to be carried to a rating relief suspension fund. There is no reason on earth why that £14,000,000, as it is accruing during this year, should not be made available now for the purpose that the right hon. Gentleman has in hand, if it were not that he has committed himself to a machinery and a method which require a great deal of time Co work out.

If hon. Members will look at the Finance Bill, they will find that the Chancellor of the Exchequer has been obliged to have recourse, in this respect, to an amazing, and as far as I know, a unique method. It is, I believe, a fundamental principle of our national finance that, if you have a surplus at the end of the year, that surplus should go towards the discharge of the National Debt. A surplus is a new experience for the Chancellor of the Exchequer. Hitherto, his financial arrangements have produced deficits, and when they have produced deficits, whatever they were they were added to the National Debt, quietly and unostentatiously. But this time the right hon. Gentleman is entitled to be congratulated because he has a surplus of £4,250,000, got by scraping butter out of the dog's mouth, after the Treasury had put it there—a most harrowing operation. Not only is the right hon. Gentleman proposing that that £4,250,000 shall not go to the discharge of debt, but he is, in Clause 19 of the Bill, asking us to enact that the surplus which is to be got out of the Petrol Duty next year shall also be kept in reserve instead of going to repayment of debt.

It means that the right hon. Gentleman is collecting this money now, every day; from the farmer with his Fordson tractor, from the commercial car, from the pleasure car, and from everybody else who uses petrol—he is collecting it all the time and he is resolved not to spend a penny of it until after the next General Election. That is the scheme which the right hon. Gentleman is so anxious to defend, that he will not let anyone get up to criticise it before he has his whack.

Mr. CHURCHILL

I really understood that it would be more convenient if I followed the right hon. Member for Colne Valley (Mr. Snowden), and the right hon. and learned Member who is now speaking then made his rejoinder.

Sir J. SIMON

I am not complaining, but I had no idea, when the right hon. Gentleman rose to reply to the right hon. Member for Colne Valley, that he proposed to take three-quarters of the time in making an attack on the Liberal party in regard to things which he had not even heard. That is the surprising thing. Let us see why it is. It is entirely because the Chancellor of the Exchequer has persuaded his colleagues, whether willingly or unwillingly I do not know, to adopt as a method of distribution the method that he is now struggling to defend. That is the sole reason. Let me at least make quite clear the position of myself and of my friends. We are not complaining because the right hon. Gentleman has adopted a principle recommended in the Liberal Yellow Book and in other places—the principle that the resources of the State funds, drawn from the general body of taxpayers, should to some extent be used for the purpose of relieving the heavy burden which is cast on localities. That appears to us to be a just principle, and it might have been applied before. What we do criticise is not the object that the right hon. Gentleman has in view but the method that he has chosen to employ. Let us see what it is.

The Chancellor of the Exchequer has continually spoken during the last half hour as though the criticism from these benches was that he has not been engaged in picking and choosing between individuals and firms and that he has not endeavoured to classify one person as deserving because he is depressed and another person as undeserving because he is prosperous. That is not the critic- ism at all, but I am not in the least surprised that the right lion. Gentleman did not seem to understand. That is not our fault. Our criticism is this: If you adopt a machinery by means of which you ultimately propose to find out how much to give to A, B, C and D, you are delaying the very urgent and necessary relief which ought not to go to individuals as such, but ought to go to specially depressed localities, and ought to assume the form of taking over some portion of the local burden of rates. There is no doubt as to what is proposed by the right hon. Gentleman. There is no use in misrepresenting the proposal which is suggested as an alternative to the proposals of the Chancellor of the Exchequer as one which would use public money in part for taking over as a national charge some portion of local charges and would use it in part for the purpose of giving relief to necessitous areas.

At this point I would put a question to the Chancellor of the Exchequer. I understand a necessitous area to be an area which, owing to special circumstances, such as the small amount produced by a penny rate, or the large number of children in the public elementary schools, or the small rateable value compared with the population, is on these grounds specially heavily hit in the matter of local rates. That is a well-understood conception. It is a conception which has been considered often by Parliament and by the Board of Education in connection with necessitous areas and the Education Grant. My question is this: For the first five years after the Chancellor's scheme comes into operation, is there going to be any more relief given to a necessitous area than the mere repayment of that portion of the rates which is excused to the productive industry within it? I should like to have an answer. I do not believe that the Government's scheme for the next five years is going to give any assistance at all to necessitous areas as such. For the first five years, as far as I can understand the scheme, it is to be confined strictly to doing this—to replacing in the hands of the local authority the sum of money which the local authority does not collect from certain ratepayers because those particular ratepayers are selected by the Government for this relief. It is obvious that if that is so, the necessitous area does not as a matter of fact get any special relief at all from the Government's scheme.

Mr. CHURCHILL

I did not attempt to deal with anything but the first part of the scheme, which is the relief of productive industry. The second part of the scheme is the reimbursement of the local authority. In the process of reimbursement of the local authority, a process of readjustment which will help necessitous areas will come into play. That subject will occupy the Autumn. For the present, we are dealing only with the scheme for relieving productive industry. The only relief, under this part of the scheme, which the local authority will get, is if industry should revive within its area in consequence of the reduction of the rate burden. It is the second part of the scheme which will deal with necessitous areas.

Sir J. SIMON

I am not asking the right hon. Gentleman to go further at the moment, but I shall be glad of an answer to my question. Do I understand that under the Government's scheme for the first five years from the beginning of the operation of the scheme, the necessitous area which is feeling this specially heavy burden of the rates is not to get any relief other than the relief which arises in that way, so that there is no special relief for necessitous areas? That view certainly was involved in the speech of the Minister of Health the other day. I come back to the actual point which the right hon. Gentleman was explaining. He has given us figures derived from most responsible sources to show that the relief which he is going to give to productive industry will go in part—and I ought, in candour to say, in the larger part—to the groups described by him as especially depressed, and that the smaller, but still a very substantial part, will go to more prosperous groups of trades. Be it so. It may be that the proportion between the one and the other will depend on where you draw the line, on the accuracy of your calculations, and, still more, I should have thought, on the working-out of the reassessment under the Act of 1925.

I do not know if other Members of the House have been struck by the fact, but it has struck me as most remarkable that neither in the speech of the Chancellor of the Exchequer opening the Budget, nor in the speech of the right hon. Gentleman the President of the Board of Trade who dealt with this point, nor in any other speech commending and explaining the Budget, has there been any reference to the Rating and Valuation Act, 1925. Let me point out what is going on now. Under that Act the whole of the land of this country is being revalued for rating purposes. An enormous sum of money is being spent on the process. In every single rating area experts are at work putting a proper value, under the existing rating law, upon every hereditament, rural and urban, in the whole country. It is a stupendous operation. They are valuing, for example, the whole of the agricultural land of the country, and there cannot be the least doubt that that Act was passed in order that rates might be paid on the values thus ascertained. It seems an extremely odd thing that the Government should come along three years later and say, "Oh, there will not be any rates on agricultural land." What is the purpose for which this enormous sum has been spent in valuing the agricultural land of the country? There is only one possible answer, but it is an answer which shows the absurd elaboration of the scheme which the Government have adopted.

At the time when the Rating and Valuation Act was passed, in 1925, the object was to get a proper valuation of each piece of agricultural land as between the occupier and the rating authority, in order that rates might be fixed. All that has now completely gone. No occupier of agricultural land, we are told, is to pay rates any more, six months after the next General Election—or whatever the period may be. The only purpose, therefore, for which this elaborate valuation is now needed is a purpose which was not the purpose at the time when the Act was passed. It is like burning down the house to roast the pig. It is for the purpose of calculating exactly how much the Treasury ought to pay to the local authorities, because the local authorities do not get agricultural rates. If anybody in 1925 had said that that was the purpose for which we were setting up this enormous machine, that that was the purpose for which every local authority is now paying fees to expert valuers, nobody would have believed it possible that such a scheme would be carried. Much more than that, it is part of the Govern- ment scheme to-day that there is to be a watchdog of the Treasury, who is going to supervise this valuation. But in 1925 a Committee of this House entirely refused to allow the Surveyor of Taxes to have anything to do with it, and the consequence is that these valuations are being made in the absence of the Treasury —though we are told the Government scheme is one which will require Treasury supervision. That is the position as regards agricultural land.

Look at the position as regards urban hereditaments. I do not pretend to speak with great authority on this subject, but I have had something to do with it for a good many years in my professional life. The truth of the matter is that outside London before 1925 there were vast numbers of factories and shops and other premises which stood in the valuation rolls at the old figure. That figure had never been altered, although if proper steps had been taken it might have required substantial alteration. Then the slump came over trade, and the hypothetical tenant—the imaginary tenant who is seeking to become the occupier of these premises—if carrying on a trade which is suffering from prolonged depression would never pay the rent which has been used as the measure of the assessment in the books. The consequence is that all over the country assessments have been standing which call for alteration. I wonder how many of those assessments have been relied on in the figures which the Chancellor of the Exchequer gave us just now, when he endeavoured to show how his relief would be distributed between the depressed and the prosperous trades. He says he made an adjustment. It must be at most only a guess. What is happening now is that this list of valuations is being rapidly revised. In many cases the valuations are rapidly coming down. On the Clyde, in South Wales, in Middlesbrough, there are many large reductions of rateable value. Very often values are reduced down to one-third. It is a perfectly sound point, therefore, to say that if you have two hereditaments, one of which is occupied and is making a large profit, and the other of which is occupied and is making a lass, then the assessment of the one that is making the loss, is or ought to be very greatly reduced as compared with the one which is making the profit.

The right hon. Gentleman says, "If you imagine an area in which the premises are making a loss, though the assessment is low the poundage will be high "But it will not be so in all cases. There are many cases where that is not true, and in every case where that is not true, it is correct to say that you will be giving a much larger measure of relief to the prosperous than to the unprosperous enterprise. The right hon. Gentleman in his concluding passage attempted to defend this—I do not know whether jocularly or seriously—by saying that, after all, people ought not to be attacked because they are prosperous. Of course not, but neither should people because they are prosperous be given a subsidy. This is exactly the same mistake as that which was made with the coal subsidy in 1925. I do not accuse the Government of doing it with malice, but they set to work on a formula which necessarily has the result of giving to the person who is prosperous—1 do not care whether to many or to few—as an individual, a larger measure of relief than you would give to a similar individual if he were suffering. I believe that whole system to be fundamentally vicious and wrong, and I find it difficult to believe that the Chancellor of the Exchequer has had this matter thoroughly "out" with all his colleagues, and has considered the alternatives. If you want to use, as I think you ought to use, public money for the purpose of relieving the burden of local rates, there is no need whatever to use it by the method of conferring favours upon individuals. It can be done perfectly well by selecting such portions of the local rates as are most suitable for the purpose, such portions as you can shoulder, and shouldering them now.

At the end of this year, the right hon. Gentleman will have this £14,000,000. By his Finance Bill he is preventing that sum going to the repayment of debt. He could perfectly well, in this present fiscal year, take over £14,000,000 worth of local burdens and meet it by that £14,000,000 which he has gained from petrol. The reason why he will not do so is than he has got himself enthusiastically in favour of a method, as he thinks, of coming to the relief of what are really selected individuals, under the general head that they belong to depressed industries. Not every member of a depressed industry is depressed, and not every area in which there is a depressed industry is an area with a high rate. The whole idea that this is to be done by selecting individuals for your favour appears to be utterly contrary to sound principles of finance and just principles of government. Therefore, I will trouble the Chancellor of the Exchequer when next he is good enough to speak about the Liberal party's observations on. this subject to take note that the suggestion, which is made not by Liberals alone, is first, that this relief should be given sooner, and that people ought not to have to wait for 18 months; and second, that in order to give the relief sooner, you should scrap this extremely elaborate and quite unnecessary scheme. Instead, you should give relief more promptly, not by giving relief to individuals, but by selecting those local burdens which the State itself can shoulder, by defining necessitous areas and by giving them, as necessitous areas, the relief which every ratepayer in them, whether shopkeeper or co-operative society, or manufacturer, is justly entitled to expect.

Mr. E. C. GRENFELL

I am sure the whole House welcomes the reappearance in his place of the Chancellor of the Exchequer, and I think it is quite evident that, if the Opposition expected to find the right hon. Gentleman showing any signs of weakness, they have been very much disappointed. At the same time I feel it my duty, speaking purely from a financial standpoint, to mention one or two points in which I think the right hon. Gentleman has departed from what I believe to be good economic lines. In not using the old Sinking Fund for the purposes of debt reduction I think he is committing an error of political tactics as well as an error in finance. I was reading the other day a volume by Sir Bernard Mallet, the eminent economist, dealing with the pre-War Budgets, and therein one saw how the estimates of the Treasury worked out very closely year by year in those times. Of course, it was easier in those years to make accurate estimates, because, apart from the Boer War and certain labour troubles, there was nothing so eventful as to disturb the Estimates of the Treasury. No blame attaches to the Treasury or to the Chancellor of to-day if their Estimates are less accurate than the Estimates of pre-War times; but since those Estimates are to form the basis of a new Budget it is surely quite clear that if they work out inaccurately there may be a large balance on the one side or the other, and the Chancellor of the Exchequer ought not to take the balance when he wins, and, when he loses, leave it to be paid by posterity.

In the statement of the Financial Secretary for this year we find the most extraordinary divergencies between the Estimates and the results. It is not a matter of millions but of tens of millions. Receipts are over-estimated by £12,500,000 —£7,000,000 in the case of Customs, and £5,500,000 in the case of Super-tax. On the other side, the receipts are underestimated by £20,500,000, to which Death Duties contribute £10,000,000, and altogether the figures show a total variation of something like £33,000,000, with a balance in favour of the Chancellor of £8,000,000. In addition, on page 2 of the Financial Secretary's statement under expenditure, we find that the interest on debt exceeds the Estimate by £8,000,000, while Civil Votes are down by £8,000,000, a total variation of £16,000,000. It is true that the figures in this case work out level, but that is only due to the fact that the Civil Vote saving has been used to meet the increase of interest on debt. If we add these variations together we find that in the year there has been a total variation of no less than £50,000,000 of results from estimates.

I agree that it is much more difficult to estimate to-day than it was before. We have the difficulties of estimating the Corporation Profits Tax, we have the miscellaneous earnings and payments, of which we cannot judge a year beforehand, and owing to bad times Super-tax is in arrear often by £20,000,000. It makes it impossible to estimate closely, and surely it is all the more necessary that the Sinking Fund should be used for debt when the old Sinking Fund provides a surplus. If the £8,000,000 or 10,000,000 which the Chancellor of the Exchequer was fortunate enough to have this year had been on the other side, our new Sinking Fund of £65,000,000 would not have provided for the Sinking Fund allocated to the different loans plus the Savings Certificates;we, therefore, would have had to provide for both of those, and to make fresh borrowings in order to pay them. I think the Chancellor has committed an error in having used his comparatively small surplus, not for the purpose for which it was intended, but for future purposes.

In drawing your attention to the £10,000,000 by which this year the Death Duties exceeded expectations, we find an argument often used in this House, namely, that Death Duties are capital and should be used as a separate fund to pay off debt. I do not hold with that view, and the Colwyn Report distinctly disagreed with it, but that has been because in the past the Treasury were able to estimate approximately accurately, as they thought, the results of the Death Duties. The moment., however, that the Death Duties exceed expectations by £10,000,000 in one year, it makes us pause, but it does not in the least follow that with the excess of £10,000,000 of Death Duties above the Estimates, the Chancellor should do anything but use his fortuitous surplus for paying off debt.

There is another thing that I would like to ask, and that is, Who are these people whose estates are now providing large sums for Death Duties? Is it not a fact that the millionaires or the rich people who are now passing away are probably the great leaders of industry who in the last 30 years of the last century were making large fortunes and who made them in the great staple, heavy industries of the country? The last century was the time when Great Britain was predominant in the heavy industries of iron, steel, coal, and shipbuilding, and those four industries are exactly the industries which are most depressed to-day. I doubt very much if the Chancellor of the Exchequer is getting any large sum of Income Tax from those particular industries, and I doubt very much if he is getting any, or at any rate more than very little, Super-tax from people in those industries to-day. What he is getting, if he is getting anything from those industries in Super-tax to-day, is from the big men who have retired from those industries and invested their money elsewhere.

One of the cries frequently heard in this House and elsewhere is that the cure for all evils is amalgamation. I quite agree that in certain industries—in the distributive industries, in the co-operative societies, in multiple shops—drapery or grocery—large organisations and amalgamation are highly helpful in reducing expenses and in systematising industry, but in anything so technical as the different branches of the heavy trades there is more danger in amalgamation than there is in their remaining separate institutions. It was during and shortly after the War that the heavy industries began to think it necessary for their salvation to secure for themselves a supply of the raw material of their trade and the iron, coal, and steel industries began to buy up each other, and in the period of inflation perhaps bought unwisely, at large prices, with the results that we see to-day; but what really happens in these large amalgamations is that it almost passes the wit of man to show sufficient power of brain and sufficient hours of the day in which he can attend to the diversified interests. The self-made iron man, the self-made man in the steel trade, knew their job, but the moment they began to amalgamate with other trades, the task was too big for them.

Some 20 years ago an eminent physician made the unfortunate remark of "Too old at 40," indicating that in his profession the man was pretty well done with, or at any rate not at his best, at 40. He admitted that he had made an exaggeration, but it is no exaggeration to-day to say that scarcely anyone, except by some special family influence, ever becomes the head of a great industrial concern at 40 and rarely at 50. The only cure that I can see for the heavy industries is some complete reorganisation from within. It is no good marrying two incompetent concerns or two concerns which have not a competent man to manage them. The one concern may not be too big for a man, but the two jobs may be too big. I was looking at a list of 10 men who controlled 10 of the biggest industrial concerns in the heavy trades. The concerns are a household word in England, and out of those 10 concerns seven are not prosperous, to say the least, providing, I believe, little or no Income Tax for the Chancellor of the Exchequer. When I looked through the names of the distinguished men—and they were distinguished men—who were in control of those concerns, I found that their ages varied downward from 90. In the 10 concerns the united ages of the gentlemen who were conducting them came to 760 years. In every case those men had deserved well of their country, but an average age of 76 for the head of a great concern is, I think we will all agree, a bit on the high side.

Where I think we have failed in this country has been that the great industrialists who have had connection with these concerns and who may have built them up themselves have not realised the merits of leisure, they have not realised the duty of seeking younger colleagues, and if a man has conducted a great concern for 30 or 40 years and is still efficient at 80, then I can assure the House that the efficiency of that concern with a man of 80 really controlling it, still the boss of it, will cease. He will have a very bad effect on the future of that company. It is the man who beyond a certain age seeks leisure, seeks to develop younger men, who is willing to let the younger men make mistakes, who is the really big man, who is watching and looking ahead and making for the prosperity of his concern after he has gone.

I have said that I doubt the general advisability of amalgamation, but in a particular trade, where the problem is a fairly simple one and one with which one man can cope, it has many merits. The heavy trades are suffering largely from high rates and still more largely, in the coal and steel industries, from heavy railway rates. Both of those are harmful to the industry, but decrepitude at the top in the management is more responsible for real harm to the industry than anything else. What has the Chancellor of the Exchequer to do with this matter? What can the Chancellor do to help in this situation? In his Rating Bill, which is going to be explained more fully tomorrow, we shall see a genuine attempt to help the heavy industries, not because he wishes to favour any one industry more than another, but because the old prosperity of England was based on that industry in the last century. The managers of those amalgamated concerns may have been inefficient, but I feel sure that with the assistance of the Rating Bill and a spirit of encouragement on the part of the chief managers towards the younger men, there is still a great future for those heavy industries here.

There is one other way in which the Chancellor of the Exchequer can help these industries. The incidence of the Income Tax when it was 2d., as in Sir Stafford Northcote's time, or even when it was ed., did not much matter to any trading concern, but to-day, with a 4s. Income Tax, it very much matters to a trading concern. You might well say that if a company does not make any profits, it, does not pay any Income Tax. The real point, however, at which the Income Tax hits all trading companies, but especially the heavy companies, is this, that unless sufficient provision can be made each year out of the earnings for depreciation, whether of minerals, of machinery, or of buildings, unless the company is prepared to knock down a building even if it has been up for only a year, and to scrap machinery that is apparently new, but not of the right sort, if there are very strict valuations before it is settled what is taxable in that company, then you are to a certain degree crippling the heavy industry. I would urge that greater latitude should be given to companies in declaring what they should put to reserve before stating what are profits. Thus the younger people may be encouraged, not only to study foreign methods, if they are better, but when they come back to find a large reserve fund which they may use to copy foreign methods, to scrap old machinery which the older people would not dare do, partly because they have an affection for their own plant and machinery and also partly because the Income Tax hits the companies and does not permit sufficient provision to be made.

6.0 p.m.

To turn to the Finance Act, hon. Members will recall Section 31 of the Finance Act of last year, in which it was sought to extend the very proper provision for preventing the evasion of the Super-tax. The Chancellor fully recognised that, there might be hard cases, but he promised, as his predecessor had promised, that no unfair advantage would be taken by this Section of private companies which are honestly doing their best, it is true to accumulate profits, but also to put sums to reserve for fresh developments. Since last year, several committees have endeavoured to find a working arrangement to meet both sides of this case. I understand that the Chancellor has not been able as yet to embody in the Finance Bill any Clause modifying Section 31. I hope that he will be able on the Committee stage to devise some such scheme. It was, in our opinion, not entirely reasonable that the Inland Revenue should declare what profits were reasonable, unless they were prepared to declare what profits were reasonable. There is a desire on the part of small private companies to avoid pains and penalties, which not only would be disagreeable from a money point of view, but might apparently reflect on their honour. It was suggested by one of these Committees last year that it would be better that a company should inform the Inland Revenue what profits they proposed to declare and ask whether the authorities approved of it; if they did, the company should be free from any penalties. I hope the Chancellor will see his way during the Committee stage to advise us that he has been able to meet us on that point.

One or two other points in the Bill require elucidation. The Chancellor promised that the Income Tax should be so simplified as almost to suit a child, and at a later period he told us that it should be so complicated that no one in the House would be able to understand it. I find, in reading the Bill through, that it is a great deal clearer than one had hoped, but there are one or two points which, I hope, the right hon. Gentleman will explain to us. Those who do not understand drafting have interpreted one of the Income Tax Clauses as imposing, not only the standard rate of 4s., but further rates running from 4s. 9d. up to 10s. I know that it is not the intention of the Chancellor to bring Income Tax or Surtax up to that amount, but it has been so read, and I think the substitution of the word "but "for" and" in that Clause would obviate any doubt. Another point on which we should like the Chancellor's view as to the meaning of the Bill, is whether it was his intention that the Super-tax should be, so to speak, superseded by the Surtax; if so, the point arises as to the incidence of the tax in the case of a person dying in, say, April, 1928, who would be free from all Super-tax, whereas if the person were to die in April, 1929, he would be liable for the full Surtax. If the Super-tax and the Surtax were, as is frequently stated, only an extended Income Tax, it seems that both the Super-tax and the Surtax ought to be treated in the same way for persons dying in 1928 or 1929. Previously, in partnerships, the partners were liable for the Income Tax of the partnership, but not for the Super-tax. I should be glad if the Chancellor would state whether for the future that applies to the Surtax as well as the Income Tax, making the partnership liable for both.

Colonel WEDGWOOD

I ought to apologise to the Chancellor of the Exchequer. I imagined that he had changed his views with his party, but I can see now that that was quite wrong. I was led away by extracts from his former speeches, on the question of the taxation of land values, to imagine for one fond moment that, when he was in the Liberal Government of 1909 he understood the question, he had grasped the mere elements, and he had arrived at the fact that land values were the creation of the community, and not of the owner of the land. So much we all grasp, but he never saw that the landlord is as big a burden upon industry, and that he can be as ruinous to depressed industries, as the rates which the Chancellor is now talking of removing. If he had arrived at the fact that land values are the creation of the community, he has now gone further, and observed, with the rest of the Conservative party, that rates are a burden upon industry, and acid to the cost of production, reduce output and increase unemployment. He accepts all that, but he cannot see the further stage, that the less the demands of the landlord, the greater the benefits to the producing industries. What we are suggesting in this Amendment is that the right hon. Gentleman should see a little clearer, and understand finance a little bit better. We realise that in the past he has slipped lip on occasions. The premature restoration of the gold standard, and the infliction upon the heavy industries of this country of a tax, which is not called a tax, namely, the contributions to the widows' and the orphans' pensions, are little mistakes which he has made in the past. He now sees that he was wrong.

I ask him to observe this. If he is going to relieve industry of rates, and pay for that relief by burdening industry with a tax on petrol of an equivalent amount, the products of industry will not be any cheaper as a result of that change. If he puts on a tax equal in amount to the amount of rates of which he relieves industry, and if that tax is levied upon industry, the ultimate results to industry will be to leave the product of industry exactly where it was before. He says, however, "I am discriminating between industries; it is true that the consumer will pay the same, but it will be the distributing industries which will pay the additional tax, and the productive industries which will get the benefit of the reduction in rates." It makes no difference to the consumer, I think he will admit, but, in the long run, does that make very much difference to the producing industries either? He told us that it was an irrefutable law that, in the long run, the reduction of rates would result in cheaper prices to the consumer, and that the consumer would get the benefit of any reduction in rates. He appealed to our deep-seated preference—prejudice, if you like—in favour of Free Trade. We know that where there is free competition, and only where there is free competition, if you reduce the burden of the rates, the consumer will get the benefit. In that case, the reduction of the rates to the depressed industries would only benefit those industries if the product of their industry were cheaper, and more people would be able to buy their goods, but if the ultimate product were not cheaper, there would be no benefit to those industries at all.

We ask the right hon. Gentleman in this Amendment to grasp in its entirety the Free Trade position that any cheapening of production means a benefit to the consumer, and not to meet the cost of the reduction of the rates by a tax on other industries in the shape of the petrol which they use, but to meet it by a tax upon land values, which he admits, not only from his speeches of old days, but from his silence to-day, to be the creation, not of the individual landowner, but of the community as a whole. We ask him to meet this reduction of rates, which we all want to see, by putting a tax upon land values, which shall be a just tax. Further, by putting a tax upon land values, it will not merely benefit industry by relieving them of the burden of rates upon improvements, but will actually make all land cheaper, and put the landlord in a worse position for demanding excessive rents. We want to get the double event—not merely the reduction of the burden of the rates upon improvements, but also a tax upon land values, and do it in such a way that the land will fall in value, and that the tax levied by landlords upon industry will be reduced, just as the rates are reduced by this scheme. The House always takes everything that we on the Labour side say as being mere party prejudice, and not based upon economic authority. Let me give the decision of the Committee on the Scottish Land Values Bill, It is a long time ago, but economic principles remain the same, however much people may change. The Committee said: It is well to select a standard of rating which will not have the effect of placing the burden upon industry. That was said 20 years ago, and the Government are accepting it now. Hence the proposal to exclude from the standard the value of buildings, of erections of all kinds, and fixed machinery. This is a recommendation of a Committee of this House 20 years ago, and it has now been adopted. To include these in the rating tends to discourage industry and enterprise; to exclude them has the opposite effect. So far the Conservative Government of to-day are with the Liberal Parliament of 1906. Cannot they go further, and cannot the right hon. Gentleman recover this other small element of his old Liberalism? The Committee went on to say: The justification for the adoption of the new standard of rating is that the land owes the creation and the maintenance of its value to the presence, enterprise and expenditure of the surrounding community. Finally, may I quote the authority of Sir Laurence Gomme, formerly Clerk to the London County Council? He said: Local taxation is a legitimate burden upon site values imposed in return for benefits received. What we ask is that the Government, in making this change, should not adopt this miserable, halting, half-way house which the Chancellor of the Exchequer dignifies by the name of a great constructive scheme—a great constructive scheme which anyone who has studied the question knows can never be put into operation—this scheme of helping some industries when the percentage of unemployment in their trades is greater than in other trades, or when the ratio of local rates to profits falls below or above a certain percentage—an utterly impracticable scheme which—

Mr. OLIVER STANLEY

Who suggested it?

Colonel WEDGWOOD

—a scheme drawn up in the privacy of the study, wholly unrelated to practical methods and of the practical facts of our present rating system, based upon a half-baked idea that you can benefit industry by relieving one class of production from rates in order to impose an exactly equivalent burden upon other branches of production. The Chancellor of the Exchequer ought to scrap this idea, which gives no satisfaction to those trades where there is keen competition, because there the benefits must pass on to the consumer, but which does give considerable satisfaction to monopolies, which will profit by the reduction in their rates and not pass the benefit on to the consumer. The scheme holds out no prospects of additional employment or of reduction in the costs of production, and ultimately it will inevitably be scrapped, in order that this country may adopt those principles of local taxation which have been adopted in every one of our self-governing Dominions.

Here we are, going on century after century, following a system of local taxation which was invented in the days of Queen Elizabeth. No one has ridiculed it more than the Chancellor of the Exchequer. Now he has got from the time of Queen Elizabeth down to the time of Charles II. Let him come and join us, in the 20th century, and see what they are doing in the rest of the Empire towards getting a system of local taxation which will not throw a burden upon industry. [Interruption.] In Charles II's time, hon. Members may recollect, the feudal landlords of this country managed to pass on to the other taxpayers all the remaining burdens upon their feudal lands. In this Budget, at the same moment that he is making such an admirable shop-window effort to advertise the advantages of relieving the rates upon industry, the Chancellor is actually removing £4,500,000 of rates levied upon agricultural land. He knows quite well that that relief will not be passed on to the consumer and cannot be passed on to the consumer, but that it goes straight into the pockets of the landlord. He knows also that it is not a sum of £4,500,000 only, but that the mere passing of this great Finance Bill, this wonderful constructive Measure of which we hear so much, will give the landlords, in the increased value of their land, £90,000,000 cash down. [Laughter.] Hon. Members laugh. I have the advantage of being a landowner, as I dare say a great many other Members have. You know what rates you pay on your agricultural land now—I do—and I know that in future when I come to sell my land I shall sell it free from agricultural rates, and I shall expect, and get, from the purchaser the capitalised value of the rate which is removed.

Mr. MACQUISTEN

May I ask the right hon. and gallant Gentleman when he is going to sell it?

Colonel WEDGWOOD

As soon as you will buy it. I am looking for a purchaser, and if the hon. and learned Member for Argyllshire (Mr. Macquisten) wants to put an honest penny into British agriculture, now is his chance.

Mr. MACQUISTEN

You want cash down, you said.

Colonel WEDGWOOD

I want more from the hon. and learned Member now than I should have wanted two months ago. I am going to get my "snap" out of this Budget. [HON. MEMBERS: "Then vote for it."] Oh, that is not the principle on which we on these benches vote. On these benches we are trying to look after the interests of the community, against our own personal interests. The right hon. Gentleman, animated by those magnificent principles which were imported into the 1909 Budget, which he did not understand then, because the taxes were not taxes upon land values, and which he does not understand now, because he could not reply to the speech of the ex-Chancellor of the Exchequer, and turned upon the unfortunate Liberals, but which he may come to understand in the dim future—[Interruption.] After the speech of the right hon. Member for Spen Valley (Sir J. Simon) I have not much hope for the Liberal party. But the right hon. Gentleman has introduced into this Budget the thin end of the wedge. He has by this Budget removed the burden of rates upon productive industries, or at least three-quarters of the rates. Last year, or the year before, his tutor the Minister of Health removed the burden of the rates from machinery. He goes one better. He removes the burden from the factory as well, and from the mine as well, though he does this a little too late for some of our industries, because in the 18 months they have to wait they will go under.

When is he going to carry this system further and remove rates also from the distributing industries and from the houses of the people, as well as from the factories in which they work? How much longer are we to wait before he carries to a logical conclusion the principles which the Conservative party are driven to accept, and removes the rates from a man's work and levies them instead upon that land value which is the creation of the community and which is the just basis of taxation? That system will not merely be just, but it will send down the value of land and enable people to get land to use on cheaper terms than at the present time. Let him carry out that principle. Let him examine what they have done in the Dominions. Let him read, mark and learn what has led to the prosperity of Sydney. In Canada, in Vancouver and elsewhere you find, perhaps not an extreme single tax position, but that they are going steadily on with this definite process of relieving industries and houses and the other results of the labour of man from taxation, in order to impose it upon those values which are the creation of the community. Although by this Budget the right hon. Gentleman cannot carry these principles through, because at the moment he is tied by the party behind him, yet he has opened the floodgates, he has allowed this subject to be discussed, and we can be very certain that before these Debates are over this House will have realised that there is an alternative method to this burdening of industry in this country, whether by rates or by a tax upon petrol.

Lord HUGH CECIL

I have listened to this Debate with a great deal of interest. In common, I think, with every other speaker who has addressed the House, the impression that is most vivid upon my mind is that nobody except myself understands economics. Certainly I do not think the right hon. Member for Colne Valley (Mr. Snowden) or the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) has any grasp of the principles that underlie value. I do not think they know what value is, or what causes it; at any rate, if they do, it is strange that they should arrive at the conclusions at which they seem to come. All the speakers who have attacked the Budget have confused or mixed up a somewhat indefinite charge of injustice, which has not been fully worked out, with a much more relevant charge of inexpediency. If we are to deal with the matter at all, clearly it is necessary to separate those two things. It is necessary to recognise that what the Chancellor of the Exchequer is proposing to do is to help industry as a matter of public expediency. I do not mean to say that he is indifferent to considerations of justice, or would not be prepared to give due weight to any considerations relative to justice, but what he has in view is to aid industry by an adjustment of taxation. Prima facie, at any rate, the scheme ought to be judged by investigating how far it will, in fact, aid industry. To that discussion the right hon. Member for Spen Valley (Sir J. Simon) contributed by putting forward an alternative scheme. He complained with great acerbity of the speech of the Chancellor of the Exchequer, alleging that the Chancellor of the Exchequer had not recognised that what the Liberal party proposed to do by their Amendment was to relieve areas instead of relieving industries, but he omitted to show that by contributing to the relief of local rates in a particular area he would necessarily help the distressed industries within that area. It might quite well happen that it would not do so. For instance, a local authority might take the opportunity of carrying out improvements which they had long desired to make and which could be made only at the expense of the rates, and so raise the rates in proportion to the assistance given from the central fund. The only remedy for that would be to introduce some method of control over rating areas, and that involves very difficult questions, and a great deal of odium and a great deal of friction. I do not say that such a scheme might not be worked out, but it is quite clear that you do not necessarily relieve industry by relieving distressed areas.

The right hon. Member for Colne Valley and the right hon. and gallant Member for Newcastle-under-Lyme both dwelt mainly on this strange theory that the site value of land is the creation of the community in a sense different from anything else. That is sheer economic nonsense, and there is no truth in it whatever. It is a mere confusion of thought, because all values are created in the same way. They are all created by the demand operating on supply. I know the Chancellor of the Exchequer does not realise that, but it is so. The only articles which have no value are those articles which nobody wants and of which there is an indefinite, inexhaustible, and abundant supply. Those articles have no value. The air we breathe, necessary as it is, has no value because there is an inexhaustible amount of it.

Mr. HARNEY

There is a fixed supply of land.

Lord H. CECIL

Yes, there is a limited supply of land, and everything of which there is a limited supply has value. It does not matter what article it is. The fact remains that if you can increase the supply of that article to an inexhaustible extent, then it has no value. In the case of site values, the value does not refer to anything else. It is something which is limited in amount, and, therefore, it has a value clue to the pressure of demand. All restrictions of output, for example, increase the value of the article produced in the same way as site values. If there is less supply, then the demand presses on the output and on the market, and up goes the price.

Mr. MONTAGUE

If the argument of the Noble Lord is right, will he tell me what causes an increase in value when supply and demand are equal?

Lord H. CECIL

Equality is achieved at a certain figure. The greater the demand, the higher is the figure, and the greater the supply the lower is the figure. They always come to an equilibrium, and that depends upon the pressure of demand and supply. It does not matter how many cases you take, because they are all the same. Take the variations in the value of coal. Those variations are governed by the law of supply and demand. The value of coal went up enormously during the War, and in many cases we were able to make a large profit on our export trade. There was a heavy demand for coal abroad; this pressed upon us, we were able to charge higher prices, and the value of our coal rose very much in consequence. It is just the same in regard to eminent lawyers. If all barristers possessed the same persuasive powers of reasoning as the right hon. Gentleman the Member for Spen Valley there would be no demand for them. That is the case with every other form of exertion, and, unless there is a demand for that exertion, it has no value. Really, value does not inhere in an article or in a person but in the human mind. Once you demand something, you get it at the figure fixed by the supply. It is the demand for an article which has a limited supply that makes its value. Therefore, the whole theory on which the right hon. Gentleman the Member for Colne Valley and the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme have proceeded is nonsense, and there is no distinction between the site value of land and the value of any other article whatever.

Colonel WEDGWOOD

But we must use the land, and we can do without other articles.

Lord H. CECIL

You cannot do without anything if you decide to satisfy your demand. You can always do without a thing by giving up your demand for it. You can even, live on land that has no value, and you need not buy land which has risen greatly in value. You may be obliged to do so in the modified sense that you want to live there, and that is the source of the demand. I may desire to have a bottle of champagne, and the demand for champagne may increase its value, but really it is the limited supply of champagne in a given year that produces its value. Of course, if people give up the drinking of champagne, that would reduce the demand for it, and the same principle applies to the value of land. The right hon. Gentleman the Member for Colne Valley said a very surprising thing when he stated that every increase of population and every increase in transport facilities caused the value of land to go up. What happened to agricultural land 50 years ago as the result of greatly improved transport was to bring cheaper corn to this country from the ends of the earth which competed with our home produce, and enormously reduced its value. As a matter of fact, the owners of agricultural land are very much poorer to-day than their ancestors were 50 years ago.

My impression of the Debate is that the efforts of the Chancellor of the Exchequer have been reasonably directed to relieving industry, although I think he was hazardous in saying that the relief of rates always goes to the consumer. I believe Lord Goschen once said that it was quite impossible to say where the relief of rates ultimately went, because the effect was so indirect. I think the Chancellor of the Exchequer is justified in saying that, when you are dealing with industry threatened with great depression by giving them assistance, you do help to restore those industries in a quicker way, and you strengthen the prosperity of the whole country. Whether you benefit the consumer by that process depends on the demand of the community for that particular article, and, if any distinction is to be drawn in these matters, then I am opposed to that method. I think you should try and favour those who aid industry by increasing the abundance or the cheapness of supply rather than those people who try to enrich themselves by enhancing the demand, and become richer without any addition to the total wealth of the community. Anybody who becomes rapidly rich does so either by taking advantage of the urgent demand for a certain article, which causes a rapid rise in price, or by means of some invention which increases and cheapens supply, and so creates a greater quantity of cheap goods which benefit the community. If you make yourself rich by restricting output or increasing the demand, you are doing the community no good at all. On the other hand, if you make yourself rich by cheapening and making a more abundant supply, you are benefiting the community. If any way can be devised of distinguishing between those two things there would be something to be said for it.

Take literature as an example. The Sunday newspapers are often criticised, and some of them stimulate a demand of a very unhealthy character for all sorts of criminal stories about crime, vice, and the like. According to the theory of hon. Members who have spoken from the Opposition side, they would make no distinction between those who have made exertions of the kind I have just alluded to, and the landlord who sells his land at a higher price which he has done nothing to enhance. You must consider whether the exertions of a person have been ethically estimable, and the Sunday newspaper proprietor who has pandered to the vices and the morbid inclinations of the public does not deserve anything, however hardly he has worked. Those who are connected with greyhound racing and bookmakers are undeserving people according to a certain moral standard. Therefore, you must distinguish between the people who deserve to be assisted, and those who do not deserve assistance. It has been said that the community help to increase the value of land and property by their town improvements, by lighting, by providing a water supply and streets. It is also claimed that the community help in the administration of justice and the maintenance of contracts. Obviously all that the community does in this respect operates on value by making the demand effective and making the relations of supply and demand profitable. Great exertions were required during the War, and there was a great demand for labour from which labour benefited. It is quite true in a sense that all those engaged in the City depend to a certain extent upon the community because communications have to be maintained and you have to ensure the necessities of life.

However the matter is viewed therefore, the attempt to distinguish one sort of wealth for taxation is unsound. It rests on a confusion of thought which is, I am afraid, rendered acceptable to many Liberal and Labour minds by a sort of traditional spite against landowners. I am against founding our fiscal system on stupidity stimulated by spite. My hon. Friend the Member for the City of London (Mr. E. C. Grenfell) spoke of the advantages of amalgamation, and it occurred to me, while he was speaking, that amalgamation could be made to relate to these principles of demand and supply which we have been considering. An amalgamation which has the effect of cheapening supplies, an amalgamation which, by economy in means of production, enables supplies to be more cheaply furnished, and which, therefore, aids industry, is a good thing; but an amalgamation which tends to what is called control of the market, that is to say, which holds up the output in order to allow the demand to drive up the price, is a bad thing.

A good many of the amalgamations that have taken place since the War certainly seem to me, as a member of the public, to have been rather for the purpose of aiding industry merely by raising the prices, and not by giving the same stimulating exertion which existed in former times to make the industry efficient; and, therefore, they seem to have done a harm to industry rather than good. They have not really operated by cheapening supplies so much as by raising prices whenever it has been possible to control the market. There are many who suggest that something of the same kind should be done in respect of coal, but let us be under no misapprehension in that regard. Amalgamation in respect of coal tending to secure economy of output would be a good thing, but, if it is going to work by raising the price of coal, by restricting the supply of coal in face of the demand and so driving up the price, it will be a mischievous thing.

I can propound a better principle than that of taxing site values, namely, to tax always in proportion to wealth. It is quite proper that the wealthy owner of site values should pay taxes, not because they are site values, but because he is rich and able to pay; and the thing to seek with respect to local taxation is some method of making the whole wealth of the particular area available for taxation, and not merely the real property which is now taxed. I know that it is a difficult thing to do, but it is the real solution, because, really, the only thing that is expedient or equitable is to tax wealth, and especially that wealth which is readily available without being withdrawn from any industrial employment or from any useful employment such as the education of children and the like.

The true principle is that we should always aim at abundance of wealth, that we should encourage by all possible means the increase of supplies. And let it be remembered—and this, perhaps, is a concession to hon. Members on the Labour benches—that it is one of the qualities, and, perhaps, one of the defects, of the capitalist system, that, if you are going to do good to industry under a capitalist system, you must begin with the capitalist. The capitalist is the heart, as it were, through which the circulation of wealth operates; it comes in to him and goes out from him, and, if you are going to help industry, that is the point to which you must address yourself. Anything more foolish than the modified Socialism with which the Labour party is now more and more associated I cannot understand. I understand, though I do not in the least agree with, those who say, "Let us have a complete change; let us have collective ownership in some form or other of all means of production." I do not believe that that would work, but I understand the attractiveness of the proposition. To go on, however, with private ownership and the capitalist system and yet always be jealous of the capitalist, so that you will never allow him to launch out and become rich, is merely to have a system of restricted and inefficient production, and, therefore, no wealth for anyone.

The way to make the capitalist system work well is the American way, under which they cherish their millionaires and get out of them as much productive capacity as possible. One often hears foolish people—the clergy are dreadfully bad in that way—talking about slums and millionaires, as though a slum naturally went with a millionaire. Of course, the contrary is true; where you have many millionaires you have few slums. The more wealth there is, the better off every one is: the whole community goes up in wealth. The revenue ought not to go up, because there ought to be economy which would render expansion of the revenue unnecessary. If the right hon. and learned Gentleman the Member for Spen Valley, instead of talking about his own scheme of areas, and saying—which was quite a misapprehension—that the Amendment did not say that the Government plan was to relieve flourishing industries—if, instead of saying that, he had dwelt on the necessity of economy of armaments, I think he would have spoken with a great deal more force, because the Chancellor of the Exchequer has a rather sad side to his character in regard to armaments. He feels for war and armaments something of the enthusiasm that a blue-bottle feels for filth. It satisfies some appetite within him, and makes him buzz about with self-importance.

Let us make it our fiscal principle that we want to produce wealth as abundantly as possible, but that we do not want to carry the sword of justice, saying that one person is deserving and another person is undeserving—partly because it is no business of the Chancellor of the Exchequer to do that, and partly because it is quite impossible to carry it out fairly or reasonably. We want our taxation to be levied, as far as it can be levied, where the wealth is that can pay. That does not mean, of course, that those who are comparatively poor should pay nothing, but that they should pay in proportion to their means—that everyone should pay in proportion. I believe that industry can be made to flourish if, with this principle, you work economically and spend as little money as possible in the hands of the public, leaving as much as possible, according to the old phrase, to fructify in the pockets of the capitalist. Do not let us listen to the foolish nonsense that would turn the Budget into a crusade against landowners, and would persuade this House and the country that there is something peculiar about the value of sites of land, because all such ways of thinking are a delusion and a snare, only originating in confusion of thought and only satisfactory to factious malice.

Mr. STANLEY

I think that those who have listened to this Debate to-day, and who had the opportunity of listening to the Debate on the Resolutions, must have been struck by the considerable difference between the speeches which have been delivered by Members of the two Opposition parties. To-day we have had from the right hon. Gentleman the Member for Colue Valley (Mr. Snowden) a speech which had little to do with the scheme which we have mainly to consider. It was a courteous and, no doubt, lucid explanation of a particular form of taxation, but it seemed to have little bearing on the relief which we are considering to-day. It certainly was in marked contrast to the speech which he made on the Resolutions, which, if I may say so, was one of the speeches which we expect from him, that is to say, compounded in part of that venom which he seems to be able to draw from some in- exhaustible source of supply, and in part of a kind of irritated surprise that a misguided electorate should voluntarily have deprived itself of the services of a perfect Chancellor of the Exchequer. I feel considerable sympathy with the ancient Romans and what they must have suffered from the oft-told tale of the glories of Plancus; but even they, as far as I know, did not have to bear the additional burden of hearing what fresh glories there would have been if Plancus had been elected for a second term.

There was an equal difference between the speeches of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), when he spoke immediately after the introduction of the Resolutions, and of the right hon. Gentleman the member for Spen Valley (Sir J. Simon) to-day. The right hon. Gentleman the Member for Spen Valley twitted the Chancellor of the Exchequer with his obstinacy in sticking to his own proposals—with his lack of fluidity and elasticity. That is rather striking in view of what occurred when the Resolutions were introduced. We had every reason to expect from the right hon. Gentleman the Member for Carnarvon Boroughs that at least he would give some time to the consideration of these proposals. He went so far, when first it became apparent in the Press that the question of rating reform would be introduced in the Budget, as to appoint a Committee of members of his party—a Committee of such quality and such quantity in proportion to the usual attendance on the Liberal Benches that he might almost have been said to have gone into Committee of the whole of his House. There was every promise of an interesting experiment in Soviet Government in one of the older of the parties, but, alas, the experiment never was made, because, within 15 minutes of the Chancellor of the Exchequer sitting down after introducing these proposals, and certainly before any Committee could have been consulted, the chief Commissar, in a short but decided speech, expressed his determined hostility to the scheme which the Chancellor of the Exchequer had introduced, and, if and when that unfortunate Committee had met, there would appear to have been nothing left for it to do except to report progress and ask leave not to sit again.

7.0 p.m.

If the Chancellor of the Exchequer should feel just a little disappointed at the reception of his scheme by the two Opposition parties, I am sure he can feel thoroughly gratified at its reception by his own supporters in the House, and also by the Press in the country and by the electorate of the country; and may I take this opportunity of expressing my own humble gratitude to the Chancellor of the Exchequer for the courageous effort which he has made. A few months ago, some hon. Friends and myself committed a literary indiscretion—one of those books which the many criticise but only the few pay for. In it we ventured to devote some space to the consideration of the question of rating reform, and, as a consequence, it was alleged against us in the "Daily Mail" that we bore, if not the mark of the Socialist beast, at least the brand of the red triangle. I think, however, that, now that that great organ of respectable opinion, in the interval, apparently, of establishing a new dynasty in Central Europe, gives unqualified approval to the principle of rating reform, we are entitled to say that we are not as pink as we were painted. There is no objection in any quarter of the House to the principle of rating reform or to the necessity of some change in the system of rating. Certainly, if there is that objection, it is not raised by the Socialist Amendment and certainly it is not to be found in that Yellow Book from which the hon. Members below the Gangway draw their inspiration. I think when you are discussing the various methods that can be adopted it is as well to bear in mind that if you are going to seek out anomalies, look for cases where one individual appears to be getting less relief than another, you will find them in this method, as well as in any other method you may adopt. What you have to do is not to indulge in tactics that may be very well for electioneering purposes, but not for statesmanship. We have to take the broad view, and see whether this or any other scheme is going to benefit production and is for the benefit of the country. The first alternative is a general relief of the ratepayer either pro rata or with special help to the occupier of the lower rate-able hereditament. That seems to me to depend on the fundamental question whether the evil of the rating system is that it is a method of taxation which bears particularly hardly on the poorer classes, or whether you consider the real evil of our present rating system is that it is a direct handicap on productive industry.

If you believe in the first case, then rating is only on a par with a tax on tea and sugar, and the relief can be given more easily by reducing your indirect taxation. If you believe in the second case, there is the objection that £20,000,000 spread over the rates in this country may go to the dwellers in Grosvenor Square and the owners of big houses in the country, or those carrying on businesses in the City of London. It does not, in fact, touch this problem at all. The second alternative is the transference of certain services from the local authorities to the State. If you take the ordinary service which can be transferred, say the main roads, the relief you can give them is equally spread over the private individuals and the productive industries, but it would by that diffusion lose much if its benefit. The only possible service which can really be of use is the maintenance of the able-bodied unemployed. But the transference of that service appears to have some considerable objection. For one thing it is expensive. It would require £80,000,000 more than we are now providing. The second is administrative. It is obvious that if you are going to take over the whole expense of the service, you must assume the whole control of the matter, and I wonder how hon. Members opposite, who received with no appreciation the passing of the Boards of Guardians (Default) Act, would welcome the taking over of the functions of boards of guardians repeated on a wholesale scale. The third objection is that you would leave untouched a great part of what is admittedly a distressed industry. The transference of the able-bodied employed to the State would give no assistance whatever to agricultural areas, and it would give no assistance to the industries that are situated in the agricultural areas.

Then there is a proposal to give some kind of relief either to distressed areas or to distressed industries, but the objection to that is that you cannot say that because you pick out the most distressed area or distressed industry that they are always going to remain the same. An invention which will provide oil from coal at a slightly cheaper rate than can be done at present might transform Durham and South Wales into prosperous areas, while peace in China might restore the cotton trade. I do think that if you are going to embark on a scheme of this kind it must be a scheme based on a permanent principle, and not some artificial condition which is liable to change at any moment because of circumstances over which we have no control. The second objection is that you discriminate against prosperous industries, and for this I can see no reason. The industry which is prosperous to-day is the industry capable of expansion} in the future, and that is exactly the kind of industry to which we want to give a stimulus. The right hon. Member for Carnarvon Boroughs sneers in public at the relief which Mr. Courtauld is getting. Surely he realises that any stimulus given to Mr. Courtauld, any assistance to sell more of ,his artificial silk, will probably do more for the coal miners in this country than any direct help you can give to the coal industry. It is the old fault of stereotyping industry, of looking, say, on a coal industry employing 1,100,000 men as a permanently depressed industry and trying to bolster is up, instead of stimulating more prosperous industries and enabling them to absorb the miner until the coal industry is reduced to an economic level. Thirdly, a scheme concentrating on depressed areas will create just as many anomalies as the Government scheme of which the Opposition complains. For instance, if you were selecting a depressed area, you could not omit Durham. Now the right hon. Member for Carnarvan Boroughs the other day on the public platform expressed great indignation that the right hon. Member for Carmarthen (Sir A. Mond), who has lately suffered a sea change, should have any benefit from the scheme. Yet, in Durham he will find the right hon. Gentleman is running one industry and running it at a profit.

I believe that the method which the Government have instituted is the best method for raising relief. It is financially practicable, because it can be put into operation in the fairly near future without imposing a new burden on the taxpayers; it is not going to be altered by extraneous circumstances, and, finally, it is a watertight compartment in itself. It touches one side of the problem and deals with that completely, but leaves the ground entirely free for anyone else who should wish to attempt a general scheme for the ratepayers as a whole. I have, however, one criticism to make. The Prime Minister in the Debate on the Gracious Speech made an extremely interesting speech on the position of industry in this country to-day, and he contrasted the depressed areas with the prosperous, and stressed the fact that all new industries and growing industries were being established in the prosperous areas owing to the burden of rates, with a resultant waste of the public services already existing in industrial areas. This Government scheme does assist to remove that difficulty, but I must confess that I should like to see it carried to its logical conclusion either by taking productive industries out of the category of rates altogether, or by fixing a flat rate for industry all over the country, so that you can put down your factory either in Durham or Cornwall knowing what rate you are going to pay according to the size of your property. We are told that this scheme is not popular. I do not believe it, and if I did believe it I should not admit it, because to admit it would be to say that the electors are incapable of taking a long view, and that it is impossible to get them to understand the connection between this burden of production and their own employment; in fact, that it is impossible to get them to understand or appreciate any scheme which does not hold out a promise of direct and immediate profit to themselves. That is an admission I am not prepared to make.

Mr. HARNEY

The Chancellor of the Exchequer undoubtedly paid us a compliment in devoting the greater portion of his address to criticising what he said were our proposals. As a matter of fact, I do not think he had correctly grasped the alternative put forward. He told us that he had very carefully looked through the Yellow Book. For that reason, he ought to guard himself against seeing things with a jaundiced eye. It seems to me that, the Government having recognised the mischiefs of the present rating system, a recognition that they refused to give to it, notwithstanding several speeches made from this side of the House, up to very recently, the question they had to put to themselves was "How are we to remedy them?" The real evil of the present system of rates is what is manifested in the necessitous areas. If we had not necessitous areas, the incidence of the rates would go unheeded to-day, as they have gone unheeded for 300 years. What do I mean by necessitous areas, because if we are to apply a remedy it is necessary to try to understand that. I should say necessitous areas are those industrial centres that are engaged in the heavy export trades, which are made up of massed heaps of houses, run up hurriedly, where there are slums and where there is a disproportionate number of children, and for those reasons these areas, quite apart from unemployment, make greater demands upon the rates than others. Then unemployment comes along. It is in these areas that the falling off of our export trade has been most heavily felt. The result is that you have immense unemployment. In South Shields I suppose 40 per cent. of the rates go in dealing with unemployment. That is the problem we are facing, the problem that put it into the Government's mind to deal with this question at all.

Is it quite sound to place the root of the evil where the right hon. Gentleman has placed it? He says there is something wrong in principle in taxing the tools of productive industry. Is there any difference between the tools of productive industry and the tools of distributive industry? I fail to see the distinction. If it is right that the instruments that produce a thing should be free, it is equally right that the instruments by which the thing is carried to our door should be free. There is no distinction in principle between the two at all. Nor is there any distinction in principle between the industrial centres that cater for a foreign market and the industrial centres that cater for the Home market. In the Midlands and the South you have industrial centres catering for the foreign markets which are quite prosperous. In the North you have industries catering for the Home markets which are not prosperous. That is not the true distinction. I have been wholly unable to see during the whole of the Debate why a man who is occupied in vending goods has any less obligation to fulfil the requirements of his neighbourhood than the man who is occupied in making the goods. Both of them share its benefits. Both have their sanitation, their sewage and their health and educational facilities. Why should one be treated on a different footing from the other? You get no real distinction on that footing at all. The true question is this. There are parts of England whose whole crime is simply their geographical position, near ports, near mines, near rivers. Towns have sprung up and factories abound. The population is densely crowded together. The need for social services is immense. When bad times come unemployment is disproportionately great. What you have to do is to say, "We will relieve these areas."

The Liberal method of relieving them is the simple and natural one. We say no more than this. You have now thrown upon the rates a large amount of what are truly national services. When we place a military army on Salisbury Plain, we do not ask the people of Salisbury to attend to their educational and medical wants. We say they happen to be there, they are doing the nation's work and the nation will pay for them. If you lift such portion of the rating burden off the industrial areas as is properly appropriate to the taxation purse, automatically you bring about the very thing that is desired. An area that suffers because foreign trade has fallen will get great relief when its burdens are shifted, because the pressure upon it is great. Take another area—Bournemouth. There are manufacturers there. They make motors and gramophones. Apply the same principle and remove the burden. But the burden is very small. The health services are low because there are no slums and no crowded conditions. The education service is low because the people who live there can afford to send their children to private schools. Unemployment is nil because the people are prosperous. In South Shields the children are so poor that they have to be taken on the rates. They are in such a state of impecuniosity that they can only get the medical attendance that is now provided by the medical services. The bulk of them are unemployed because their industries are hit by the loss of foreign markets. So the system proposed by the Liberal party would automatically effect the result we are all striving for. It is moonshine to say anyone would have thought of tackling this question at all if it was not for the evils that have been manifested in these areas.

The Liberal method is to relieve those areas, and it would draw no distinction between one part of the country and another. It would be simple. It would not call upon the taxpayer to bear any portion of the burden now that lies upon the rates except in so far as it is absolutely necessary. I am not now going to argue the stale question of the single tax. These things are too impracticable at this moment. You ought to have those in the neighbourhood contributing to its requirements according to the benefit they receive and to their ability. It is on that basis that the principles of rating that exist to-day were laid down 300 years ago. Everyone in the parish made his contribution to the various requirements of the parish. The test of ability was not your land but your house, and it was a fair test. To-day the result has come about that the owner of the site is paying rates on the agricultural value, which is practrcally nothing, and the owner of the building is paying rates upon the gradually growing value of the building. Site value was worth little a few hundred years ago. It is worth a great deal to-day. The Noble Lord indulged for a long time in arguments accompanied by epithets of stupidity and foolishness and nonsense addressed to those who thought otherwise. What he wanted to say was that there is no difference between the increased value that is given to land by the accumulation of people and the increased value that is given to personal service. But in the case of personal service, or ordinary movable goods, as the demand gradually grows the supply can come in to meet it. There is an increasing demand for land in the centre of a town, but there is no more land to be got, and, of course, it must go up in price.

I am not blaming the owner of the land. He has a right to get as much as he can. But the system is wrong. It only rates him for the value the land had originally, instead of the value it has to-day, a value which has been given to it by the combined influence of an increasing demand and a fixed supply. It is not that I quarrel with the Noble Lord's doctrines. I quite agree with him, but the owner of the land has an interest that is to-day worth a thousand times mere than it was originally and why should he not pay on what it is worth to-day, the same as everyone else? The Noble Lord will agree with me that the professional man ought to pay according to his income. He ought to have a house in proportion to his income and pay for it. Why should not the owner of the soil be put in exactly the same position, and as the value of his site rises he also be called upon to pay in accordance with the value of the same.

I would like, before sitting down, as I come from an industrial area, to make my position quite clear. The criticisms I want to pass upon the Government scheme are these. No. 1: It will not come into operation at best before 18 months have elapsed. There is no need whatever for that. The 18 months' delay is brought about, not by a shortage of money, but by the necessity for making a new valuation to meet this extraordinary principle that is to be put into operation. The second criticism is, that it is so complicated as to be unworkable. You have to differentiate between one class of industry and another class of industry. You have, in the case of the railway companies and canals and docks, to pool all the relief they will get and then redistribute it in certain proportions. You are—and this is really the thing with which the Chancellor of the Exchequer dealt—to benefit prosperous as well as depressed areas. He says: "How can I draw a distinction between them?" The answer is that you cannot draw a distinction between depressed and prosperous areas, but you should not adopt the method which creates the present situation. If you take the Liberal method, you are not called upon to adopt that principle. That is the answer to that.

As I read the White Papers that have been circulated on this question, it would appear that in most of these areas there will be 70 per cent, of the assessment value—that relating to shopkeepers, residents, offices, and other classes—that will be untouched by relief. The relief will only apply in respect of 30 per cent. If this 30 per cent. had the effect of making a whole district prosperous, it might be said, "Oh, well, the 70 per cent. will gain indireclty," but really it is not suggested that in the necessitous areas, the industrial areas, the densely crowded areas of which we are speaking, that any portion of the relief given will result in the payment of higher wages. Nobody suggests that. Will it result in unemployment being reduced? I cannot say that it will in my area. We are told that at best the relief will be equivalent to 6d. a ton on coal. Sixpence on a ton of coal will not recapture a single one of our lost markets. Even the proportion of this relief that goes to depressed areas will not have the desired effect. It will not create a bigger wages bill on which shopkeepers live. It will not assist employment. The other portion of relief is to go to subsidised persons who do not want it at all.

It seems to me to be a monstrous thing to say that the big breweries and distilleries—the assessable value of which, I am told, is about £550,000—that made £25,000,000 last year, are, under this scheme, going to get more relief than the shipbuilding industry, which has an assessable value of £520,000, and has been suffering a loss for the last five years. Is there any justification for that? The mischief of it all is that, if you were to transfer to the areas where it is really needed, the relief you are going to give to industries that do not need it, it would be possible, in those distressed areas, to recapture lost markets. The scheme of the Liberal party, so fairly put by my right hon. and learned Friend the Member for Spen Valley (Sir J. Simon), would do away with all this. It would be self-adjusting. As I said before, under that scheme, where the burden was crushing, the burden would be correspondingly relieved, and where the burden was light little would be taken off, because little would be needed. In that way the taxpayer would be called upon only to meet the requirements of the depressed industries to the extent that was needed. I do not propose to say any more, and for these reasons I certainly desire to support the Amendment proposed by the Labour party.

Sir HERBERT NIELD

I do not intend to take part in the Debate for the purpose of discussing the matter which is at present before the House. I desire rather to call attention to a number of anomalies and hardships in the existing system, but I venture to say that, inasmuch as the Amendment was moved at once, the door was closed against any representations that I might make as to the existing system levying various branches of the Inland Revenue. I turn to the particular Amendment which is before the House. It seemed to me, as I listened to the speech of my hon. and learned Friend the Member for South Shields (Mr. Harney) that I had come back again to those old and Debates which took place in the Parliament of 1909, when this House was occupied for months in discussing what was so improperly called the People's Budget, and again through the early spring months of the following year, the Government in the interval having gone to the country and lost 100 seats as a result of the election. Surely we had heard enough and had wasted so much time on this question of site values that we should have avoided it for the future. I noticed behind the speech of my hon. and learned Friend the haunting spectre that the Liberal party always seem to have before them lest Free Trade should be in the balance. My hon. and learned Friend was obviously objecting on the ground that industries alone should be helped and not necessitous areas. Those of us who have had long experience in administrative circles know the mischief of giving large sums of money to necessitous areas as such. This relief which the Chancellor of the Exchequer has foreshadowed in the Budget, a striking out upon a fresh line entirely, is surely intended to help our industries to get back their old lost markets and to combat unfair foreign trade. As I understand it, it is directed to those industries that have to bear the burden of high wages in this country and heavy rates based upon heavy assessments.

One cannot but remember the active opposition that the Liberal party showed to that Measure which was introduced to exempt machinery from rating. If they were really practical politicians desirous of helping the country's trade, they would not oppose these efforts which are being made to relieve industry from burdens which are distinctly unfair. Take the case of fixed machinery. A man takes a certain plot of land. He is not assessed upon the number of feet that is occupied by his factory. He is not assessed upon the nature of the business he carries on, nor is he assessed for local rating upon his profits. But the very moment he brings in valuable machinery of a fixed nature—and there again there is an absurdity in distinction, he is not assessed in respect of large movable machinery—as soon as one of these machines is placed upon the floor of the factory he becomes assessable in respect of it, and he is always assessed for the shafting and apparatus required. This is a terrible handicap to trade, and there seems to be no justification for it. Still, that was the attitude of the Liberal party during the progress of that Measure. I suspect that they are anxious to dissipate the fund which will be at the disposal of the Chancellor of the Exchequer either now or in 18 months' time in giving this relief to geographical areas instead of to different trades which are suffering depression from the unfair competition of other countries. I do urge upon them in this crisis in our industrial history to get rid of those old ideas and endeavour to join up forces, in order that we may do everything we possibly can to put our industries on their feet again and so enable them to recover the ground which they so unfortunately lost in the War or through the results of the War. If that were so, I am sure we should all be united in welcoming this Budget as really constructive. We ought to leave out all those old controversies which have cost so much time and so much labour, and, indeed, so much money, and turn our whole attention in the House of Commons towards trying to perfect the proposals which are in this Budget in the hope that we may thereby do something practical to advance the industries of the country.

Sir ASSHETON POWNALL

The hon. and learned Gentleman the Member for South Shields (Mr. Harney) who addressed the House from the Liberal Benches dealt specially with one portion only of his party's Amendment, namely that with regard to the rating of land values which has already been dealt with by two of my right hon. Friends. He ignored the portion of the Amendment that the revenue required to secure relief should be provided by national economies, and the reduction of unnecessary expenditure upon armaments. I regret it because it would have been very interesting to have heard the views of Liberal spokesmen upon these very interesting questions. With regard to national economy we all of us in theory are in favour but we all know in practice how extraordinarily difficult it is. I spent a little of the Whitsuntide recess in delving into the Yellow Book issued by the Liberal party. I find that they state in page 486: In directions other than national defence and security the amount of practicable economy is not likely to be large. That is not the impression that one would gather from their Amendment on the Paper. They speak of the Navy, Army and Air Force and take the view that there is a possibility of a saving of £40,000,000 by a cut in our War Departments. A cut of £40,000,000 is to come off a total expenditure of a little over £100,000,000 now spent on the Navy, Army and Air Force. I presume that the £17,000,000 which represents pensions and retired pay would not be affected by any reductions made by the Liberal party. That leaves a net total of £90,000,000 off which £40,000,000 has to come. It would be most interesting to know which are the services which are to be reduced by nearly one half. I will take as an example one fighting service. In the case of the Army, the proportionate reduction would be £13,000,000 or £14,000,000. That reduction could not be made. Even if you were to abolish the whole of the British infantry at home and abroad, you would not have a saving of £13,000,000 or £14,000,000. If you did abolish the infantry at home and abroad, you would not stop the whole of the expenditure because, obviously, there are charges for pensions and other services which will go on for many years to come. When one reads statements of this sort and compares them with the Liberal Amendment, in view of a general election at no very far distant date one would like to hear an authoritative statement from the benches opposite as to how they are going to carry out this saving of £40,000,000 on the fighting services, out of a net expenditure of £90,000,000.

In regard to the Budget as a whole, my only feeling on hearing the Chancellor of the Exchequer open it some weeks ago was one of amazement at the complexity and the ingenuity of the arrangement that he was proposing, and in re-reading it recently I was even more struck by the way in which he has dovetailed our industrial needs with our financial position. It reflects very great credit not only upon the Treasury but upon the other Departments who must have been at work for a year or thereabouts on this great scheme. It also reflects very great credit upon the confidential advisers of the Government in many walks of life, railway boards and others, who did not allow details to come out, as so often happens. One particular feature appeals very much to me, and that is the very ingenious method of making petrol, the twentieth century discovery, pay for the troubles of coal. Coal and all its subsidiary trades has struck a very bad time, and all the industrial troubles in connection with them and the employment they give have led to many Debates in this House in the last few years. Making those who use petrol, many of them for pleasure purposes, to contribute in this way for the re-establishment of the coal and subsidiary industries, reflects the greatest credit upon the Chancellor of the Exchequer, and I think it will do a great deal towards the recovery of these industries.

As regards finance, the Chancellor of the Exchequer is rather optimistic in trying to pledge his successors for 50 years to put the immense sum of £355,000,000 aside for interest and Sinking Fund. On a good many occasions in recent years we have had raids made upon the Sinking Fund, but I hope that it may not be so in this connection. My right hon. Friend, in one of those flashes of imagination with which he brightens his speeches, spoke of the time in the year 1978 when some of the younger Members of the present House of Commons may be listening to the then Chancellor of the Exchequer dealing with the position. I could not help thinking of his own Parliamentary Private Secretary, the hon. Member for Aberdeen and Kincardine (Mr. Boothby), who has the good fortune to be almost the most blessed in respect of years of anyone in this Chamber, and my mind's eye saw him in 1978 filling, it may be, the position now occupied by his present dis- tinguished Chief, and at one fell swoop knocking off taxation amounting to £355,000,000. I thought of the praise that he could then give to his illustrious predecessor at the present time.

There is one particular aspect of the £355,000,000 that I specially welcome, and that is the provision in regard to War Savings Certificates. Our financial standard since the War has been of a very high standard, except in this respect. We have deliberately shut our eyes year after year to the fact that interest was accruing on some hundreds of millions of pounds' worth of War Savings Certificates and we have made no provision for the interest so accruing. Now that £15,000,000 or £20,000,000 is to be set aside specifically for that purpose, any criticism from the financial purist point of view is met. In regard to the National Debt, we must remember this important fact that in the last few months British War Loans have been quoted in Wall Street. We know that in the United States money is so cheap that it can be borrowed by the United States at 3¼ or 3½ per cent. I envisage at a fairly near date in the future, when British War Loans will be quoted to an even larger extent than they are now in Wall Street, a re-borrowing of much of the £3,000,000,000 of the 1929–1947 War Loan at a very much cheaper rate, with a consequent saving of, I hope, one per cent, or it may be rather more, which might mean a saving of some £30,000,000.

With regard to the rating proposals of the Budget, it so happens that my constituency will not benefit, directly or indirectly. It is not an agricultural area and it is not an industrial area. Those of us who represent constituencies which have not been hard hit by trade depression welcome most heartily, although it is no direct benefit to us, what is being done for agriculture and industry. As showing how great has been the increase in local taxation, I have a statement from the Fine Cotton Spinners' and Doublers' Association, that local taxation has increased by 300 per cent. compared with 1914, while at the annual meeting of Messrs. John Brown and Company, the big engineering firm, it was stated that the rates amount to nearly £2 per ton on all steel. That shows how difficult it is to quote in the markets of the world when local rates amount to £2 per ton on steel. It is not generally necessary to voice the grievances of Glasgow, because one finds that a good many Glasgow Members are able to air their own troubles, but I find that in Glasgow the rate pre-War was 7s. 8d. in the £ and at the present time it is 14s. 1d. It may be said that if the assessable value remained the same that is only approximately an increase of 70 per cent., but that is not the case. The assessable value has increased during these years from £7,500,000 to £11,500,000. In other words, had the rate remained approximately the same, it would have provided for the extra cost of living expenses; but we find that the rate has increased by 80 per cent. in addition to an increase of assessable value of 70 per cent. That shows that in industrial areas the question of rates is all important.

I do not think our industrial friends must hope for too much, even in 18 months' time. Take coal alone. The ascertainment loss for the last three months of last year was given at 1s. per ton. At the moment it is estimated at 9d. per ton, but 6½d. per ton is the estimated benefit for coal under the Chancellor of the Exchequer's proposal. I agree that 6½d. is a very considerable benefit and I have no doubt that the coal trade will be very glad of it, but it is not enough, with prices where they are now, to bridge the gulf which exists between profit and loss. One suggestion which I have to make to my right hon. Friend is in regard to the evasion of the Betting Duty. A Committee upstairs was addressed during the last two or three weeks by an expert on the Betting Duty, who gave actual instances showing leakage. He stated that several millions of pounds of the Betting Duty are lost. It is agreed that nothing like the Chancellor of the Exchequer's estimate of the yield is being realised. I would call the attention of the Financial Secretary to the Treasury to this matter, if he has not already looked into it, as to whether there is not a leakage in connection with the Betting Duty which might be stopped.

My only regret in regard to the Budget is that the Chancellor of the Exchequer could not in connection with his petrol proposals have put up the duty on petrol from 4d., which is to be the amount of the duty, to 6d., and in return knock off approximately one-half the licence duty now paid on motor vehicles. That would have been extremely popular for reasons which I need not enter into now. I appreciate the fact that the administrative difficulties are very great, but I do hope that in the near future instead of collecting 4d. we may collect 6d. per gallon, with a corresponding reduction on motor licences. If we look back over the last three years and realise that we have spent between £80,000,000 and £100,000,000 out of the national purse, because of our industrial troubles, and that but for that fact the Income Tax might have been reduced by 6d. for each of these three years and we remember the optimistic note with which the Chancellor of the Exchequer concluded his Budget speech, we must hope, and I certainly hope, that in the near future there may be real and refreshing fruit for the parched lips of Income Tax payers.

Mr. MONTAGUE

Some little time ago the Noble Lord the Member for Oxford University (Lord H. Cecil) intervened in the Debate in a very extraordinary manner by introducing questions of abstract political economy. The speech was exceedingly interesting and his remarks were made in order to justify his attitude against the idea of discussing site values and bringing into the Debate the question of the taxation of land values. Before beginning what I particularly want to say, I should like to mike a few remarks upon the speech of the Noble Lord and his conception of what value really means. He based a great deal of his argument upon the idea of value in order to justify the rapacity of landlords and the right of people who hold a monopoly of land in urban and other areas to tax the community by excessive charges in the way of rents. He said that value was something which was due to the difference between the supply of articles and the demand for them, and that when the demand was high relative to the supply of commodities, the value would rise, and when the demand was low relative to the supply the value would fall. I asked a question, by way of interjection, as to what happened if supply and demand equalled each other? I asked that question for this reason, that it is not a question of a glass of water in the Sahara Desert or of exceptional cases like the scarcity value of champagne or pictures, but a question of ordinary economic facts and the production or sale of ordinary commodities produced in the competitive markets.

8.0 p.m.

If supply and demand are equal then unquestionably you must have some basis in order to justify your conception of values other than supply and demand. The producer of goods generally knows his market, and produces up to that market; he endeavours to balance supply and demand. If he sells goods for any length of time under their normal price, something is bound to happen. The competitive effect would be disastrous to him, and if he is able to get an extra price for a considerable time, the result of competition will soon bring the prices down to their normal level. That level is not a question of the spots on the sun; it is something which is common to all commodities, and that something is service and labour in the fullest possible sense. The theory of values which we put forward is not the absurd theory that supply and demand create anything at all except scarcity on the one hand and the opposite on the other, both of which neutralise each other. It is all very well for the Noble Lord to talk in the way he did about values. Hon. Members opposite do not want to admit that values are really the product of human labour and enterprise, not the product of some abstract absurdity which justifies the rapacity of the landlord class.

Let me now deal with the Petrol Duty and its use. The Petrol Duty is going to produce £14,000,000, which is to be spent for the relief of taxation upon industry. I suggest that this is part of the policy of the present Government to support the interests of people who loan money as against the interests of people who borrow money. This is purely a financiers Budget, and it is an instance of the policy of supporting big financial interests which are behind modern enterprises against the interests of the mass of the people. Let us see what this taxation is and what it really means. The taxation is to be levied upon the consumer, but it will be levied in the main on the working classes of the country. The Petrol Tax is going to be paid, and is being paid, by the working people, the poor people, and it is going into the pockets not of the producers and capitalists, but into the pockets of the big financiers, who to-day have these depressed industries under their thumb. Let me quote what the Chancellor of the Exchequer said in reference to the particular question we are discussing, that is the distributive trades. This is what the right hon. Gentleman said: A clear distinction can be drawn between productive industry and distributive trades. Productive industry is exposed, in the main, to world-wide competition. It cannot recoup itself from the consumer. …The distributing trades, according to every test which the Inland Revenue can apply, have not suffered, but, on the whole, have prospered in the last 10 years, and the revenue raised upon their profits has not diminished."—[OFFICIAL REPORT, 24th April, 1928; col. 848, Vol. 216.] The reason why the distributing trades, on the showing of the Chancellor, have been prosperous is because they are in a position to put it on the backs of the consumers. Let us bear that fact in mind. I have in my hand a bus ticket which was purchased by a friend of mine in the neighbourhood of West Hartlepool a few days ago. On the back it says, Receipt for a halfpenny; payment of petrol tax. That ticket was taken for a journey of about 12 miles, and in the course of that journey 44 people use that bus, purchasing tickets and paying one halfpenny each. That one journey cost about 6d. for petrol, and produced 1s. 10d. in the form of an extra price, an extra consumer's price, on account of the Petrol Duty. The bus company made a profit on the Petrol Tax, by putting it on to the consumers, of 1s. 4d. on a journey of about half an hour's duration, which was probably as much as the total wages of the driver and conductor for that half hour. That is always what happens with this kind of legislation. The consumer gets it and gets it in the neck. That is a practical illustration as to who is really paying this tax in order to relieve industry. A great deal has been said about the incidence of this tax and the people who are to be relieved. It must be admitted that a large number of prosperous firms are going to be relieved at the expense of these bus users, the ordinary common people, who have to pay through the nose in order that this relief may be given.

But this relief is not going into the pockets of the depressed industries. There are scores upon scores of firms in the North of England and Scotland, and other parts of the country, whose debentures are largely owned by big American companies, international financiers, who have the big industries of this country in their pockets. They are the people who have financed these industries in their bad times, and now they are to get the taxpayers of this country to recoup them. An hon. Member opposite has said that money is cheap in America, that you can get money at 3½ per cent. Yes, to be lent to British industry at about twice that percentage, and now in order to prevent these industries going under, they have come to the House of Commons for legislation in order to tax the nation so that these foreign financiers, who are more and more controlling British industry, may have the advantage.

That is the position we are fighting. Not because we do not realise the difficulties of British industry: we do; not because we do not realise the importance of the question of rating: we do. But we say that we should proceed from a national point of view, that the interests of the nation should be first in our minds, and not the interests of international financiers. When I came to the House this afternoon I saw in Palace Yard a big vehicle, beautifully decorated, and the inscription "Baldwin No, 1 Bus". On each side was a lovely painted representation of the Union Jack. It had one fault; it ought to have been painted with three golden balls in the middle of it.

Mr. HARDIE

Every time that the question of land ownership is debated in any form in this House we always find that it is met with a bitterness which does not seem to characterise any other subject. As soon as the House begins to deal with land, and the revenues which accrues to landlords without any effort on their part, the opposition at once becomes very bitter indeed. The Noble Lord who spoke just now, and who seldom takes part in our Debates without creating a great deal of interest because he is so very well informed, as soon as he came to deal with the question of land forgot all his learning, it was thrown on one side, because he was filled with the idea of the sacredness of private ownership. The Chancellor of the Exchequer was in a very weak mental attitude to-day. He seemed to be completely taken off his usual form of debate by having his own arguments in favour of the proposal put forward by the Labour party presented to him. Everyone realised that he was in real difficulty; he was talking against his own convictions, and no matter how he tried to gloss over his former statements, it was painfully evident I am sure to those who sat behind him that he was compelled to wriggle in order to try and find a way out of a really tight corner.

It is generally held, in speeches at any rate in this House, that it is fair that each member of the community should pay his share in the taxation of the country. But when it comes to the important question of ability to pay, there is a definite black line of demarcation. The man working for 30 shillings or £2 a week pays in indirect taxation more than the man with £1,000 a week. If you take the basis of food consumption the appetites in the two cases are about the same. When you come to consider not only the accumulations of wealth through profit in business, but the fact that people are becoming rich although they never render any service whatever, your lip service, your moral sense, fails absolutely.

The City of Glasgow, like other industrial centres, has become prosperous, not because Lord This or Lord That owns the land of Glasgow. It has become prosperous because of the industry of the people there. There could have been no values in Glasgow hut for the industry of the working community. Yet what do we find? When we get to the point at which a man receives sufficient to maintain his wife and his children, we find that all above that point is absorbed by the landlord. When we want to widen a street in Glasgow, or to tear out slums that are a menace to public health, and when we do so at tremendous expense, what happens? We make a nice open space. Is that an increase of wealth for the citizens of Glasgow? No. We have merely increased the power of the landlord to say, "Now that this land has been cleared, I am going to have a bigger price for it."

The Chancellor of the Exchequer has made no attempt to-day to reply to the arguments of my right hon. Friend the Member for Colne Valley (Mr. Snowden). If the Government had desired to do something for the relief of harassed industry, they could have found a better way. If they had made investigations in areas in which great distress is to be found, and into the opposite state of affairs in other areas, they would have gained much more knowledge than they possess to-day. I know of an industry in my own area, the best equipped industry in the world for what it does. It has not been making profits. I know of another industry, just outside my constituency, that would stand as the biggest example of inefficiency in production to be seen anywhere. It is paying. Yet this inefficiency is to be supported. Why should it receive a subsidy for inefficiency? Surely the question of efficiency could have had some consideration when the Government were laying down the basis of their proposal. The Chancellor of the Exchequer waved his hand as if he were a hand-loom weaver trying to overcome difficulties. That sort of thing does not blind any Scotsman. It is always a sign that the mind is not working when the hands start moving about. Are we to assume that there is to he no test whatever as to efficiency in industry before this relief is granted? What is to happen in the case of inefficiency that I have mentioned? Those concerned in that case will say, "Well, we know that there is machinery much improved, but it is an awful nuisance to have to start and rearrange the work. We shall get relief and we shall go on in the old way. We shall muddle through in the true British spirit." That is the sort of thing that the Government will foster.

When the hon. Member for the City of London (Mr. E. C. Grenfell) was speaking I was surprised to hear so much truth coming from the other side of the House. I wondered whether the lion. Member realised how much he was giving away against his own party and the Chancellor of the Exchequer. He said that the real defect in British industry to-day was that the people in charge were too old. His allegation was that British industry was suffering from senility. He went further and said that the state of affairs was such that he could not conceive a sequence of efficiency among industrial concerns and that out of 10 firms of which he knew seven were badly managed and inefficient, while only three could be described as efficient. The hon. Member said that he spoke from inside knowledge. Now it is proposed by this Measure to subsidise industrial inefficiency, and I would like to hear any Tory Member after this, getting up on a platform to talk about business efficiency and how it is to be secured. We are now engaged in passing a Bill to subsidise inefficiency. If there is any meaning at all behind these proposals, I could have understood the fixing of a certain basis upon which there would be some measurement of efficiency in relation to this matter.

A great many of the Members of this House—when they are here at all—seem to think that it is a very difficult thing to deal with a subject in detail. The mind that is always thinking outside of details is generally thinking in a circle—a circle so big that it cannot comprehend either the centre or the circumference—and such minds are always in a muddle. There is no trouble in getting down to details for men who know the subjects which they are discussing. But think of the muddle which the present Government have made. We have an Act of Parliament called the Electricity Act, but the Government, when they passed it, did not go right to the basis of that subject. The then Attorney-General at that Box, said that the Government were out to bolster up private enterprise and private property. It was shown time and again that municipally owned electricity production was cheaper than privately owned production. But did the Government say now, "Since we are going to take a grip of this industry in the interests of British trade, we are going to set a certain standard of efficiency"? Did they say, "We know how many pounds of coal it takes to produce a certain amount of electricity, and there shall be a standard of efficient production"? No, they did not set any standard of efficiency at all. Had they run lines through the whole of Britain and fixed a certain price for the unit, I could have understood their procedure. They could have raised the standard of efficiency, increased the number of con- sumers and cheapened electricity, but that was too direct a method. That would not have allowed combines to take place in copper, aluminium and all the other raw materials brought into requirement by the carrying of that Measure. We know how these combines have been formed, and a book could be written about the case of the cables.

It is not stupidity so much as cupidity. It is just this idea: "We want to protect our friends and our own class." As far as the relief of rating on industry is concerned, the Government have not given a moment's thought to the trade of the country or to efficiency in production. It is just the same as when the Chancellor of the Exchequer came along here, with all the vim and vigour of a man who is convinced that he is right and that everybody else is wrong, and produced the kerosene tax. A week later he came back and withdrew it. If you had a strong Chancellor of the Exchequer, a man who was moved by principle, he would have based his ideas on justice and he would have said to the House, "These are my proposals; they are based on justice and principle, and I am going to adhere to them."

The Chancellor had his oil experts working out a formula which he did not understand and very few others did, but now while their work remains, all the rest proves to have been froth and sound. The Chancellor had to admit that while his experts were right about the oil, he, as the expert financier, had made a mistake. The experts outside who know what fourpence is were more numerous than the experts inside and so the outside experts won. The word expert is one which I do not like, because it has been associated with things that are not nice. I am not a politician either. [HON. MEMBERS: "Hear, hear!"] No, and I would jump into the deepest part of the river outside if I thought I was even like one. But the Chancellor of the Exchequer was appointed to the office which he fills because he was supposed to be an expert in getting money. As far as one can judge from Chancellors of the past, as well as the present Chancellor, their chief qualification seems to be in knowing how to tax that which gives the least resistance. Look at what the right hon. Gentleman did with his kerosene tax. I do not wonder that he was ill. I do not know if there is a disease called "kerosenitis," but it was at that time that the Chancellor became ill.

We are asked to pass a Bill that once more entrenches the right of the biggest swindler of our times, namely, the landlord. Some hon. Members to-day said they did not blame the landlord. That may be nice, kind, and gentle, but how do you test even a child in honesty? I was reading a case yesterday of a lady who was testing out a new servant as to her honesty in the house, and she put certain coins on a table where this girl would pass. The girl took none of them, and, therefore, she was honest. She did not take them because she knew that they did not belong to her, that those values were not her's, but the moment the community creates values, what do the landlords do? Take the case of the new road from Glasgow to Edinburgh. There you have all these wolves waiting on the chance of getting 50, 70, or 100 times the value that is being created by the expenditure of our money. The Government stand for aiding and abetting the swindler and the thief, and no matter with what legal language you may surround it, it nevertheless remains swindling—the characteristic of this Government since they first took office. It has been one long programme of building up every interest that belongs to Toryism and that is against the working class.

Even when they are telling the working class that they are going to give them houses, they know that even there they are filling their own friends' pockets by the higher price of land. They have talked about making things better for the working class, but they did not attempt to stop the rings that have made the rents to-day beyond those which the poorer classes of this country can afford to pay. The hon. Member for St. Helens (Mr. Sexton) has told us more than once about how even the bricks of a prison were taken to build a church, and how the bell that used to toll the men to death was used to ring the people to church to pray. All that insincerity that belongs to what you might call the tooth and claw of the human jungle is still represented on those benches, and for these reasons we vote against the Bill.

Mr. W. M. ADAMSON

There has possibly been a tendency in the discus- sion on the Second Reading of this Bill to call attention to one aspect of it, but for a few moments I would rather like to accentuate the argument as to this Bill continuing a very bad and what ought to be an obsolete system of indirect taxation. We are still perpetuating the system of indirect taxation, which is bound to bear most heavily upon the poor, and it is because many of us on these benches are opposed to that system that we are to-day speaking against the same system being perpetuated in rating, as being more likely to fall heavily upon the backs of the poor. Since the present Government came into office we have had in Budgets year after year that increase of indirect taxation upon the necessities of life. Last year it was crockery and cutlery, and now we are having it upon even the poor dejected button and, secondly, on oil and petrol, which will ultimately fall upon the consumer, who has to pay for these things in the ordinary vocations of life. We have always understood that the science of framing the financial proposals of the people of this country was that the Chancellor of the Exchequer should not only be able so equitably to arrange the income and expenditure as to meet the obligations of the State, but that these obligations should be carried out in the interests of the great mass of the people, but year after year we are having impositions placed upon the producers and the consumers that are becoming almost unbearable, while relief of taxation is given to those who are best able to bear taxation.

It is because we object to these things that we view with very great apprehension the Finance Bill of this year, that will make these burdens even heavier, and when we conic to the central viewpoint of this Budget and the new method of relieving separate industries by taxation, we are bound to consider this proposal and the ultimate object which it seeks to attain from the point of view of the results that will follow and of ascertaining who will ultimately bear the heaviest share of the burden when these proposals are being operated, in the interests, first of all, of the Chancellor of the Exchequer but, we perceive and conceive, not in the interests of the nation. I have no doubt that in the minds of the proposers of this policy the relief of industry has bulked very largely, and in particular one industry that has been engaging the time and attention of this House, and that is mining. As one who represents a fairly large portion of a mining area, I think it is well that the Chancellor should have taken some note particularly of the position of mining, not merely as it affects the industry itself, but as it affects the other basic industries of the country and the whole industrial life of our nation.

A question was put on the 2nd May by the hon. Member for Spennymoor (Mr. Batey) to the Secretary for Mines as to the comparative value of local rating in mining areas and royalties, and the reply was that in the whole of Great Britain the amount in royalties was approximately £3,000,000, as compared with less than £1,500,000 in rating. If we are to tackle the problem of coal-mining, and bring any relief whatever to it, instead of merely directing the sources of certain taxation to the relief of mining, the better way would be to tackle the whole question of royalties, which are actually twice the amount of rates, and by which no service or useful undertaking is ever carried through. In the area which I represent, the local rating is equivalent to 2½d. per ton of coal, whereas the royalty is 5¾d. If relieving the industry of rates is going to help the industry, evidently the abolition of rates will not entirely establish it upon a basis which will bring contentment and happiness to those who give their lives, their energy, their skill, and the whole of their existence to the development of the industry. If this scheme for the relief of rates is merely going to increase profits where profits already exist, if it is merely going to take some of the hardships from industry, which are often due to lack of initiative by much flaunted private enterprise, even if it is only going to help industries to bear their burdens, unless it is brought hack to those who are in industry, and relieves the social conditions of the great mass of the workers, and helps them to meet their obligations with a fuller and freer sense of life and justice, we cannot support it.

Colonel APPLIN

I have listened with some interest to the attempt of the hon. Member for Cannock (Mr. W. M. Adam- son) to bleed to death the goose that lays the golden egg. His friends certainly consume the larger portion of that egg, for, outside our great War Debt, the greatest portion of the taxation of this country goes to the social services of this country. The people who pay the largest portion of the money that goes to these social services are the very class of people who are coming in for such abuse to-night. I am not here to defend any particular class, but I wish to point out that fact, and if you put the last straw on the camel's back you will inevitably break it, and our whole social system will break down. I would remind hon. Gentlemen that Income Tax alone more than pays for the whole of the free education of this country, and we know that the burden of Income Tax has reached a point where you cannot put on another penny without injuring, not the landlord, who is getting such abuse—his income is down so low that it is as much as he can do to pay his Income Tax—but you injure the very people who are using their money to pay the wages of the workers, and who are keeping the men who are employed from being unemployed. The very first call on all capital in industry is for the wages of the men who are working. They must be paid, even if no dividends are paid to the shareholders.

Mr. KELLY

The hon. and gallant Gentleman will admit that the people have to earn the profits first.

Colonel APPLIN

But if there were no money there, they could not earn it. My point is that you cannot get blood out of a stone, and you cannot pay wages unless you are making some sort of profit with which to pay them. The first charge on profits goes to pay wages. Hon. Members know well that in whatever industry or business you may start, the first thing you have to do is to buy the plant, and then to engage the staff to work it. You have all your overhead charges, and you may be working for weeks, months and years without getting a single penny with which to pay a dividend. I did not rise, however, to talk about the landlord, but to say a few words about the unfortunate tenant. The licensed victualler of this country is paying a licence to the Government for the right of carrying on his business, and that licence is based on the number of hours which he is allowed to carry on that business. These hours were from 17 to 19½ in 1910, when the tax was imposed. To-day, the hours vary from 8 to 9½, rather less than half the time on which, admittedly, the tax is levied. I am not asking for a favour; I am not suggesting a rebate as a concession; I am asking for ordinary justice. It is well known that; in 1874 the principle was admitted, by the Chancellor at that time, that the number of hours which a publican was allowed to carry on his business was on the same scale as the tax which was imposed, for when Sunday closing took place in certain districts, the tax was at once reduced by one-seventh. That shows that the principle has been recognised. It is certain that the Chancellor of the Exchequer realises the tremendous injustice that is now imposed on the licensed trade by the fact that they are asked to pay a tax on 17 or 19 hours, whereas they are only permitted by the law to remain open eight or nine hours.

Another point which makes this even more unjust is the fact that the licensed victualler of those days was able to sell very much more of his goods than he can to-day, because the price of liquor was something like a third, or even one-fourth, and in some cases one-fifth, of what it is to-day. No one knows better than my right hon. Friend the effect of the rise of the price of liquor on the reduction of the sale. He has bemoaned the fact that the revenue has been very much reduced. That hits the publican very hard, because he pays this tax on a 19 or 17 hours' day, and at the same time can only sell half, or possibly less than half, of the liquor which he has for sale. Therefore I hope the Chancellor of the Exchequer will, as a bare act of justice to the trade, reduce the charge for the licence pro rata to the reduced number of hours permitted for the sale of liquor or, as an alternative, that he will persuade the Home Secretary to increase the hours. I am not suggesting this latter course; I am only suggesting that we should have some sort of equity, and I do ask that my right hon. Friend will consider this question most carefully and will grant at once some relief in the matter of this licensing duty, which is out of all proportion, either in equity, fairness or justice.

Mr. KELLY

There has been a good deal of discussion to-day on site values, and it seemed a long way from that subject to the topics dealt with by the hon. and gallant Member for Enfield (Colonel Applin). I wondered while he was speaking whether he had authority from any licensing bench or from any trade association to make the request that he has put to the Chancellor this evening. I am a member of a licensing bench, and I have not heard of the point put forward by the hon. and gallant Member, and I have not heard of a request for an increase of hours. Would he like to see a return to the hours which operated in the days prior to 1914 in this part of London, where many people were employed from five or six o'clock in the morning until half an hour after midnight?

Colonel APPLIN

I never suggested an increase of hours for one moment. I only said that if you want to do justice, and you cannot do the other thing, that this was the only alternative, but I am not suggesting it.

9.0 p.m.

Mr. KELLY

I hope nothing will be done either in the direction of reducing the licensing charges pro rata to the reduction of hours or towards increasing the hours. But the interesting part of the hon. and gallant Member's speech was that in which we were told how wages were paid to the workpeople of this country. One would assume from that speech that in many undertakings the wages paid came out of the pockets of the shareholders. I could gather no other impression from the speech. I suppose we shall be told that the share-holders are like the camel, and that if there is another straw added to the load it will break their backs. The hon. And gallant Member's view as to where wages come from is a new one. I would assure him that wages come from the same source as the profits which are paid to the shareholders, that is, out of the labour of the workpeople, and I would say that the shareholders have never given anything to any of the workpeople in any of the undertakings in this country. [Interruption.] I am not surprised to hear that. Trade union leaders, I agree, are just as much a burden upon the people of this country as are certain other sections. I say that without any hesitation. And they are essential, in order to protect the interests of the men and women whom they represent.

Mr. TASKER

But they do not protect them.

Mr. KELLY

Perhaps the hon. Member for East Islington (Mr. Tasker) knows that they are able to protect their members much better than do the Architects' Association, of which, I think, he is a member. [Interruption.] I will ,:ay nothing about the medical profession; they are the most confined and restricted trade union in the country, and threaten to strike on any occasion when their interests are involved and are usually able to win through because of the Government.

Mr. DEPUTY-SPEAKER (Captain FitzRoy)

The range of discussion on the Finance Bill is fairly wide, but I do not think it includes the subjects which the hon. Member is raising.

Mr. KELLY

I confess that I was wrong in allowing myself to follow the hon. Member who made those interjections. With regard to the Budget itself, I find it difficult to understand how this great constructive proposal is to benefit the productive industries, which are asked to hold on for another 18 months in the hope of getting a relief of 75 per cent. of their rates, while having in the meantime to pay part of the duty now levied on oil and petrol. The great engineering, shipbuilding and other industries which have been suffering so much in recent years are promised that if the proposals work out as it is suggested by the Chancellor of the Exchequer they will work out, they may receive relief to the extent of 75 per cent. of their rates, but meantime, despite trade depression and despite the fact that they cannot pay a reasonable standard of wages to their workpeople, they must pay their share of the new taxation which is being imposed by the Government. If the Government had been in good faith in wanting to lighten the burden on industry, they might have relieved it of the burden imposed upon it by health and unemployment insurance. Millions of pounds are taken out of industry every year, and wages are kept down, as a consequence of the payments demanded for unemployment insurance alone. The Government might very well have taken that burden upon themselves, not in 18 months from now, but at the present time. All they are doing, however, is to promise that if the receipts from taxation upon petrol are adequate, there will be relief to the extent of 75 per cent. of the local rates.

We have not had an explanation, though I suppose it may come to-morrow, of the proposals of the Government. They have not made up their minds. Even at Question Time to-day they were not quite sure as regards certain industries, such as the steel and iron, engineering and shipbuilding industries, whether in the case of plants which were generating their own power the whole of the establishment would be relieved of 75 per cent. of the rates. We do not understand even to-day that the Government have made up their mind as to the extent of the relief which is going to be given to these industries cannot conceive these great constructive proposals as being of any advantage what-ever. In dealing with the shipbuilding industry the other week, we endeavoured to secure better conditions, and in the engineering trades we tried to secure a reasonable wage standard. On those occasions, we were told that it was impossible for those trades to pay any more wages to the people engaged in them, and yet we are being asked by the Chancellor of the Exchequer to wait until October, 1929, when the Government will be able to announce some easement so far as local rating is concerned.

I suggest that the Government are not acting in. good faith. No doubt they have got their eye on the general election, and we shall have to wait until after the election before we see these proposals put into full operation. I suppose the proposals we are discussing have been prepared with a general election in view, but it is a very poor answer to give to the industries of this country to say that the only proposal the Government have to make is one for taxation to be raised from the very industries which are supposed to be relieved in 18 months' time. Those engaged in the steel and engineering trades are told that they must continue to pay their present high rate of taxation in the hope that something will be done for them at the end of 18 months. I shall vote against the Second Reading of this Bill, and I hope the country will realise at the general election that they have been fooled by the present Government.

Sir ROBERT HORNE

I apologise to the House for intervening in a Debate, of which I have heard almost nothing at all, through a series of unfortunate circumstances for which I was not responsible. The hon. Member for Rochdale (Mr. Kelly ), has raised a question which I think deserves full consideration, and I sympathise with what he said about the delay in bringing into operation the beneficent proposals which have been put forward by the Chancellor of the Exchequer. The hon. Member referred to the difficulties which confront certain industries at the present time, but I did not gather whether the hon. Member was suggesting that the whole scheme of rating relief was a fraud upon the electorate, or whether his opinion was that that particular scheme would be a good thing if it came into operation at once. If he is of the opinion that the scheme is a fraud, then I must disagree with him, because I cannot imagine anything that would be of more use to this country at the present time than a scheme of rating relief.

Mr. KELLY

At the present time.

Sir R. HORNE

In some instances, the rates on certain industries have gone up to a figure which is four times as much as they were at the end of the War, and this is a fact which explains a very great deal of the trouble from which we are now suffering. Let me put this point a little more definite in cases which I know. The case of shipbuilding has been mentioned. I know of a shipbuilding yard on the Clyde which has great difficulty in getting any orders at all, and it has taken many orders on which it has not been able to earn a profit, and that firm has to pay a rating bill of £11,000 a year more than it was paying before the War. There is a steel firm r ear Glasgow which paid last year six times as much in rates as it earned in the shape of net profits. I will take another example. I know of three steel companies in Scotland which, taken together, have paid in rates between 1918 and 1926, no less than £700,000 more than they have made net profits. In the case of a business community such as we are, in a nation which lives by its industry, and which can only continue to exist if its industries are prosperous, it does not need any further argument to show that rating relief is one of the first necessities of our existence. What I am saying is no contradiction of the principle on which the Chancellor of the Exchequer is acting. My only difference is as to whether the right hon. Gentleman has taken the best method of achieving the results which I am sure every hon. Member of this House desires to achieve.

I do not propose to review the situation at any length, and I rose merely to draw attention to two matters. Those who listened to my speech during the Debate on the Budget proposals will remember that I drew attention to the fact that I thought it was a very fallacious way to deal with the problem of rating relief by having regard to the average rates of this country. The problem was much deeper than that, because the greatest difficulty occurs in those parts of the country which are most heavily rated and where unemployment is most severe. Accordingly, an average rate gives no indication of what the problem is, nor does it direct attention to those districts which are specially in need of such relief as the Chancellor of the Exchequer is prepared to give. I think the method which the Chancellor of the Exchequer proposes to adopt is really one which, so far as I can gather, is based upon an average, and I have come to the conclusion that it would be wiser if some modification were made of the proposals of the Chancellor of the Exchequer in this respect. I am making this criticism in the friendliest possible spirit, and I regard these proposals from the Treasury as the first great constructive suggestion which has been made since the War for the reconstruction of the business of the country. Therefore, it will be quite well understood that it is not in any spirit of hostility to the proposals that I now proceed to make a suggestion to the Chancellor of the Exchequer.

I refer to the fact that it is not a case of averages, but that some districts are very much worse hit than others by the heavy rates which they have to bear. The Chancellor of the Exchequer's proposal is to remit three-fourths of the rates in each case in connection with businesses of the kind with which he proposes to deal. Let us see exactly how that works out. While a depressed district will be considerably better off, it will still be left in an anomalous position in relation to other districts which are not so depressed. I do not say that many examples of such an extreme kind can be found, but I will take an extreme case in order to illustrate the point that I am endeavouring to put to the House. I find, for example, a district in which the rates are 39s. 3d. in the £, and I find another district in which the rates are only 7s. 6d. in the £. In both cases three-fourths of the rates will be remitted under the proposal of the Chancellor of the Exchequer, but what is the result? The result is that, while the more heavily-rated district comes down to a figure of 8s. 6d. instead of the previous figure of 34s. 3d., the other district comes down to a figure of is. 10½d., and you still have the extraordinary anomaly of two industrial districts in the country in which industry is rated in the one case at 8s. 6d. in the and in the other at Is. 10½d. in the £. I regard that as an anomaly which, when we are dealing with this matter, we ought to attempt to cure.

It is a bad thing which has grown up in our country of recent times that in many cases businesses are not put in those parts of the country which are most suitable for them, but in parts which are selected because the rates in the district are lower. I am of the view that, so far as businesses are concerned, no consideration of that kind ought to come into the picture at all, but that businesses ought to be planted in places where they can be most effectively worked, and that there should he no temptation to them to shift from one part of the country to another because it happens that in another part of the country the rates are lower than in that in which they thought fit to establish themselves. As the House knows, there is a very embarrassing movement going on at the present time, which is costing this country vast sums of money, and it is taking place for no other reason than that great establishments are moving from places in which they are heavily rated to places where the rates are lower. Accordingly, I venture to make this suggestion. I have given it a great deal of consideration since the Budget Debate, and it follows out the line that I then took, and I hope that it may be possible for it to receive the consideration of the Chancellor of the Exchequer. Probably it has occurred to many other minds as well as to my own. It is that, instead of remitting rates in all these various districts to the extent of three-fourths, an attempt should be made to have an equal rate for industries throughout the country.

Let me ask the House to consider why it is that the rates are very much higher in one district of the country—say Durham—than they are in another. The reason is that the unemployment in that district is so great, and the vast mass of the rates is really being applied in relief of unemployment. The principle, as I take it, which is at the root of these proposals is that unemployment, which is such a vast burden on the country, is, after all, not a local problem but a national problem. I entirely agree with those who think that it should be dealt with locally, because I am perfectly certain that any attempt to deal with unemployment centrally would be ineffective and would lead to great abuse. I think it must always be dealt with locally, but I am certain that the problem is one which has to be dealt with from a national point of view. If that be so, are we doing enough, under the present suggestions, to remedy this difficulty? I do not think we are, because we are still leaving the people who are most cursed with unemployment with this burden to bear, and are not getting rid of the main trouble with which we are faced. I do not say that this suggestion of mine as to an equal rate would entirely cure that situation, but at least it would moderate and alleviate it to some extent, because you would have a rate all over the country which would apply equally to all the industries affected.

Two main arguments have been put in the country against' the scheme of the Chancellor of the Exchequer. For example, my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) is constantly appealing to the cottager on the ground that, while a large industrial establishment next door to him is going to get relief in rates to the extent of three-fourths of the amount that it pays, he, poor cottager, is going to have no relief at all; and for the purposes of these illus- trations we always find on these Saturday afternoons that the establishment next door to the cottager is Courtauld's or some other very lucrative firm earning enormous profits. That argument, however, does not appeal to me at all, for the reason that the industry which is near the cottager is in most cases an industry which is in a condition of depression, and is the industry upon which his employment depends, so that relief given to that industry is a provision for him of his livelihood. It is no attack on these proposals to say to him that the industrial establishment is being relieved while he is being left in the lurch, because in fact his position is being sustained and bolstered up in order that he may live a life of peace and contentment.

The other argument is one which is much more appealing. As I understand it, it is that, while all industries have equal relief to the extent of three-fourths of their rates, industries which are enjoying great prosperity are getting an enormous advantage. I think that when that argument is used it is generally forgotten that a very large amount of the relief will come back to the Chancellor of the Exchequer by way of Income Tax, but, apart altogether from that, there is a point which will be steadily used against these proposals, and that is that the lucrative industry is getting a benefit far beyond what it deserves. What I am now suggesting will, as I have said, do something to alleviate that position, because the lucrative industry will have to pay something for its brother in another district which is depressed and is not doing so well because of unemployment. Those districts which are full of employment and are thriving will help to some extent to bear the burden of those districts in which employment is scarce. Accordingly, I would venture to ask the Chancellor of the Exchequer, before we come to deal with the Bill in Committee, to consider very seriously whether it would not be worth while, even now, to consider the idea which I have suggested. I do not think that it would involve very much in the way of alteration so far as the Bill is concerned. I believe that it could be very simply stated, and that it would be possible to get a uniform plan through- out the country which would be of the greatest possible advantage to our depressed industries, because it would compel the more prosperous industries to pay something to support them.

So far as I can see, there are only two arguments that can be suggested against this plan. The first is that it detaches the industry from an interest in the rating of the locality in which it is. I do not think there is anything in that criticism for this reason, that, in the large majority of instances, these industrial establishments are controlled by limited companies. They do not have any votes now, and they take hardly any part in local administration. They will have the same interest in the future as in the past, namely, in the conditions in which their workpeople live, but this proposal will make no difference to the attitude of the industrial establishments. It may be said, on the other hand, that the local authorities will cease to consider with sufficient care the position of the industrial establishments in their area, but the local authorities have for some time watched how the voter is going to take their proposals. Since they are in the majority outside the purview of the board of directors, I have not the slightest doubt that the local authority will find themselves moved in no different direction—

Mr. WALLHEAD

Surely the right hon. Member does not suggest that the influence of a limited company is confined to the votes of the number of directors on its board. It has very great influence very often.

Sir R. HORNE

My experience is that limited companies are very little listened to by local authorities when it comes to an election. No doubt they take an interest in the conditions in which their workpeople live, but, from my experience, very little attention has been paid to the suggestions they make and rates have been imposed with very little consideration as to what the effect would be upon them. There is one other point which I venture to raise, and I do so with much less confidence than the last, because in my conviction that was one of serious importance, but the second point really compels me to throw myself upon the mercy of the Chancellor of the Exchequer and not so much to appeal to his reason, although I do that also, as to appeal to his heart, for I have discovered that he has one. I said that I had some sympathy with the last speaker when he said that October, 1929, was a considerable distance away. I am sure that everybody feels the force of that point of view. There are certain districts in this country which find it very difficult to wait. I know the Chancellor's difficulties with regard to the finding of the money, and, but for that, I would do more than appeal to his heart. I would very strongly urge him upon grounds of reason to do what I suggest. It is a suggestion which, I am sure, has been before him repeatedly. It is that some earnest of this Bill, the effects of which will have a great influence upon the industry of the country, should be given now in a limited degree. The Chancellor of the Exchequer had last year a surplus of over £4,000,000, which he proposes to keep in his hand and devote to the financial part of the scheme which is to be developed at a later stage. I gather that my hon. Friend the Member for the City of London (Mr. E. C. Grenfell) has this afternoon greatly deprecated taking that sum for another purpose than the payment of debt. I am a great believer in the payment of debt, but I do not feel these pangs which some of the more extreme purists in finance feel when some small sum is diverted from that purpose. There are occasions in life when a man with good credit can use his money for much better advantages than the immediate repayment of debt.

On the present occasion, I make no quarrel at all with the Chancellor of the Exchequer for using last year's surplus for the purpose he intends. I am going to suggest that he should go further. I suggest that he should spend that sum now. It is almost precisely the amount he requires to relieve the railway rates. If it were used at the present time for the purpose of reducing freights on those traffics which are concerned with the heavy industries most depressed, then he would do a very great service and produce a great benefit throughout this country at the present time. If you take the coal trade in South Wales, or on the north-east coast of England, it is at the present time in a condition more deplorable than anything we have ever known, and it may very well be that this subvention of the Chancellor of the Ex- chequer, good as it is, may come too late in many cases. That money can be wisely used at the present time for the purpose of helping up these industries. I would not apply it to all trades or to all lines of the coal trade, but the Chancellor of the Exchequer has this afternoon given a category of industries which he regards as being particularly needful of help. He referred in particular to those which employed large masses of labour, to those which were doing an export trade, and to those which were not sheltered industries. I suggest to him that he should take these very categories and give a relief to the railway companies which would enable them in their turn to give decreased freights to these very industries, like the coal trade or the ironstone trade, thus helping the heavy industries of the country. I am informed that, if such a thing were done, it would mean an advantage to the coal trade alone of from 8d. to 9d. a ton. Anyone who knows how coal merchants to-day are fighting for markets will realise what a benefit that will be in the attempt to defeat other nations in the markets of the world. I venture to make these suggestions to the Chancellor of the Exchequer. I hope that he may be able to adopt them, because I believe that, great as is his scheme, and I have expressed my appreciation of it before, he would make it of greater advantage and much greater benefit to the country if he were to adopt these two simple suggestions which I have made to-night.

Mr. MacLAREN

I cannot resist the temptation of saying something in reply to the Chancellor of the Exchequer's exuberant and virulent attack on what he was pleased to term the single taxer, Henry George, and the taxation of ground values. Our Amendment states that what we want is some fundamental reform in the rating system and the levying of rates on site values, and my right hon. Friend buttressed his argument with telling quotations from the Chancellor's speeches. The Chancellor's speech to-day was very disconcerting. I remember in my early Radical days, as a young student of Liberal politics, what a devoted reader I was of the Chancellor of the Exchequer. I admired the way in which he took up the challenge of the landowners and I studied every speech he made. I never thought the day would come when I should be addressing him as a Conservative Chancellor of the Exchequer from the Opposition benches. His apologia to-day was somewhat halfhearted. He came to the Box and said there was a change of front, but yet there was the sentiment still left in the mind. He did not agree with much that perhaps be used to say in the course of political discussion. The right hon. Gentleman is undoubtedly one of the leading Parliamentarians of the day, but it was obvious that when he came to the Box to follow my right hon. Friend the Member for Colne Valley (Mr. Snowden), he was somewhat compromised, and what compromised him was nothing more nor less than the truth, which he cannot evade, still clinging to his mind as a convinced reasoner on these economic subjects, that the rating of land values is a thing you cannot reply to. You may sneer at it or laugh at it, but, as an economic student, you cannot reply to it, because it is an invincible case.

After painting the horrid year of the national strike, and jumping into some reminiscent poetry of what might have happened if certain things had not happened, he turned to attack the Liberal party, and it was a very astute move. It saved him from some trouble in dealing with my right hon. Friend's points. It certainly removed the difficulty of replying to his own old speeches. He said the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) did more to force this question in the country than anyone who has ever taken a part, in politics. He was referring to the Budget of 1909. He said the taxes in that Budget purported to be taxes on land values, that they were utterly futile and had to be scrapped, and, that being so, it was useless to waste the time of the House in discussing our Amendment. The taxes that were embodied in that Budget were not based on the principle of taxing site values at all. They were four fancy taxes, which some of us protested against from the very inception. We knew that they would not have the effect which the right hon. Gentleman was advocating in the country. The Chancellor of the Exchequer and the right hon. Gentleman the Member for Carnarvon Boroughs, like many other Liberals, were advocating direct taxation of land values in the ,country, and here they were rigging up a Finance Act which bore no blood-relationship to the principle which they were advocating. These four taxes became unworkable, but they were not taxes on land values, and the right hon. Gentleman knows it, arid I challenge him to deny it. They were land taxes utterly futile for the purpose. But the right hon. Gentleman stood at that Box and: got cheap cheers from those who do not know, who sit behind him, for saying they were more expensive to institute than anything they brought in and that it was futile to discuss the Amendment. That is the kind of cheap claptrap argument that we may expect from others, but he has been through the experience. He knows all about it.

If the right hon. Gentleman the Member for Carnarvon Boroughs were in his place, I should have something to say to him, too. It was the conduct of the Liberal party of that day that led to the scrapping of the Budget and that taxes that were futile, but none the less it was a Budget that roused the faith arid hope of the population of the country. Finally, we saw it scrapped, the taxes abandoned, and remittances made to the landlords. If I were asked what is the cause of the downfall of the right hon. Gentleman the Member for Carnarvon Boroughs and the wreckage of the party below the Gangway, I should say it was the conduct of that Budget, the hope that it roused in the populace and the failure it came to finally in the House. The Chancellor of the Exchequer to-day became a little exasperated in order to find weapons wherewith to meet hon. Members below the Gangway, and asked what about Henry George? I only wish Henry George were in this House. It is interesting to hear the name mentioned at this time. I happen to know that the Chancellor of the Exchequer has done some very thorough reading of Henry George's writings, but I do not think it was altogether fair to make the statement which he did. He said that Henry George believed that land was the only source of wealth.

Mr. CHURCHILL

Almost the sole source.

Mr. MacLAREN

That makes it worse. Let me rejuvenate the right hon. Gentleman's mind on his own reading. Henry George says labour applied to land and the products of land is the source of wealth production, and he goes further and says that no wealth can be produced without the use of land in some shape or form, and that anything which we do to help production will only increase the demand for the raw material, land. That brings us to grips with the proposition now before the House. The right hon. Gentleman and those who followed him, speaking as they did, rather inferred that we are not all anxious to unrate and untax industry. I say again that we are. I have advocated it, and so has my right hon. Friend, time and time again. We are anxious to unrate and untax industry so as to give it a chance to get forward. Not infrequently I have made speeches in that direction in the House, and been laughed at by hon. Members opposite. However, it was interesting to hear the right hon. Gentleman the Member for Hillhead (Sir R. Horne) telling us the story of what is going on on the Clyde. Those are things of which we know in Glasgow. The rates are crippling industry. We are at one with the Government in so far as that proposition is concerned, but you cannot discuss the relieving of industry and leave the question there. You must also discuss ways and means of raising money to make up the difference that will be required by the relief given.

My right hon. Friend the Member for Colne Valley put a point to-day which I am now putting again, that unless you take the monopoly values of land as your new basis for assessment the relief you are now giving will find its re-expression in rent and will come back to the landowners in some shape or form. That is the major proposition in our Amendment to-day. It is not enough—and indeed, I should like, if I may, to say this to the right hon. Gentleman the Member for Hillhead—merely to say what a grand proposition this is, because we are relieving by 75 per cent. the rates of the industries of this country. You must find out whether that relief is going to re-express itself either in indirect taxation or direct taxation, and that is not being done. Taxation and local rates are a deduction from the wealth produced in this country. The Chancellor of the Exchequer would be a bold man indeed if he dared to suggest that any arrangement which he may devise by this or by other schemes of giving relief is in any way going to relieve industry as a whole of that burden. You cannot get out of the present impasse unless you consider the proposition embodied in this Amendment to-day, namely, that a fundamental change in our rating system is necessary by levying rates upon site values which are created by the industry and enterprise of the community.

I have sat here all day waiting either for the Chancellor of the Exchequer himself or for some other Member in the House to deny the proposition put by the right hon. Gentleman the Member for Calne Valley, namely, that these advantages proclaimed in the Measure which we are now discussing will find re-expression in rent. I have waited all day to hear someone deny that proposition. If it is not denied, if no Member in this House is in a position to deny it, I will put this to the Chancellor of the Exchequer. I beg of him to give it some consideration because I am going to put it as a sort of constructive point to him. If it be true that the advantages which will accrue to industry will find a re-expression in ground values—and that has not been denied—any demand for raw material, any demand for the extension of factories, any demand for the extension of housing conditions around factories, will mean that the fresh impetus given to industry will find re-expression in rent. I put this to the Chancellor of the Exchequer for his consideration.

I am not asking the Chancellor of the Exchequer to devote his whole attention to a discussion of the fundamental realities of the taxation of land values, but I will put this to him, that in regard to any advantages which may accrue to land values in this country and thereby to the owners of land, a safeguard is at the hand of the Chancellor of the Exchequer now if he likes to use it. I would suggest to him that, as a means of checking the flew of these advantages into the hands of people, whom I seriously believe he did not hope to be recipients of relief, an Amendment should be made in Schedule A of the Income Tax, and that, instead of an annual valuation, the valuations of land under Schedule A should be on a capital basis. I am giving him that by way of suggestion I think he is astute enough, and a sufficiently good student of the Treasury, to knew what that will mean. It certainly would have the effect of recording any advantages accruing at the end of a lease and he the means of enabling him to call upon the owners to pay something with regard to those advantages. I have not time to proceed further.

I have been interested more in the proceedings of the House of Commons to-day than, I think, I have ever been on any day that I have ever sat in the House, because of the discussion of this subject, which I consider to be fundamental. The Chancellor of the Exchequer to-day pointed across at these benches and said that Henry George had one follower in this House. I wish that he had more. As a follower of Henry George, as a single taxer, if you like, T say that your political or economic beliefs may be whatever colour you like, but they will not have the same success as you might hope for unless you deal fundamentally with this question of the land. Therefore, while I commend the removal of this incubus upon the rates which has for years been crippling British industry in the international market because of the re-expression of prices which have undercut us in foreign competition, as to whether these reliefs are the most scientific way of proceeding I would rather that something much more fundamental should accrue. I hope that the right hon. 'Gentleman the Member for Caine Valley will, after the next General Election, complete the task of relieving industries in this country and substituting for this rather complicated form a simple and definite plan, an alternative rating system of a flat rate on land values.

Mr. DALTON

To-night's Debate has, very naturally, centred round the rating relief proposals of the Chancellor of the Exchequer, and the alternative policy set out in the Amendment that was moved from this bench at the beginning of the day, and the Amendment of the Liberal party, which has also been brought into the Debate, I thought the Chancellor of the Exchequer seemed unusually ill-at-ease in the presentment of his case. It was very noticeable that his speech was pitched in a comparatively minor key, enlivened with an occasional staccato passage. I presume that the Financial Secretary to the Treasury, although he is not at the moment here, is going to reply to the Debate.

Mr. CHURCHILL

The Secretary of State for War.

Mr. DALTON

The Secretary of State for War. I was assuming that the Financial Secretary was going to reply, but apparently there is some doubt as to whether that will be so. The distribution of tasks on the Treasury Bench does not appear to be always in accordance with precedent. Whoever may reply, I hope he will answer the point that has been put as to why the proposal to levy a tax or a local rate upon site values is to be ruled out as quite impracticable in this country, when it has been done for many years with great success in practically every Dominion in the British Empire. How is it that this great Imperial party cannot take a few lessons from the Imperial practice of the outlying parts of the Empire, and why are we to be told that improvements in the systems of national and local taxation which have been carried out very effectively in Canada, Australia, New Zealand and South Africa, not to speak of many foreign countries, are quite beyond the wit of a Tory Government, assisted by an expert Treasury?

There are one or two other points regarding the rating relief scheme to which I would like to call attention. The scheme has not many friends in the House. Everybody is critical of sonic detail or other. The right hon. and learned Member for Hillhead (Sir R. Home) was very critical of it. He said that it did not go far enough, that it was too long delayed and that instead of the proposal for a three-fourths reduction for certain industries there should be equal rates for all industries. The Government are taking considerable credit for the scheme, such as it is. I suggest that they are not entitled to take credit. They have been in office for 3½ years, and during the whole of that time this problem has been increasing in acuteness. This problem of unequal rates and of heavy burdens of rates upon what the Chancellor of the Exchequer called the tools and plants of production which, as he rightly says, is economically unsound and even vicious, has been going on for the last 3½ years. He has allowed this economically unsound and vicious system to continue during the 3½ years he has occupied his present position. We agree with his statement on that point, but it was a partial statement. Is it not the case, certainly we assert that it is the case, that a tax upon the dwelling places of mankind is even more vicious than a tax upon the workplaces of mankind? A tax upon a house is far worse than a tax upon a place of work, because a man must live somewhere even though he may not be at work all the time. There is no ground of principle upon which it can be justified that we should de-rate factories and workshops whilst leaving heavily rated, and in some cases even more heavily rated in the future, the dwellings in which the working classes of this country live and in which their children are brought up. There is no justification for stopping short of the de-rating of the dwellings of the people.

The Chancellor of the Exchequer has made many excuses as to why he has delayed this highly beneficent scheme, which he would have us believe it to be, for 18 months. He says that he has no money to bring it into operation before. There, again, he has been criticised on his own side, and it is not for me, unduly to gild the lily of criticism from the Tory Benches. If he has no money, that is his fault and not ours. He had a very easy way of finding the money. Not merely, as the right hon. Member for Hillhead suggested, had he a surplus of £4,000,000 on last year—I do not myself subscribe to the proposal that that surplus should be put into a fund for the relief of rates—but he has a very easy resource by undoing the step which he took in 1925 when he relinquished £42,000,000 of revenue, chiefly raised from Super-tax payers and the higher range of Income Tax payers. I make no apology for repeating the counsel which I have given to the Chancellor of the Exchequer on more than one occasion. Advice does not cease to be good if it is not taken by those to whom it is given. The way out of practically every difficulty with which the Chancellor of the Exchequer has been faced during the last few years would be, at least, to re-impose the Super-tax which was remitted in his first Budget, and some part of the Income Tax on the higher range of payers of Income Tax.

10.0 p.m.

If that were done, all the difficulties would fade away and we could immediately finance schemes of rate relief on a much wider range and on a much sounder principle than that which has been proposed in this Budget. We could avoid altogether the Petrol Duty. Is it going to be seriously argued that the Petrol Duty, which the Chancellor of the Exchequer admits will be a burden upon trade and distribution, is economically superior to the re-imposition of Super-tax? If so, I hope that whichever of the Chancellor of the Exchequer's colleagues replies will endeavour to make a case on that point. Super-tax is levied upon incomes and profits that have been made in excess of a certain standard; in excess of £2,000 a year. Is not a tax of that kind far superior to these miserable alternatives of indirect taxation upon the necessaries of life and of trade which the Chancellor of the Exchequer has been imposing one by one during his years of office? The simple way back to a sound financial position is to retrace the fatal step taken in the Budget of 1925.

The Super-tax as a weapon has been neglected by the Chancellor of the Exchequer. The Death Duties, on the other hand, have served him well. We should like to give him what credit we can and when we write his financial epitaph, we shall recall the fact that he increased the Death Duties on intermediate estates in his first Budget. I do not know whether the House realises the extent to which the Death Duties even at their present level still fall short of what might reasonably be done in the raising of revenue through this means. We have not yet the figures for the last financial year, but on looking at the last report of the Inland Revenue Commissioners I find that in 1926–27 the property passing at death in this country was £466,000,000, on which the Death Duties only absorbed £67,000,000, an average of 14 per cent., leaving a total of £400,000,000, after the payment of the Death Duties, to pass from the dead to the living. I think I should be speaking for all my hon. Friends on this side of the House when I say that we look to the extension of the Death Duties as another means of raising the necessary money for carrying out the policies for which we stand.

It is intolerable that these enormous sums of money should pass on the death of their owners to people who have done nothing to earn them, and who are in many cases demoralised by such excessive additions to their wealth. [HON. MEMBERS: "Hear, hear!"] Hon. Members who sympathise with what I am saying will, I am sure, be interested to know that in 1927, the last financial year but one, ten millionaires died, of whom six left between £1,000,000 and £1;500,000, one left between £1,500,000 and £2,000,000, and the remaining three each left over £3,000,000. The ten together left £25,000,000, of which the Exchequer received only £9,000,000. [Laughter.] In the presence of death hon. Members ought to restrain their laughter, even at the deaths of millionaires. Only 9,000,000 out of £25,000,000 were taken by the Treasury, and £16,000,000 were left. I should think it more equitable if the proportions were reversed, and 16,000,000 were taken by the Treasury and £9,000,000 were left, which would be a very ample provision for the heirs of ten dead millionaires. I mention these matters in order to dispose once more of the idea that we have come to the end of our resources of taxation. We have not either in regard to incomes on the larger scale in regard to Super tax, or as regards Death Duties on the larger estates, and the argument which has been put forward to-day from the Government Front Bench that there is no money for the relief of necessitous areas, no money until October, 1929, in order to do something to revive industry, diminish the burden of poverty and crushing rates, which bear down many of our industries, carry no conviction to anyone who has made the least study of the figures I have mentioned.

There are one or two other subjects of interest in the Finance Bill which I think should be briefly mentioned before the Debate closes. I have a question to ask with regard to the fixed Debt charge provision in Clause 18 of the Bill, which I hope the Financial Secretary, if he replies, or any other person who is deputed to reply for the Government, will answer. The fixed Debt Charge is £355,000,000 according to the Chancellor of the Exchequer's speech, and Clause 18 provides that sum for future years. The question I have to ask is this: Is that £355,000,000 to be a definitely fixed charge until Parliament shall otherwise determine, or is it to be automatically reduced, as the Chancellor of the Exchequer seemed to suggest in his Budget speech, by any savings through future conversion operations? The Chancellor of the Exchequer in his Budget speech said: The interest saved by the annual repayments of Debt and any economies which may be effected in the administration of the Debt will each year be automatically added to the Sinking Fund. And he goes on— I propose, as far as I have anything to say to it, that the Income Tax payer shall look forward to any relief which may be yielded by the conversion of the Debt or any large portion of the Debt to a lower rate of interest. That is not included in the calculations of the fixed Debt charge."—[OFFICIAL REPORT, 24th April, 1928; col. 829, Vol. 216.] The question I ask is this: Does the Chancellor's speech with regard to these conversion operations mean that the fixed Debt charge is not to be fixed at all but is to be a Debt charge diminishing year by year as the Debt is converted to lower rates of interest? If that is what is meant, and I suspect it is, then I say that the fixed Debt charge is a fraud from the start, and far from paying off the Debt in 50 years it is exceedingly unlikely that it will ever pay it off. We have had experience before of these fixed Debt charges which lasted little longer than the ink took to dry in which they were written. Whatever may happen 50 years hence, it is very clear that for next year the Chancellor of the Exchequer is laying the foundations of an electioneering Budget of a most spectacular character. [HON. MEMBERS: "Hear, hear!"] I have no doubt that hon. Members who cheer feel that but for this their seats would slide from under them at the next election. Even that reinforcement may be insufficient to keep all of them with us in the next Parliament.

I observe from the Chancellor of the Exchequer's provisions for the Sinking Fund arrangements for next year that the Sinking Fund provision is to drop. If you deduct the Saving Certificates interest, which is estimated at £20,250,000 a year, from the total pro- vision he is making for Sinking Fund and Saving Certificates together, you find that next year the provision for Sinking Fund is going to drop to £46,250,000. Only £46,250,000 is to be provided for the Sinking Fund next year, in which case the Chancellor of the Exchequer is providing less than what is required for the Statutory Sinking funds. I foresee in this an intention not to bribe, perhaps that is too harsh a word, but to induce large sections of the electorate by an eleventh hour reduction in their tax burdens to come to the support of the Tory party at the next election; and I repeat, that I am sure hon. Members opposite are glad of the prospect.

Nothing much has been heard to-day about economy except perhaps the summary given by the Noble Lord the Member for Oxford University (Lord H. Cecil) of the relations of the Chancellor of the Exchequer to armament expenditure. We on this side believe that no great economies are any longer possible except through reducing expenditure on armaments, and we believe, agreeing with the Noble Lord in this respect, that one of the greatest obstacles to any such economy is the present Chancellor of the Exchequer. We do not forget that when Lord Cecil of Chelwood was endeavouring at Geneva to agree upon plans with the American and Japanese delegates which would have led to an all round reduction in naval armaments, that it was the Chancellor of the Exchequer who in various speeches on the subject of naval parity completely ruined the prospects of agreement and economy. That will be remembered when economy is discussed in the days to come.

Mr. DIXEY

What about your six cruisers?

Mr. DALTON

I am talking about this year, and the hon. Member is endeavouring to deal with a time when he and I were not Members of this House. There is one final point which I think is worth comment in this year's Finance Bill; that is the increase in the child allowances to Income-tax payers. We on these benches are always glad to see a tardy acceptance of ideas which we have long pressed on the Government Any student of the Government Debates on Finance Bills in this House will be familiar with the fact, that year after year an Amendment has been moved from these benches—I am not sure that I did not move it myself—

Mr. DIXEY

How many years ago did you move it?

Mr. DALTON

I am not sure that we shall advance our Debate at all if I allow myself to be drawn aside in order to answer remarks which come from certain quarters of the House. Another time and another place will be more suitable for a competition in chit-chat with the hon. Member for one of the Cumberland divisions. I repeat that year after year an Amendment has been moved from these Benches to increase these allowances and has been defeated by the Tory Whips. We are glad to realise that justice has been done in this respect, but there is this postscript to be added—namely, that the great majority of parents in this country will derive no benefit at all from these increased child allowances because the great majority of parents are not Income Tax payers, and in justice and in fairness these increases in the child allowances to the children of Income Tax payers should be supplemented by some corresponding benefit for parents who are not Income Tax payers.

When the Colwyn Committee made various calculations as to the distribution of the burden of taxation they worked out that a person below the Income Tax level, with an income between £100 and £200 a year with three children, paid about 10 per cent. of his income in taxation, chiefly in food taxes and other indirect taxes; and that total still stands. It is not sensibly diminished by any of this year's adjustments. Some 10 per cent. of the income of people who have between £100 and £200 a year is paid in taxation. Now that this new scale of child allowance is to operate for Income Tax payers, we find that the percentage of income paid in taxation by a man with a wife and three children and an earned income of £500 a year is reduced to 5 per cent., and the man with £500 a year unearned income, and with a wife and three children, pays only 6 per cent. It is obviously inequitable to leave the burden of taxation pressing so heavily on those who have children and an income below the Income Tax level. There are many ways in which that disparity might be adjusted, bat the most obvious is a substantial reduction in the whole burden of food taxes, including the wiping out altogether of the Sugar Duty. Until that is done there will be gross inequity between the fate of these two sections of parents.

This Budget, no less than previous Budgets, and the Debates upon them, enable us to see quite clearly the differences in financial objective between the two sides of the House. The policy of the Government, which has been consistently pursued through the series of Budgets of the present Chancellor of the Exchequer, has had the effect of making the rich richer and the poor poorer. It gives reliefs where they are least necessary, and up to date where they are least helpful in the revival of trade. I submit that no essential revival of trade followed the great reduction of Super-tax and Income Tax three years ago. Trade was worse rather than better after those reductions, plus the corresponding reductions in social expenditure, were carried out. [Interruption.] I repeat that the Chancellor's policy has had the effect of making the rich richer and the poor poorer, and that statement can be verified by statistics. The Government are unwilling to use the engine of national finance to bring about any large improvement in the conditions of life of the great masses of our people. On the contrary, in so far as their engine of finance has affected the lives of the great mass of our people, it has reduced them to a lower level by cutting away a great deal of social expenditure which we would desire to see greatly extended. We wish to use the engine of national finance to redress the social injustices that we find all around us, to bring new prosperity to the people by placing the burdens of taxation on the backs best able to bear them, and by adjusting our taxation in other ways so as to promote production rather than check it or to drive it into wrong channels. We would use the engine of finance in order to bring prosperity into homes that have long been haunted by poverty and misery. In the conflict between the achievements of the Government and the policy put forward on many occasions by us, we are content to leave the decision in the hands of the electorate.

The SECRETARY of STATE for WAR (Sir Laming Worthington- Evans)

The House has just listened to a haracteristic speech from the hon. Member for Peckham (Mr. Dalton), who seems unable to get away from the old election tag that we propose to make the rich richer and the poor poorer. We have heard that sort of thing long before he was in the House and, fortunately for us, the electors have heard it also. It will no longer be a new gospel to them and they will deal with the hon. Gentleman as he deserves to be dealt with and as they have dealt with his party when his party have said that sort of thing before. Let me, however, be serious with the hon. Gentleman with regard to a question which he asked. He asked whether the £355,000,000 which is provided in this year's Budget as a fixed debt charge is to be a definite fixed charge, or whether it is to vary in future. I thought my right hon. Friend the Chancellor of the Exchequer made it quite clear in his Budget speech how that figure was arrived at, and for what purposes it was to be used. He made it quite clear that it was to be a fixed debt charge, but, that if, owing to favourable conversions—to which he looked forward—the House of Commons in future saw that it was higher than was necessary, of course the House of Commons could deal with it. But until the House of Commons deals with it, it is a fixed debt charge for the purposes which he stated. The hon. Member was inclined to scoff at that fixed debt charge. Let me remind him that his own Chancellor of the Exchequer, priding himself as he does on his correetitude with regard to finance, in his year of office provided a Sinking Fund of £57,000,000, including Savings Certificates, and that we in the Budget of last year, for the same purposes, and including the same Certificates, have provided £86,500,000. As my right hon. Friend has said, the provision in this Budget and what he is contemplating for future years, shows an average of £71,750,000 over that period, a sum nearly £15,000,000 in advance of that which the right hon. Gentleman the Member for Come Valley (Mr. Snowden) prided himself on having secured.

I pass from the hon. Member for Peckham to the more serious criticisms of the right hon. and learned Gentleman the Member for Spen Valley (Sir J. Simon), who spoke for the Liberal party. The Amendment on the Paper in the name of the right hon. and learned Gentleman and his colleagues admits the need of relieving industries and areas which are abnormally depressed owing to the heavy burden of rates. But it asks the House to decline to pass this Bill on the ground that the Bill seeks to secure the end of relieving the depressed industries, by a method which would give a greater measure of relief to flourishing industries than to those which are depressed, and the whole of his speech was devoted to that portion of the Amendment. The Amendment asks the House to declare that the revenue required to secure relief should be provided by national economies and by the reduction of unnecessary expenditure on armaments. I ask the House to remember that throughout the right hon. Gentleman's speech not one word was said about any of the economies that were possible or desirable, and not one word was said about finding any money by a reduction of expenditure on armaments. In fact, he concentrated on the one point that, however much the depressed industries ought to be relieved from the heavy burden of rates, this Bill ought not to be passed because the method adopted was wrong in that it helped the prosperous rather than the depressed industries. Let me, therefore, endeavour to deal with the case which he made. He first complained that my right hon. Friend spoke before he spoke.

Sir J. SIMON

I did not complain.

Sir L. WORTHINGTON-EVANS

Well, he said it was curious that the Chancellor of the Exchequer should speak after having asked for the co-operation of the House without having waited for the right hon. Gentleman so that he might offer his co-operation. It would have been a reasonable complaint if there had been any hope of receiving any co-operation from the Liberal party, but after all the Leader of the Liberal party has been stumping the country, and has been showing what he thinks of co-operation. He goes down to Reading, and he makes this sort of speech: "This Bill of the Tory party is said to be intended to relieve the burden on industries, but what are they doing? They are relieving the brewers. They are not relieving the small people with small houses, who have to pay heavy rates. No, they are relieving their Tory friends. If you are rearing babies in cottages, you get no relief. If only you are brewing beer, you get relief." That is the idea of the right hon. Gentleman the Leader of the Liberal party of co-operating with the Tory party for the purpose of relieving an admitted evil. What are the facts? It is a little hard on my right hon. Friend that he, of all men, who has given a bonus for babies in this very Bill, should be complained of as helping the brewers, who have been made to pay over the last few years several millions ahead of time.

The gravamen of the charge is that the more flourishing industries, not the less flourishing industries, are to get the greater relief. Now, is that true Did the right hon. and learned Gentleman the Member for Spen Valley (Sir J. Simon) make any case at all in favour of that. proposition, which is the ground of this Amendment? My right hon. Friend the Chancellor of the Exchequer gave the House the division of industry into two groups, employing an equal number of people, the one group a depressed group and the other group a flourishing group. The depressed group, employing exactly the same number of people, has double the unemployment of the other group. The depressed group, as a group, is making an annual profit of £67,000,000, and the other group, employing an equal number of people, is making a profit of £162,000,000 a year. Of the £26,000,000 that is being and will he distributed in relief of the burden of rates, £14,250,000 will go to the first group, the depressed group, a sum equal to 20 per cent. of their profits; and to the second group £5,500,000 only will go, a sum equal to about 3 per cent. of their profits. Does the right hon. and learned Gentleman say that in that case the prosperous group making £162,000,000 of profit are getting more relief than the first group? Obviously, he cannot say so, for they are getting something like, in proportion, one-sixth of that which is being given to the first group. Of the £26,000,000 that is going in relief of rates, £14,250,000 is going to the depressed group, £5,500,000 to the more prosperous group and £5,750,000 to agriculture. In other words, taking the two groups, the depressed group get three-quarters, and the more prosperous group get one-quarter of the relief which goes to industry.

These figures were given by my right hon. Friend before the right hon. and learned Gentleman spoke. What is his answer? He gave no answer at all. He never dealt with these figures, but he asserted that this relief was not going in the right direction; that it was going to the prosperous, and not to the hard hit. That is the exact contrary of the fact. He said, "But there is another way in which depressed industry can be assisted, and that way is already on the Statute Book. If an industry is losing money, it can get ii s assessment reduced. Why does it not? For that is the better way." That is being done, and many have got their assessment reduced. But, he says, "If they get their assessments reduced, does not that show that those who have not had their assessments reduced—the prosperous ones—will get more relief than if they 'had had their assessment raduced?" Curiously, there is a little fallacy in his arithmetic, because, again, that is not what happens. Supposing an industry was a non-prosperous industry, and had its assessment reduced; let us assume that it was reduced by one-half, and then we come along, and we reduce the remaining half by three-quarters. That means that that industry by both these methods has had its rates reduced by seven-eighths, and the prosperous one, which has not been able to gain a reduction by the first method, would only be entitled to rely on the reduction which we give of three-quarters, and it would get a lower reduction, even in those circumstances, than the less prosperous one. The right hon. and learned Gentleman forgot the elementary result of three-quarters of one-half, and neither saw the first nor the second answer to his own question.

He asked another question. He said, "Yes, but as I understand it, this relief is to be given in five-year periods, and during the first five years, there is nothing for the necessitous areas." He has not followed the Debates as closely as some of us, or he would have recollected that the Minister of Health dealt with this question in the Budget discussion. My right hon. Friend showed how the reduction would work out. Naturally, he only showed it in general terms, because the actual legislation, which will bring this about, is in the third stage of this great plan, and that stage will be embodied in a Bill which will be produced in the autumn. He gave, however, sufficient indications. He said it would take the form of a block grant. Part of that sum will be in lieu of rates of which local authorities have been deprived; part of it will be in lieu of the percentage grants for health services which have been hitherto paid; part of it will take the place of the agricultural rates grant, and part of it will supersede the old assigned revenues …What we are aiming at is that the distribution of that money shall not be in proportion to the expenditure of the local authority, but that it shall be in proportion to its needs. It shall be in proportion, first of all, to population—for it is the population, in the first instance, that makes the need; and, secondly, it shall have some reference to the ability of the locality to pay, so that the poorer locality, by reason of its poverty, shall have something more than the richer locality, which can better afford to provide for its own needs. That is the ultimate aim to which we are directing our energies."—[OFFICIAL REPORT, 26th April, 1928; cols. 1153–54, Vol. 216.]

Sir J. SIMON

May I interrupt for a moment? I do not desire to score a point, but it is desirable to make this matter plain. I not only heard the speech of the right hon. Gentleman the Minister of Health hut I read it afterwards. He used the words: That is the ultimate aim to which we are directing our energies. Then he went on to say, To begin with, in discussing with local authorities …the first thing we have to take into consideration is the rateable value of this authority which has been lost. In the following paragraph the right hon. Gentleman said: The further we get away from the starting point, the further we get away from the time when it is possible to calculate what will he the difference between the old system of rating and the new."—[OFFICIAL REPORT, 26th April, 1928; col. 1l54, Vol. 216.] I do not mind being told that I have misunderstood, but I certainly understand, as a matter of words, that those words conveyed the idea that, in the first quinquennial period, the adjustment with the local authorities will be on a different basis to the adjustment that will be made later. If that is not so, I will be glad to accept the correction. I am not the "learned gentleman": I am only learning.

Sir L. WORTHINGTON-EVANS

I cannot get out of the habit of calling the right hon. Gentleman also "learned." I am very glad to be able to say to the right hon. Gentleman that, even in the first five years, all The considerations which have been enumerated and which I have read are to be taken into account, and that they will be progressively taken into account. As my right hon. Friend the Minister of Health explained, there would be too great an interruption if the full plan were put into operation in the first five years, but they will be progressively put into operation, so that the real reform which is to he made will be fully operative in successive stages.

Mr. DALTON

How many years hence will that be?

Sir L. WORTHINGTON-EVANS

The right hon. Gentleman told us what the Liberal policy was. He said this plan of ours should have been done sooner. He pictured industry on its death-bed, and said we were tarrying, watching the patient dying, waiting until October of next year instead of bringing the plan into operation at once. He said: "Let local authorities have something on account"—I am not sure that he said "on account": that shows my commercial mind—"but, at all events, let them have something now." He said we are raising money each year, suspending the Sinking Fund, and collecting money from the Petrol Duty. He said: "I know the reason why you are not doing it sooner. You are doing that because you have a cumbrous scheme which will take months and months to mature. Scrap the scheme and let them have it now." I think that was the argument of the right hon. Gentleman and the policy of the Liberal party.

Mr. SHINWELL

That was the appeal which was made to you from your own side. Why do you not deal with your own side where the same arguments were used?

Sir L. WORTHINGTON-EVANS

That means selecting some local burdens and using the money for relieving those burdens. The right hon. Gentleman did not tell us what those local burdens were to be or how the money was to be applied. He was in favour of relieving the heavily depressed over-rated industries, and he said, "Do not delay; do it at once," but he did not say how we must do it; all he said was that we must relieve some local burdens.

Mr. SHINWELL

Ask the right hon. Gentleman the Member for Hillhead.

Sir L. WORTHINGTON-EVANS

The right hon. and learned Gentleman the Member for Spen Valley did riot tell us how he would do it at once. The Yellow Book says that there are highways and bridges which constitute 19.6 per cent. of the local expenditure, and they are central national services which might be paid out of the national funds. The Yellow Book also says that Poor Law relief is not a local but a social service, and might be relieved according to the Liberal plan.

Mr. SHINWELL

That is the plan put forward by the right hon. Gentleman the Member for Hillhead.

Sir L. WORTHINGTON-EVANS

How does the right hon. and learned Gentleman the Member for Spen Valley propose that this should be done? Does the right hon. and learned Gentleman mean that there should be an additional grant in aid; that the system in operation should be extended, and instead of a 50 per cent. Grant-in-aid there should be a 60 per cent. or a 70 per cent. grant? That is the only alternative to the Government plan, and I would like to ask what would be the effect of that on local expenditure. Would it reduce local expenditure or increase it? The idea is to reduce the rates in the case of heavily rated industries, and that can only be done by reducing local expenditure. Our whole experience of Grants-in-aid has been to stimulate local expenditure when a local authority has only to pay 10s. in the £.; but if the scheme of the right hon. and learned Gentleman the Member for Spen Valley were carried out they would not have to pay even 10s. in the £ and there would be every inducement to increase local expenditure. Therefore I cannot see that that would be any relief to the hardens of over-rated industries. Assuming that there was some method of getting over that let us see the next difficulty. Who is going to get the benefit of any reduction of expenditure? Is it going to be the depressed industries in the overrated areas, or is it going to be depressed and prosperous areas alike? When com- plaints are made that our plan is going to favour the industries which do not need relief I reply that the proposal of the right hon. Gentleman is going to lead to local extravagance, to a much greater extent. If that were done, the small amount that can be found for the relief of industries would be spread, not in the direction of the groups to which I have been referring, but over the whole industrial field, and not only that, but to private houses and private individuals—over the whole horizon of local taxation; and the amount of actual relief to industry itself would be infinitesimal.

If the right hon. Gentleman takes, not highways, but the able-bodied poor, he is faced with another set of difficulties. How is the administration in connection with the able-bodied poor to be carried out if the whole or a large part of the cost is to be borne by the central authority, and not by the local authority? The question of the able-bodied poor is necessarily one of local administration. Is the locality to be given 20s. in the £ of its expenditure out of national funds, and, if 93, what check is there going to be on extravagance in the locality? We have had Poplar, and we have had some experience of a central fund handing over sums to local authorities without check. The result has been the Boards of Guardians (Default) Act, which has now put a check upon local administration. I cannot conceive of a scheme more likely to add to rather than reduce the burdens on industry than the proposal which the right hon. Gentleman makes.

Of course, there is an easy way if we wanted, as someone suggested, to bribe the electorate. We need not take all this trouble. We could give doles here and doles there—[Interruption.] If we wanted to escape trouble, if we wanted to escape opposition and to gain friends, of a sort, we might, perhaps, do that, but our aim is something quite different. We have here in front of us a real reform of the relations between the central government and local government, of the duties of the central government and of local government—a reform which, ever since the Poor Law Commission, ought to have been carried out, but no Government has had the pluck to face the difficulties which it involved. It is undoubtedly overdue, and it is only because the country has got a Government which is not afraid of facing the difficulties, which has got a Chancellor of the Exchequer sufficiently enlightened and a Minister of Health sufficiently strong and able to carry out this great

reform, that we are asking the House to give a Second Reading to this Bill.

Question put, "That the words proposed to be left out, stand part of the Question."

The House divided: Ayes, 322; Noes, 135.

Division No. 152.]	AYES.	[10.49 p.m.
Acland-Troyte, Lieut.-Colonel	Cochrane, Commander Hon. A. D.	Hammersley. S. S.
Agg-Gardner, Rt. Hon. Sir James T.	Cockerill, Brig.-General Sir George	Hannon, Patrick Joseph Henry
Albery, Irving James	Cohen, Major J. Brunei	Harrison, G. J. C.
Alexander, E. E. (Leyton)	Col fox, Major Wm. Phillips	Hartington, Marquess of
Amery, Rt. Hon. Leopold C. M. S.	Colman, N. C. D.	Harvey, G. (Lambeth, Kennington)
Applin, Colonel R. V. K.	Conway, Sir W. Martin	Harvey, Major S. E. (Devon, Totnes)
Apsley, Lord	Cooper, A. Duff	Haslam, Henry C.
Ashley, Lt.-Col. Rt. Hon. Wilfrid W.	Cope, Major Sir William	Headlam, Lieut.-Colonel C. M.
Astbury, Lieut.-Commander F. W.	Couper, J. B.	Henderson, Lieut.-Col. Sir Vivian
Astor, Maj. Hn. John J. (Kent, Dover)	Courtauld, Major J, S.	Heneage, Lieut.-Col. Arthur P.
Astor, Viscountess	Courthope, Colonel Sir G. L.	Henn, Sir Sydney H.
Athoil, Duchess of	Cowan, sir Wm. Henry (Islington, N.)	Herbert, Dennis (Hertford, Watford)
Atkinson, C.	Craig, Sir Ernest (Chester, Crewe)	Hills, Major John Waller
Baldwin, Rt. Hon. Stanley	Croft, Brigadier-General Sir H.	Hohler, Sir Gerald Fitzroy
Balfour, George (Hampstead)	Crooke, J. Smedley (Deritend)	Holbrook, Sir Arthur Richard
Balniel, Lord	Crookshank, Col. C. de W. (Berwick)	Hope, Capt. A. O. J. (Warw'k, Nun.)
Banks, Sir Reginald Mitchell	Crookshank, Cpt. H.(Llndsey, Galnsbro)	Hope, Sir Harry (Forfar)
Barclay-Harvey, C. M.	Culverwell, C. T. (Bristol, West)	Hopkins, J. W. W.
Barnett, Major Sir Richard	Curzon, Captain Viscount	Hopkinson, Sir A. (Eng. Universities)
Beamish, Rear-Admiral T. P. H.	Dalkeith, Earl of	Hopkinson, A. (Lancaster, Mossley)
Beckett, Sir Gervase (Leeds, N.J	Davidson, Rt. Hon. J. (Hertford)	Home, Rt. Hon. Sir Robert S.
Bellairs, Commander Carlyon	Davidson, Major-General Sir J. H.	Howard-Bury, Colonel C. K.
Benn, Sir A. S. (Plymouth, Drake)	Davies, Maj. Geo. F. (Somerset, Yeovil)	Hudson, R. s. (Cumberland, Whiteh'n)
Bennett, A. J	Davies, Sir Thomas (Cirencester)	Hume, Sir G. H.
Bentinck, Lord Henry Cavendish	Davies, Dr. Vernon	Hurd, Percy A.
Berry, Sir George	Dawson, Sir Philip	Hurst, Gerald B.
Birchall, Major J. Dearman	Dean, Arthur Wellesley	Iliffe, Sir Edward M.
Bird, E. R. (Yorks, W. R., Skipton)	Dlxey, A. C.	Inskip, Sir Thomas Walker H.
Bird, Sir R. B. (Wolverhampton, W.)	Dixon, Captain Rt. Hon. Herbert	Jackson, Sir H. (Wandsworth, Cen'l)
Boothby, R. J. G.	Drewe, c.	Jephcott, A. R.
Bourne, Captain Robert Croft	Edmondson, Major A. J.	Jones, Sir G. W. H. (Stoke New'gton)
Bowater, Col. Sir T. Vanslttart	Ellis, R. G.	Joynson-Hicks, Rt. Hon. Sir William
Bowyer, Captain G. E. W.	Erskine, Lord (Somerset, Weston-s.-M.)	Kennedy, A. R. (Preston)
Boyd-Carpenter, Major Sir A. B.	Erskine, James Malcolm Monteith	Kindersley, Major Guy M.
Braithwaite, Major A. N.	Evans, Captain A. (Cardiff, South)	King, Commodore Henry Douglas
Brass, Captain W.	Everard, W. Lindsay	Kinloch-Cooke, Sir Clement
Brassey, Sir Leonard	Fairfax, Captain J. G.	Knox, Sir Alfred
Briggs, J. Harold	Falle, Sir Bertram G.	Lamb, J. Q.
Brittain, Sir Harry	Fanshawe, Captain G. D.	Lane Fox, Col. Rt. Hon. George R.
Brockiebank, C. E. R.	Fermoy, Lord	Leigh, Sir John (Clapham)
Brooke, Brigadier-General C. R. I.	Fielden, E. B.	Lister, Cunliffe-, Rt. Hon. Sir Philip
Broun-Lindsay, Major H.	Finburgh, S.	Little, Dr. E. Graham
Brown, Col. D. C. (N'th'l'd., Hexham)	Foster, Sir Harry S.	Lloyd, Cyril E. (Dudley)
Brown, Brig.-Gen. H.C. (Berks, Newb'y)	Foxcroft, Captain C. T.	Locker-Lampson, Rt. Hon. Godfrey
Buckingham, Sir H.	Fraser, Captain Ian	Locker-Lampson, Com. O.(Handsw'th)
Bull, Rt. Hon. Sir William James	Frece, Sir Walter de	Loder, J. de v.
Bullock, Captain M.	Gadle, Lieut.-Col Anthony	Long, Major Eric
Burgoyne, Lieut.-Colonel Sir Alan	Galbraith, J. F. W.	Looker, Herbert William
Burman, J. B.	Ganzonl, Sir John	Lougher, Lewis
Burney, Lieut.-Com. Charles D.	Gates, Percy	Lucas-Tooth, Sir Hugh Vere
Burton, Colonel H. W.	Gault, Lieut.-Col. Andrew Hamilton	Luce, Maj.-Gen. Sir Richard Harman
Butt, Sir Alfred	Gilmour, Lt.-Col. Rt. Hon. Sir John	Lumley, L. R.
Cadogan, Major Hon. Edward	Glyn, Major R. G. C.	Lynn, Sir R. J.
Calne, Gordon Hall	Goff, Sir Park	MacAndrew, Major Charles Glen
Campbell, E. T.	Gower, Sir Robert	Macdonald, Capt. P. D. (I. of W.)
Carver, Major W. H.	Grace, John	Macdonald, R. (Glasgow, Cathcart)
Cassels, J. D.	Graham, Fergus (Cumberland, N.)	Macintyre, Ian
Cautley, Sir Henry S.	Grant, Sir J. A.	Macmillan, Captain H.
Cayzer, Sir C. (Chester, City)	Grattan-Doyle, Sir N.	Macnaghten, Hon. Sir Malcolm
Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.)	Greaves-Lord, Sir Walter	Macqulsten, F. A.
Cazalet, Captain Victor A.	Greene, W. P. Crawford	Mac Robert, Alexander M.
Cecil, Rt. Hon. Sir Evelyn (Aston)	Greenwood, Rt. Hn. Sir H. (W'th's'w, E)	Maitland, A. (Kent, Faversham)
Chamberlain, Rt. Hon. N. (Ladywood)	Grenfell, Edward C. (City of London)	Makins, Brigadier-General E.
Chapman, Sir S.	Grotrian, H. Brent	Malone, Major P. B.
Charterls, Brigadier-General J.	Guest, Capt. Rt. Hon. F. E. (Bristol, N.)	Manningham-Buller, Sir Mervyn
Chllcott, Sir Warden	Gunston, Captain D. W.	Marriott, Sir J. A. R.
Christie, J. A.	Hacking, Douglas H.	Mason, Colonel Glyn K.
Churchill, Rt. Hon. Winston Spencer	Hall, Admiral Sir R. (Eastbourne)	Mailer, R. J.
Churchman, Sir Arthur C.	Hall, Capt. W. D'A. (Brecon & Rad.)	Merriman, sir F. Boyd
Cobb, Sir Cyril	Hamilton, Sir George	Meyer, Sir Frank
Mitchell, S. (Lanark, Lanark)	Reid, D. D. (County Down)	Thompson, Luke (Sunderland)
Mitchell, W. Foot (Saffron Walden)	Remer, J. R.	Thomson, F. C. (Aberdeen, S.)
Mitchell, Sir W. Lane (Streatham)	Rentoul, G. S.	Thomson, Rt. Hon. Sir W. Mitchell
Monsell, Eyres Com. Rt. Hon. S. M	Rice, Sir Frederick	Tinne, J. A.
Moore, Lieut.-Col. T. C. R. (Ayr)	Richardson, Sir P. W. (Sur'y, Ch'ts'y)	Titchfield, Major the Marquess of
Moore, Sir Newton J.	Roberts, E. H. G. (Flint)	Tryon, Rt. Hon. George Clement
Moore-Brabazon, Lieut.-col. J. T. C.	Roberts, Sir Samuel (Hereford)	Vaughan-Morgan, Col. K. P.
Morden, Col. W. Grant	Russell, Alexander West (Tynemouth)	Waddington, R.
Morrison, H. (Wilts, Salisbury)	Rye, F. G.	Wallace, Captain D. E.
Murchison, Sir Kenneth	Salmon, Major I.	Ward, Lt.-Col. A.L. (Kingston-on-Hull)
Nail, Colonel Sir Joseph	Samuel, A. M. (Surrey, Farnham)	Warrender, Sir Victor
Nelson, Sir Frank	Samuel, Samuel (W'dsworth, Putney)	Waterhouse, Captain Charles
Neville, Sir Reginald J.	Sandeman, N. Stewart	Watson, Sir F. (Pudsey and Otley)
Newton, sir D. G. C. (Cambridge)	Sanders, Sir Robert A.	Watson, Rt. Hon. W. (Carlisle)
Nicholson, O. (Westminster)	Sanderson, Sir Frank	Wayland, Sir William A.
Nicholson, Col. Rt. Hn. W.G. (Ptrsf'ld.)	Sandon, Lord	Wells, S. R.
Nleld, Rt. Hon. Sir Herbert	Sassoon, Sir Philip Albert Gustave D.	White, Lieut.-Col. Sir G. Dalrymple-
Nuttall, Ellis	Scott, Rt. Hon. Sir Leslie	Williams, A. M. (Cornwall, Northern)
Oakley, T.	Sheffield, Sir Berkeley	Williams, Com. C. (Devon, Torquay)
O'Connor, T. J, (Bedford, Luton)	Shepperson, E. W.	Williams, Herbert G. (Reading)
O'Neill, Major Rt. Hon. Hugh	Skelton, A. N.	Wilson, Sir C. H. (Leeds, Central)
Oman, Sir Charles William C.	Slaney, Major P. Kenyon	Wilson, Sir Murrough (Yorks, Richm'd)
Penny, Frederick George	Smith, R. W. (Aberd'n & Klnc'dine, C.)	Wilson, R. R. (Stafford, Lichfield)
Percy, Lord Eustace (Hastings)	Smithers, Waldron	Winby, Colonel L. P.
Perkins, Colonel E. K.	Somerville, A. A. (Windsor)	Winterton. Rt. Hon. Earl
Perring, Sir William George	Spender-Clay, Colonel H.	Withers, John Jamer
Peto, Sir Basil E. (Devon, Barnstaple)	Sprot, Sir Alexander	Wolmer. Viscount
Peto, G. (Somerset, Frome)	Stanley, Lieut.-Colonel Rt. Hon. G. F.	Womersley, W. J.
Philipson, Mabel	Stanley, Lord (Fylde)	Wood, B. C. (Somerset, Bridgwater)
Pilcher, G.	Stanley, Hon. O. F. G. (Westm'eland)	Wood, E. (Chest'r, Stalyb'dge & Hyde)
Pilditch. Sir Philip	Steel, Major Samuel Strang	Wood, Rt. Hon. Sir Kingsley
Power, Sir John Cecil	Starry-Deans, R.	Woodcock, Colonel H. C.
Pownail, Sir Assheton	Strentfeild, Captain S. R.	Worthington-Evans, Rt. Hon. Sir L.
Preston, William	Stuart, Hon. J. (Moray and Nairn)	Young, Rt. Hon. sir Hilton (Norwich)
Price, Major C. W. M.	Styles, Captain H. Walter
Radford, E. A.	Sueter, Rear-Admiral Murray Fraser	TELLERS FOR THE AYES.—
Raine, Sir Walter	Sugden, Sir Wilfrid	Major Sir George Hennessy and
Ramsden, E.	Tasker, R. Inigo.	Captain Margesson.
Rees, Sir Beddoe	Templeton, W. P.
NOES.
Adamson, W. M. (Staff., Cannock)	Greenwood, A. (Nelson and Coine)	Ponsonby, Arthur
Alexander, A. V. (Sheffield, Hillsbro')	Grenfell, D. R. (Glamorgan)	Potts, John S.
Amnion, Charles George	Griffith, F. Kingsley	Richardson, R. (Houghton-le-Spring)
Attlee, Clement Richard	Griffiths, T. (Monmouth, Pontypool)	Riley, Ben
Baker, J. (Wolverhampton, Bilston)	Groves, T.	Ritson, J.
Baker, Walter	Grundy, T. W.	Roberts, Rt. Hon. F. O. (W. Bromwich)
Barker, G. (Monmouth, Abertillery)	Hall, G. H. (Merthyr Tydvll)	Robinson, W. C. (Yorks, W.R., Elland)
Barnes, A.	Hardle, George D.	Rose, Frank H.
Barr, J.	Harney, E. A.	Saklatvala, Shapurji
Batey, Joseph	Hartshorn, Rt. Hon. Vernon	Salter, Dr. Alfred
Bowerman, Rt. Hon. Charles W.	Hayday, Arthur	Scrymgeour, E.
Briant, Frank	Henderson, Rt. Hon. A. (Burnley)	Scurr, John
Broad, F. A.	Henderson, T. (Glasgow)	Sexton, James
Bromfield, William	Hirst, G. H.	Shaw, Rt. Hon. Thomas (Preston)
Bromley, J.	Hirst, W. (Bradford, South)	Shepherd, Arthur Lewis
Brown, Ernest (Leith)	Hore-Bellsha, Leslie	Shinwell, E.
Brown, James (Ayr and Bute)	Hudson, J. H. (Huddersfield)	Short, Alfred (Wednesbury)
Buchanan, G.	Hutchison, Sir Robert (Montrose)	Simon, Rt. Hon. Sir John
Cape, Thomas	John, William (Rhondda, West)	Sinclair, Major Sir A. (Caithness)
Charleton, H. C.	Jones, Henry Haydn (Merioneth)	Sitch, Charles H.
Cluse, W. S.	Jones, Morgan (Caerphilly)	Slesser, Sir Henry H.
Clynes, Right Hon. John R.	Jones, T. I. Mardy (Pontypridd)	Smillie, Robert
Compton, Joseph	Kelly, W. T.	Smith, Ben (Bermondsey, Rotherhithe)
Connolly, M.	Kennedy, T.	Smith, Rennis (Penlstone)
Cove, W. G.	Lansbury, George	Snell, Harry
Cowan, D. M. (Scottish Universities)	Lawrece, Susan	Snowden, Rt. Hon. Philip
Crawford, H. E.	Lawson, John James	Stamford, T. w.
Dalton, Hugh	Lee, F.	Stephen, Campbell
Davies, Rhys John (Westhoughton)	Lowth, T.	Stewart, J. (St. Rollox)
Dennison, R.	Lunn, William	Strauss, E. A.
Duncan, C.	MacLaren, Andrew	Thorne, G. R. (Wolverhampton, E)
Dunnico, H.	Maclean, Nell (Glasgow Govan)	Thurtle, Ernest
Edge, Sir William	MacNeill-Weir, L.	Tinker, John Joseph
Edwards, C. (Monmouth, Bedwellty)	Malone, C. L'Estrange (N'thampton)	Tomlinson, R. P.
Fenby, T. D.	Montague, Frederick	Townend, A. E.
Garro-Jones, Captain G. M.	Morrison, R. C. (Tottenham, N.)	Trevelyan, Rt. Hon. C. P.
George, Rt. Hon. David Lloyd	Naylor, T. E.	Varley, Frank B.
Glbbins, Joseph	Oliver, George Harold	Wallhead, Richard C.
Gillett, George M.	Owen, Major G.	Watson, W. M. (Dunfermline)
Gosling, Harry	Palin, John Henry	Webb, Rt. Hon. Sidney
Graham, Rt. Hon. Wm. (Edin., Cent.)	Paling, W.	Wellock, Wilfred
Greenall, T.	Pethick-Lawrence, F. W.	Westwood, J.

Wheatley, Rt. Hon. J.	Williams, Dr. J. H. (Lianelly)	Young, Robert (Lancaster, Newton)
Wilkinson, Ellen C.	Wilson, R. J. Marrow)
Williams, C. P. (Denbigh, Wrexham)	Windsor, Waiter	TELLERS FOR THE NOES.
Williams, David (Swansea, East)	Wright, W.	Mr. Whiteley and Mr. Hayes.

Bill read a Second time, and committed to a Committee of the whole House for To-morrow.