HC Deb 03 May 1928 vol 216 cc1953-2025

13. "That such part of the assets belonging to the Currency Note Redemption Account as is, in the opinion of the Treasury, having regard to the market value of those assets, in excess of the requirements of the Account shall, as the Treasury determines, be realised and the proceeds thereof paid into the Exchequer."

Tenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."


This is one of the Resolutions which constitutes an extension of an existing duty. We have just discussed a Resolution which imposes a new duty, and now we are discussing a Resolution which will affect a great number of users of motor vehicles. I think that the House and the country, as well as the motor car industry, are entitled to know why, after the experience of the past years, we are still further to extend this duty. I should have thought that the Government would have desired to assist the trader who uses a trailer, but I do not think the extension of this duty will do that. I should like to have an explanation from the Financial Secretary to the Treasury, whom we are always pleased to hear.

Lieut.-Commander KENWORTHY

There is only one point which I want to raise on this Resolution. There are not only trailers used for the carriage of goods about the country by road transport companies, but there are also occasional trailers, and those are the kind of trailers which I chiefly have in mind. One of these trailers is the caravan trailer. Nowadays, a number of people are attempting to get back to nature by using caravans, which they tow behind motor cars. They then rent a field from a farmer and put the caravan there for a number of weeks. They really do very little damage to the road. Then there are the travelling showmen. They use their trailers in order to carry their trapezes and circus equipment going from fair ground to fair ground. They are probably only on the road two or three times a year. Do I understand that they come under this Resolution?

The MINISTER of TRANSPORT (Colonel Ashley) indicated dissent.

Lieut.-Commander KENWORTHY

I understand that the Minister of Transport says that is not so, but I think we should have an explanation from him on this point.

Colonel ASHLEY

I did not want to interrupt the hon. and gallant Member in his speech, because he so seldom has an opportunity of addressing the House, but, if I may venture to interject anything, I can tell him that this Resolution has nothing at all to do with these showmen or their trailers. It is a very simple Resolution designed to stop a small hole in the taxation net. In 1923, it was found that where a trailer was superimposed upon a tractor, such a vehicle escaped its due share of taxation, although it was a fairly heavy vehicle and did substantial damage to the roads, because the law did not recognise that it was a new form of vehicle and it had to be rated on horse-power. In 1923, that hole was properly stopped, with the unanimous consent of the House, but unfortunately the Resolution which imposed that tax had "six wheels" put into it. Now the ingenuity of the manufacturers has devised a particular vehicle with eight wheels, and all we seek now to say is that the eight-wheeler or the ten-wheeler, as it happens to be, shall pay the same tax as the six-wheeler.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Eleventh Resolution read a Second time.


I beg to move to leave out from the word "pound," in line 3, to the end of line 26.

In moving this Amendment, I am submitting to the House a recommendation which I hope will be received with sympathy in all parts of the House, including the Government Bench. The suggestion which I shall make when I come to it will be a fairly simple one, but, before I do so, I am afraid that it will be necessary to refer to certain somewhat highly technical points. I am going to ask the kind indulgence of the House, because I feel that I am undertaking a task which many men of far greater ability than I can lay claim to would find anything but an easy task. May I first of all just remind the House of what it is that this Income Tax Resolution does? In the first place, it resolves that Income Tax shall be payable for this present financial year at the same rate as last year; secondly, that Super-tax shall be payable this year at the same rate as last year, and then there are other words added to the effect, first of all, that all enactments which applied to Income Tax and Super-tax last year shall apply this year, and, further, that all enactments—I am putting it quite shortly and simply—which were included in last year's Finance Act and which, under the provisions of that Act, were not to come into operation until this year, are to apply in this financial year. The object of the first and second Amendments which T have down on the Paper, taken together, would be to omit from this Income Tax Resolution all those parts which seek to bring into effect, or to bring to life, those sections of last year's Finance Act which were not to come into operation until this year.

May I take one of the provisions in last year's Act which is not to come into operation until this year? It is Section 31, which imposes Super-tax on certain persons or certain companies who were not liable to Super-tax otherwise than under that enactment. That enactment was not to come into operation until this year. Members of the House generally, however inexpert they may be in matters of procedure, at any rate understand this, that, under our Standing Orders, legislation imposing a new tax cannot be entered upon without a previous Financial Resolution. The reasons for that and the advantages of it I will refer to in a moment. The effect of Section 31 of last year's Finance Act, as I have stated, was to impose a tax on certain persons and companies which had not been liable for it before. But it was not preceded by a Financial Resolution. When we came to inquire as to the reason of that, it appeared that a Financial Resolution was not technically necessary last year because this tax-creating Section would not create any tax for the year then in contemplation but only for the next following, that is for the present, financial year, and that it would be given life to by the general Income Tax and Super-tax Resolution this year.

That system of passing legislation to create a tax with postponed effect, and doing it without a previous Financial Resolution, has, I believe, grown up as a result of some private ruling which was given by the then Chairman of Ways and Means in connection with a Revenue Bill, a machinery Bill, which, naturally, was not to come into operation until a future date. It was found on examining that Bill, that though it was in the main merely a machinery Bill, the result of the machinery was that to some extent, here and there, there was a new tax created, and I understand that, some private Ruling was given at that time that a Financial Resolution was not required. I only want to say, that I do not for one moment desire to question any previous Rulings which have been given and which have resulted in this course to which I am now referring of passing legislation for the purpose of imposing a tax and bringing it into operation by a subsequent Financial Resolution instead of having the Financial Resolution before the legislation is made.

I am going to submit to the House, and I am going to do so with some confidence that my submission will be sympathetically received, that if our Standing Orders are such that this practice can be commonly and extensively adopted, it is high time that we considered whether it is not necessary to make some kind of reform in regard to our financial procedure to prevent it happening. The Standing Order which governs this particular matter is Standing Order No. 71—one of the oldest of our Standing Orders—which, if I may just pick out shortly the necesasry words, is to this effect: If any Motion be made in the House for any … charge upon the public revenue, … or for any charge upon the people, the consideration … shall not be presently entered upon, but shall be adjourned until such further day as the House shall think fit to appoint, and then it shall be referred to a Committee of the whole House before any Resolution or Vote of the House do pass therein. The reason for this Standing Order is easy to understand, and is not difficult to find. The imposition of a new charge upon the people is, obviously, a matter of very great importance. It is a matter which, according to the whole theory of our constitution and the liberties of our people, is, and should be, the very peculiar care of Members of the House of Commons. I say, advisedly, Members of the House of Commons, because I mean particularly the representatives in this House of the Commons of the country, and that in this sense the position of a Member of the House of Commons, though he may sit upon the Front Bench, is far more important than his position as a Member of the Government. The important thing is, that we, as the representatives of the Commons, should see that, before any new tax is charged upon the people of this country or any section of the people of this country, we have full warning of it, and full opportunity to consider and understand it before, by means of our votes and our decisions, that charge upon the people is made.

I am going to take as an illustration Section 31 of last year's Finance Act, to which I have referred, and a very excellent illustration it makes. Hon. Members who were in the House last year will, no doubt, have in mind that on the Second Reading of the Finance Bill that Clause was criticised very severely indeed. As a result of those criticisms, which were met with the sympathy and understanding one expects from the present Chancellor of the Exchequer, the Clause came to be so altered in the various stages before it became part of the Act of Parliament, that, among many other little things I may mention, instead of being a Clause of less than two and a-half pages, it became a Section of more than five pages, and, incidentally, the number and class of persons and companies who were rendered liable to tax under that Section was very materially reduced.

I want to refer, incidentally, to one other Section passed in the same way, one in connection with the change over from Super-tax to the Surtax. Although technically there may possibly be a slight dispute as to whether there is definitely a new charge upon the people, some of us venture to think that it is so. Hon. Members will recall the Section I mean when I say that it is the one under which when a man dies an extra year of Super-tax or Surtax is payable—one more year's tax than would have been payable if we had not had this alteration in the law. In that case, also, there was no Financial Resolution, and it was not until we got to the Committee stage of the Finance Bill that we found a new tax was to be made, when an Amendment was brought before the House to that Section which was moved under the firm belief that there was an error in the drafting of that Clause, and that it was not intended to create this extra tax. But when that Amendment was moved, we were told from the Treasury Bench, to the great astonishment of many of us, that they did understand that that was the effect of the Clause, and that it was the intention of the Clause. Hon. Members will see at once that had there been a Financial Resolution before that, that particular mistake or lack of knowledge on the part of Members of this House could never have arisen, and they could have con- sidered the matter, made their criticisms in time, and had the question fully discussed.

Hon. Members will realise, therefore, that what I want to submit to the House is, that it is of great importance—never mind to which party in the House we may belong—that the House of Commons, before it has been—I use the word in no offensive sense—inveigled into passing legislation which imposes a new tax upon any class of people in this country, should have full warning of it, and a fair opportunity of discussing it before the actual wording of the legislation imposing that tax is decided upon and brought before this House. I have explained to the House how the practice of which I complain has grown up. It may be a very difficult matter to know exactly how it is to be dealt with or how my criticism should be met, but I feel certain that in the endeavour to do something of that kind we should have the support of every Member in the House who has held office as Chancellor of the Exchequer or otherwise in the Treasury, to whichever party he may belong. I am firmly hoping that with their assistance and the assistance of the present Mr. Speaker, whose knowledge of procedure in matters of this kind is unrivalled, we shall be able to arrive at, if necessary, some alteration in the Standing Orders, or some considered ruling from the Chair to see that in future there shall be the necessity for a Financial Resolution to be considered in Committee of this House before any legislation will, either immediately or at any future period, impose the charge of a tax upon any of the people of this country.

May I refer to one or two authorities as to the importance of this particular procedure by way of Financial Resolution in Committee before legislation is carried? One of the books which is a splendid work, and, I suppose, one of the greatest authorities in connection with the Standing Orders of the House of Commons and its financial procedure, is Redlich and Ilbert from which I quote these words in reference to the particular Standing Order in question. All these rules are measures intended to protect the House against itself"— and I would say that sometimes that means, to protect the Members of this House against those who sit upon the Government Benches or against those in Government Departments— to prevent hasty grants of money and ill-considered increases in the responsibilities of the people. Again, I take these words from the same authority: It is an express rule that all proposals as to taxes or grants, or, indeed, any matter concerning the income or expenditure of the nation, must be considered in a Committee of the whole House before the Measures for giving effect to them are brought before the House. I would like to go back a little further. An hon. Member who is not new in his place, speaking some time ago from the Liberal Benches, was referring to shibboleths, and disparaging certain references to something which had been said to have happened in the year 1660, or thereabouts. But hon. Members of this House will not regard as musty or unworthy of notice the history of the building up of the power of the Commons in this country, and I want to refer to something as far back as 1670. There is in the Library of this House a book the title of which is:


together with several Rules and Customs which by long and constant practice have obtained the name of


Gathered by observation, and out of the Journal Books from the time of Edward VI.

(By Henry Scobel, Esq., Clerk of Parliament.)

Never before printed.

Printed in London in the year 1670."

[An HON. MEMBER: "What is the price?"] I think the price would depend upon the pocket of the person who wanted it. The book is to be found in the Library of this House. I want quite seriously to call the attention of the House to the fact that this book contains those orders which have grown up in this way and had been established by the Commons of this country in the days when they were really engaged in a hard struggle to preserve the liberties of the people against the Crown by reason of their financial control. The passage which I wish to quote from that book is this—and will hon. Members bear in mind that this is practically, apparently, a Standing Order of the House of Commons as far back as 1670: Some bills of great concernment, and chiefly bills to impose a tax or raise money from the people, are committed to a committee of the whole House; to the end there may be opportunity for fuller debates, for that at a committee the members have liberty to speak as often as they shall see cause, to one question; and that such Bills, being of general concernment, should be most solemnly proceeded in, and well weighed; and sometimes when a bill of that nature hath been conceived fit to be made, the House hath thought fit to resolve themselves into a committee, and either there or in the House to vote some heads for direction of such as shall be imployed to prepare the Bill. The House will see that even so long ago as 1670, when our tax laws were far less complicated than to-day, the Commons of this country regarded it as necessary in the interests of the people that when a proposal was brought in to create a charge upon the people, it should be considered in Committee of the Whole House before the Bill was brought forward, in order that some instruction might be given to those who were to be employed in preparing the Bill.

I thank the House for listening to what, I am afraid, has been a difficult case to explain; but I do express the hope that in calling attention to this matter I shall have the sympathy of all parties in this House, and of the present Front Bench. It will be fairly obvious from what I have said that I have moved this Amendment not in any controversial spirit or with a view to creating any difficulty for the Chancellor of the Exchequer, whose absence we all deeply deplore. Important as I believe this principle to be, the immediate application of it in regard to this Section in last year's Finance Act is not now of very great importance. So far as the harm is concerned, the harm occurred last year, when we did not have a Financial Resolution. Therefore, on this occasion, if I can get, as I hope to get, some expression of opinion from those who are more competent than I am to speak on this matter, I shall content myself with asking leave to withdraw the Amendment if, as I rather anticipate they will, the Government say that, if it were passed now, it would create a somewhat serious displacement of the machinery in connection with Income Tax and Super-tax in the present year.

Captain BOURNE

I beg to second the Amendment, very much for the reason that my hon. Friend has already given. I think that after the experience of this week few hon. Members can doubt the value of a Financial Resolution. We have had an instance this week where taxation proposed by His Majesty's Government has been altered in the Budget Resolution, under pressure from the House of Commons. I agree with my hon. Friend that it is undesirable that taxation should be brought in the Finance Bill of one year which is not to come into effect until the next year. All hon. Members who have taken part in the discussion on the Finance Bill will remember that in the first place the taxes are prepared in very difficult and technical language and, secondly, the amount of work that has to be got through in the Committee stage is so great that time is limited and there is not adequate opportunity for discussion. The advantage of a Financial Resolution is to draw the attention of the House to the proposals of the Government, and these are discussed before they are put down in legislative form. It is for that reason that, if an Amendment be necessary in our Standing Orders, I trust those who look after these matters will pay attention to this point. There is always our national characteristic practice of broadening down from precedent on to precedent, and rulings are perhaps given that cover a revenue which may be used as precedents for taxation proposals in Finance Bills. It may be ruled that it was possible for the Government to introduce a direct tax into one Finance Bill without a Financial Resolution, provided that it was covered by some Financial Resolution next year when the tax became operative. The forms of this House have been made so as to give a good deal of trouble to the Executive in imposing new taxation and in order that matters may be thrashed out in full not once but many times before any burdens are placed upon His Majesty's subjects, and it would be a derogation of our duty if we were to permit any relaxation of that rule.


I intervene with hesitation in the discussion of what is, undoubtedly, a very important point which has been raised by the hon. Member for Watford (Mr. D. Herbert), and certainly one which must appeal to all who are interested in the financial practice of the House; but we must be perfectly clear in our minds, first of all, as to the circumstances which surround this particular matter. This goes back to Section 21 of the Finance Act of 1922, which was designed to deal with certain problems connected with the evasion of Super-tax. In succeeding years, it was felt that that Section was not adequate for the purpose that it had in view. Then we come to the proposals of the Government in 1927, when it was intended to strengthen that Section in the Act of 1922 to deal with evasion, and the controversy that took place in the House at that time. Section 31 of the Finance Act, 1927, as the hon. Member for Watford pointed out, is very different from what was originally proposed. The original proposal was comparatively short, and some of us on this side of the House, and I trust other hon. Members interested in preventing tax evasion, thought that it, appeared to be reasonably adequate for the purpose. But it was argued by hon. Members, particularly on the other side of the House, that the scheme of the Government went beyond what was strictly required and that it would, in fact, interfere with the sound conduct of a considerable section of business in this country. In the last resort, the Clause was modified very considerably, and, I should have thought, modified in the direction which many hon. Members opposite particularly desired. The hon. Member for Watford also referred to Section 42 of the Finance Act of 1927 in pleading his present case. That Section is simply a linking together of Income Tax and Super-tax substantially on the lines which were recommended by the Royal Commission on the Income Tax in 1919, and to make it, what I would call for the purpose of popular debate, a continuous process. That was given effect to in Section 42 of the Act of 1927.

I come now to the particular point which the hon. Member has raised. He has indicated to the House, quite frankly, that he does not intend to press his Amendment, because, if it were pressed, the scheme would very largely disappear, and we should, on this specific issue, be thrown back to the provisions of Section 21 of the Act of 1922, which I cannot imagine is the intention of the hon. Member or of many hon. Members on the other side. Therefore, we need not waste time arguing that point. The material point is whether something is taking place in this procedure which weakens the control of the House of Commons to the extent that it evades or takes away the preliminary Financial Resolution which, beyond all question, is a very important part of our practice in problems of this kind. I can certainly speak for all hon. Members on this side of the House when I say that we wish to preserve the very fullest control for all sections of the House of Commons over the imposition of any charge made in this country, and at all times; but the question which arises here, and which was present in our minds when this problem was debated a year ago, is whether in fact we were imposing a charge in the proposals that were raised in debate. At that time—of course, I do not profess to be an authority on the Rules of the House—it appeared to me that, first of all, we were not actually imposing a charge within the financial year for which we were legislating in the Budget proposals at that time. We were making a declaration as to what we intended to do or what would take place in the financial year succeeding the one which we had immediately in mind. It occurred to me that the position was one very largely of a declaratory character. The hon. Member for Watford suggests that in the mingling of the Income Tax and the Super-tax into what is now the Income Tax and Surtax scheme, we had, in fact, imposed or increased a charge. I find it difficult to believe that that is the case, and I cannot help feeling that the effective reply will be found in the ordinary administration of Income Tax and Super-tax in this country, and particularly in the lag which exists in one department of the tax, perhaps to some extent in assessment and in collection.

The broad view which some of us took, rightly or wrongly, was that in this matter the Government were clearly acting on a declaratory basis and outlining a policy for a time succeeding the precise financial year for which they were making provision. Accordingly, as they were not in fact imposing a charge a Financial Resolution was, strictly speaking, not required. I have only expressed the view which we held at that time. Far be it from me to suggest that there may not be all kinds of hidden dangers which ordinary Members of the House of Commons, as most of us are, find it very difficult to appreciate. I can only close on this note, that I do not see any advantage whatever in a Financial Resolution unless, in fact, a definite charge is imposed. I can see no value in a Financial Resolution which is only declaratory in character, and unless the Government have some very strong plea to put on that point probably a view of that kind cannot be very easily shaken.

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

My hon. Friend who moved the Amendment has done a service to the House in calling attention to a matter which would always be an extremely interesting subject of Debate, at a time when it really arises for practical action. To-day, he has had to bring it forward attached to an Amendment which he does not, as he says, intend to press. I need not spend time in dealing with the Amendment, because he does not intend to press it, and I could not accept it. It would, indeed, deprive the taxpayer of the protection which Section 31 gives, that there shall not be evasion in certain cases, and it would undo the whole of the work which we did last year in that connection. But the most interesting point raised by the hon. Member I can reply to in these terms. The Government have no desire whatever to deprive the people of the protection that is given by the procedure of the House, and I think the actual procedure that was followed last year and that will be completed to-day, has not deprived the people of the protection to which they are entitled. The Financial Resolution is intended to give notice to Members of the House before they pass an Act which creates a tax. Not only has notice been given, but much longer notice has been given than usual. Usually, a Financial Resolution precedes a Bill by a few days or a week at most. On this occasion, there has been a year of notice. There have been two discussions in this House, one last year and another to-day, and twice the House of Commons has had the opportunity of saying whether or not it would agree to the tax, if there is a new tax contained in the Resolution.

I will not argue whether there is or is not a new tax. The right hon. Gentleman who has just spoken for the Opposition is not clear that there is a new tax. There are, I think, more people brought within the ambit of taxation, but that also may be disputable. It is, however, immaterial from my point of view, because I would say that even if there is a new tax then the procedure which is intended to protect the people has been followed, not merely in the ordinary way, but in a way which gives notice of at least a year between the Resolution and the actual tax. I quite realise that there may be two views upon this subject. We are in order—there is no doubt about that. The procedure of the Government is in order. That was held last year by Mr. Speaker, and we have followed that procedure and this is not being done for the first time. There are several precedents for this course. It may well be, however, notwithstanding the fact that we are in order, notwithstanding the fact that we are following precedent, that amendments of the procedure and variations of the Rules which at present cover us, might be desirable, and, if Mr. Speaker were to indicate that he desired that matter to be considered, then I am sure that, on the part of the Government, he would be entitled to and would receive any assistance we were able to give.


The right hon. Gentleman is doubtful as to whether under this Resolution and under the Section of the Finance Act which we discussed last year, any new taxation is proposed. The right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) feels confident that no new taxation is proposed. I suggest humbly to the House, as I did last year when I spoke on this question, that there is a new tax proposed in the sense that an extra year of Super-tax is imposed upon the people who are liable to that tax. I do not propose to elaborate that point now, because it was gone into fully last year. If it is desired to raise that matter again I think the proper time to do so is when the Finance Bill comes before us. But, inasmuch as a Clause of that Finance Bill will be founded on the Resolution now before the House, and as the Resolution introduces into our fiscal system something entirely new—a combination of Income Tax and Super-tax in one tax—and as we have placed before us a schedule setting out the rate of that tax as a whole, I do think it is essential that we should be clear in the House to-day as to exactly what the Resolution means. I have been studying it with some care, and I am bound to say that, after doing my best to understand it, I am not able to reconcile the first and second paragraphs of the Resolution without coming to the conclusion that a double taxation is imposed.

The first part of the Resolution lays it down that Income Tax shall be charged for the year 1928–1929 at a standard rate and, in the case of individuals with incomes over £2,000, it then lays down the total rates they have to pay, rising from 4s. 9d. up to 10s. Then paragraph ( b) of the Resolution says that Super-tax shall be charged for the year 1928–1929 as for the year 1927–1928. I can only read that as meaning that for the year 1928–1929, the taxpayer will have to pay this combined Income Tax and Super-tax at the rates laid down in the first paragraph, plus Super-tax for 1928–1929 the same as was charged for 1927–1928. I am certain that is not the intention of the Government, but, reading the Resolution through again and again, I am unable to arrive at any other interpretation of these two paragraphs taken together. I am certain that an explanation will be forthcoming, but as a matter of plain English, the Resolution seems to bear the meaning I have indicated. Therefore, I think we are entitled to a statement from the Secretary of State for War or from the Financial Secretary, as to how these words can be interpreted to mean anything else and how they can carry out the intention of the Government, which is to do away with Super-tax as from January next year and have Income Tax and Surtax all in one. If that be so, what is the necessity for paragraph (b)? Is it intended that the amount on which taxation shall be assessed is to be the same two years in succession? That was what I understood last year, but the phaseology of paragraph ( b) could not be in- terpreted in that way and the House is entitled to an explanation from the Government.


Like the hon. Member for Yarmouth (Sir F. Meyer), I was at first sight exceedingly disturbed about the form of this Resolution. To tine as to him, it appeared that charges were to be imposed on the subject which in the aggregate would amount at the highest rate to 20s. in the £ for Super-tax. But on reconsideration of the Resolution I arrived at the conclusion that not even the present Government could propose a tax of that amount. Concerning the point raised by the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham), I cannot help feeling that as regards paragraph (a), which sets out the rate of Surtax, he was right in assuming that no new charge was to be imposed upon the people. But paragraph (b), which says that the same Super-tax shall be charged for the year 1228–29 as was charged for 1927–28, seems to me less clear than paragraph (a). With all those who have spoken I feel that a great debt of gratitude is due to the hon. Member for Watford (Mr. D. Herbert) for bringing before the attention of the House and the country the enormous importance of the procedure which this House has adopted in regard to finance after long experience.

I appreciate the exceedingly ingenious defence of that procedure which was put up by the Secretary of State for War, but I am a little doubtful about it. His apology was that instead of having only a few weeks, or it might be only a few days notice of a contemplated change in taxation, we have, under the procedure which the Government have thought fit to adopt, 12 months notice. But does not that prove a little too much? If the Government, who are careful to give us 12 months notice, are only substituting, in fact, one form of financial procedure for another, does not that procedure, in itself, imply the imposition of a new charge? Otherwise what would be the point of giving 12 months notice of a change which was to come into operation this year? For those and other reasons which have already been communicated to the House I should like, once more, to express the gratitude which I am sure is felt in all quarters of the House to my hen. Friend the Member for Watford for moving the Amendment.


Can we have an explanation from the Government on the point made by the hon. Member for Yarmouth (Sir F. Meyer)? It is quite obvious that the drafting of this Resolution has been done very skilfully—so skilfully as to render it unintelligible to the ordinary Member of the House. What we want to know is whether or not paragraph ( b) means that there shall be Super-tax in addition to the scale of taxation which appears in paragraph ( a). It is a very simple point, and I hope the Secretary of State for War, who is in charge on this question, will be able to give a definite answer.


I think I can give a definite answer. The Super-tax for 1927–28, that is the old style Super-tax, is payable in January, 1929, and the Surtax—that is the new style of Super-tax—for 1928–29 is payable in January, 1930. Unless both these paragraphs ( a) and ( b) were passed now, the income for the year 1927–28 would be assessed neither for Super-tax nor for Surtax. In this Resolution the payments are continuous—first Super-tax, old style, and then, in 1930, Surtax, new style.

6.0 p.m.


I am afraid that explanation is not as clear to the House as it may be to the mind of the right hon. Gentleman. I would like to understand it quite clearly. We are legislating to-day for two things. We are fixing the rate of Super-tax for 1927–28, and we are fixing the combined tax for the following year, and what reason is there for having to do two years' work to-day? I think that is what is troubling the House, and a much clearer explanation than we have had of the necessity and implications of this Resolution would give widespread satisfaction in every quarter of the House.


Unless the provision were made for this transitional period, there would be no Super-tax or Surtax payable in January, 1929, and that is why both are included in this Resolution, one payable in 1929 and the other payable in 1930.


I beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Twelfth Resolution read a Second time.


I beg to move, in line 1, to leave out the word "years," and to insert thereof the word "year."

This Resolution raises, I am afraid, something about as complicated as the last, because it brings us to the treatment which the Government have meted out to the Sinking Fund and their whole new policy concerning the method of redeeming the National Debt. This is the first of a series of Amendments, the remainder of which are consequential, and in moving it I shall have the opportunity of speaking on the whole Resolution, so that repeated discussions will not be necessary. This Resolution involves an issue a great deal more important than was indicated in the remarks concerning it which the Chancellor of the Exchequer made in his Budget speech. I am not for the moment discussing whether or not we, on this side, approve of what he is doing, but the point—


On a point of Order. Do I understand that we are discussing each Amendment separately, or is the whole of the Resolution being discussed?

Mr. DEPUTY-SPEAKER (Captain FitzRoy)

The hon. Member for Keighley (Mr. Lees-Smith) is moving his first Amendment, but I imagine that he is raising all the questions which appear in his three subsequent Amendments—(1), in line 1, to leave out the word "respectively"; (2), to leave out the words "on the 31st day of March, 1928, and"; and (3), in line 2, to leave out the words "and the 31st day of March, 1929".


That is so.


I understand that that does not preclude the last Amendment on this Resolution, standing in my name, in line 5, after the word "manner," to insert the words "of debt redemption".


Not if that Amendment raises some fresh point altogether.


This Resolution, if it is accepted and followed up, will bring to an end the system by which the Budget surplus of each year is put to the redemption of the National Debt, and will, that is to say, sweep away what this Resolution, using the technical term, calls the old Sinking Fund, which has been established in this country, I believe, for over 60 years. In his Budget speech the Chancellor of the Exchequer dwelt almost entirely upon his proposals concerning the new Sinking Fund, but he did not make it clear that he was meting out quite unprecedented treatment to this old Sinking Fund, consisting of Budget surpluses, which was established about 1866. His broad plan, as unfolded in the Budget speech, was this, that he is forming what is called the new Sinking Fund, that is to say, the Sinking Fund which was refashioned two or three years ago by the Prime Minister when he was Chancellor of the Exchequer, and which, as the present Chancellor explained, was originally set up by Sir Stafford North-cote; and that he is going back to the policy which Sir Stafford Northcote established of making this Sinking Fund one containing what he called a fixed charge, so that, as the National Debt is redeemed and a little money is saved on interest, that money goes for the further redemption of the Debt, and it becomes cumulative in its effect.

We are not proposing, so far as we are concerned, to raise any objection to the principle of a Sinking Fund based upon a fixed charge, but one thing is essential. If you are going to do that, you must provide sufficient money to be sure that that fixed charge will be large enough to meet its requirements and to have a margin in addition for any contingency which may arise, such as a rise in the rate of interest on Treasury bills. Our criticism of this part of the Budget is that, as a matter of fact, it does not provide sufficient money for the scheme laid down. The scheme is too ambitious, and, because it does not provide sufficient money, when you look into the details you find that the Chancellor of the Exchequer has been driven to adopt a whole series of wangles with regard to the Treasury Note Reserve and the Savings Certificates, and among other things he has had to raid this old Sinking Fund, although his speech did not indicate what exactly was being per- petrated. The Chancellor of the Exchequer said he was going back to the system established by Sir Stafford Northcote, but, as a matter of fact, this is not that system. Sir Stafford North-cote established the new Sinking Fund, of the type which the Chancellor has explained, but at the same time he retained the old Sinking Fund, the Budget surpluses, so that revenue was coming from two sources for the purpose of redeeming the National Debt.

The right hon. Gentleman the Chancellor of the Exchequer has established a new Sinking Fund, but he has not provided sufficient money in order to finance the scheme, and because he has not done that, he is taking the money out of the old Sinking Fund in order to balance his accounts in the new Sinking Fund. What he is doing is that, in the very process of establishing a new Sinking Fund, he is raiding the Sinking Fund which we already possess. That is what is happening, and it is no use the Chancellor of the Exchequer thinking that he can hide this fact by saying that if other Chancellors were to follow his policy, the National Debt would be wiped out in 50 years. I am not discussing the amount at all; I am discussing this method, which involves what is really an attempt at a public deception, but that public deception has not succeeded, because the result of this method has been that the price of Government securities fell immediately the Budget statement was made, and fell admittedly because of the treatment of this old Sinking Fund.


They went up yesterday.


Naturally, but we know that the factors which make securities go up and down are numerous. If you impose an adverse factor, that drives them down, and if they may subsequently go up, they are still lower than they would be if that adverse factor had not been applied. [ Interruption.]—Hon. Members seem to contest that proposition. May I then support myself by the remarks on the subject, made two days after the Budget was introduced, by the City correspondent of the "Times"? That is an authority which I hope hon. Members opposite will consider we are entitled to quote, and I hope the right hon. Gentleman the Secretary of State for War will answer it instead of being merely amused. Writing in the "Times" of 26th April, the City correspondent stated: The only market which failed to derive any benefit from the Budget was that for British Government securities, which closed lower on the day. This was due to the Sinking Fund proposals. The raiding of the old Sinking Fund—namely, the surplus of £4,239,000 realised on last year's Budget—was described as very objectionable, for hitherto Budget surpluses have always been applied automatically to reduction of debt. As was anticipated, the proposal to fix the annual debt charge was criti[...]ised on the ground that it may prove to be a device for raiding the Sinking Fund. There is one further feature of this Resolution to which I wish to call special attention, because I do not think it has any precedent in our financial history. By this Resolution the Government not only take the Budget surplus of last year, but they are empowered to raid any Budget surplus which may accrue next year; that is to say, it lays down the right to raid the old Sinking Fund in advance. I have not been able to find any precedent for this at all. The Chancellor of the Exchequer explained in his speech that there had been raids on the Sinking Fund in the past—not very many; about once in 10 years or so—but on each occasion the Government justified themselves by saying that on account of the special difficulties and circumstances of the year they were entitled to take that action. But here is a proposal by which the Government take power to raid in advance, quite apart from there being any exceptional circumstances. It is pretty clear that, if it is done, this old Sinking Fund comes finally to an end, and if that is what is intended, we move this Amendment because we are entitled to have information from the Government as to what they mean on that point. Looking at the figures of the old Sinking Fund policy, this is indicated, because the Chancellor of the Exchequer established his new Sinking Fund, but he is giving himself so small a financial margin that., if any contingency arose, like a rise in the rate of interest, the money he has provided would not cover his obligations, and money would have to be found from some other source. This Resolution, obviously, indicates what that other source is intended to be.

This is not merely a minor matter of the Sinking Fund of one year. If we are now taking the step which means that this old sinking Fund is to disappear, we are really taking a major step in the history of the National Debt. This old Sinking Fund has been very important. I have been looking at the figures of the last six or seven years, from 1920 onwards, and I find that since that time, this old Sinking Fund has redeemed nearly £450,000,000 of National Debt, which is much more than the new Sinking Fund to which the Chancellor of the Exchequer confines his attention. This is really, therefore, a major question. It seems to me that we are watching the passing of this old Sinking Fund, and if that be the Government's policy, it ought to be definitely stated. This Amendment is moved in order that a definite statement of their intentions may be made.


I beg to second the Amendment. In common with many other Members of the House, when I heard the Chancellor of the Exchequer's Budget speech, I was carried away by the buoyancy of his optimism into believing that, in some respects, he was producing a good financial scheme; but with every day that has elapsed since then, and with every day that I have studied in detail these proposals with regard to the Sinking Fund, I have realised that that part of his speech, at any rate, consists of what my hon. Friend below me calls a series of wangles, and which I would call a number of devices.


May I ask if the word "wangle" is Parliamentary?


It is not a term of art, but I have always understood it to be another word for "device."


I think I am, at least, in order in saying that the proposals include a number of devices which are quite unworthy of the high traditions of national finance to which we are accustomed in this country. The particular matter which is dealt with in the Twelfth Resolution is confined to the question of the treatment of the surplus on the financial years 1927 to 1928, and 1928 to 1929. We shall have particulars on the later Resolution dealing with the other devices which have been adopted to deal with the Sink- ing Fund as a whole. On this matter, there is, first of all, the treatment of last year's surplus. The Chancellor says that, instead of that being handed over to the Debt Commissioners, it should be put into a Suspense Fund. As a matter of fact, what has happened to that £4,000,000 odd already? It may not have been handed to the Debt Commissioners, but it has certainly been used to reduce the Floating Debt, and, therefore, what is actually proposed by the Chancellor, is that this £4,000,000 odd shall be re-borrowed. That is surely a proposal which is very injurious to the credit of this country.

Now we come to the provision for the year 1928 to 1929. That consists, in fact, of two parts. There is, first, the setting aside of the money derived from the Petrol Duty into this Suspense Fund to meet the occasion of the new de-rating proposals. In the second place, there is a proposal to raid any accidental balance that there may be in the ordinary course of the Budget. I suggest that both these separate devices are injurious in themselves. First, in regard to the accidental balance, whatever it may be. I am not quite clear that the House fully appreciates the effect of the change of procedure adopted by the Chancellor of the Exchequer. As I understand it—I shall be corrected, no doubt, if I am wrong—in previous years the Chancellor has set aside a definite sum as a Sinking Fund, and that definite sum, £65,000,000 last year, was to be applied to the relief of debt, and was so applied. In the year which we are now considering, 1928 to 1929, there is in the accounts a figure of £65,000,000 put down for the Sinking Fund, but, as I understand it, that is merely an estimate of the amount that will be so used. In the event of the interest on the major part of the Debt rising above the amount anticipated, or in the event of the amount of interest on the Savings Certificates rising above the amount estimated, this figure of £65,000,000 will he very much cut down. It may be, and I think is likely to be, reduced to the amount of several millions below £65,000,000. If that be the right interpretation, we shall be faced at the end of this year with this position. Even if there be an accidental balance to this Budget, we may be faced with a very great reduction in the figure of £65,000,000, and yet the accidental surplus will not be used to increase it up to the full amount of £65,000,000.

In the second place, we have to deal with the definite allocation by the Chancellor of the Exchequer of the yield of the Petrol Duty, for that is what it comes to. With regard to that, the Minister of Health, in defending the Chancellor of the Exchequer, argued in this way. He said, "If we were proposing to run into debt, and spend this year money that we were only to get next year, we should be blamed. We certainly ought not to be blamed for getting money in advance before we need to spend it. If a company were to do that it would be very laudable." I would remind the Government that the national finances are not in the same position as the finances of a company. What is required is not to find the money a year in advance of the occasion of spending it. The right method, the method that has been adopted by all Chancellors of the Exchequer in times gone by, is to find the money in the exact year in which it is required. Why is that the case? Because it is a very improper thing to place a burden upon the taxpayers in one particular year for some benefit that you may confer upon them in the following year. The right method of finance is to use the money year by year as it is required. It is equally wrong to spend money to-day by raising a debt. It is equally wrong to raise more money than you require in the financial year, in order to spend it in some subsequent year. These are wrong principles. The right principle is to raise the money in the year in which it is required.

That leads me to consider why the Chancellor has adopted this course. I sweep away his attempt at camouflage in the explanations which he has given. The Chancellor is like a conjurer who, when he wants to do his trick, proceeds with some excellent patter in order to take in those who are listening to him. You have to look to what he does, and not to what he says. What he is actually doing is to put aside, out of unnecessary taxation in this year, a sum which will be available in a future year. Why is he doing that? It is perfectly clear to those who go behind finance to the electoral situation. Assuming that the calculations of the Government are correct, the Election will take place after next year's Budget. Therefore, it is perfectly clear that what the Chancellor of the Exchequer would like to be able to do, is to make a great Budget next year, in which he gives away great benefits and reduces taxation. If he has raised an unnecessarily large amount of money this year, he will be able, as a result to reduce taxation next year. That is perfectly clearly the object of the proposal, but it is not an object to which this House ought to be a party. We ought to be a party to dealing with the finances of the country in the recognised way, and to finding the money at the proper time when it is required, and net to place upon the taxpayer the burden of raising money which is not needed for the immediate requirements of the State.

The fact is that the whole of this Budget, the whole of the devices which the Chancellor of the Exchequer has introduced, are rather like the way in which some shady company chairman issues his balance sheet to the shareholders. Most Members know quite well that the form in which the company's balance sheet and profit and loss account actually see the light of day is not the form in which it is first decided between the directors of the company and their auditors. It is certainly not so in the case of the disreputable companies. A great deal of window dressing goes on between the drawing up of the accounts in the natural form and the shape in which they are presented to the shareholders. What the Chancellor is doing is that same kind of shady window-dressing with the national accounts which the disreputable company director does with the affairs of a private company. I, for one, as an upholder of the high tradition of finance in this country, disapprove of these devices, of these subterfuges in order to disguise the real facts. What we want in this House, and what we want the country to have, is an accurate knowledge of the finances of the country. I disapprove of the method in which they are presented; one part of that humbugging method is this proposal to sequester the surplus of last year, and still more to sequester all the surplus that may arise in a forthcoming year, for the purposes of putting it to the Suspense Account, as this Resolution proposes.


The best way, in my opinion, of putting to the test the proposal which is made by the Government with regard to the Old Sinking Fund is to make a short examination of what provisions they made during last year, and what they propose to make in the coming year, for the reduction of debt. There are no means of ascertaining exactly what is the net reduction in our national indebtedness during the past year, but it is quite apparent from the accounts, and from such information as has been given to the House in the course of this Debate, that the £65,000,000 nominal of the New Sinking Fund has actually been whittled down to such a small sum as to be almost negligible, that, indeed, the effect of the Sinking Fund has been destroyed by the means by which the money was raised, on the one hand, and, on the other, by issues or by guarantees entered into by the Government which have tended to depreciate the credit of the Government. This is no pedantic question of whether or not Sir Stafford Northcote was right, or whether the examples set by Chancellors 10 or 20 years ago was a good or a had example. It is a matter of real importance to every industry in this country which is dependent upon new capital for its extension and its re-equipment, and it is of prime importance to the Government as a whole in the new financial arrangements which they have to make for the conversion of the enormous debt now carried by the country.

Let me mention the first subject first. If this fund is large and is operative, and if what is known as the Baldwin Sinking Fund is in full operation and is not neutralised on the other side, the natural effect last year would have been to reduce our national indebtedness by a net sum of £05,000,000—I mean £65,000,000 cash; it might have been a great deal more than£65,000,000 nominally. The repayment of that £65,000,000 would have set free some 865,000,000, held mostly in this country, a little of it abroad, perhaps, for investment in other ways and in other forms. Some of it would probably have sought new gilt-edged securities; moneys that are held in trust obviously go in that direction. A considerable amount would have been set free for the prior charges of industrial concerns. Railways would have had a larger field of investment money into which to dip for their new loans. Big industries which were floating debenture charges or preference stocks would have had something, within the limit of that £65,,000,000, available for their purposes. To that extent it would have been of direct benefit to industry, because of the freeing of the capital which is now locked up in Government securities.

Then it would have had a further effect. The next effect would have been that it would have tended to bring down the current rate of interest. In my view there is no benefit which the Government could confer upon the country which would have been greater than an all-round reduction in the rate of interest of gilt-edged securities. That would affect not only Government stock but corporation stock; they would have been able to borrow on even better terms than they can at the present time, and in the case of some great corporations the terms are even better than those of the Government. It would have lowered the rate of interest, or have tended to lower the rate of interest, on all the borrowings of the great concerns. Indeed, my hon. Friends in the Labour party will know that the best way of reducing the power of capital is to reduce the interest which you pay for the use of that capital, and by reducing capital theoretically it would practically have had the effect of giving the industries of this country a better chance of keeping their heads above water. It, therefore, becomes a practical question for the industries of this country, as it certainly does for the Government in the management of our national finances.

The amount of loan which has to be redeemed this year and next year runs into some hundreds of millions, and it must be a constant preoccupation of the Chancellor of the Exchequer and the Treasury officials. If they are not going to substitute for the loans which are to be converted and which will mature during the next two years loans on better terms than the existing terms, it means that there will be no relief in the interest charge which has to be borne every year by the revenue of the country. If the conversions are to bring no advantage, it means that one of the main sources of the reduction of annual expenditure will be taken away from the Government. One of the principal fields in which there might be a reduction of our annual expenditure is in the interest charges. Those interest charges cannot be reduced unless these maturities are met by the repayment, partly in cash and partly in stock, on better terms than the loans are now held in the market.

From those two prime considerations let us now proceed to an examination of how far progress was made in the last 12 months towards attaining those ends. The new Sinking Fund nominally amounted to £65,000,000, but from that, as was admitted by the Chancellor in his opening statement, we have had to provide, for the interest on Savings Certificates not otherwise provided for in the Budget, the sum of no less than £14,000,000, that is, in addition to what had already been provided for in the way of interest on the maturing of National and War Savings Certificates. Then there was during that year a sale of assets amounting roughly to £15,000,000. These various assets were purchased out of loan moneys, and when they were sold the proceeds ought, in strict propriety, to have been used for the repayment of those loans. Indeed, the proceeds of those assets should have been nothing more or less than an addition to the Sinking Fund. Instead of that, the proceeds were used for the ordinary purposes of annual expenditure. Then there is the notorious transfer of £12,000,000 from the Road Fund balance and the surplus of £4,500,000 or £5,000,000 which was appropriated. There is also to be deducted from this sum of £65,000,000 the amount of which the Chancellor of the Exchequer deprived himself in the current and future years by his Schedule A tax amendment of last year. By providing fur the payment of the whole amount in the month of January there was, of course, no payment to be made in the month of July, and the effect of having taken that amount from the taxpayer early in the year—if you assess the value of that in its capital proportion and the interest chargeable upon it—that means that there is an addition of no less than £8,500,000 to indebtedness. Indeed, it is not an effective reduction of debt, but exactly the opposite, being an effective addition to debt.

Then there is the capital portion of the payments to America, which comes to no less than £5,000,000. That is accounted for in the national accounts. At the very time when we are receiving payment from our old Allies—payment of capital in repayment of debt—and that capital repayment by them goes into the revenue account, our payment to the United States of £5,000,000 is regarded as a repayment of capital. What is justifiable in the one case is justifiable in the other. If it is necessary to point out in the national accounts that £5,000,000 is devoted to the repayment of capital in the case of the United States debt, it would be equally correct bookkeeping to provide that the capital repayments from our Allies to ourselves should also be regarded as partially a capital repayment, and not taken as though it were simply the payment of interest and nothing more. The best way of dealing with that would have been to set off the capital repayment on one side against the capital in repayment on the other. I think that if we were to analyse the Allied payments we should find that the repayment of capital in respect of their loans comes to almost identically the same sum, within, perhaps, 2100,000 or £200,000, of the capital repayment to the United States.

Finally, in last year's accounts there was the repayment of the Kenya and Palestine loans. Those have both been taken into the revenue account, whereas they ought to have been dealt with as repayment of loans. To deal with them as revenue when they are nothing more or less than the repayment of loans has the natural effect of reducing the effectiveness of the new Sinking Fund by the creation, or what is nothing more or less than the augmentation, of a deficit. What do those sums come to in total? They come to a total deduction of £64,000,000 from the £65,000,000. There are a number of other questionable items which one might have added, but I do not propose to include them, because they are debatable. Those I have specified are not debatable; they are actual facts about which there is no dispute. We might have taken into account the new guarantees, the trade facility guarantees. Those moneys could never have been borrowed at their present rate of interest but for the fact that there was the guarantee of the Government behind them. There has been an enormous addition to the Local Loans 3 per cents. The Government may plead they have little or no control, but, as far as the market for capital is concerned, as far as the City is concerned, as far as industry is concerned, it makes no difference whether it is Local Loans Stock which is issued, or a new issue of Consols. It makes no difference whatever. It takes out of the market an equivalent sum of capital which is available for gilt-edged investments. The only way the Government can possibly achieve either the reduction of their Debt or the conversion of their Debt is to see to it that their demands on the market for gilt-edged investments are very much less than the amount of money clamouring for investment, and to that extent the Sinking Fund would have been the most potent influence in the money market during the last 12 months and in the year to come.

I turn from the year which has just closed to look at the provision made for the coming year, 1928–29. The provision for the coming year is to be on the Northcote basis. The sum of £355,000,000 is to be provided for the service of the Debt and the reduction of Debt. If the interest charged is large, the margin left for the reduction of Debt will he small; if the interest charged is small, the margin for the reduction of Debt will be large. That, roughly, is the principle on which it is to be worked, but with £355,000,000, the sum fixed by the Government, the nominal Sinking Fund will actually be much less than even the smallest figure of the Baldwin Sinking Fund in the past. It cannot reach £50,000,000, it is impossible that it should do that, and unless Treasury bills are floated at an extremely cheap rate, a good deal cheaper than is anticipated by any of the experts, it is very doubtful whether the new Sinking Fund will come to much over £40,000,000 nominal for the coming year. If £40,000,000 be the correct figure in the coming year, we have also to allow for the insufficient budgeting for the provision of interest, which is a considerable figure, no less than £24,000,000.

I hope the House will not think it improper that I should go info this figure by figure, but I want to build up the case, and I know the representatives of the Government will appreciate that I am doing it fairly, without taking ultra-controversial points. Let us see how the budgeting for next year has been done. In 1927 we spent on ordinary interest £299,000,000. The Savings Certificates' interest on repayment came to £15,000,000. That brings the total up to £314,000,000. Then there were the Savings Certificates with accrued interest in them, which was not provided for, £14,000,000, which makes £328,000,000. The provision for this year, if it is to be anything within the figure I foresee, will not be more than £304,000,000, so that there is a short fall of £24,000,000 purely on the debt redemption account. If that be so, and if there be again taken £4,500,000 from the Road Fund; if the capital portion of the United States debt is regarded as a capital repayment of £5,000,000; and if the sale of assets is £10,000,000; and if the currency note assets are to be taken in accordance with the Resolution which will be laid before the House this evening at £13,000,000, it means that the actual net reduction will be £56,700,000 from the nominal Sinking Fund of £65,000,000. If that be the correct figure, how strong is the reason for not tampering with the old Sinking Fund, because even the new Sinking Fund is quite inadequate and will not provide for the requirements of the year. There will remain £4,250,000 from the old Sinking Fund to help us out in the course of the year.

The Resolution provides that the old Sinking Fund for next year is to be similarly tampered with. There is a nominal surplus next year and that also is to be taken for the purposes of annual expenditure. The natural effect of that is that in the course of the next 12 months so far from there being an appreciation in Government credit it will remain absolutely stationary or it may grow worse. The Secretary of State for War and the hon. Gentleman who opened the discussion asked questions with regard to the rise in Government stock, but the rise from day to day does not matter very much. There are all sorts of influences brought to bear day by day, but I think we should measure national credit over a fairly long period. I do not think we have any reason to be proud of the way in which our national credit has improved during the last four years.


Why does the right hon. Gentleman always take the last four years?


I have no particular objection to taking any date which the hon. Gentleman mentions. I have taken the last four years because the Sinking Fund has not been operative during that period and I put down the stabilisation of British credit to the absence of the Sinking Fund. I am not taking that period with any political object and not because the four years synchronises with the lifetime of the present Government. I have pointed out the close connection there is between a Sinking Fund without neutralising influences and one which is constantly being reduced by Budgets which bring in to the revenue sums which should have been used for purely capital purposes.


When the right hon. Gentleman spoke on the Budget he compared our credit with several other countries and I thought, it was with reference to that argument that he compared our credit so unfavourably and only applied it within the last two years.


I agree that there had been a great improvement since the conclusion of the War but by the good fortune of having large surpluses which came within the period of the ex-Chancellor of the Exchequer, the right hon. Member for Hillhead, and whether he wished it or not under the old Sinking Fund these surpluses went- to the reduction of debt by scores of millions. That had a marked effect. I do not know how far the hon. Member opposite would like to go back but if he tries to translate the facts I have mentioned he will see that British credit rose with great rapidity up to 1923 and from that date there has been a serious sagging and it is only within recent times that there has been any signs of a recovery, yet we have not touched the high watermark of 1923. The absence of that recovery, which has been pretty general throughout the world, is entirely due to the Sinking Fund not being made an operative influence in improving the credit of this country. I do not wish to depreciate the credit of our own country but I think we could make it much greater if we were not taking so much each year from the Sinking Fund and devoting it to annual ex- penditure, whereas it is money which ought to have been used only for reducing the debt.

My reason for pressing this point is that I see no chance of our national credit improving or of our financial conditions becoming more favourable for British industry whatever you may do in the way of transferring burdens or protective duties. There can be no permanent recovery unless we can approach nearer to the lowest interest standard in the world instead of being the fifth or sixth in the list. I believe British credit is as good as any in the world but the money market does not look at it in that light. They look at it from the point of view that there is more and more stock available. What operates is the old law of supply and demand translated into the ordinary practice of the money market. So long as they have that impression so long will it be impossible to improve the rate of interest on which the Government raises money when it deals with the 5 per cent. War Loan. It will not be possible to deal with that subject by any ingenious contrivances and the conversion will have to be a straightforward transaction from beginning to end.

There may be some means by which £2,000,000,000 can be wiped out or converted without appealing to the market for the whole of that vast sum. We may draw other investors in and provide in that way for the repayment of some of our British investors in the enormous loan of £2,000,000,000. But unless we can arrange that whatever be the stock it is actually a much smaller sum than the gilt edged money set free by redemption on maturity you will have to continue paying at the present rate of interest. Unless we can improve our national rate of interest our accounts will become waterlogged and this will make the price of money one of the disadvantages under which we shall continue to labour. For the purpose of helping industry and improving the national credit I think this House should take every means in its power to prevent the Government reducing the Sinking Fund either old or new.


The right hon. Gentleman the Member for West Swansea (Mr. Runcirnan) has approached an Amendment which relates to the old Sinking Fund with a disquisi- tion on the delinquencies of the Government relating to the New Sinking Fund, and he has asked us to believe that last year, instead of having redeemed through the Sinking Fund something like £65,000,000 we have in fact redeemed only £1,000,000.




In a speech which the right hon. Gentleman made last week he dealt in a similar manner with the two previous years and he showed that he was satisfied that instead of having redeemed anything we had added £93,000,0040 to our outstanding indebtedness. I think I am quoting his figure correctly. It is worth while examining what has actually been the net operation of the Sinking Fund during the four years taken by the right hon. Gentleman. There are two ways of stating the matter. You may deal with it by taking the normal amount of the new Sinking Fund and deducting from it any deficit that occurred during the years which you are reviewing and in that way exclude from consideration either the concealed Sinking Funds or the Savings Certificates. If you exclude the hidden Sinking Fund and the certificates you will find that the net reduction by the Sinking Fund during the last four years is 172.9 million pounds. That is the exact net reduction after taking into account the deficits of 1925 and 1926 amounting to £50,000,000. If you take it in the other way and take into account the old Sinking Fund the deficits and also the short payments of interest on the Savings Certificates and take credit for the hidden Sinking Fund the actual amount of net reduction caused by the operation of the Sinking Fund is 155.7 million pounds.


Is the right hon. Gentleman taking in that calculation the stocks which the British Government guarantee?


The figures I have given the right hon. Gentleman would no doubt admit as being correct as I stated them but he wishes to set off against those figures the new loan created under the British Government's guarantee under the Trade Facilities Act, the Local Loans Act and the Palestine Loan and similar investments. Before I deal with that I want to deal with the other point raised by the right hon. Gentleman the Member for West Swansea. He said, "Yes, but you have taken into the revenue account capital assets." We all know that it is an extremely difficult thing to define assets of this kind. Every Chancellor of the Exchequer for some years past has dealt in exactly the same way with the so-called capital assets. But if you do take them and exclude them from the revenue account it is clear that you must exclude capital liabilities which are exactly the counterpart of the capital assets which come into the national accounts. The right hon. Gentleman will remember although he did not remind us that there are enormous war terminal charges and a large annual expenditure on war pensions. Is not the liability for war pensions a capital liability arising out of the War?


I made it clear what I meant by the use of capital assets. I said that such assets as had been purchased out of Loan money when sold should be used to wipe out loans.

7.0 p.m.


The right hon. Gentleman claims to have whittled down the Sinking Fund to such an extent that instead of having redeemed through the Sinking Fund something like £65,000,000 he makes out that the amount is only £1,000,000 net. It is to that kind of argument I take exception. The right hon. Gentleman said "Yes, you may have guaranteed loans under the Trade Facilities Acts. You have created new credit." If he meant by that, "You have come on the gilt-edged market and taken money which would otherwise have rendered other loans cheap," I would agree with him, but that is not what he has been saying.


It is what I said last week.


It is not what the right hon. Gentleman has been saying to-day or all that he was saying last week. He said that, at the same time that we have been reducing Debt by the Sinking Fund, we have been increasing Debt by the guaranteed loans. He set the one against the other, but are they comparable? Of course, they are not comparable. The national loans should be redeemed out of the Sinking Fund, but the guaranteed loans that have been made to trading firms to electrify railways, to set up power stations, should not be redeemed out of the Sinking Fund but should be redeemed by the borrowers out of the undertakings. These loans do not create any charge whatever on the National Exchequer and there is no need whatever to redeem them out of the Sinking Fund.

I do not know if the right hon. Gentleman speaks for the Liberal party in this matter, because I have an interesting little account given to me from the Liberal Yellow Book, which must have been directed to the sort of argument that he has put before this House. Indeed, his argument should properly have been addressed not to the Government, but to his colleagues on the Liberal Benches. On page 114 of the Liberal Yellow Book, referring to Government guaranteed loans, which they extol as a proper method of developing the assets of the State—indeed they think so much of them that they are going to set up a Department of State called the National Investment Board for the very purpose of developing these guaranteed loans—they say: These arrangements would not interfere in any way with the normal operation of the Sinking Fund for the reduction and eventual extinction of the Dead-weight Debt—just as this is not now affected by the financing of the telephones or the issue of Local Loans Stock. The Dead-weight Debt would continue to be reduced each year by the amount of the Sinking Fund, and the Budget would he progressively relieved of interest charges by a corresponding amount. The right hon. Gentleman will excuse my calling his attention to the next part, but it is important. As regards the field of capital developments and the rate of interest, it may be true that, if we were to stop building houses and roads and power stations, the Treasury, finding fewer competitors in the market (apart from overseas borrowers), might be able to borrow a little more cheaply. But a project of lowering the rate of interest by suspension so far as possible of new capital improvements—in fact, by stopping up the outlets and main purposes of our savings—would he distinctly misguided. Put directly, perhaps, no one would uphold such a policy. Nevertheless, it lurks un-recognised behind much opposition to schemes of national development. I am afraid that the right hon. Gentleman has hardly been conscious of what was lurking behind his opposition.

He has pointed out again to-day that the credit of this country has not increased so quickly as the credit, of other countries in recent years, and he puts that down to the non-effectiveness of the Sinking Fund. I am not prepared to admit that it is due to the non-effectiveness of the Sinking Fund. Anybody who contemplates the difficulties under which my right hon. Friend the Chancellor of the Exchequer has been labouring these last few years, cannot help feeling a glow of satisfaction that, notwithstanding the difficulties, the credit of the country is as good as it is. Since March, 1925, the Debt which has matured for payment has amounted to £1,014,000,000, and the whole of that debt has been cared for; part of it has been repaid in cash and part of it by conversions, except a sum of £142,000,000 which is now outstanding and is to 'be dealt with this year.


Very unfavourable conversions.


I do not agree with the hon. Member. The market conditions have been in every case the governing factor. You cannot get money cheaper than it is. In a conversion, you are dependent upon the market, and, when you have to come for such large sums in successive years, the surprise—if surprise there be at all—is that you have succeeded with so little derangement of the country's finances in making the conversions in the way that they have been made. The right hon. Gentleman has quite rightly called attention to the desirability of cheap money being available for trade. During that period of four years some £450,000,000 of securities have been placed on the London market on behalf of the Dominions, the Colonies, and foreign countries. That is a fairly large sum for the years during which all those other operations have been carried through. That money has, of course, been useful to this country. It has stimulated our export trade, and, without it, I have no doubt unemployment would have been worse.

What is the complaint of the right hon. Gentleman? That the Sinking Fund has not been effective, has not been large enough. That is his complaint; it must be. A week ago he called attention to the wonderful effects that £5,000,000 of American money had had on the Funding Loan, and he said, "If only you had £50,000,000, what an effect it would have had! How much higher your public securities would have stood! How much lower interest you would have had to pay to-day!" Are the Government entirely to blame for this, for the events of 1926 costing the Exchequer one way or another £80,000,000? All that is not a matter for which the Government can be blamed, and if that amount had been in hand it would have been better than the 50,000,000, and would probably have had a better effect upon the price of securities.

Let me come to the immediate Amendment that is before the House. The hon. Member for Keighley (Mr. Lees-Smith), who moved it, asked whether this raid on the Old Sinking Fund was to be considered its death knell and whether in future there was to be no Old Sinking Fund. The Chancellor explained exactly what was being done over the Old Sinking Fund. The sum of;£4,260,000 is being carried from the Old Sinking Fund to a suspense account, something to be dealt with by future legislation of this House. The next year, it cannot be considered as a raid, because the money is being accumulated, £14,000,000, for the very purpose of being carried into the suspense account, and that suspense account, together with the revenue that is raised year by year, is intended, as the Chancellor said, to finance the plan to relieve the rates. The Fund is being accumulated in advance for the purpose of relief of the rates, and really the House has to come to a decision. Does it want the rating plan, in which case it has got to finance the rating plan, or—


At the proper time.


Is there any harm in looking in advance and forming a Reserve Fund for a liability that you know is going to fall upon you? That money in the meanwhile will not be wasted. It will be in the Reserve Fund. It will be earning income for the Government. It will not be wasted, and it will be ready to be applied when it is required, when this House has legislated. It cannot be applied before. This House in legislating will direct the final destination of that Suspense Fund. The House has to snake up its mind. Does it want the plan, in which case it will have to effect the financing of the plan. If the House is not prepared to accept the proposition to finance the plan by last year's surplus of £4,200,000 and this year's provision being put to a suspense account, then it has got to face some other means of raising the money, and that means some other form of taxation. I have no hesitation in asking the House to reject this Amendment because I believe the House is in favour of the plan.


I want to express my regret that the Chancellor of the Exchequer is not able to be here to-day to take part in this very important Debate, but I am glad to say that the Treasury Bench has been reinforced since last night. One might safely assume that some S.O.S. has been broadcast in the Government Departments and the British Army has come to the rescue. This discussion has so far wandered rather a field from the somewhat narrow point that was raised by my hon. Friend the Member for Keighley (Mr. Lees-Smith), I would not for a moment suggest that there has been any collusion between the right hon. Member for West Swansea (Mr. Runciman) and the Secretary of State for War. It is rather an evidence of the foresight of the right hon. Gentleman that he should have come down to the Debate this afternoon with voluminous typewritten sheets which were singularly applicable as replies to what the right hon. Gentleman said.

The point of my hon. Friend's Amendment is a very narrow one. It is asking the House of Commons not to agree to a Resolution which in effect means the abolition of the Old Sinking Fund. I need hardly remind the House that the Old Sinking Fund means that the Budget surpluses shall be devoted to the purposes of Debt reduction. There have been occasions—the Chancellor of the Exchequer, during his Budget speech, flourished a large sheet of paper on which he said he had a list of them—on which the Sinking Fund has been raided. The general practice has been that, if a surplus did accrue, or had accrued at the end of the financial year, it should be devoted to the purpose of Debt reduction. The Resolution which we are now asked to approve would give to the Treasury or to the Exchequer in future the right to dispose of the surplus in any way that they might think fit and, therefore, this Resolution is in effect, to use the expression used by the Secretary of State for War, an authority to the Exchequer in future to raid the Sinking Fund.

I think it will not be out of order on this Resolution to say a word or two about the controversy between the Secretary of State for War and the right hon. Gentleman the Member for West Swansea. I am not going into all the detailed figures given by the right hon. Gentleman—when figures are thrown across the Floor of the House in such a quarrel, it is quite impossible at the moment to appreciate their true significance—but there is one single figure bearing on this matter which cannot be disputed and which is very easily understood. Three years ago, the Chancellor of the Exchequer allocated £50,000,000 to the Sinking Fund. In the following year he allocated £60,000,000, and last year he allocated £65,000,000. We had, during those three years, a deficit amounting to £50,000,000, and, therefore, it is a very simple sum in arithmetic to arrive at the conclusion that the Statutory Sinking Fund, or what the right hon. Gentleman called the Baldwin Sinking Fund, of £50,000,000 a year, has not been paid during the last three years. As a matter of fact, only an average of 43,000,000 a year has been paid. That is a raid on the Sinking Fund, and the purpose of my hon. Friend's Amendment is to prevent practices of that sort in future.

Reference has already been made to a proposal which is to come into operation next year, that is to say, the provision of a fixed debt charge. I am speaking from memory—I was not at all prepared to speak in this Debate—but, if my memory serves me rightly, the Chancellor of the Exchequer has provided in this year's Budget £304,000,000 for the purpose of interest and cost of debt management, and £65,000,000 for the Sinking Fund, that is to say, £369,000,000 altogether. He apparently feels certain that what happened last year will not happen this year, and is providing only £304,000,000 for interest and service of the debt. In each of the last two years, his estimate of interest on debt has been far short of what the interest has actually amounted to and, therefore, it is very reasonable, although I am never dogmatic—I think the House will at least give me that credit—in expressing an opinion as to what may be the result of estimates made often 18 months before the expenditure fully matures, it does seem likely, judging by the experience of the last two years, that the Chancellor of the Exchequer this year is not providing for a Sinking Fund of £65,000,000. Next year it is proposed to provide a, fixed debt charge of £355,000,000, and there is a very close connection, as I shall show in a minute, between that and the Resolution which is now before us. The Statutory Sinking Fund is £50,000,000, and £50,000,000 deducted from £355,000,000 only leaves £305,000,000 for the debt services; but there is another factor to be taken into account. I do no'-, want to raise this now, beyond saying that the Chancellor of the Exchequer says he is providing for the accrued interest on the National Savings Certificates. I do not understand it at all; I want to ask for information on it later. As far as I can see, he is providing, in that fixed debt charge, less than was provided for under the Baldwin Sinking Fund. The accruing interest upon the Nationd Savings Certificates may be £20,000,000 a year. He is only providing £50,000,000 a year for the whole of the Sinking Fund payment, and the Chancellor of the Exchequer himself stated that there was a specific Sinking Fund requiring, I think, £51,200,000 a year.


The average was £50,250,000.


Why should the right hon. Gentleman interrupt me about a matter of half a million? My point is not affected in the least. My point is that the specific Sinking Fund charge is more than the Chancellor of the Exchequer is providing altogether for Sinking Fund, for debt which has not a specific Sinking Fund attached to it, and something like £20,000,000 a year for the accruing interest upon the National Savings Certificates. Therefore, if you add these three or four items together, you are not going to get, under this new fixed debt charge, much more than. £20,000,000 or £30,000,000 a year for Sinking Fund.

It is all the more important that we should not approve the Resolution now before the House because, if times become more prosperous, there may be Budget surpluses, and they, under the old Sinking Fund, would go to the help of a, Statutory Sinking Fund which was not sufficient for the purpose. That, I think, is a very strong reason why the House should not adopt this Resolution. I entirely agree with what was said by the right hon. Gentleman the Member for West Swansea, and I think the point had already been made by my right hon. Friend, as to the bad effect which was created in the money market by the statement of the Chancellor of the Exchequer in regard to debt reduction. This is not the occasion to enter fully into this question, and, therefore, I simply confine myself to saying that I endorse, with all the force I have at my command, what was said by the right hon. Gentleman the Member for West Swansea as to the importance of maintaining a large Sinking Fund. The effect of that upon the National credit cannot be exaggerated, and, in view of the appalling problem—I do not care what party is in office, the seriousness of the problem of the conversion of huge blocks of War Debt during the next few years cannot be contested—the paramount duty of the Chancellor of the Exchequer is to be thinking night and day of the ways and means by which he can improve the national credit; and the most effective way in which he can do that is to maintain a large Sinking Fund.


I do not think that anyone in any quarter of the House will quarrel with the concluding words of the speech of the right hon. Gentleman the Member for Colne Valley (Mr. Snowden). I believe that in all quarters of the House great importance is attached to the argument on which that speech was based. I think we may also be grateful to the right hon. Gentleman for calling attention to the point raised by this Resolution and by the Amendment. Perhaps I might just call the attention of the House to the actual words of the Resolution, which are follows: That the old Sinking Fund for the years ending on the 31st day of March, 1928, and the 31st day of March 1929, shall, instead of being issued to tie National Debt Commissioners, be carried to a suspense account for the purpose of being subsequently applied in such manner as Parliament may hereafter determine. I frankly confess that the Amendment moved by the hon. Member for Keighley (Mr. Lees-Smith), and supported in a speech of great power by the right hon. Gentleman the Member for West Swansea (Mr. Runciman), places me in a, considerable dilemma. With a great part of the argument used by the right hon. Gentleman the Member for Colne Valley I cordially agree, but I believe that the central conception embodied in the Budget this year is a great and fruitful conception, and I believe that hardly any sacrifice—I want to be precise—hardly any sacrifice of financial principle which may be involved in this Resolution is too heavy a price to pay for it.

I frankly admit that the Budget does offer, as our Debate this afternoon has shown, a very tempting target for criticism. Some of the shafts of criticism have already found their mark, and in this Amendment we have another shaft of criticism. I do not know whether my right hon. Friends on the Front Bench are going to exhibit, with regard to this Amendment, the same sensibility to criticism which they exhibited in regard to previous Amendments which they have accepted. I do not know whether they are going, in this matter also, to follow what the Chancellor of the Exchequer described as the guidance of the House of Commons, but, speaking for myself, I would only say this, that I find it exceedingly difficult to resist the economic arguments put forward by the hon. Memfor Keighley and by the right hon. Gentleman the Member for West Swansea. I confess that. I hardly ever listen to the right hon. Gentleman without falling a victim to that rare combination of cogency of reasoning and lucidity of exposition of which he is so great a master. Those arguments would be true if we were considering the Amendment in isolation.

There are two right hon. Members of t his House whose absence this afternoon I greatly regret. I am riot referring to the Chancellor of the Exchequer, though we all regret his absence, but I should particularly have liked to hear, in connection with this Amendment, an expression of opinion from the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), for my recollection is pretty clear that in 1912, when he proposed his Budget of that year, he proposed to do precisely what the Chancellor of the Exchequer is proposing to do in the Budget of this year, that is to say, he proposed to hold in suspense what he then described as the largest realised surplus on record, a surplus of £6,500,000. That surplus was to be held temporarily in suspense, without prejudging what would be done with any part of it, with a view to meeting the contingencies which might arise from the coal strike of 1912, from the under-expenditure of the Admiralty in the year then expiring, and the threatened expansion of the German naval programme. There are Members of the House to-day who will remember that the proposal of the right hon. Gentleman was stoutly resisted on orthodox financial grounds by a right hon. Friend of mine the right hon. Member for West Birmingham (Sir A. Chamberlain). I regret the absence of my right hon. Friend very much for that reason. I venture to recall to the remembrance of the House two sentences which my right hon. Friend then used: I deplore and I blame the choice which the Chancellor of the Exchequer has made of the way to treat the realised surplus of this year. I beg him to remember that one of the elements of our strength is our reserves for use in such emergency, and that he is the particular guardian of those reserves. I beg him even now, at this late hour, to show some sense of his responsibility in that respect and to reconsider the proposal which was laid before the Committee to take away the whole of the realised surplus from its proper and legal application to the redemption of debt. The words which my right hon. Friend the Member for West Birmingham addressed to the right hon. Member for Carnarvon Boroughs, I would address this afternoon to my right hon. Friend the Chancellor of the Exchequer, for no words of mine could possibly add to the force—I was almost going to say to the solemnity—of that appeal. I do not know whether' it is discreet—possibly it is the height of indiscretion—to ask whether those arguments which fell from my right hon. Friend in 1912 were addressed to his colleague the present Chancellor of the Exchequer before this Budget was opened. If those words were addressed to the Chancellor of the Exchequer and addressed to him in vain, it would be a great consolation to some of us who are rather perturbed in the financial conscience by this particular proposal, to know the grounds on which my right hon. Friend the Member for West Birmingham was led to acquiesce in what I can describe only as an outrage upon financial propriety. I will make this frank confession to the House: I am myself led to acquiesce in that outrage simply and solely because I do not want by any defection on a point of detail, however important, to weaken my support of a Budget which I regard as a great effort in constructive statesmanship.


I am sure we have all followed with interest the display of the rival arguments of financial experts. I wish to refer first of all to the speech delivered by the right hon. Member for West Swansea (Mr. Runciman). With the praise that has been showered upon him for the lucidity of that speech. I entirely agree, but I am not in agreement with many of the suggestions that he made in the course of his speech. Before dealing with the speech I would make one general observation. We have heard from all quarters of the House a great deal about the improved credit of the country. It may be true that nationally we are financially better, but I beg to remind the House that the credit of the majority of the people of this country was never so low as it is in 1927. It is a remarkable contrast that we should have begun this week discussing the problem of unemployment and how we can find bread for a million workers and their dependants, and that for the remainder of the week we are devoting ourselves to a learned discussion of high finance. The right hon. Member for West Swansea, in the course of a very able speech, submitted to the Members occupying these benches that this mysterious manipulation of finance was of first-class importance to the working classes of this country. The right hon. Gentleman proceeded to back up that statement with these arguments: He said that if you release millions of money that is now held by the Government and set it free for industrial pur- poses, you give an impetus to production, you create more employment, and you will have a tendency to increase the wages of the workers.

I submit that that is an economic argument that might have been applicable to the middle of the 19th century but is not applicable to the conditions of to-day. Industry is not withering to-day because of a shortage of capital. I do not know any industry of any consequence that can be run at a profit in this country that is not really over-capitalised at the moment. Without any knowledge of what is called "the City," I am sure that if an hon. Member in any part of the House can indicate to the wealth owners of this country that a greater return on their surplus wealth is to be found by supplying the needs in capital of a particular industry, the necessary capital will be forthcoming. As a matter of fact I think I would have no difficulty in proving to an unbiased audience that industry is suffering largely from over-capitalisation.

The next point made by the right hon. Member for West Swansea, or attempted to be made, was that the setting free of this £65,000,000 would lead to a reduction in the rate of interest and thereby ease the burden on the workers of the country. In reply to that I want to say two things. The first is that we have long ago passed the day when the banks of this country would allow the value of the money which they control to be reduced by the release of £65,000,000 now held under Government control. It was to prevent these things that the banks amalgamated. It is in order to regulate the price and the flow of money and the output of production that the great financial combines of this country have been brought into existence. But then I am more interested in the other suggestion made under this heading, namely, that if the rate of interest were reduced the burden on the working classes, who have to provide the interest, would be reduced, and that that reduction in burden would be expressed in a raising of the standard of living of the workers.

That contention is entirely due to a misunderstanding of how wages are fixed to-day. Employers do not sit down on a Saturday afternoon and estimate the amount of money which they have paid for the week, putting aside the on-cost charges and saying, "So much for inter- est and so much for this and so much for that, and now there is so much left, and because the rate of interest is reduced there is more left than there was before the reduction took place." Wages are fixed by the law of supply and demand applied to the labour of this country. The wages of the workers are not fixed by the rate of interest, but by the numbers of workers available and the number of jobs available. In these days, when we are baffled by the problem of unemployment, to suggest that a reduction in the rate of interest is going in the slightest degree to interfere with that law in the fixing of wages, is playing with the intelligence of the workers of the country.

The third point is this, though I am not sure that it is closely connected with the speech of the right hon. Member for West Swansea. The £65,000,000 which we are discussing is at present under Government control. The nation regulates the return which will be received by the owner of that sum for its investment. But when you release it from Government control you set it free to be invested elsewhere, and I would be very much surprised, leaving out of account the amount that belongs to trust funds, if the owners of it would be content to put it into industry or commerce at the rate at which they have lent it to the nation. I go further and submit to my hon. Friends that we should get under Government control as much as possible of the wealth and capital of the country. We may come into power in a few years from now. We want capital to finance our Socialist proposals. The more capital we have under Government control the greater facility will there be for the establishment of the order of society which we hope to build in substitution for the present one. Therefore, I want to impress on my own friends here that they should weigh very carefully every proposal that aims at freeing from Government control the wealth of this country. Keep it there even at this 5 per cent. because even at 5 per cent. or 4½ per cent. we shall be able to use it more profitably than we could hope to use the equivalent amount of money if we had to go into the market under a Labour Government and seek in a constitutional way from the owners of wealth the capital necessary to finance our scheme.


I shall not take up time for long, because the last speaker has nearly made me change my mind in deciding how I would treat this subject. I have been in agreement with almost everything that has been said by the right hon. Member for Colne Valley (Mr. Snowden) and by the right hon. Member for West Swansea (Mr. Runciman) and other speakers. I think that the suspension of the Old Sinking Fund is the most unwise thing that I could imagine any Government would have done, when we are all looking to the Government to raise the credit of this country—the Government credit and the credit of the country generally—and when we are looking for wisdom and for proper treatment of the nation's financial affairs. The Amendment deals only with the Old Sinking Fund. Many of the speeches have wandered from the Amendment and treated of the general credit of the country. I have not, like most of the Members of the Liberal party and the Secretary of State for War, had the advantage of reading the yellow literature which my right hon. Friend has mentioned, but I cannot imagine anything much more vicious than the chapter which he quoted from the Liberal Yellow Book. It is against all the precepts I have heard laid down in the House and against all the rules that financiers have advocated in order to restore credit. Before the War, when the Stafford Northcote Sinking Fund was working, Budgets were supposed to be, and in fact turned out to be, very accurate statements of what was expected to be the revenue and the expenditure of the country. In the War no Budget existed. No one attempted to make any estimate of expenditure and revenue. Even since the War I do not think any Chancellor, I do not think the Inland Revenue or the Treasury have attempted to say a Budget when it is brought in is anything more than a series of very vague guesses as to what will happen. The world has not settled down since the War and with real peace, within reasonableness, you will expect to know how things will turn out.

We have had these capital assets referred to. Sometimes they have fetched money and sometimes they have proved to be worthless. It has been the essence of all budgeting since the War that, while exercising due care, the Chancellor should be prepared to find all his calculations were wrong, and so they have turned out to be. Estimates have been made of the revenue coming in and the surpluses have been, whether real or not, out of all proportion to any surplus ever imagined before the War. What we are doing now is to say when the revenue for the year is brought in, anything over and above what we budgeted for is not to be used to pay off debt. But if we made a mistake, if China caused the expenditure to increase, or if Egypt or some other country were to cause an increase of expenditure, there would be no surplus at the end of the year, there would be a deficit and there would be nothing with which to pay off debt. Surely it is necessary now more than ever, if you get a realised surplus, that it should go to the Sinking Fund. It should go to paying off the huge capital debt, because it is clear if these estimates are inaccurate, if the balance is on the other side, not only will there not be a surplus but there will be a severe deficit, and the so-called Stafford-Northcote Sinking Fund will not materialise at all in that year. There will he no clear surplus and no debt paid off, even without dearer money, which of itself might upset all the Chancellor's calculations.

I do not think the reception in financial circles of the Budget was at all unfavourable. The Chancellor, with the help of his associates on the Front Bench, was endeavouring to cure some of the great evils existing in the country by a bold plan, but honestly those having a better understanding of finance should view this suspension of the Old Sinking Fund as a really bad step and one that is totally unnecessary, at any rate this year. The right hon. Gentleman has said this £4,000,000 is a very small matter. If so, why suspend the Sinking Fund this year for a paltry £4,000,0001 Why break one of the most important rules of finance for £4,000,0001 I will not touch on the more general subject of our credit and repayment of debt, because I dealt with that last year, and the right hon. Gentleman the Member for West Swansea has fully covered it. I agree with all he says on that. This question of the suspension of the Sinking Fund is in itself more important in keeping our credit good than anything that has been done for many years.


I think, possibly, the Secretary of State for War, when he referred to the large amount of money that had been lent by the London money market during the last year or two, was probably, although he was not referring to it in that way, to some extent giving an answer to the point raised by the right hon. Gentleman the Member for West Swansea (Mr. Runciman), because I cannot but help thinking that the continual drain on capital for the purposes of our Dominions, and many investments of high standing, must have come into competition with the gilt-edged market, and he has not perhaps made sufficient allowance for that in the arguments he has adduced to-day as well as the other day. I believe in the whole of the discussions on this Budget we fail sufficiently to appreciate the enormous change that is taking place in the money markets of the world and how much more international they are to-day than they were before the War, and we do not make sufficient allowance for these international influences which affect even the price of our stocks. It is a very dangerous argument to try to support a political line by arguing as to where the stocks are standing, because if the stream of money we see beginning to come from New York to the London Money Market should continue, that may have an effect on our stocks which has nothing to do with the Government that may be in office in the next two or three years. On the other hand, if it should not fructify any further, that might have an effect in the opposite direction. Therefore any hon. Member who tries to argue politically has to be exceedingly careful in regard to the arguments he uses.

Coming to the exact point before us, there was in the columns of the "Times" the other day a discussion upon the principles on which our accounts should be given. There was a letter pointing out, in reply to someone who wanted to publish the accounts on what were called commercial lines, that the accounts of the nation were always kept on a cash basis. Of course a certain allowance has to be made for repayment of loans for certain kinds of public work. The theory always is that the Chancellor only raises the money he actually wants to spend for definite purposes in the year with which he is concerned. I understand that is the great principle of finance. I have tried to remember any incident that is exactly similar to the Chancellor's idea of beginning to build up a fund out of which he is going to help to relieve rates by raising the money in advance. Although a small tax has often been imposed which will be much larger by the time the expense comes in the following year, the Chancellor has laid down the principle that he is going to impose taxation this year in order to meet liabilities which are coming upon him next year, and that is breaking this principle of only raising the cash he wants for the year in which he is going to spend it. You can easily see how this principle of applying the money to a Sinking Fund has come into existence. It is intended that the Chancellor should get no advantage from any mistake he may make by estimating for too large a sum, and on that account it has always been insisted that the money should be put into the Sinking Fund. It has, of course, the advantage of helping the debt, but I do not believe that is the main underlying principle. I believe the principle was that the Chancellor had really made a mistake and he was not to benefit from it. On these lines the finance of the country has been carried on, and that has always been considered the orthodox view.

I entirely agree with the hon. Member for the City of London (Mr. E. C. Grenfell), and I think the position he has taken up is the only consistent one. As for the argument of the hon. Member for York (Sir J. Marriott), I think he will live to regret it. I can see the Labour party in office when the rigid hand of the ex-Chancellor of the Exchequer may not be present, and any Socialist Member could justify raiding the Sinking Fund on the speech of the hon. Member for York. He said he so approved the rating scheme of the Government that he felt he was justified in setting aside his financial principles for this purpose. Any Member who supports any Socialist or reform scheme will now be able to justify raiding the Sinking Fund. The action of the Conservative party to-day will have made it absolutely impossible for them to object to any Labour Chancellor raiding the Sinking Fund on the lines the present Chancellor is suggesting to us. The hon. Member for the City of London is giving much sounder financial advice, from their standpoint, than they know. There was a brief interval when the Labour Government was in office, and the Secretary of State for War retired and became editor of a financial paper. I can well understand, if the Labour Chancellor had brought in a proposal of this kind, the article that would have been written by the right hon. Gentleman. He is supporting this plan tonight. If any Labour Chancellor had suggested that the Sinking Fund should be raided, words would not have been strong enough to condemn the Labour party. To-day, of course, everything can be justified, so it can be justified by any other party at any other time. I view this Division with a certain cynical amusement when I think of hon. Members opposite, whose views really are those of the hon. Member for the City of London, though they dare not express them. They are going into the Lobby to make a precedent which one day they will probably very bitterly regret.


I object to the suspension of the old Sinking Fund for two reasons. First of all, I hold that for the purpose of financing the proposed constructive portions of the present Budget it is unnecessary to adopt a policy of that kind, and, secondly, I agree with my right hon. Friend the Member for Shettlesten (Mr. Wheatley) in that I think it very desirable, from the point of view of a future Labour Government and from the point of view of Socialism, that we should give an eye not only to our national but to our international credit.

8.0 p.m.

When we come to the financial side of the proposal for which we stand, and for which we hope some day to get the sanction of the country, we shall be face to face with this question of the credit of the nation in relation to the rest of the world, and for that reason as well as for the other reasons I oppose the raid upon the Sinking Fund. I rise mainly to deal with the point of view which has been again put before the House, and which is constantly being put before the House by Liberals and Conservatives, a point of view which I consider economically unsound, and which is always put forward to justify saving the taxation of the country at the expense of the poor of the country. Whenever it is a ques- tion of expenditure upon social services, or constructive legislation designed to raise the status of the life of the people, we are always told by the financiers of both the other parties that we are a poor nation, that we cannot afford this expenditure, and that, if we tax the people of the country who are the investing public, we shall raise the price of money and there will be less employment. I have used certain figures more than once in this House, and I do not wish to repeat them unduly, but I consider it is very necessary to put the point of view that the nation is not poor and is not short of capital. It is not a question of capital; it is a question of trade. If the people have the wherewithal to buy goods, the goods will be purchased. Capital is sluggish, no doubt, and money is dear, but that is not because there are not resources of wealth in the country but because of the depression in trade and the lack of opportunity on the part of the people to purchase the goods which will make trade prosperous.

I want to answer these capitalistic financiers. I may be wrong, because I am not an expert in finance, but I know the difference between two and four and between five and six, and the facts seem very obvious. The national income is what we have to consider when we are dealing with taxation. The ratio of taxation to national income is no higher than it has ever been during the last century. It is, indeed, a little lower than it was 100 years ago. The national income is £4.000,000,000. Even the right hon. Gentleman the Member for Carmarthen (Sir A. Mond) puts it at that figure, and Sir Josiah Stamp puts it at slightly over that. Out of that, we have a national taxation of about £820,000,000. You have local rating, which is a far bigger burden directly on industry than taxation, amounting to £180.000,000. Then there is the amount which is saved by the nation for the purpose of investment and which is not 1/16th of the national income. There is £250,000,000 put back into industry by the investing public. In round figures, you have £200,000,000 put into foreign investments which may or may not be necessary. It is argued that it is a desirable thing that some of the surplus wealth should go into foreign investments. Those sums together total £1,450,000,000 of the national income of £4,000,000,000 and there is a balance of £2,550,000,000 available for free expenditure. If that wealth were divided equally among the people—I am not suggesting that is a desirable thing; it certainly is not Socialism—but, for the sake of argument, if you divided it equally among the whole population, you would have an income for every family of over £6 a week.

The average income per family of the working class is only about one-fifth of that. You have £2,000,000,000 divided between 2,500,000 of the population and the remainder divided between the remainder of the population. Yet, with all that vast surplus of wealth, the economists and financiers come to the House of Commons and tell us that the reason why working people are unemployed is that there is not sufficient capital or sufficient cheap capital available for investment in industry and trade. That is not the trouble; the trouble is the poverty of the people. You will not raise the status of the people by objecting to the redistribution of the national income and reasonable taxation for social services. I have never had these figures dealt with or had the argument answered. I have always contended, and Socialists always contend, that the reason why there is bad trade and unemployment is not because the capital is not there ready if there is a chance of profit, but because the people do not get sufficient to find the wealth which they are capable of producing. This is not a poor nation at all. Although I agree that it is bad financial' policy to suspend this Old Sinking Fund, yet, for the reasons I have given, I reject false economics, as I regard them, that are always put forward by Tories and Liberals and which are especially aimed at the idea that the workers have a right to their share in the national income.


I can only look at a question of this kind from the point of view of an observer and of one who has tried to understand a little of the progress of our social organisation. I do not understand what is meant by the credit of the country. It stood pretty high even during the worst years of the War, and for the last 100 years it has stood fairly well. Before 1914, the National Debt was much lower than it is now, and the credit of the country was considered fairly good; but I do not believe that the country was better then than it is now. I do not believe that the Debt in 1914 or the Debt now is to be considered as having much bearing on our situation. In 1914, the average working class wage was about 24s. a week. The Debt is big now, far bigger in proportion to our wealth production than was the case in 1914; but still the income of the working classes is just about what it was 14 years ago. So far as real wages are concerned, little or nothing has been altered.

The Yellow Book of the Liberals tells us that there is at the present moment a re-investment of fresh capital of about 2 per cent. of the wealth of the country which is £500,000,000 a year. That includes foreign investments. If £500,000,000 is 2 per cent. of the national capital then the national capital is £25,000,000,000. I suppose that capital includes the £8,000,000,000 of Debt we are now discussing. That is a curious thing. From the point of view of the people who have to find the interest, this is Debt; but, from the point of view of the man who receives the interest, this Debt is wealth. It is a better kind of wealth than houses or building or business. No fire insurance is needed; there is no depreciation, and you do not need to worry about it. You simply hold the Debt, and wealth pours in on you because you hold it. There is something radically wrong about a state of affairs like that. A manufacturer getting 5 per cent. or 7½per cent. out of a business has to worry about maintaining his business and his output. He has to pay interest on depreciation and insure against loss. But, if the nation is in my debt and my wealth consists of Debt, I am exceedingly well off and my family can live for generations untold on what is Debt to you but wealth to me. What a contradiction in terms!

I have yet to receive proof that there is any real scarcity of wealth in this country available for investment. The right hon. Member for Carmarthen (Sir A. Mond) does not believe so anyhow. He has just floated a company of an international character for the purpose of financing businesses. He believes that wherever a business shows any sign of giving any return whatever there will be no lack of capital. He has told us very frankly that he has no preferences about the matter at all. It can either be here or it can be abroad. It can either finance industry in this country or our competitors abroad. It can finance businesses abroad, where the workers have low standards of living and receive low wages, businesses which compete with our own people here. It does not matter, because it is finance. It will show a return. I believe, as my hon. Friend has said, that capital may be sluggish at 5 per cent., but it is lively at 7½ per cent., at 10 per cent. it goes mad, while at 15 per cent. it will go to war. This jargon leaves me quite cold. Here we are with all this wonderful and potential power. While we are said to be staggering along under great financial difficulties, the potential horse-power, as far as the wealth of the country is concerned, has more than doubled since 1907 according to the Balfour Report on Industrial Efficiency. They give the figures after a great deal of investigation, and they tell us that our mechanical power has more than doubled in the last 20 years.

Here is another remarkable factor. Immediately after the War we had a very much bigger Debt than we have now. I believe it was considerably higher at that time. We have reduced it. The Debt has been reduced by the application of Sinking Fund, and we are told that if this process continues the condition of the masses of the people will improve. But it is a curious fact that as the Debt has decreased wages have decreased and standards have come down. The Debt has become less and wages have become less. While we paid off £60,000,000 odd of our liabilities last year, the "Labour Gazette" says that for the first three months of this year there was a decrease at the rate of £5,250,000 per annum in the wages of a few hundred thousand working people. Thus, the smaller the Debt the position of the working class becomes worse as far as wages are concerned. The whole thing is a contradiction in terms.

I do not believe your jargon. I think it is jargon invented to blind the people and keep them in subjection. This is treated as a scientific thing, but I think that at the bottom the explanation is a simple one, namely, that the people of this country are poor because they are robbed, and they are robbed because of the mechanism of finance we continually hear so much about in this House. This problem and this robbery continues. I do not say that it is in the power of any single individual to stop it, but the whole organisation is wrong. The point of view expressed by my hon. Friend the Member for Islington West (Mr. Montague) is one with which I entirely agree. The social organisation is wrong, and it must be considered wrong when you have, on the one hand, an increase of power and investment wealth as far as the relative few are concerned, and, on the other hand, the great mass of people staggering along under the burden of poverty, which is becoming more intolerable as the years go by. Side by side with that poverty is an increase of financial power, the doubling of our mechanical power, the increase of our scientific power, and it ought not to be beyond the wit of man to find a solution of the problem. Let every man in this House say, if he sees a means of doing it, that he will favour the raising of the standards of living of our people. It would be better if we tried to conceive some method whereby our vast power, our knowledge of the wonderful powers we control, could be organised on a scientific basis so as to bring, not poverty to one class or to another class, but plenty to every class. I think that that could be done if the Chancellor of the Exchequer would set about utilising his chances to the best of his ability.


I should not have risen but for the fact that certain questions have been asked of the Minister in charge of this particular item, and no reply has as yet been forthcoming. Certain points were submitted to the Minister in charge, and they were points which were not only submitted from these

benches but from below the Gangway, and they were points which received almost unanimous support and approval from every speaker who has followed the discussion from its commencement, with the exception of the Secretary of State for War. It was pointed out even by the hon. Member for York (Sir J. Marriott), who placed his conscience quite obviously in the possession of his party for the time being, what a tremendous wrench he would have to undergo, in the hope, no doubt, that he might soften the hearts of those responsible for this Resolution and obtain from them the kind of answer that he wanted, namely, that instead of raiding, to use a term that is being used, the surplus from the revenue and transferring it from the old Sinking Fund to the Suspense Account, they recognised the practice that has been generally and regularly followed, even in the ease of the item of £4,250,000 which has largely been the issue round which the whole of this discussion has centred, and would give effect to the proposal contained in the Amendment. The whole of the reply given by the Secretary of State for War was largely directed to the hon. Member for Swansea West (Mr. Runciman), and he did not deal with the proposition of my hon. Friend the Member for Keighley (Mr. Lees-Smith). Before we go to the-Division those in charge of this particular item should, at any rate, treat the House with that courtesy to which it is entitled and give a reply.

Question put, "That the word 'years' stand part of the Resolution."

The House divided: Ayes, 217; Noes, 125.

Division No. 106.] AYES. [8.25 p.m.
Acland, Troyte, Lieut.-Colonel Boyd-Carpenter, Major Sir A. B. Colfox, Major Wm. Phillips
Agg-Gardner, Rt. Hon. Sir James T. Brass, Captain W. Conway, Sir W. Martin
Ainsworth, Lieut.-Col. Charles Bridgeman, Rt. Hon. William Clive Cooper, A. Duff
Albery, Irving James Briggs, J. Harold Cope, Major William
Alexander, E. E. (Leyton) Briscoe, Richard George Couper, J. B
Alexander, Sir Wm. (Glasgow, Cent'l) Brocklebank, C. E. R. Craig, Sir Ernest (Chester, Crewe)
Allen, J. Sandeman (L'pool, W. Derby) Brooke, Brigadier-General C. R. I. Crooke, J. Smedley (Deritend)
Allen, Lieut.-Col. sir William James Broun-Lindsay, Major H. Crookshank, Col. C. de W. (Berwick)
Amery, Rt. Hon. Leopold C. M. S. Brown, Brig. Gen. H. C. (Berks, Newb'y) Crookshank, Cpt. H. (Lindsey, Gainsbro)
Balfour, George (Hampstead) Buchan, John Davies, Maj. Geo. F. (Somerset, Yeovil)
Banks, Reginald Mitchell Burman, J. B. Davies, Sir Thomas (Cirencester)
Barclay-Harvey, C. M. Cadogan, Major Hon. Edward Davies, Dr. Vernon
Barnett, Major Sir Richard Campbell, E. T. Dawson, Sir Phillip
Beamish, Rear-Admiral T. P. H. Cassels, J. D. Drewe, C.
Bellairs, Commander Carlyon Cayzer, Maj. Sir Herbt, R. (Prtsmth, S.) Edmondson, Major A. J.
Benn, Sir A. S. (Plymouth, Drake) Chamberlain, Rt. Hon. N. (Ladywood) Elliot, Major Walter E.
Bethel, A. Chapman, Sir S. Ellis, R. G.
Boothby, R. J. G. Clayton, G. C. Everard, W. Lindsay
Bourne, Captain Robert Croft Cobb, Sir Cyril Fairfax, Captain J. G.
Bowyer, Captain G. E. W. Cochrane, Commander Hon. A. D. Falle, Sir Bertram G
Fanshawe, Captain G. D. Kennedy, A. R. (Preston) Ruggles-Brise, Lieut.-Colonel E. A.
Fermoy, Lord Kindersley, Major Guy M. Russell, Alexander West (Tynemouth)
Fielden, E. B. King, Commodore Henry Douglas Salmon, Major I.
Forestier-Walker, Sir L. Knox, sir Aimed Samuel, A. M. (Surrey, Farnham)
Foster, Sir Harry S. Lamb, J. Q. Samuel, Samuel (W'dsworth, Putney)
Fraser, Captain Ian Long, Major Eric Sandeman, N. Stewart
Fremantle, Lieut.-Colonel Francis E Lougher, Lewis Sanderson, Sir Frank
Gadie, Lieut.-Col. Anthony Lucas-Tooth, Sir Hugh Vere Sandon, Lord
Galbraith, J. F. W. Luce, Major-Gen. Sir Richard Harman Savery, S. S.
Ganzoni, Sir John Lumley, L. h. Shaw, R. G. (Yorks, W. R., Sowerby)
Gates, Percy MacAndrew, Major Charles Glen Shepperson, E. W.
Gault, Lieut.-Col. Andrew Hamilton Macdonald, Capt. P. D. (I. of W.) Sinclair, Col. T. (Queen's Univ., Belfast)
Gilmour, Lt.-Col. Rt. Hon. Sir John Macdonald, R. (Glasgow, Cathcart) Skelton, A. N.
Glyn, Major R. G. C. McDonnell, Colonel Hon. Angus Slaney, Major P. Kenyon
Grace, John MacIntyre, I. Smith, R. W. (Aberd'n & Kinc'dine, C.)
Graham, Fergus (Cumberland, N.) McLean, Major A. Smith-Carington, Neville W.
Grattan-Doyle, Sir N. MacRobert, Alexander M. Smithers, Waldron
Greaves-Lord, Sir Walter Makins, Brigadier-General E. Sprot, Sir Alexander
Greene, W. P. Crawford Malone, Major P. B. Stanley, Lieut.-Colonel Rt. Hon. G. F.
Grotrian, H. Brent Manningham-Buller, Sir Mervyn Stanley, Lord (Fylde)
Guest, Capt. Rt. Hon. F. E. (Bristol, N.) Margesson, Captain D. Stanley, Hon. O. F. G. (Westm'eland)
Guinness, Rt. Hon. waiter E. Meller, R. J. Steel, Major Samuel Strang
Gunston, Captain D. W. Merriman, Sir F. Boyd Storry-Deans, R.
Hacking, Douglas H. Meyer, Sir Frank Sueter, Rear-Admiral Murray Fraser
Hanbury, C Milne, J. S. Wardlaw Tasker, R. Inigo.
Hannon, Patrick Joseph Henry Mitchell, S. (Lanark, Lanark) Templeton, W. P.
Harland, A. Mitchell, Sir W. Lane (Streatham) Thorn, Lt.-Col. J. G. (Dumbarton)
Harrison, G. J. C. Monsell, Eyres, Com. Rt. Hon. B. M Thomson, F. C. (Aberdeen, South)
Harvey, G. (Lambeth, Kennington) Murchison, Sir Kenneth Thomson. Rt. Hon. Sir W. Mitchell
Harvey, Major S. E. (Devon, Totnes) Neville, Sir Reginald J. Turton, Sir Edmund Russborough
Haslam, Henry C. Newman, Sir R. H. S. D. L. (Exeter) Vaughan-Morgan, Col. K. P.
Headlam, Lieut.-Colonel C. M. Nield, Rt. Hon. Sir Herbert Wallace, Captain D. E.
Henderson, Capt. R. R. (Oxf'd Henley) Nuttall, Ellis Ward, Lt.-Col. A. L. (Kingston-on-Hull)
Henderson, Lieut.-Col. Sir Vivian Oakley, T. Warner, Brigadier-General W. W.
Heneage, Lieut-Colonel Arthur P. O'Connor, T. J. (Bedford, Luton) Waterhouse, Captain Charles
Hennessy, Major Sir G. R. J. Oman, Sir Charles William C. Watson, Rt. Hon. W. (Carlisle)
Herbert, Dennis (Hertford, Watford) Percy, Lord Eustace (Hastings) Watts, Dr. T.
Hills Major John Waller Peto, Sir Basil E. (Devon, Barnstaple) Wells, S. R.
Hilton, Cecil Philipson, Mabel White, Lieut. Col- Sir G. Dairymple
Holbrook, Sir Arthur Richard Pilcher, G. Williams, A. M. (Cornwall, Northern)
Hope, Capt. A. O. J. (Warw'k, Nun.) Power, Sir John Cecil Williams, Herbert G. (Reading)
Hopkins, J. W. W. Preston, William Wilson, R. R. (Stafford, Lichfield)
Howard-Bury, Colonel C. K. Price, Major C. W. M. Winby, Colonel I P.
Hudson, Capt. A. U. M. (Hackney, N.) Raine, Sir Walter Windsor-Clive, Lieut.-Colonel George
Hudson. R. S. (Cumberl'nd, Whiteh'n) Ramsden, E. Winterton, Rt. Hon. Earl
Hume, Sir G. H. Reid, D. D. (County Down) Withers, John James
Hume-Williams, sir W. Ellis Remnant, Sir James Womersley, W. J.
Hurd, Percy A. Rentoul, G. S. Wood, E. (Chest'r, Stalyb'ge & Hyde)
Inskip, Sir Thomas Walker H. Rhys, Hon. C. A. U. Wood, Rt. Hon. Sir Kingsley
Iveagh, Countess of Rice, Sir Frederick Woodcock, Colonel H. C.
Jackson, Sir H (Wandsworth, Cen'l) Richardson, Sir P. W. (Sur'y, Ch'ts'y) Worthington-Evans, Rt. Hon. Sir L.
James, Lieut.-Colonel Hon. Cuthbert Roberts, Sir Samuel (Hereford)
Jephcott, A. R. Ropner, Major L. TELLERS FOR THE AYES.—
Mr. Penny and Sir Victor Warrender
Adamson, Rt. Hon. W. (Fife, West) Duckworth, John John, William (Rhondda, West)
Adamson, W. M. (Staff., Cannock) Duncan, C. Jones, J. J. (West Ham. Silvertown)
Alexander, A. V. (Sheffield, Hillsbro') Dunnico, H. Jones, Morgan (Caerphilly)
Ammon, Charles George England, Colonel A. Jones, T. I. Mardy (Pontypridd)
Attlee, Clement Richard Evans, Capt. Ernest (Welsh Univer.) Kelly, W. T.
Baker, J. (Wolverhampton, Bilston) Fenby, T. D. Kennedy, T.
Baker, Walter Forrest, W. Kirkwood, D.
Barker, G. (Monmouth, Abertillery) Gardner, J. P. Lansbury, George
Barnes, A. Garro-Jones, Captain G. M. Lawrence, Susan
Barr, J. Gillett, George M. Lee, F.
Batey, Joseph Graham, Rt. Hon. Wm. (Edin., Cent.) Lindley, F. W.
Bondfield, Margaret Greenall, T. Livingstone, A. M.
Bowerman, Rt. Hon. Charles W. Greenwood, A (Nelson and Colne) Lowth, T.
Broad, F. A. Grenfell, D. R. (Glamorgan) Lunn, William
Bromfield, William Groves, T. MacDonald, Rt. Hon. J. R. (Aberavon)
Brown, James (Ayr and Bute) Hall, G. H. (Merthyr Tydvil) Mackinder, W.
Buchanan, G. Hardie, George D. Maclean, Neil (Glasgow, Govan)
Cape, Thomas Hartshorn, Rt. Hon. Vernon Malone, C. L'Estrange (N'thampton)
Charleton, H. C. Hayday, Arthur March, S.
Cluse, W. S. Henderson, Right Hon. A. (Burnley1 Maxton, James
Clynes, Rt. Hon. John R. Henderson, T. (Glasgow) Montague, Frederick
Connolly, M. Hirst, W. (Bradford, South) Morrison, R. C. (Tottenham, N.)
Cove, W. G. Hollins, A. Murnin, H.
Crawfurd, H, E. Hore-Belisha, Leslie Naylor, T. E.
Dalton, Hugh Hudson, J. H. (Huddersfield) Oliver, George Harold
Davies, Rhys John (Westhoughton) Hutchison, Sir Robert (Montrose) Owen, Major G
Dennison, R. Jenkins, W. (Glamorgan, Neath) Palin, John Henry
Parkinson, John Allen (Wigan) Short, Alfred (Wadnesbury) Townend, A. E.
Pethick-Lawrence, F. W. Sinclair, Major Sir A. (Caithness) Trevelyan, Rt. Hon. C. P.
Ponsonby, Arthur Smillie, Robert Viant, S. P.
Potts, John S. Smith, Ben (Bermondsey, Rotherhithe) Wallhead, Richard C.
Richardson, R. (Houghton-le-Spring) Smith, H. B. Lees- (Keighley) Watson, W. M. (Dunfermilne)
Ritson, J. Smith, Rennie (Penistone) Watts-Morgan, Lt.-Col. D. (Rhondda)
Runciman, Rt. Hon. Walter Snell, Harry Wellock, Wilfred
Saklatvala, Shapurji Snowden, Rt. Hon. Philip Westwood, J.
Salter, Dr. Alfred Stamford, T. W. Wheatley, Rt. Hon. 1
Scrymgeour, E. Stephen, Campbell Wilkinson, Ellen C.
Scurr, John Stewart, J. (St. Rollox) Wilson, R. J. (Jarrow)
Sexton, James Strauss, E. A. Young, Robert (Lancaster, Newton)
Shaw, Rt. Hon. Thomas (Preston) Sutton, J. E.
Shepherd, Arthur Lewis Thomas, Sir Robert John (Anglesey) TELLERS FOR THE NOES.—
Shiels, Dr. Drummond Thurtle, Ernest Mr. Charles Edwards and Mr. Whiteley.
Shinwell, E. Tinker, John Joseph

I do not know whether the right hon. Member for Swansea, West (Mr. Runciman) wishes to move his Amendment—in line 5, after the word "manner," to insert the words "of debt redemption."


I do not intend to move it.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 214; Noes, 123.

Division No. 107.] AYES. 18.34 p.m.
Acland-Troyte, Lieut.-Colonel Elliot, Major Walter E. Iveagh, Countess of
Agg-Gardner. Rt. Hon. Sir James T. Ellis, R. G. Jackson, Sir H. (Wandsworth, Cen'l)
Ainsworth, Lieut.-Col. Charles Everard, W. Lindsay James, Lieut.-Colonel Hon. Cuthbert
Albery, Irving James Fairfax, Captain J. G. Jephcott, A. R.
Alexander, E. E. (Leyton) Fanshawe, Captain G. D. Kennedy, A. R. (Preston)
Alexander. Sir Wm. (Glasgow, Centr'l) Fermoy, Lord Kindersley, Major G. M.
Allen, J. Sandeman (L'pool, W. Derby) Forestler-Walker, Sir L. King, Commodore Henry Douglas
Allen, Lieut.-Col. Sir William James Foster, Sir Harry S. Knox, Sir Alfred
Amery, Rt. Hon. Leopold C. M. S. Fraser, Captain Ian Lamb, J. Q.
Balfour, George (Hampstead) Fremantle, Lieut.-Colonel Francis E. Long, Major Eric
Banks, Reginald Mitchell Gadie, Lieut.-Col. Anthony Lougher, Lewis
Barclay-Harvey, C. M. Galbraith, J. F. W. Lucas-Tooth, sir Hugh Vere
Barnett, Major Sir Richard Ganzoni, Sir John Luce, Major-Gen. Sir Richard Harman
Beamish, Rear-Admiral T. P. H. Gates, Percy Lumley, L. R.
Benn, Sir A. S. (Plymouth, Drake) Gault, Lieut.-Col. Andrew Hamilton MacAndrew, Major Charles Glen
Bethel, A. Gilmour, Lt.-Col. Rt. Hon. Sir John Macdonald, Capt. P. D. (I. of W.)
Boothby, R. J. G. Glyn, Major R. G. C. Macdonald, R. (Glasgow, Cathcart)
Bourne, Captain Robert Croft Grace, John McDonnell, Colonel Hon. Angus
Bowyer, Captain G. E. W. Graham, Fergus (Cumberland, N.) MacIntyre, Ian
Boyd-Carpenter, Major Sir A. B. Grattan-Doyle, Sir N. McLean, Major A.
Brass, Captain W. Greaves-Lord, Sir Walter MacRobert, Alexander M.
Bridgeman, Rt. Hon. William Clive Greene, W. P. Crawford Makins, Brigadier-General E.
Briggs, J. Harold Grotrian, H. Brent Malone, Major P. B.
Briscoe, Richard George Guest, Capt. Rt. Hon. F. E. (Bristol, N.) Manningham-Buller, Sir Mervyn
Brocklebank, C. E. R. Guinness, Rt. Hon. Walter E. Margesson, Captain D.
Brooke, Brigadier-General C. R. I. Gunston, Captain D. W. Meller, R. J.
Brown, Brig.-Gen. H. C. (Berks, Newb'y) Hacking, Douglas H. Merriman, Sir F. Boyd
Buchan, John Hanbury, C. Meyer, Sir Frank
Burman, J. B. Hannon, Patrick Joseph Henry Milne, J. S. Wardlaw-
Cadogan, Major Hon. Edward Harland, A. Mitchell, S. (Lanark, Lanark)
Campbell, E. T. Harrison, G. J. C. Mitchell, Sir W. Lane (Streatham)
Cassels, J. D. Harvey, G. (Lambeth, Kennington) Monsell, Eyres, Com. Rt. Hon. B. M.
Cayzer, Maj. Sir Herbt. R. (Prtsmth. S.) Harvey, Majors S. E. (Devon, Totnes) Neville, Sir Reginald J.
Chamberlain, Rt. Hon. N. (Ladywood) Haslam, Henry C. Newman, Sir R. H. S. D. L. (Exeter)
Chapman, Sir S. Headlam, Lieut.-Colonel C. M. Nield, Rt. Hon. Sir Herbert
Clayton, G. C. Henderson, Capt. R. R. (Oxf'd, Henley) Nuttall, Ellis
Cobb, Sir Cyril Henderson, Lieut.-Col. Sir Vivian Oakley, T.
Cochrane, Commander Hon. A. D. Heneage, Lieut.-Colonel Arthur P. O'Connor, T. J. (Bedford, Luton)
Colfox, Major Wm. Phillips Hennessy, Major Sir G. R. J. Oman, Sir Charles William C.
Conway, Sir W. Martin Herbert, Dennis (Hertford, Watford) Percy, Lord Eustace (Hastings)
Cooper, A. Duff Hills, Major John Waller Peto, Sir Basil E. (Devon, Barnstaple)
Cope, Major William Hilton, Cecil Peto, G. (Somerset, Frome)
Couper, J. B. Hoare, Lt.-Col. Rt. Hon. Sir S. J. G Philipson, Mabel
Craig, Sir Ernest (Chester, Crewe) Holbrook, Sir Arthur Richard Pilcher, G.
Crooke, J. Smedley (Deritend) Hope, Capt. A. O. J. (Warw'k, Nun.) Power, Sir John Cecil
Crookshank, Col. C. de W. (Berwick) Hopkins, J. W. W. Preston, William
Crookshank, Cpt. H. (Lindsey, Gainsbro) Howard-Bury, Colonel C. K. Price, Major C. W. M.
Davies, Maj. Geo. F. (Somerset, Yeovil) Hudson, Capt. A. U. M. (Hackney, N.) Raine, Sir Walter
Davits, Sir Thomas (Cirencester) Hudson, R. S. (Cumberland, Whiteh'n) Ramsden, E.
Davies, Dr. Vernon Hume, Sir G. H. Held, D. D. (County Down)
Dawson, Sir Philip Hume-Williams, Sir W. Ellis Remnant, Sir James
Drewe, C Hurd, Percy A. Rentoul, G. S.
Edmondson, Major A. J. Inskip, Sir Thomas Walker H. Rhys, Hon. C. A. U.
Rice, Sir Frederick Smith-Carington, Neville W. Waterhouse, Captain Charles
Richardson, Sir P. W. (Sur'y, Ch'ts'y) Smithers, Waldron Watson, Rt. Hon. W. (Carlisle)
Roberts, sir Samuel (Hereford) Sprot, Sir Alexander Watts, Dr. T.
Ropner, Major L. Stanley, Lieut.-Colonel Rt. Hon. G. F. Wells, S. R.
Ruggles-Brise, Lieut.-Colonel E. A. Stanley, Lord (Fylde) White, Lieut.-Col. Sir G. Dairymple-
Russell, Alexander West (Tynemouth) Stanley, Hon. O. F. G. (Westm'eland) Williams, A. M. (Cornwall, Northern)
Salmon, Major I. Steel, Major Samuel Strang Williams, Herbert G. (Reading)
Samuel, A. M. (Surrey, Farnham) Storry-Deans, R. Wilson, R. R. (Stafford, Lichfield)
Samuel, Samuel (W'dsworth, Putney) Sueter, Rear-Admiral Murray Fraser Winby, Colonel L. P.
Sandeman, N. Stewart Tasker, R. Inigo. Windsor-Clive, Lieut.-Colonel George
Sanderson, Sir Frank Templeton, W. P. Winterton, Rt. Hon. Earl
Sandon, Lord Thorn, Lt.-Col. J. G. (Dumbarton) Withers, John James
Savery, S. S. Thomson, F. C. (Aberdeen, South) Womersley, W. J.
Shaw, R. G. (Yorks, W. R., Sowerby) Thomson, Rt. Hon. Sir W. Mitchell, Wood, E. (Chest'r, Stalyb'dge & Hyde)
Shepperson, E. W. Turton, Sir Edmund Russborough Wood, Rt. Hon. Sir Kingsley
Sinclair, Col. T. (Queen's Univ., Bell'st.) Vaughan-Morgan, Col. K. P. Woodcock, Colonel H. C.
Skelton, A. N. Wallace, Captain D. E. Worthington, Evans, Rt. Hon. Sir L.
Slaney, Major P. Kenyon Ward, Lt.-Col. A. L. (Kingston-on-Hull)
Smith, R. W. (Aberd'n & Kinc'dine, C.) Warner, Brigadier-General W. W. TELLERS FOR THE AYES.—
Mr. Penny and Sir Victor Warrender.
Adamson, Rt. Hon. W. (Fife, West) Hall, G. H. (Merthyr Tydvil) Richardson, R. (Houghton-le-Spring)
Adamson, w. M. (Staff., Cannock) Hardie, George D. Ritson, J.
Alexander, A. V. (Sheffield, Hillsbro') Hartshorn, Rt. Hon. Vernon Runciman, Rt. Hon. Walter
Ammon, Charles George Hayday, Arthur Saklatvala, Shapurji
Attlee, Clement Richard Henderson, Rt. Hon. A. (Burnley) Salter, Dr. Alfred
Baker, J. (Wolverhampton, Bilston) Henderson, T. (Glasgow) Scrymgeour, E.
Baker, Walter Hirst, W. (Bradford, South) Scurr, John
Barker, G. (Monmouth, Abertillery) Hollins, A. Sexton, James
Barnes, A. Hore-Belisha, Leslie Shaw, Rt. Hon. Thomas (Preston)
Barr, J. Hudson, J. H. (Huddersfield) Shepherd, Arthur Lewis
Batey, Joseph Hutchison, Sir Robert (Montrose) Shiels, Dr. Drummond
Bondfield, Margaret Jenkins, W. (Glamorgan, Neath) Shinwell, E.
Bowerman, Rt. Hon. Charles W. John, William (Rhondda, West) Short, Alfred (Wadnesbury)
Broad, F. A. Jones, J. J. (West Ham, Silvertown) Sinclair, Major Sir A. (Caithness)
Bromfield, William Jones, Morgan (Caerphilly) Smillie, Robert
Brown, James (Ayr and Bute) Jones, T. I. Mardy (Pontypridd) Smith, Ben (Bermondsey, Rotherhithe)
Buchanan, G. Kelly, W. T. Smith, H. B. Lees (Keighley)
Cape, Thomas Kennedy, T. Smith, Rennie (Penistone)
Charleton, H. C. Kirkwood, D. Snell, Harry
Cluse, W. S. Lansbury, George Snowden, Rt. Hon. Philip
Clynes, Rt. Hon. John R. Lawrence, Susan Stamford, T. W.
Connolly, M. Lee, F. Stephen, Campbell
Cove, W. G. Lindley, F. W. Stuart, Hon. J. (Moray and Nairn)
Crawfurd, H. E. Livingstone, A. M. Sutton, J. E.
Dalton, Hugh Lowth, T. Thomas, Sir Robert John (Anglesey)
Davies, Rhys John (Westhoughton) Lunn, William Thurtle, Ernest
Dennison, R. MacDonald, Rt. Hon. J. R. (Aberavon) Tinker, John Joseph
Duckworth, John Mackinder, W. Townend, A. E.
Duncan, C. Maclean, Nell (Glasgow, Govan) Trevelyan, Rt. Hon. C. P.
Dunnico, H. Malone, C. L'Estrange (N'thampton) Viant, S. P.
England, Colonel A. March, S. Wallhead, Richard C.
Evans, Capt. Ernest (Welsh Univer.) Montague, Frederick Watson, W. M. (Dunfermline)
Fenby, T. D. Morrison, R. C. (Tottenham, N.) Watts-Morgan. Lt.-Col. D. (Rhondda)
Forrest, W. Murnin, H. Wellock, Wilfred
Gardner, J. P. Naylor, T. E. Westwood, J.
Garro-Jones, Captain G. M. Oliver, George Harold Wheatley, Rt. Hon. J.
Gillett, George M Owen, Major G. Wilkinson, Ellen C.
Graham, Rt. Hon. Wm. (Edin., Cent.) Palin, John Henry Wilson, R. J. (Jarrow)
Greenall, T. Parkinson, John Allen (Wigan) Young, Robert (Lancaster, Newton)
Greenwood, A. (Nelson and Colne) Pethick-Lawrence, F. W.
Grenfell, D. R. (Glamorgan) Ponsonby, Arthur TELLERS FOR THE NOES.—
Groves, T. Potts, John S. Mr. Charles Edwards and Mr. Whiteley.

Thirteenth Resolution read a Second time.


I beg to move, in line 4, to leave out the words "into the Exchequer," and to insert instead thereof the words: to the National Debt Commissioners for the redemption of debt. My object in moving this Amendment is to ask the Government for an explanation of what is meant by the Resolution on the Paper. The intention of the Government, I take it, was set out in the speech of the Chancellor of the Exchequer introducing the Budget. I presume that what the Government then intended was that the assets of this account would be taken by the Bank of England at their present value. They were, I think, being held back as a reserve which the Treasury thought necessary against the possibility of a future depreciation. The reserves which were to be retained by the Treasury amounted to £13,200,000. I gather that they are real assets, and, obviously, they ought not to be used to meet current expenditure. The Chancellor proposed to use them as a special means of strengthening the Sinking Fund for this year and inaugurating a new debt redemption scheme. Such, I understand, was the intention of the Chancellor of the Exchequer, but the Resolution provides that these assets shall be realised and the proceeds thereof paid into the Exchequer.

No provision is made in the Resolution for carrying out the intention declared by the Chancellor of the Exchequer. If that intention is to be carried out, is it not necessary that there should be some proviso, at some point in this Resolution, stating that the money so retained is to be used for the redemption of debt? I take it that if the intention of the Chancellor of the Exchequer is to be incorporated in the Resolution, the Resolution at present is inadequate, because it merely means that there is a transfer of this account into the Treasury and the Exchequer can use it in any way it pleases. If this Resolution is passed in its present form the Exchequer will be free to use this amount for the ordinary purposes of annual expenditure and there is no guarantee, as there should be, that it is being earmarked for the redemption of debt. The representatives of the Government will, I hope, be able to show how it is that the Resolution is inconsistent with the statement of the Chancellor of the Exchequer. Certainly, before the House disposes of the Resolution we ought to have some assurance from the Government that there will he safeguards in respect of the carrying out of the intention of the Government. As the Resolution stands, it does not appear that there will be any such safeguards, and for that reason I beg to propose this Amendment.


The right hon. Member for West Swansea (Mr. Runciman) has moved this Amendment for the purpose of getting some explanation from the representative of the Treasury, and I would like to put one or two other points. The right hon. Gentleman complained that this Resolution does not specify the purpose to which the released reserve fund has to be applied, and that if left in its present form it would give the Treasury the opportunity to apply it to any purpose which they might think fit. But, if I remember aright, the Chancellor of the Exchequer has provided in the Budget of this year for the appropriation of a sum of £13,200,000 to the debt reduction scheme. It is part of the £65,000,000 that he hopes to be able to apply this year for the purpose of debt reduction. I would like to ask this question. How is this Currency Reserve Fund invested at the present time? So far as I know, it is already invested in Government stock. I do not know whether it is the intention of the Treasury to cancel these bonds to the extent of that sum as soon as the authority has been received, but it seems to me that that would be a very easy and appropriate way of dealing with it. I would like to have an answer to that point, which is supplementary to the question put by the right hon. Member.


The right hon. Member for West Swansea (Mr. Runciman) has correctly interpreted the desire of the Government. It is not their intention to use this in any way for current expenditure, but it is their intention to devote this sum for the purpose of strengthening, as the right hon. Gentleman said, the Sinking Fund for this year. These assets arise from the fact that certain fractions of the revenue from securities, from taxpayers' invested money, were retained to build up a reserve for this currency. When the purpose for which the reserve has accumulated disappears, the money quite properly returns to the taxpayer. The right hon. Gentleman wishes to add further limiting words to the Resolution, but there is no real necessity to add the words which he suggests. There are the most positive statements by the Chancellor of the Exchequer of the purpose to which the money is intended to be devoted. The whole scheme of the Sinking Fund depends upon the use of the Fund for this purpose, and there is no reason for splitting up this sum from the other sums of money which we are to use for the Sinking Fund and treating it in a special way. Our general policy is to bring into a single figure the sums of money which are being devoted to the redemption of debt.

As to the question put by the former Chancellor of the Exchequer, as to the technical steps involved in the transfer Of these sums of money, I am afraid I am not technically competent to answer, and, therefore, my hon. Friend the Financial Secretary to the Treasury will be able to deal with that question. Personally, I speak at all with great diffidence in the presence of the financial pundits who are here assembled, and I should not dare to embark upon the discussion of these financial transactions, which I should almost certainly describe wrongly.


The hon. and gallant Member says the Chancellor has every intention of devoting this money to the redemption of debt, but does he suggest that the mere intention of the Chancellor of the Exchequer has legal force behind it? The only way in which you can give this intention legal force is by covering the point in the Resolution.


The right hon. Gentleman shows himself singularly distrustful of the Chancellor of the Exchequer, but he cannot expect us to sympathise with that view, and we must ask the House to reject the limiting words which he proposes, quite unnecessarily, to insert in the Resolution.

The FINANCIAL SECRETARY to the TREASURY (Mr. Arthur Michael Samuel)

The currency notes in existence are partly covered by banknotes, which are equal to gold, and amount to roughly £56,250,000—it is something between £55,000,000 and £57,000,000—and £5,500,000 is silver. There are, further, enough securities to make up the balance of the total amount of the currency note issue, and in addition a reserve of £13,200,000 has been accumulated, which is not required to cover the currency note issue, and so belongs to the taxpayer. If the right hon. Gentleman looks at the Financial Statement, he will see that the £13,200,000 appears there, and my right hon. Friend the Chancellor of the Exchequer has added £800,000.


I desire to carry this matter a little further than the two right hon. Gentlemen who have spoken from this side of the House. I think that, quite beyond the question of whether or not this money is actually going to be used in the Sinking Fund, we are entitled to raise the whole ques- tion of the propriety of regarding as part of the Sinking Fund capital assets of this character. There is reserved against the whole currency note issue a large amount of Government paper, and there seems to me to be a very grave objection to treating any part of that Government paper as assets which can in any conceivable sense be used as part of what is known as the Sinking Fund. In the first place, when this question was discussed on the Budget. I stated that in my opinion this was purely a bookkeeping transaction, but the Financial Secretary then derided my point of view, which he said was entirely erroneous. I am very glad to be fortified since then by what is perhaps the principal financial paper in the country, namely, the "Economist," which makes this remark: In view of this reinforcement, which proposes to maintain the Sinking Fund at £65,000,000 for this year only, from the point of view of Government credit this is a paper transaction, for the reserve consists of Government securities in the hands of the Treasury, and its employment as part of the Sinking Fund merely means the cancellation by the Government of debt which it owes to itself. The idea of the Sinking Fund means that there is being paid out a cancellation of debt, thereby conferring on the taxpayers further advantage. No advantage of any kind arises from this transaction. The money is already invested in Government securities; these securities are bearing interest, and the taxpayer is not in the smallest degree relieved by this capital asset being placed by this bookkeeping transaction to one account rather than to another. I disagree, therefore, entirely with the whole proceeding of calling this part of the Sinking Fund, when the transaction should have been completed quite outside the Sinking Fund, a mere book-keeping transaction of the Treasury.

A further issue is involved. We are shortly to have before us a Bill, which has already received its First Reading, for the transfer of this currency to the Bank of England. I should be out of Order in attempting to discuss any of its provisions now, but I suggest that, when that Bill does come before us, we shall have to consider the whole basis on which the matter is being discussed. I suggest that this provision, which it is proposed to pass at the present time, is anteceding the discussion of this House, and it may be that, when we come to that Bill, we may not take the course of action which the Government are proposing. Until that course of action is taken, it seems to me to be entirely improper to pass this Resolution. Even that does not end the matter, because, even assuming that we in principle assent to the proposals of the Government, it does not follow that the amount which the Government think is adequate will be the amount which is adequate. There may be changes in the value of securities which may make it very undesirable to transfer any amount. There may be changes that are in prospect which may make us review the whole policy in a different way.

There is a further point which I desire to bring before the House. The whole of the fiduciary note issue has corresponding to it certain Government securities. It is quite true that any Chancellor of the Exchequer, who respects the traditions of finance which have hitherto been upheld in this country, would propose to treat as part of the Sinking Fund the whole of those securities, but with the Chancellor of the Exchequer whom we have at the present time, and with this Resolution before us,

it seems perfectly possible that, at some future time, he may propose to treat as part of the Sinking Fund these additional securities. The whole of this transaction is in accord with the devices of the Chancellor which we were discussing just now. They are not sound business, and represent nothing in the nature of an improvement in the credit of the Government. They do nothing towards a provision, which the right hon. Gentleman was telling us about on the previous Amendment, to assist by discharging the Debt, in reducing interest charges, and making it more easy for the Government to obtain loans in the future. I am entirely against the whole of this transaction, which seems to me to be an unsound and unreal transaction. I maintain that this money, instead of being used as part of the Sinking Fund, ought to have been transferred to get rid of the Debt outside the Sinking Fund altogether.

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

The House divided: Ayes, 216; Noes, 116.


Resolutions reported,