WAYS AND MEANS.

HC Deb 15 April 1930 vol 237 cc2804-70

Again considered in Committee.

[Mr. DUNNICO in the Chair.]

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

Mr. STEPHEN

>: I have attempted to make a study of the two nations, the poor and the rich, in this country. I pointed out that the Tory Government sought to reduce the taxation on the large incomes, on the theory that in this way they would put more money at the disposal of industry and so 7.0 p.m. would make things better for trade generally. We took the view, on the other hand, that what was more necessary than anything else was an increase in the purchasing power of the working classes. There is practically nothing in this Budget, however, to suggest that we accept that thecry to-day. I want to draw attention to that sentence in the Chancellor's speech in which he said that the change in connection with the Income Tax will not affect three-quarters of the whole number of Income Tax payers, so that only ormquarter will be affected by the increase. Since the wealthy members of the community have enjoyed during the years of the Conservative Government those reductions in taxation, the present increase does not compensate the other section of the community for the relief that was given to the rich by the Tory Government. We are wrong in respect of the Income Tax in that it is utterly inadecuate. There is a greater need than ever for the development of many of the social services. There was so much we could not do in connection with unemployment insurance. There was no money for the reduction of the waiting period from six days to three days; there was no money for the increase of the scales of benefit of the unemployed. There is no money in this Budget for those other Measures which we are told were to be introduced.

The words of the Chancellor of the Exchequer towards the end of his speech would seem to show that he is visualising no great changes in the Budget next year and that this Budget is going to be practically the same as next year's. He said: I abate not one jot or tittle in my lifelong advocacy of great schemes of social reform and national reconstruction, but our immediate concern is to make these things ultimately possible out of revived and prosperous industry. To that we must first direct our efforts and devote what resources we can afford to that remunerative purpose."—[OFFICIAL REPORT, 14th April, 1930; col. 2681, Vol. 237.] So that evidently the policy of the Government is that there can be no schemes of social reform until we have been able to see a revived and prosperous industry. How are we to get a revived and prosperous industry?What is to be the line that is to be taken in order to achieve that revival and prosperity of industry? No one suggests that there is a, reconstruction of those industries along Socialist lines; there is no such suggestion on the part of the Government. Quite evidently the Labour Government are looking for a revival of this capitalist industry in this country, with a national prosperity somehow or other in the future. I have been long enough in this House now to know how one year after another we have been promised that we were just about to reach the turn and that there was coming the revival and development of industry. I do not believe any such revival is possible. The Socialist criticism has been that so far from there coming improvement in capitalist industry in the future, the contradictions of capitalisms would increase and industry would go from bad to worse.

That has been the Socialist position, and now we are told that we have got to wait until this capitalist industry improves. It is inherent in the capitalist system in the stage at which it is to-day that there can be no such revival. In his speech at Plymouth the Chancellor of the Exchequer, replying to the estimate of the right hon. Gentleman opposite as to the cost of the social reforms advocated by the Labour party, said: But even accepting Sir Herbert's figures of the ultimate cost of social reform schemes of £220,000,000, if I were compelled to find the money, I should be able to do it. When I profess to prophesy I always do so on the side of strict moderation. I am quite certain that all the younger men and women who are in this hall to-night will look to see the time when the State will be spending far more than an additional £200,000,000 a year upon social services and national development. Does the Chancellor of the Exchequer mean that we are going to have an additional £200,000,000 of taxation of capitalist industry at some time in the future? Is a revival to come about in some mysterious way, when the Chancellor of the Exchequer will be able to get so much more out of it? I do not believe that any sane observer can hold any such view. The former Chancellor of the Exchequer pointed to the year 1931, in which he visualised, owing to possible developments of industry and commerce, an increase in revenue of about £10,000,000 or £15,000,000, but to contemplate an additional £200,000,000 due to expanding trade and industry seems to me to be utterly unsound. I would bring the Committee back to the point from which I started, that the working class are paying four-fifths of the indirect taxation of this country, for the cost of the Army, the Navy, the Air Force, and other services—

Mr. A. M. SAMUEL

The hon. Member, I think made that remark before, but I could not catch what he said. If he will turn to page 22 of the Financial Statement issued by the Financial Secretary to the Treasury, he will see that Customs and Excise bring in £252,000,000. It is true that part of that money is paid by people of poor means, but it is also paid in part by those of higher means. The hon. Member says that the working men who pay get nothing from it, but if he will look at the other side of the statement he will see that those who contribute to indirect taxation get back not only the Army, the Navy, and the Air Force costs and values, but they get £55,000,000 for education, none of which is taken by the well-to-do. I do not grudge it, but let us have the facts correctly. Then they get back, in respect of health, labour and insurance (including old age and widows' pensions), £96,000,000, and there is also £54,000,000 for War Pensions and Civil Pensions, while Exchequer contributions to local revenues amount to £44,000,000. As has often been stated in the House, the main portion of the amount contributed by indirect taxation goes back to the people who provided it.

Mr. STEPHEN

I am indebted to the hon. Gentleman for his statement, but perhaps he will allow me to say that I was quoting from the speech of the present Chancellor of the Exchequer. The quotation that I made was this: To-day, you Income Tax-payers, remember, every penny raised by Income Tax, Super-tax and Death Duties is taken for the service of the National Debt, and all the other expenses of the Army, Navy and Air Force, education, old age pensions, public health and cost of Civil Services has to be met out of indirect taxation, and four-fifths of the indirect taxation is paid by the wage-earning classes of the country.

Mr. SAMUEL

The amount of money from direct taxation—Income Tax, Surtax, Estate Duties, Stamps, Excess Profits Duty, Corporation Profits Tax, Land Tax, etc.—is £437,000,000. The amount required for interest and management of National Debt, Consolidated Fund services, and National Debt Sinking Fund is roughly £308,000,000. Therefore, nearly £70,000,000 more is produced by direct taxation and is devoted to purposes enjoyed by the wage-earning classes than is stated in the speech which the hon. Member is quoting.

Mr. STEPHEN

I was quoting from the present Chancellor of the Exchequer, and I was willing to accept his statement. There is this great Army, there is this Navy, there is this Air Force—[Interruption.] I am not calling it the Contemptible Army, or anything like that, though possibly it would have suited the hon. Member opposite better if I had. I say that there is this Army, there is this Navy, end there is this Air Force, and the working class have to pay four-fifths of the indirect taxation which maintains them. The working class who do that are in the slums; they are faced by reductions of wages; they are faced by one difficulty after another; and I say that the burden of taxation upon the poor people of this country is far too heavy, for they are not getting from it the return that they ought to have, and that is what is wrong with this Budget.

There is in this Budget very little hope for the future. It involves the stabilisation of capitalism. It promises very little for many years to come in the way of great schemes of social reform, and those schemes of social reform will only come in the future, on the basis of the speech of the Chancellor of the Exchequer, if there is an expanding revenue due to a great revival of trade and commerce. I believe that that point of view is entirely wrong. I believe that it is alien to the point of view of the Chancellor of the Exchequer himself h previous days. I think that this Budge; will bring very little hope to those who took to the Socialist Budget as the first stage on the way to freedom for the great mass of the working class. It is a Budget that is fundamentally in favour of the well-to-do. It is making light, or leaving light, the burden upon the rich people of this country, and I am surprised that, such a Budget should come from the present Chancellor of the Exchequer. One may congratulate him on the lucidity of his statement; one may congratulate him on the form in which it is presented; but I think that it is contrary to the interests of the mass of the working class. It may please the City, but I do not think it will please the working class. It is a Budget which may show that the Chancellor of the Exchequer was well worthy of the honour that the City bestowed upon him when it offered him it freedom, but I do not think it will bring great hope to the mass of the workers of this country.

Sir HENRY BETTERTON

I rise for one purpose, and one purpose only, and that is to take this, the first opportunity in my power, of bringing before the Committee the result that will undoubtedly follow from a part of the statement that we heard yesterday. I refer to the decision of the Chancellor of the. Exchequer to allow the Safeguarding Duty on lace to lapse at the end of June. It is not too much to say—in fact, it is strictly accurate to say—that that decision has been ieceived with consternation and despair by the people engaged in the trade, because they realise that in all probabllity it will mean the ruin of an at cient industry, and that those now employed in it will be rendered workless. Theirs is a small industry, and that is, perhaps, why they feel so strongly in the matter, as, I think, justifiably. They feel that, had their industry been a large and powerful one, like, for instance, the coal industry, they would not have been treated in the way that they have.

I suppose that the three constituencies in the Nottingham district in which there are more lace makers than in any other are my own constituency, that of West Nottingham, and that of South Derbyshire, and it happens that in each of these constituencies there is a large coal-mining population. These people, therefore, have this spectacle before them. They see that, whereas this large and powerful industry has just been accorded perhaps the greatest measure of Protection that has ever been given to any trade, they, because they are weak and few in number, are to be deprived of that measure of Safeguarding on which their whole industry depends. Is it surprising that they think, and, in my opinion, with justice, that they have been sacrificed to the prejudices of the Chancellor of the Exchequer? It will not surprise anyone, I think, in this Committee, to know that in consequence the name of the Chancellor of the Exchequer will be execrated in many a humble home in Nottinghamshire, for to him and to the Government of which he is a member will be attributed, and rightly attributed, the suffering and unemployment which will follow.

I desire to repeat just one or two statements of fact, in order that the Cornmittee may draw their own conclusions from them. The first is that for about four years prior to 1924 there was a most serious slump in the lace-making industry of this country, and that slump continued, certainly for four years, and I think for rather longer. During that period, something like 140 firms, many of them old-established firms, went out of business altogether, some in consequence of bankruptcy, some because they had to make a composition with their creditors, but all because they found that their industry was declining and they could not continue. The result was that many hundreds of men and women engaged in the industry were thrown out of employment. Moreover, to those actually engaged in the work of making lace must be added those engaged in subsidiary and necessary occupations connected with lace, such as designers and finishers.

As a result of this situation, an appeal was made to the Board of Trade in 1924, and a full inquiry was held, the Report of which I hold in my hand. The Chairman of the Committee of Inquiry was Sir George Barnes, and another and most respected member of it was Mr. Arthur Pugh. The Committee decided emphatically that, if this industry was to be saved, it must have a Safeguarding Duty in order to protect it. We have pointed out that unemployment in the lace industry is due to the combination of a number of causes. Any one of these would be serious alone. The cumulative effect appears to be producing a psydhological reaction in the Nottingham lace industry which renders the sense of depression still more acute and the consequences may be nothing short of disastrous. We feel that the industry is drifting into a position from which recovery will be impossible. The Report also contains various suggestions which the Committee think would improve the condition of the industry and enable it better to compete in the markets of the world. Every one of those suggestions has been carried into effect. The duty was put on and the result of the duty, combined with the efforts of the trade itself, has even surpassed expectations. From that day to this the situation of the trade has risen from extreme depression and despair to a position in which they are full of confidence and the trade is really in a prosperous condition. It is not necessary to point out what that means to those who are actually engaged in the trade. In wages, in this small trade, it means an increase of something like £30,000 a year. It means also that the sales in the home market have increased since the duty was put on by from 23 per cent. in the first year to 90 per cent. in the second year, 125 per cent. in the third year, and 162 per cent. in the fourth year over the last pre-Duty year. Those figures speak for themselves. If you take the total sales, not limiting it to the home market, the increase is 62.6 per cent. It is particularly fatal at this time to remove these duties. A short time ago information was received from America that it was the intention of the American Government to increase the duties on imports of lace from 90 per cent. to, in some qualities, 250 per cent., and I believe up to 300 per cent. That means that, so far as English lace is concerned, the American market is closed.

The DEPUTY-CHAIRMAN

I am not quite sure that the hon. Baronet is en titled to enter into a detailed discussion. I do not think that this is the appropriate occasion for going into the details of any specific trade.

Sir H. BETTERTON

I will not do it. I am pointing out that this is a particularly unfortunate moment to take this duty off, because the effect will be that lace that formerly went to America will now come here. The effect of this combination of circumstances has produced a situation of consternation and despair among those engaged in the industry. I know it is probably hopeless to ask the right hon. Gentleman to reconsider his decision, but it is, at any rate, right that the Committee should know what the result of that decision will be. I am reminded of a precept once uttered by the greatest of the right hon. Gentleman's predecessors that a man who adheres to his opinion when the circumstances under which he formed it have entirely changed, is a slave to his prejudices. The right hon. Gentleman must not be surprised that those who are engaged in this trade think that they have been the victims of his prejudices.

Colonel WEDGWOOD

The hon. Baronet is an example of the vices of protective tariffs. The speech to which we have just listened is one to which we are listening with increasing frequency in the House. As in other countries, people come here representing special interests and speaking for them. I wish the hon. Baronet would remember the principle laid down by Edmund Burke, that he came here in the interests of the whole country and not only in the interests of a local industry. When he is complaining of the removal of the Safeguarding Duty, his complaint is against his own Government, which fixed the period during which it should endure. It expires automatically. As well might the beet sugar people—and I have no doubt they will through some representatives in the House—complain when the subsidy comes to an end automatically. The vice of Protection is that no sooner do you start protecting an industry than it thinks it has to go on with Protection for ever, although a protective tariff has been introduced over and over again simply in order to put some industry on its feet to enable it during a certain period to establish itself under new world conditions.

I did not get up to discuss the Lace Duty. We heard yesterday from this bench Mr. Gladstone, austere aad orthodox as ever. We have had from the Front Bench opposite to-day Mr. Disraeli, facile, vivid and witty as ever. I do not know that I agree with either of them. Mr. Mantalini, balancing his accounts up to the last farthing, honestly paying his way, in the good early Victorian manner, was excellently done. I am not quite certain that the "Rake's Progress" opposite was equally good. As far as I could make out, the right hon. Gentlen.an's chief complaint was that the Chancellor of the Exchequer had paid his debts instead of allowing them to accumulate and increase.

The one central fact about the right hon. Gentleman opposite was that he established the gold standard on dollar parity when the pound was not worth it, and, ever since, the Chancellor of the Exchequer on our side, and I think honest financiers throughout the House, have been endeavouring to keep that gold standard good. We think that when he established the gold standard, he appreciated the currency and deflated too rapidly. That had a terrifically bad effect throughout industry. Now the same gentleman comes along and begs the Chancellor of the Exchequer not to put on additional taxation but to increase the Debt. What is that hut infla ion, exactly the reverse of the policy which he inflicted on the country five years ago. Whoever else is entitled to lecture the Chancellor of the Exchequer on financial probity and paying his debts and not incurring any additional expenditure, the right hon. Gentleman is not.

My complaint against the Chancellor of the Exchequer is by no means on the grounds submitted by hon. Members opposite. I do not think it is the business of the Chancellor of the Exchequer to attract millionaires to this country, or to get people into the country in order that they may employ in parasitic employment people who otherwise might be engaged in useful productive work. We do not want rich people, and I do not mind if they leave this country. What we want is cheap capital, and, if I had any complaint to make upon the form of taxation that has been adopted in this Budget, it would he that it must tend to restrict the creation of new capital and thereby push up the price and lead to dearer capital when our industry wants the cheapest capital possible. I believe that is sound whether it is the Treasury view or not. We want cheap capital.

I have a far more serious charge to make. We had a chance also of making land cheaper, and it was not taken. Cheap capital, cheap land, and cheap raw materials coming from abroad are essential to any revival of industry, and we have not the tax on land values which was promised. Naturally, everyone will realise how tragically disappointing the land taxers, not only in the House but throughout the country, are at what has happened. We have had promises galore for the last five years. We have been told that a tax on land values would be in the next Budget. We have now the Budget, and it is not there. The taxation of land values to which we looked to benefit trade, to cheapen land, and to enable people to get work has been postponed, and, from a promise, it has become a mere item in "Labour and the Nation," like so many other items. This year, next year, some time, never. I do not suppose now that I shall ever see a tax on land values—[Interruption.]

I cheer myself up in a different way, I reflect that I am also a landlord, and I see in this final dissolution of our hopes some consolation. I shall no longer fear to see my land going down in value. I shall no longer have to throw it on the market, or see my neighbours throwing land on the market and depreciating the value of my land. There are always compensations. When I reflect that last year we had from the right hon. Gentleman the gift of all the rates on our agricultural land, sending up its value so, pleasantly, I thought perhaps we might have to pay for it, or some part of it, this year. But no. We always come out on top. So that, so far as the landlords of the country are concerned, I can see some benefit from what has happened. What worries me is the landless proletariat in this country, They have just closed down another pit in my constituency. Another 1,000 families smashed! Another 1,000 families deprived of the right to obtain a living, barred off the land! Unfortunately, very few of them continue now to ask for justice. Most of the landless proletariat are content with the dole. But here in this Budget was a chance of giving them some beginnings of justice, of the right to work for themselves on the land of their own country.

There is to be a Valuation Bill. I think that the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) must know what will be the fate of any Bill to value the land in this country. When he introduced his rather ill-advised Land Value Duties in 1909, he did not have a separate Valuation Bill. He put the valuation Clauses into the Finance Act. Why? He put them in because he knew perfectly well that the Finance Bill had to pass the House of Commons and could not be amended in the House of Lords, whereas if he had put them into a Valuation Bill it would have taken him months and months to get such a Bill through the House of Commons, and it would have never had a chance of getting through the House of Lords. This new policy which is followed to-day seems to be fatal to any chance of getting a Valuation Bill through. The time of this House is limited, and the time of the other House, unfortunately, is unlimited. There might have been an excuse in 1909 for having a separate Valuation Bill. Valuation was new. There was no machinery in order to get the valuation. Now, at any rate, we have the machinery. We have, thanks to this old device, the ground work on which any valuation must be based.

Mr. LLOYD GEORGE

We have the valuation.

Colonel WEDGWOOD

We have the valuation, but unfortunately it is not brought up to date. It can easily be brought up to date. There is no great difficulty in the way of getting this new valuation actually done. The difficulty that has been devised—I do not know by whom—if it has been specially devised for this occasion, is that we cannot get the Bill through, and not that we cannot get the valuation through. What will the valuation be? Unfortunately, in those bygone days we had four different valuations, and nobody except the then Chancellor of the Exchequer understood one from the other. We want on this occasion to have one valuation and no varieties. We want to have one valuation of the land and the minerals exclusive of all improvements in the land. Unfortunately, I fear that the same forces which have turned out of the Budget the tax on land values may emasculate the Valuation Bill as well, and, when we get it introduced into this House, it may be one of those valuations which will be extremely difficult for any valuer to carry out, and which, when carried out, will be of little service whether for taxation, for rating, or for purchase.

The Chancellor of the Exchequer was good enough to say that there wan a committee dealing with this question. The committee, if I recollect aright, consists of himself, the Financial Secretary, the President of the Board of Education, and the Treasury officials. I do not suppose that the Chancellor of the Exchequer will have much time to give to that committee. The Financial Secretary to the Treasury—well, his heart has never been in the taxation of land values. The President of the Board of Education, we cannot forget, is also the largest landowner in the Labour party. [Interruption.] Perhaps even one of the biggest in this country. We hope for the best. We shall want to watch that Valuation Bill when it comes in and see whether it reflects the opinions which have been put forward by all those who ask for the taxation or rating of land values, or whether it reflects the opinions of those who wish to make any sort of rate or tax impossible.

I want to make it clear that we are very grateful to the Chancellor of the Exchequer for his promises. We hope that these promises may some day mature, but, speaking for myself, I am a little doubtful, after having heard his speech yesterday. In his statement as to the importance he attached to the taxation of land values, he quoted Mr. Asquith. But Mr. Asquith was not what I would call one of the "first flight land taxers." He quoted Mr. Asquith as saying that the taxation of land values was "a potent instrument of social reform." I hate social reform. The very sound of it makes me ill. When I hear somebody advocating the taxation of land values as a potent instrument of social reform, I know perfectly well that he is only thinking how much money it will bring in. I do not care twopence what money it brings in. The Chancellor of the Exchequer, naturally, must look at that side. I would not be in this House if it was only to devise some fresh means of getting money for the Exchequer.

We want the taxation of land values because it will make land cheaper. The whole virtue of the movement is that it shall be more difficult for run in this country to keep the working class unemployed. All the useful productive work you can imagine must begin by the application of labour to land. It cannot begin in any other way. If you make it difficult for the primary trades to get access to their raw material, you are not merely throwing them out of work, but you are throwing everybody else out of work. If we want more useful productive work in this country, and if that work must depend upon the application of labour to land, there is one perfectly simple way of increasing that sort of work, and that is to make A a little easier for labour to apply itself to land. I cannot see how you can get away from it. The work we want der ends upon labour having access to land and you allow the landlords of this country—

The DEPUTY-CHAIRMAN

I think that the right hon. and gallaat Gentleman is getting too far afield. He can, of course, discuss, in a broad general way, these things, but we cannot have long detailed speeches upon things not in the Budget. While the right hon. and gallant Gentleman was perfeetly in order in making reference to the absence from the Budget of the taxation of and values. he is not entitled to enter into a long disquisition upon the merits of something not included in the Budget.

Colonel WEDGWOOD

I certainly do not wish to make long orations. We have had long orations enough. I will stick to generalities. My point is, that here is the first opportunity for the Chancellor of the Exchequer really to do something for the unemployed in this country, to give them a chance of getting to work in their own country, and that he has not taken that chance. It seems to me that we cannot do bel ter in this Committee or in this How e than see what it is that is causing unemployment. It is not the abolition of tariffs on lace. It is not the exportation of rich men to America. It is the locking up of the land of this country. Until we can make it both expensive and uncomfortable to own land and not to use it, we shall be doing nothing to put an end to the present state of unemployment from which we suffer. The Chancellor of the Exchequer has been seeking taxes which would not burden industry and strangle the revival of trade. I do not think that he has found those taxes. I believe that many of the existing taxes will make capital dearer and the revival of trade more difficult. He had here to hand a tax which he could have levied and which would not have been passed on to the consumer, which would have made land and raw materials cheaper, and which would thereby have helped industry instead of burdening it. He has thrown away this chance. He is giving us a Valuation Bill in place of it. A valuation Bill, unless he says what is to come of the taxation and rating of land values, will never get through this House either this Session or next Session. I would beg of the right hon. Gentleman the President of the Board of Trade, in the absence of the Chancellor of the Exchequer, to express to him the bitter disappointment of the overwhelming majority of the Labour party in this House, of the Liberal party in this House, and of our joint parties in the country at the absence from his Budget of the promised taxation of land values and the substitution of a Valuation Bill which will hardly get through this House and which much in evitably, unconnected as it is with the Finance Bill, be thrown out by the House of Lords, and make it impossible for us to get any step forward in the direction of dealing with land monopoly in this Parliament.

Mr. MOND

I have listened to the greater part of this Debate and one or two things appear very clearly from it. We have heard a number of speeches on the Budget, but we have not had a single speech, except the speech of the right hon. Gentleman the Chancellor of the Exchequer, in favour of it. Every speech from every side of the House has been full of complaints at what is in or what is not in the Budget. Nobody seems satisfied. It is not, so we are assured by the Members who come from the Clyde, a poor man's Budget, and it is not, for fairly obvious reasons, a rich man's Budget. It is not a national Budget, for it will bring no prosperity to the nation. I do not think that it suits anybody except perhaps the Chancellor of the Exchequer himself. I am not so certain that by the time that he has had an opportunity of considering it a little more closely and of considering some of the criticisms which have been and will be levelled against it he will be as satisfied with it as he is now.

I think that some of the critics of the Budget have been rather ungrateful to the Chancellor of the Exchequer for what he has given to them. The right hon. Member who has just spoken has got his Valuation Bill, if he has not 8.0 p.m. got his taxes. At any rate he has the promise of a Bill, and that is more than he has had for five years or longer! Hon. Members from the Clyde have seen the basis of taxation narrowed to a point which is quite unprecedented and quite against all the sound canons of finance. The Chancellor of the Exchequer, instead of broadening the basis of taxation, has narrowed it to a point where practically the whole of the impositions are to fall upon a small group. Surely as a first step that should satisfy hon. Members opposite. They have every reason to be disappointed with the remarks with which the Chancellor of the Exchequer finished his speech. The right hon. Gentleman ended with one or two observations which might be re-echoed from this side of the House. At the same time, although the right hon. Gentleman paid lip service to those ideals and canons of finance he has, we believe, made not the slightest attempt to carry them out. On the contrary, he has gone in precisely the opposite direction.

One can say that the Budget is unimaginative, that it is dreary and unquestionably damaging. The Chan cellor of the Exchequer said that the additional burden of taxation would not be severely felt by the people who have to pay. That is unquestionably true; it will not be severely felt by those who in the first place have to pay. But it is as well for him to remember that when he imposes taxation he is not only taxing people but money, and that taxes have various effects quite apart from the persons by whom the money is owned. The Chancellor is taxing capital. He is proposing to spend money that would this year have been used for capital purposes in order to refurnish and rehabilitate industry. He is taking that money at the exact point at which the greater part of it would probably be used for investment. He is taking, not the income of the country, but what would have been capital accumulations and savings to the tune of some £40,000,000.

At the present time all our competitors in every country are reducing their taxation. Those of us who are responsible for the carrying on of industry—presumably in order to keep this country going, so that Chancellors of the Exchequer and politicians can always play about with it and spoil the work that is done—those of us who, according to the Chancellor of the Exchequer, have to be encouraged, because our task is made so hard and burdensome by the unhappy finance from which this country continually suffers—we shall not view with any pleasure the results of the bungling in this particular Budget. The probable results of it are very clear. Industry will become more stagnant, unemployment will increase, our competitors will be better equipped relatively than we are, and the reserves of industry will be mulcted just at the point of becoming fruitful.

I would make a special appeal to the Chancellor of the Exchequer and the President of the Board of Trade to relieve the reserves of industry not only from this new imposition but from the payment of Income Tax. Those reserves represent money just at the point at which it is about to be most fruitful, both in the production of new revenues which the Ohancellor can tax, and in the creation of employment. Quite a substantial amount, £5,000,000, of the money which is to be raised will come directly from the reserves of industry. The Chancellor of the Exchequer had far better leave the money in industry, where it will give some work to the unemployed and provide him with some revenue in future. That is a point which has been raised over and over again, but has been disregarded by one Chancellor of the Exchequer after another who has had no experience of industrial affairs. There is another aspect of the Budget which is perhaps even more remarkable than the imposition of taxes. That is its bearing on the tariff question. The right hon. Gentleman is going to allow the duties on lace, cutlery, gloves and gas mantles to lapse, he has given notice of repeal of the McKenna Duties. There is no reason at all for doing this.

Colonel WEDGWOOD

Cheaper gas mantles.

Mr. MOND

Not necessarily. The right hon. Gentleman's great desire is to follow what he considers to be a Free Trade principle. It opens up a long vista. The right hon. Gentleman who has interrupted referred to cheaper gas mantles, but I see trade depression, unemployment, distress for ti e worker and the despondency of the country.

Major McKENZIE WOOD

How long have you thought this?

Mr. MOND

For years. One of the reasons why I left the very pleasant association of the hon. and gallant Gentleman and his party, and why other industrialists have left them, is that we cannot talk lightly of these things, that our daily lives consist, not of talking of these things from these benches, but of having to carry them out in practice, and to bear the brunt of the effects cf Acts passed by this House. We have considered and reconsidered the old Free Trade arguments which are adhered to so gallantly, and, if I may say so, so unimaginatively, by some Members of this House. All this distress which we shall witness to the glory of Cobdenism is based on an entirely out'corn theory regarding Free Trade and Protection. It is based upon considerations that no longer apply. In spite cf that, the Victorian politicians return to it with a curious avidity. They know all the arguments on both sides and they feel safe when engaged in the good old discussions which they know. Some of us of the younger generation are not quite so interested in the rattling skeletons of defunct statesmen. From what the right hon. Gentleman the Member for Epping (Mr. Churchill) said this afternoon about Duties, he is not prepared to be frightened by the Chancellor of the Exchequer pretending that the worms which flourish on the late lamented political economists are really dangerous serpents. They are not; they are just ordinary worms to be dealt with in the ordinary way.

We have to remember that years ago this country abandoned the balance between agriculture and industry. There was a time when the woaker displaced from industrial employment could easily get back to the agrieultur al work from which he came. That time has long since passed. To-day you have a great industrial population that has no prospect of getting back to any sort of agricultural existence. We are one of the only countries in the world faced with that position. There are works which I know well, where within the memory of living men they used to stop the machinery in harvest time in order that men and horses might be used for the harvest. Those days have gone. The population has grown, and grown to such an extent that it can be employed only by industry. Yet we have thrown over the only possible method of maintaining an economic balance which will keep our men at work, and that is by means of a tariff system. Nearly every country in the world employs it. The whole of our Dominions employ it; Australia employs it and so does South Africa., and America, and nearly all the great manufacturing countries. They are not having less of it; they are having more of it, and in larger units. The Empire is large enough, larger than any unit in the world, and it could easily devise such a system, if there were a will to carry it out in this country. I am not talking now of absolute Empire Free Trade, because those things are very difficult to work out, but. of a, method of the freest trade, which is essential and could be carried out easily.

The pedantry of the cheers we had just now are clearly indicative of the lack of desire on the part of hon. Members opposite to embark on any new line of thought in order to solve the problems of the country. They prefer to go back to the very antique teachings of Socialism, which have been disproved and discredited in every civilised country in the world. As a matter of fact, the moment you admit the principle of anti-dumping, which is admitted by all the economists of this country, the moment you start thinking on different lines, of the fitness for citizenship, of husbanding the resources of the nation and of a desire, not for cheap labour but for a high standard of living, the whole Free Trade theory becomes absurd and unworkable.

Mr. BROCKWAY

Hear, hear!

Mr. MOND

I am glad that I am succeeding in getting some converts.

Mr. BROCKWAY

Let me correct the hon. Gentleman. Many of us on these benches are not Free Traders, but we are not Protectionists. We believe in the organisation of international trade.

Mr. MOND

A most interesting statement. I have always wondered what the people who sit upon the mountains, the hon. Members who sit on the seats opposite, really are. They are not Free Traders and they are not Protectionists. They seem to be neither Communists nor Socialists. They have a sort of ardent faith of their own, which they keep to themselves and do not disclose to the rest of us poor mortals, because we might be unable to comprehend it. The Chancellor of the Exchequer has tried to claim financial soundness for his Budget, but it is not a claim that he can fairly make. His Budget was wrecked by the policy of his Government long before the Budget was brought in; it was wrecked by the incurring of further expenditure for which he had made no plans. So he has had to put himself into a position for which he himself really apologised towards the end of his Budget speech. He admits that high taxation is not a good thing, and yet he imposes it. It is essential, if this country is to recover, that the whole policy of high taxation and extravagant expenditure should cease, and thai we should have a series of real Gladstonian Budgets, based upon low expenditure and low taxation. Quite a different line of policy has been pursued by the right hon. Gentleman this year, whereas the right hon. Member for Epping made a great and gallant attempt to pursue it during his stewardship as custodian of the national finances. The only economy that has been effected this year has been in the Fighting Services, and even there the Chancellor of the Exchequer seems to think it necessary, if I may use the expression, without offence, to bleat about the War.

It seems strange that, although it is only 12 years since the country had to depend for its very existence upon the Fighting Services,there should be this demand for cutting them down to far below the point of reasonable efficiency. The Government have cut the Fighting Services down to the lowest point to which they can be cut. While I do not want great military or naval expenditure I do say that we ought to be very chary about cutting the Fighting Services down below a point where they can be reasonably and properly carried on. The right hon. Gentleman can console himself with the fact that thousands of patriotic cadet boys have been deprived of their summer camp as a result of his economy, and in the name of pacifism and Socialism. While basking in the sun at Eden Lodge, perhaps he may give some little thought to those cadets who might also have been basking in the sun had not the Secretary of State for War thought that he spied a menace to the peace of the world in the cadet corps of this country. The cadet boys can console themselves on the fact that they have contributed towards the relief of the bookmakers.

There is only one sure road to prosperity, and that road the Chancellor of the Exchequer refuses to walk. It will take a long time to rebuild the capital of this country, which was impaired and dispersed and, in some ways, destroyed by the War. The revenue of this capital is the true purchasing power and the true taxable revenue of the country. The Chancellor of the Exchequer has intimated that these are his views, but he has not had the courage to pursue them. I know that it creates laughter among hon. Members opposite when we talk about the recovery of finance and the long time that it takes to rebuild your financial position. If we take the trouble to study the financial history of this country and of the world we find that there is no short cut. To be able to spend money wisely, the only way is to have it as income, and not try to spend the capital. A great many people in all walks of life have tried it. They have spent their capital and have been greatly surprised when they suddenly came to the end of it. That is what this country is doing in this Budget. That is what has been done in past Budgets, and it must come to an end. We must get back to a period of retrenchment, economy, and lower taxation, And back to the point where we consider the profits of industry rather than the largesse of the politician.

Mr. DENMAN

I think the Committee will feel that we deserve a little cheerfulness, after the hon. Member's speech. He asserted that what we needed in this Budget was some new idea. So far as I could understand his speech, the only positive idea that he offered to us was the idea of tariffs, which I have heard discussed by his father in great detail many years ago. Tariffs, whatever may be their merit, have nothing to do with this Budget. We do not propose tariffs as an immediate method of raising large sums of money. There has to be inquiry and long processes before we can obtain money in that direction. What the Committee has to consider is the obtaining of the money which we have declared by our Estimates we need in this current year. The hon. Member seems to suggest that he would advocate an increased expenditure upon armaments, or, at any rate, upon cadets. The object of our discussion must be to suggest how the money can be raised, and I want to confine myself rather strictly to the question of raising money in view of the immediate needs of the situation. Those of us who represent important commercia. and business constituencies are bound, in courtesy to our own consti;aents, to make comments on the Budget as it is, and the possibilities of the financial position as we see it.

The Budget seems to have come triumphantly through any practical criticism that has been offered against it. There has been no practical alternative suggested. From hon. Friends behind me on this side of the House we have had the suggestion that the Budget ought to have heralded a new creation of the power of our social State. That, however, must be a matter of a great many different Statutes, and a large alteration of our old social order. It is r at a proposition that you can expect in I he, Budget. Do they really suggest that this year, on the Estimates before us, aid with the Statutes which have been passed and are in prospect in the current year, we ought to have raised a much larger sum of money, and if so, how? It is a little hard on the Chancellor of the Exchequer to ask from him on this occasion a great increase of taxation, which is, I presume, what they have in mind.

I want to make two positive suggestions as to what I think should be the broad outlook of our Labour finance My first point is a very small one, and I would ask the President of the Board of Trade to convey it to the Chancellor of the Exchequer. It is that, in the Finance Act, we should once for all, by one Clause, put an end to a very old, I will not say scandal, but a very old offence in. our finance, and that is the existence of perpetual pensions. Before the War there were several of these pensions, but in the course of the War they dropped out, and there is now only one left, a perpetual pension of 25,000 a year, which has been going on for 120 years. This pension will go on indefinitely unless we end it. Unless we put an end to it, it will go on for as long as this particular family exists. I do not want the demise of that family, nor do I want that pension to be stopped this year, but I do want a term set to it. I want the Finance Bill to state that after a certain date that pension shall stop.

The other suggestion is of more substance. I suggest that the real function of Labour in finance is to build up the assets of the State. That is a thing with which this Budget has nothing to do. It is an undertaking which no Chancellor of the Exchequer has attempted; and I propose to indicate how very barren are the assets of the State. Take India as an example. That country has a debt of about £800,000,000, and the assets are well over £600,000,000, but if you look at oar figures you will find that the assets of the State are extremely small, in fact, the only substantial one is the Suez Canal shares. [An HON. MEMBER: "The Post Office!") Yes, but the capital value of the Post Office has never been stated. It brings an enormous income to the State, but we have no statement anywhere as to its capital value.

This Budget carries on the normal procedure of transferring income from one set of persons to another. That is a process which was first started on a considerable scale by the Liberal party, and in the technique of it there is not much more to be done. There are not many ways left untried by which income can be taken from the wealthy and the poor. We can perhaps get a little more or a great deal more, but the process has reached about as high a pitch of perfection, technically, as it can attain. I am pleased that the Chancellor of the Exchequer has depended more on Income Tax than on Surtax and Death Duties. It is extremely doubtful whether a great deal more money can be obtained from either the Surtax or Death Duties for the simple reason that both of them are in some measure voluntary, and when a tax is voluntary there is always a danger that less will be claimed from it than one would like. In the case of Income Tax you can be fairly sure that the amount of avoidance will be small, but in the case of Surtax the individual has the one simple device of avoiding aggregating to himself the fragments of income which have already paid Income Tax, and need not be aggregated if he does not wish to do so. He can leave portions abroad, or distribute portions amongst members of his family. There are many ways in which it can be avoided.

Still worse is the position of Death Duties. There is always the danger that the old Conservative and Labour doctrine about wealth may prevail and that we may really convince the people that to amass a great horde of wealth not only makes entry into Heaven unnecessarily difficult but is also essentially vulgar. Whenever public opinion begins to think on those lines Death Duties will yield enormously less than they do now. At present there is an average of one estate of £500,000 and upwards per week and nine estates between £100,000 and £500,000 per week. If it became the correct thing not to bequeath large sums of money—no one need bequeath large sums unless he wants—you may get a dangerous shrinkage of revenue from Death Duties, and I suggest to the Labour party that what we really ought to be doing is not to go on indefinitely with this process of transferring income but to begin and raise up a solid structure of assets of the State. I would suggest that the direct way of doing that is by enabling a portion of the Death Duties, when the time is favourable, to be payable in kind. If they are paid in kind, as they can be in the ease of land, the land can be immediately gold and the money realised taken for the national revenue and used for the expenditure of the year. Death Duties are, of course, a levy on the year's capital for the purpose of the year's revenue, and I suggest that we should take a portion of this capital sum and keep it in the hands of the State in kind.

Our assets are extremely small. We have no complete list of the assets of the State. It must strike many business men in this House as an odd fact that we have no national balance-sheet. Every small company at its annual meeting has its balance sheet, but the State has no statement whatever of assets and liabilities. You can extract from the financial returns great masses of our assets, but they are not complete, nor are they very illuminating. You find amongst our assets the figure of £39,000,000 for the Unemployment Insurance Fund owners. That is not a very brilliant asset for the State. There is the Post Office, the Army possessions, the Naval possessions, but nowhere do they occur in our list of assets. In fact, the State is an extremely poor organisation. There are positive advantages in allowing Death Duties to be paid in kind, but there are several difficulties in the way, especially if you try to get too much out of them. One difficulty is that by suddenly putting securities on the market which have to be sold you may depress the share value of a great number of companies and also the value of our own national loans. It is much better that less of that money should come on to the market. If the single owner of a business has died and a great mass of his shares in the company have to be sold, you might injure the credit of the company. Difficulties of that kind arise. But if you transfer them in kind, and they are kept in kind, these things do not happen and the State is gradually enriched and enjoys increasing interest from the assets.

I have referred to the ease of the avoidance of Death Duties. Business men art an extremely sentimental race and I have found a real objection on their part when they feel that out of the structure which they have built up during their lives they have suddenly to hand over to the State a quarter of all that they have collected and that that quarter is to be dissipated in a single year's expenditure. If, on the other hand, a man who has built up that structure felt that that quarter was going to remain a possession of the State, to be permanently fruitful and, ultimately the means of lessening other kinds of taxation, I think you might arouse a real feeling amongst certain kinds of patriotic business men which would encourage the possession by the State of assets which they themselves have built up.

We have had one or two romarkable examples of people handing over sums of money to be allowed to accumulate in relief of the National Debt. These people do not want that money to be spent in the State expenditure of a single year, but if they know that it will accumulate and ultimately form a considerable sum in the capital resources of the State then they are content. We had the very remarkable example of Colonel Hall Walker who gave his whole racing stud to the nation. It now provides one of our most profitable Socialist activities. It gives us some £17,000 a year of profit which, in itself, is a very fine achievement. I am sure that donor would have objected to the stud being sold and the proceeds being used in the annual finance of the country, but he was content that it should remain the possession of the State to be of value, both in producing revenue and in producing very fine horses.

I suppose that all of us in this House have our dreams of different kinds. I have sometimes dreamt of a time when the State would be able to produce a balance-sheet as glorious as the balance-sheet of the Prudential Insurance Company. The Prudential Company at present is wealthier than the State in its assets, but, of course, its liabilities are very much less. If I do not live to see, in my time, a State balance-sheet as fine as the Prudential Companys balance-sheet, it is an event which may be possible in the lifetime of my children; and I should like to think that our Labour Chancellor of the Exchequer had started erecting a great structure of State assets which would, not only permanently increase the wealth of the State, but would also give hopes of a reduction of taxation.

Sir JOHN FERGUSON

I shall not detain the Committee long, because we have had many speeches, and I am sure that many hon. Members are suffering from exhaustion. Hitherto my interest in the Budget has been more or less confined to points touching the City of London. An hon. Member ofposite said that it was a Budget that would appeal to the City, but, had that hon. Member been in the City this forenoon, he would have heard something dire qtly contradictory of that statement. Yesterday I listened to the Budget statement as one who was interested in the trade of the country more than anything else, and in the possibility of some diminution of unemployment following upon an increase in the trade of the country. It is in the furtherance of that idea and in the hope of being able to do something to alleviate prevailing distress that I have given 10 years' voluntary service.

We learned yesterday for the first time that new taxation would reach the alarming total of about £35,000,000 this year and about £45,000,000 next year. We also heard of some undefined taxes which are being left over, apparently more as a menace than anything else. The McKenna Duties are left in a very unsatisfactory state—if the trade of the country is the Chancellor's first consideration—and I am not sure that that evil result will not be aggravated by the remark which I distinctly heard him make at the Table: "I may change my mind yet on this matter." It is a deliberate blow, a personal blow, struck at the Empire by the adherent of a theory which, I hope, is quite dead even now and will be pronounced dead in the years to come.

An examination of the figures shows that last year's deficit is primarily the fault of the Socialist Government. I think that that fact must be acknowledged because, of the deficit of £14,500,000, nearly £10,000,000 is due to extra unemployment benefit. The country to-day is paying for post-War extravagance on social services. Social services now cost about £380,000,000 or nearly twice the total of the pre-War Budget, and seven times the amount spent on social services before the War; but these facts do not appear to act in any way as a deterrent to the prodigality which it is proposed to carry on at the expense of the country. I think the statement will be generally accepted that more taxation means less saving, and less saving means less money for investment in industrial enterprise.

We hear a great deal about the right to work or maintenance. Those of us who have gone through the mill know that there is an obligation to work. The dole, as at present administered, seems to reverse that principle, but the fact remains that we have primarily to rely on industry, which means, in ordinary terms, an increase in our export trade.

We must maintain our industrial efficiency at its highest point and our producing costs at as low a figure as is possible consistent with efficiency. What is the position to-day? Our basic industries have not been able to equip themselves with up-to-date machinery. Their overhead expenses, even to-day, stand at a figure at which it is impossible to run business profitably. If some of our companies to-day were able to obtain the money necessary to instal new plant in their works an entirely different condition of affairs would be found at the end of a year.

I know of one company which was working with old machinery and found it impossible to obtain new capital from the public. Capital was obtained from a private source and inside 15 months the company was paying a comparatively large profit, representing a yield of almost 14 per cent. on the money which had been put into the business. Had that money not been put in, the business would have headed straight for liquidation. To the mind of anyone who is watching the course of the expenditure of money this rushing mighty river of additional social expenditure is alarming. I wish to see every man as happy, as comfortable, as well fed, as well clad as I am myself. That has been my principle all my life and I stand by that principle as a, Mean-her of the House of Commons to-day. This treatment of industry has been, and is, a crushing blow, because it has destroyed to a very great extent any chance of new capital being put. into industry.

There is another point. The amount spent last year on redeeming stock was £28,000,000 only, while the sum taken in Death Duties was just on £80,000,000. Every endeavour should be made that the Sinking Fund should never be less than the yield of the Death Duties. When all is said and done, it is simply a tax on capital, and it is essential to maintain this level in order to reduce the cost of the Debt and to enable the Chancellor of the Exchequer to make a good bargain when the question of conversion comes along. Conversion up to date has been exceedingly disappointing, and very little saving has been effected. The service of Debt in this country, as hon. Members know, is almost £1,000,000 a day. How can the Debt be successfully refunded at lower rates when our national expendi- ture keeps on increasing at such an abnormal rate? All the advantages accruing to successful conversion are lessened and in fact made impossible by such generous, to put it no stronger than that, expenditure.

The expenditure of local authorities must have appealed to anyone who studies these figures. It is now £520,000,000 a year, against £170,000,000 before the War, and the national expenditure is £860,000,000 roughly, against about £195,000,000 before the War; and if you add the two together, you will find that the expenditure is £1,385,000,000, as compared with £367,000,000 in 1914; that is to say, £1,000,000,000 of difference. The result is high prices and this curse of unemployment, which has such a deteriorating effect, mentally, morally and physically, on the people of this country.

When the Chancellor of the Exchequer said yesterday that he had not thought it necessary this year to provide for the expenses of a General Election, there echoed through this House the crack of the Socialist whip on certain Members on the benches below the Gangway on this side, and the Toying look with which he said it was an indication to us on these benches that it was all done by kindness. In the opinion of many thinking people who have the best interests of this country very closely at heart, and after many years' study of this question, this Budget will go down to posterity As one of the most vindictive and most destructive Budgets that has ever been introduced in this House—vindictive because it is mainly directed against one class of the people whom the Chancellor evidently does not love, and destructive because of the disastrous effect which it will have on the trade and the industries of this country and on the employment of its people, to which not one single sympathetic reference was made by the right hon. Gentleman yesterday. If further proof were required that this is a spendthrift Budget, you have it in the entire absence throughout the whole of the right hon. Gentleman's speech of the one word "economy."

Mr. PERRY

I am sure the Committee has listened with interest to the speech of the hon. Member for Twickenham (Sir J. Ferguson). Some of us, however, have been rather amazed by the point of view expressed. His policy and his criticism with regard to Debt reduction, and particularly the use of the Sinking Fund, might have been much more rightly directed to the right hon. Member for Epping (Mr. Churchill) and the present Leader of the Opposition, for certainly within recent years no statesman has fallen so far short of the fulfilment of the Sinking Fund in regard to the payment of the National Debt. The hon. Member for Twickenham also made a point. with regard to our social services, hut I have yet to hear from him or from any Member of his party, any constructive alternative for the expenditure on our social services to-day. Let him look at the present acute position in the United States, where, despite their policy of high Protection, unemployment has reached a total of between 4,000,000 and 5,000,000 people, and, largely on account of the lack of social insurance and expenditure on social services, they are having to apply huge sums in order to relieve the distress caused by unemployment. As long as this or any other Government fails to deal adequately with the problem of unemployment, it must not be allowed to shirk its responsibility by providing for the men and women who suffer from unemployment.

Despite the criticism that has been levelled against the provision of another £10,000,000 for the Unemployment Insurance Fund, it must not be forgotten that on the ordinary principles of insurance that is bound to be a charge on the Fund and will ultimately come back either in the maintenance of the present contributions on a high level when employment has improved, or in a continuance of an increased contribution perhaps in later years. I would suggest to the hon. Member for Twickenham, as one who had a very great enthusiasm for the Empire Crusade in its early stages and who very quickly got out of it—

Sir J. FERGUSON

No, that is quite in error.

Mr. PERRY

The hon. Member can settle that point for himself. I would point out to him that in one of his own pet Dominions, one of the most highly protected Dominions within the Empire, which has lately adopted a policy of prohibition in regard to many imports, their position, as revealed to me within the last 24 hours by a distinguished states- man of that Dominion, is that their policy of high tariffs has so created the demand for higher wages and has so increased the cost of living, that that in itself has led to a vicious circle, and the Arbitration Courts in that Dominion are largely breaking down because of the operation of that vicious circle in Australia. I would suggest, despite what the hon. Member has tried to make us believe, that the way out. of the difficulty, even in the Dominion of Australia, is not in the direction which he has now advocated.

I would like to put before the Committee one or two views on this Budget, particularly as it appeals to the majority of Members on this side of the House. This would not be the time, I suppose, unduly to criticise the expenditure in detail. I am not going to complain of the expenditure on the Social Services. It must be the duty of any Government to provide for those who suffer from unemployment so long as it fails to settle that very disastrous problem. Let us look at it from another point of view. The hon. Member for Twickenham and the hon. Member for East Toxteth (Mr. Mond) were pouring testimonials upon the right hon. Gentleman the Member for Epping for his last Budget. I believe, however, that three out of five of the last Budgets, all of which were compiled by the right hon. Gentleman, showed a deficit. Many of us on this side of the Committee complained strongly two years ago that the Supertax and Income Taxpayers were then being relieved by the right hon. Gentleman. I do not contend for a moment that the Super-tax or Income Taxpayers have not some claim for consideration, but I submit that there are other sections of the community who have far stronger claims for redress. We on this side welcome the steps which have been taken by the Chancellor to meet the present situation. Many of us would have liked to see many more provisions in the Budget. We would have liked to see perpetual pensions swept away, the means limit for old age pensions abolished, and an extension of the old age pensions scheme.

We recognise, however, that the Chancellor has had to deal with a difficult situation, and, in fixing his new taxation as he has, he has acted on right lines. The principle of taxation should be not so much what a man pays in taxation, as what he has left when he has been taxed. The basis of taxation should be ability to pay, and in the efforts which he has put forward to raise the money necessary for his Budget, the Chancellor of the Exchequer has placed the burden upon the shoulders of those who are best able to bear it. A great fuss was made in the Conservative newspapers this morning about the increase of 6d. in the standard rate of Income Tax. Now that the relief, instead of being 2s. 3d. in the on the first £225 of earned income, is to be 2s. 6d. in the on the first £250, three-quarters of the people who pay Income Tax will not be affected by the alteration in the Budget. It is an amazing reflection on the unequal distribution of wealth that so much Income Tax is paid by only a small section of the community. The burden of the man of moderate means with a family, with the rebates which he will get under the new scale drawn up by the Chancellor, will be eased very considerably.

I am glad that the Chancellor is taking steps to prevent an avoidance of Death Duties by the transfer of estates into small private companies. We heard a lot in days gone by about wealthy people, who have claimed on occasions to be the only patriots, repeatedly forming their estates into small private companies in order to avoid their fair share of taxation. Many of us rejoice that the first steps are being taken in this Budget to bring to the community a share of that increased wealth which is created by the community in land improvement.

Mr. FOOT

Do we understand that steps are being taken in the Budget?

Mr. PERRY

I should like to have seen it part of the Budget. I should have said that the Chancellor has promised that legislation is to be intro-9.0 p.m. duced to carry out this much needed reform, and that I should be glad to hear the reason why it is not included in the Budget—

Mr. WOMERSLEY

There is no money in it.

Mr. PERRY

They will have to go to Grimsby for it. I am glad that this legislation is to be introduced, and that a much needed reform will be carried into law.

Mr. BOOTHBY

The Committee will have listened with interest and a certain amount of astonishment to the first speech in favour of the Budget which has been delivered. I do not remember a debate on the Budget Resolutions in which a Budget has been so castigated and assailed from every quarter of the Committee as the present Budget. The speech of the hon. Member for Kettering (Mr. Perry) was the first speech which contained even a modified approval of the main proposals of the Budget. This Budget is not popular in any point, and I am not surprised. We started off with a trenchant denunciation by my right hon. Friend the Member for Epping (Mr. Churchill). Then we had a wail of sheer despair from the hon. Member for Bridgeton (Mr. Maxton). Later, the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) was heard in full cry and in bitter complaint about the betrayal of all the things for which he has stood in British politics for the last 30 or 40 years. The right hon. and gallant Gentleman knows as well as we know, and as well as the hon. Member for Kettering knows, that the method which has been adopted by the right hon. Gentleman, with regard to the taxation of land values, despite all the speeches which he has made, and all the articles which he bas written, is the one method of securing that the question shall not become actively or practically embarrassing in the near future, because he knows very well that the chances of getting through a separate Bill for the valuation of land are absolutely negligible.

The Chancellor of the Exchequer yesterday estimated his deficit for the year that is to come at £26,264,000, and some of us on this side ask ourselves why the deficit reaches so formidable a figure. We find from the speech of the right hon. Gentleman that the Civil Estimates have gone up by £27,000,000. There, therefore, is to be found the cause of the deficit. According to the right hon. Gentleman, £14,000,000 more is required for the Unemployment Fund, £5,000,000 more for the new Widows Pensions' Act; and, in addition, there are automatic increase in old age pensions of —1,000,000 in education grants of £2,500,000, and in Housing and Health Insurance grants of over £1,000,000. Without wishing to be in any way harsh, there are some of us on this side of the House who quite genuinely believe that this wholly unproductive expenditure upon what are called the social services has not only gone far enough but too far at the present time.

Mr. MUGGERIDGE

What would you cut? Help us.

Mr. BOOTHBY

if the hon. Member will wait for a moment will try to show how I would have done it. In the first place, at this very critical juncture in our national affairs I would not have passed the Unemployment Insurance (No. 2) Bill nor would I have given the additional widows' and orphans' pensions.

Mr. MUGGERIDGE

Will the hon. Member allow me to ask him what he would do with the unemployed?

Mr. BOOTHBY

If the hon. Member will give me a chance he will see that I am just coming to that point. What I was saying was that during the last 10 months the Chancellor of tie Exchequer had assented to an addition of £9,000,000 to the purely unproductive expenditure on social services, a sum which we cannot possibly afford at the present, time. The hon Member has asked what I would have done. My answer is that I would not have put upon the Statute Book either of the two Acts, which involved that additional expenditure. I do not think they were necessary, nor do I think we could afford it. We are very much poorer than before the War, and our rate of expenditure is enormously higher, even allowing for the difference in the value of money. Our national income has gone down, but our taxation is the highest of any country in the world. The alarming thing in the Budget statement of the Chancellor of the Exchequer was that he held out no hope whatsoever of any de crease in this unproductive expenditure. On the contrary, he apparently contemplated, and, indeed, he to some extent budgeted for, a steady increase of expenditure upon the purely social services in the years that are ahead. How did he meet the actual problem, and nobody denies that it was a difficult one, with which he was confronted? He made no serious attempt to carry out economy. As my hon. Friend the Member for Twickenham (Sir J. Ferguson) pointed out, the word "economy" figured at no point in the course of the speech yesterday. On the contrary, he has already agreed to an increase of £9,000,000 expenditure on the social services, and is shortly adding a further increase by the raising of the school age.

The hon. Member who interrupted just now asked what I would do about the unemployed. It has always been a source of amazement to me that the Government have never made any attempt to deal with the problem of the unemployed. At the present moment it is perfectly right to describe unemployment benefit as it is given to a very large number of the unemployed as a "dole." It is a dole, it is nothing more or less; and it is a dole which is clawed every week off the wages which are paid to the vast majority of the workers in this country, who are more or less permanently employed. That is the viciousness of the present system. So much is docked every week from the wages of the steadily employed and that money goes to the Unemployment Insurance Fund. Those men, and they are in a vast majority, who are in more or less permanent employ, never get any benefit from the contributions they pay. Their contributions are handed over to the growing army of permanently unemployed, who do nothing from one day to another but hang about the streets smoking cigarettes and go to the cinemas in the evening. I am not saying that they themselves are necessarily to blame, but I do say that they are the victims of a system which is not only unjust but extremely unsound from every point of view. Over and over again Ion. Members on this side of the House, both in the last Parliament and in the present Parliament, have urged that the only way to deal with this problem is to separate the two categories of the unemployed; to have on the one hand a proper insurance scheme so that those who contribute regularly week by week shall be entitled to draw the benefits for which they have contributed—and full benefits, on a generous scale: while those who are, though perhaps through no fault of their own, more or less permanently unem- ployed ought to be dealt with in a separate category and by a separate authority.

Mr. MUGGERIDGE

Would not that cost money?

Mr. BOOTHBY

I do not think it would cost anything like the amount of money the present system is costing. Look what the Government have been compelled to do. Twice they have had to come to the House and do what the Minister of Labour herself has described as a dishonest thing, ask for an increase of borrowing powers. Despite the fact that the Chancellor of the Exchequer estimates that for this year the cost of the Floating Debt will be £11,500,000 less than the cost of the Floating Debt last year, he still proposes to allocate the whole of the Suspensory Fund for the de-rating scheme to the purposes of Debt repayment. [Interruption.] Yes, the £16,000,000 of the Suspensory Fund is to be allocated during the next three years to repayment of debt. This year he is applying £5,000,000 of that Suspensory Fund to fortify still further the Sinking Fund; next year it will be another £5,000,000 and in the following year £4,500,000. All I would say is that many of us on this side of the House consider that the Fixed Debt charge of £355,000,000 a year is in itself ample for the purposes of repayment of debt, and that there was no necessity, at this critical juncture, for the right hen. Gentleman still further to increase his estimated deficit to over £31,000,000 by applying yet another £5,000,000 to debt reduction, simply because there was a deficit upon the Budget of last year.

I do not think we can possibly judge the operation of this fixed debt charge of £355,000,000 a year after two years. We have had two of what we must all regard as the most difficult years this country has ever experienced, and just because in neither of those two years has the full limit of £50,000,000 a year been paid into the Sinking Fund there is no reason to suppose that in the long run, and taking an average over several years, the Fixed Debt charge of £355,000,000 a year will not prove ample for all practical purposes. We are paying off debt in this country on a scale that has not been attempted by any other country in the world, and that I should not think would be attempted by any other country, and according to the Chancellor of the Exchequer himself, the reduction in the dead weight of National Debt last year alone amounted to no less than £31,000,000.

No one on this side advocates reducing the figure of the Fixed Debt charge below the statutory sum of £355,000,000 fixed by my right hon. Friend the ex-Chancellor of the Exchequer, but at the same time I think we ought all to realise that in so far as that enormous transference is concerned—I admit it is a transference; we collect the money from the taxpayers on the one hand and distribute it among the holders of War Loans and so forth on the other—it tends to take money from productive industry and to put it into the hands of the rentier class. In other words, the whole tendency of this enormous debt redemption which goes on year after year is to take money out of active hands and to put it into more inactive hands. What we on this side of the House say is that under those conditions, and especially looking to the enormous reduction which has been effected in the cost of the Floating Debt, there was no reason for the right hon. Gentleman to put still another £5,000,000 this year and to promise another £5,000,000 next year towards debt repayment. It is financial pedantry of the very worst kind.

In order to provide for this enormous Debt repayment and to pay for his own extravagance and additional expenditure upon the social services, the Chancellor of the Exchequer has had resort to direct taxation. He has imposed direct taxation amounting to £31,500,000 this year and to £43,500,000 in a full year. It is a tremendous sum, and I think hon. Members on every side must agree that it is a most formidable addition to the burdens upon industry; but one of the features that alarms me is that hon. Members opposite have stressed so much the fact that by far the bulk of this additional burden falls upon a very small minority in this country; and, indeed, by the further modifications and reliefs in the lowest scales of the Income Tax, the Chancellor of the Exchequer has, on the whole, tended to accentuate this effect. The whole burden of this taxation falls upon a small minority of the people of this country. We are gradually getting into the position that nearly the whole burden of taxation is going to be borne by a very small minority of the community, and the rest of the community are practically going to have no stake in the country, and will not care whether the taxes go up or down, or anything else. By this method, you are introducing a sense of irresponsibility among the mass of electors which, although it may tend to increase the voting support of hon. Members opposite in the constituencies—I imagine the financial Clauses were primarily designed for that purpose—although it may have that effect, at the same time constitutes a direct threat to the whole system of democracy, because you are creating a system under which a majority of the people will have no interest in taxation, and no sense of civic responsibility.

Hon. and right hon. Gentlemen opposite cannot really maintain that this additional burden on the direct taxpayers, through the increase of the standard rate of the Income Tax, does not ultimately fall upon industry. Of course it does. The Chancellor of the Exchequer admitted that in the concluding passage of his Budget statement. [HoN. MEMBERS: "No"] There is no doubt that direct taxation, through the increase in the Income Tax, must ultimately be reflected in wage reductions and the increase of prices in the industrial sphere.

Hon. Members opposite are always talking about the purchasing power of the people, but may I point out that nothing diminishes purchasing power and slackens demand so much as excessive, injurious and oppressive taxation, which finds its way right through the community as a whole, aril ultimately penalises the workers, and diminishes wages in every part of the country. Direct taxation of this kind stifles enterprise, because nobody will invest money in any enterprise in which there is no prospect of getting an adequate return on the capital invested. Another thing which is so dangerous in regard to direct taxation—a danger which shows itself far more in this country than. in any other country—is that it will tend to accentuate that disastrous process of the drift of capital out of this country into the very industries in foreign countres which are in such fierce competition with our own. Heavy direct taxation is bound to drive capital out of this country. Hon. Members opposite are quite aware that the one cry of the Stock Exchange is that you cannot persuade investors to put one shilling into British industries, and the reason for that is lack of confidence—in my opinion, it is to some extent a correct belief—and that they are likely to get a higher rate of interest in Germany or the United States of America. The Chancellor of the Exchequer has often admitted in this House that never was capital more required by industry than at the present time, because industry requires to be reconstructed and rationalised from top to bottom, and, unless ample supplies of capital are available, that process of rationalisation can never be carried out.

We have to face the psychological fact that this additional increase of direct taxation comes at a very critical moment in our present economic situation. The Chancellor of the Exchequer has said all that needs to be said on that point, and, after what has been said by the hon. Member for Bridgeton, there is no need for me to say any more. A substantial addition to direct taxation must mean the imposition of a very considerable burden, and nobody knows that better than the Chancellor of the Exchequer. This section of the Budget dealing with direct taxation comes as a message to industry, not of hope, but of something very like despair.

I cannot imagine what the Chancellor of the Exchequer thinks that he has achieved in this particular Budget. As I have already said, the right hon. Gentleman has disappointed everybody. He has certainly abandoned Socialism. The concluding passages of the right hon. Gentleman's statement made it clear that, although he recognises his action in increasing direct taxation, will make it difficult for him to improve the capitalistic system, or to get it into working order—[An HON. MEMBER: "Why complain?"] I am not complaining. Even hon. Members opposite admit that the right hon. Gentleman has abandoned all hope of Socialism, and we have not heard one word about Socialism in this House for the last 10 months. Having abandoned Socialism, the Chancellor of the Exchequer has also abandoned all hope of adopting a national development policy.

While I have always condemned the unproductive expenditure to which the present Government has committed us, I am not at all opposed to sound productive expenditure. The Chancellor of the Exchequer ought to have resisted the demands for further expenditure on doles and pensions, and he should have raised more money for the purpose of national development such as the improvement of roads, docks, and harbours to improve the industrial equipment of this country, because that is a form of expenditure for which you would ultimately get some return. As a true representative of an Aberdeenshire constituency, I hate to see money thrown down the drain, without any prospect of a return upon it. That is what the present Government has done. The Chancellor of the Exchequer has abandoned all hope of a national development policy, with the exception of a pathetic little item of £1,185,000 required for the development of the schemes promoted by the Lord Privy Seal. Out of a total gross expenditure of over £850,000,000 there is only this paltry little item of £1,185,000 for the great schemes for national development designed by the Lord Privy Seal.

The Chancellor of the Exchequer has abandoned all hope of obtaining a favourable conversion upon a large scale. Quite recently the right hon. Gentleman had a more favourable chance than has offered itself since the War. Money is much cheaper now than it has ever been since the War, and there seemed to be a likelihood that it would become cheaper still. I regret that the Chancellor of the Exchequer has quite clearly abandoned all hope of adopting a favourable conversion, on a substantial scale, in the near future. As the Financial Secretary knows, the chief hope of a favourable conversion scheme lies in the net yield that you get from such an issue, and that must be substantially diminished by the increase in the standard rate. The policy involves very little chance of a still further cheapening of money, and probably means that foreign exchanges will move against us.

Therefore, the whole policy of deflation pursued by the right hon. Gentleman with such grim determination during last year, and his absolute determination not to borrow for the purposes of national development, and the reduction of the floating debt, have been chucked away. Any fruits which might have been derived have been sacrificed by the raising of the Income Tax. A vigorous policy based on productive expenditure and involving possibly a loan for development purposes; or an absolutely orthodox policy designed to assist favourable conversion in the near future, might have done some good, but now the Chancellor of the Exchequer has fallen between two stools. He has neither satisfied the demand of the Chancellor of the Duchy of Lancaster for a substantial development loan, on the one hand, nor is he very likely, as a result of the raising of Income Tax, to obtain favourable conversions upon a very large scale in the near future. No one is pleased—no loans and no conversions; only the wretched British taxpayer has to pay for the unproductive expenditure to which the right hon. Gentleman has assented.

It seems to me that industry requires at the moment very careful nursing. Looking at the matter from the broadest possible point of view, what have we given industry during the last five, six or 10 years? We have given it the icy blast of complete Free Trade, and the right hon. Gentleman by his Budget has only opened the last window to that icy blast by removing the Safeguarding Duties, exposing industry to the full effects of world competition, under conditions which differ fundamentally from those which prevailed before the War when demand and purchasing power outran productive capacity. For some reason, which is not easy to understand, there is no doubt that to-day world capacity for production exceeds demand and purchasing power. in these conditions, the right hon. Gentleman has chosen to open the markets and industry of this country to the full blast of world. competition. On the top of that we have given to industry a most rigorous deflationary policy, lasting from 1919 and continuing in full force to-day, accompanied by a steady fall in commodity prices which has never stopped since the spring of 1920. On the top of that we impose on industry a burden of direct taxation twice as great as the burden imposed on industry in any other country in the world. Having done these three things, we hear it said that it is because of the failure of the capitalist system to function that we are suffering from our difficulties. The marvel of it is that capitalism in this country has survived up to the present as it has. It says a lot for capitalism that it has managed to stand up against the treatment it has received.

From the very first words of his Budget speech to the last, the right hon. Gentleman never produced a single constructive or helpful idea or scheile—not one. There was no sign of any imagination or constructiveness—except possibly in the remission of the Licence Duty to bookmakers. There was no serious attempt made to come to the assistance of industry at a very crucial time. As somebody outside the House remarked immediately after the Budget speech, when the figures were available, the Chancellor of the Exchequer might quite easily have concocted the whole of his Budget in 10 minutes. There was no evidence of any constructive thought applied to the general economic problem. There is no doubt that at the present time great age is an advantage for suceess—crtainly in politics and probably throughout a great part of industry in this country. but I do not honestly think it is very desirable that we should have at the present time people in charge of our economic affairs with mediaeval minds.

Speaking not merely as a member of the Unionist party, but as one of the younger generation, I firmly believe that the right hon. Gentleman has not progressed further in his economic ideas than about the year 1830. and that is putting it moderately. There is no sign in this Budget, at any stage, of any attempt to grapple with modern economic movements in a realistic spirit, and that is why there is no satisfaction in regard to this Budget in any quarter of the House. Until the hon. Member who sits behind the Chancellor spoke, not a speech in favour of the Budget, had been made in the Committee to-day. In my judgment, this Budget has dealt, and will deal in the years to come, a savage blow at industry from which recovery will be long and painful.

Mr. PETHICK-LAWRENCE

It has been my pleasure to listen to nearly the whole Debate this afternoon and this evening, and perhaps I may be forgiven if I say that the greater part of it has been almost wholly irrelevant to the sub- ject of the Budget which we are supposed to be discussing, except one or two speeches, including that of the hon. Member for East Aberdeen (Mr. Boothby). Although I think he made a great many statements that were both mischievous and misleading, he did address himself to the subject of the day. We have had the hon. and gallant Member for Bournemouth (Sir H. Croft), expanding himself, as we always expect, upon his favourite theme, and he scarcely condescended to put himself in order by dealing with those Safeguarding Duties which are to lapse during the current year. He dealt, as he always does, with Protection in a large and airy way, and he was somewhat aggrieved when I pulled him up for including the McKenna and Silk Duties in Safeguarding. "Why," he said innocently, "they are all Protectionist"—as though all Protectionist proposals come under Safeguarding.

The Safeguarding Duties were put on in cases where industries were supposed to be suffering badly from foreign competition.

Sir JOSEPH LAMB

Proved to be—not supposed to be!

Mr. PETHICK-LAWRENCE

Hon. Gentlemen can make their own speeches; I prefer to make my own in my own way. Those Duties were put on in cases where industries were supposed to be suffering from severe foreign competition, and as being needed in order to save them from disaster. No one could possibly speak in those terms of the motor industry and the silk industry. The right hon. Gentleman the Member for Epping (Mr. Churchill), when he imposed the taxes on foreign motor cars and silk, did not pretend that this was the case. Of course, the motor car industry and the silk industry were growing industries, and, as everyone knew, whether they were protected or not, they were certain to make immense strides during the last few years. The right hon. Gentleman the Member for Epping was quite aware of that, and, when he put on the Silk Duty, he said quite definitely that he was doing so because he knew that. there was a large source of revenue to be obtained thereby, and the industry was increasing so much that the natural fall of prices would be intercepted by the tariff which he was putting on. When hon. Members opposite, like the hon. and gallant Member for Bournemouth, attempt to prove their case of an increase in industry by lumping in the motor car trade and the silk trade, which have absolutely nothing to do with Safeguarding, it shows that they know the weakness of their own argument, and that they cannot prove their case by dealing with matters which really belong to the Safeguarding Duties.

The hon. Baronet the Member for Rushcliffe (Sir H. Betterton) did confine himself to one of several businesses which will cease to come under the Safeguarding scheme, and he quoted figures, but the trouble with him is the same as it is with all those who attempt to argue in favour of Safeguarding. They select figures very carefully, but give no grounds on which they are based, and no means of checking them, and those of us who do not share their opinions can neither find their figures nor find any which hear out those which they give. I will only put one point. The hon. Baronet was careful to say very little about the export trade in lace. I have taken the trouble to look up the figures for exports of lace, and I find that the export trade has fallen, during these years of Safeguarding,, from 32,000,000 square yards in 1924 to 25,000,000 square yards in 1929. That, of course, is the effect. of these tariffs—they tend to kill the export trade. [Interruption.] That has certainly been so in this particular case at any rate, which the hon. Baronet desired to bring to my attention. I could take the other figures if necessary, but I do not want to take up time, showing that that is a general result of these tariffs. Certainly that is the result in the lace trade. I would remind hon. Members that the figures I have given relate to the domestic exports. I purposely excluded re-exports, where different considerations might operate.

Sir H. BETTERTON

It is the fact, is it not, that the figures with regard to re-exports are not in the least comparable with those before the duty, because now re-exports go into bond, and are not included in the figures at all, whereas formerly they went out on a through bill of lading and were included in the figures?

Mr. PETHICK-LAWRENCE

I do not in the least understand what the hon. Baronet has said. I was not referring to re-exports, but was referring to domestic exports, which are the only ones relevant to the point I was making. I now come to matters which really form part of the Budget itself. The hon. Member for Bridgeton (Mr. Maxton) and the hon. Member for Camlachie (Mr. Stephen) oppose the Budget because it does not give greater reform at the expense of placing heavier burdens upon a certain section of the community. The right hon. Gentleman the Member for Epping opposed the Budget because he objected that the expenditure on social reform was too great. In his usual picturesque language, he described the expenditure of the Budget in this direction as "lush doles to eager recipients." When I think of the people who will obtain benefits from the social expenditure of the Government—some of the widows who have lived in great poverty all these years, and some of the working men in the North of England who struggle hard to get a living and are unable to do so—I think that the expression "lush doles to eager recipients" is not exactly in the best traditions of the House. The point, however, that I want to make is that both of these lines of attack on the Budget are really irrelevant. The Budget is not a scheme of social reform—

Mr. W. J. BROWN

Why not?

Mr. PETHICK-LAWRENCE

My hon. Friend who asks that question has not been very long in the House—

Mr. BROWN

No, but I am learning rapidly.

Mr. PETHICK - LAWRENCE

The Budget is not a scheme of social re-form—

Mr. ALBERY

The Chancellor of the Exchequer said that it was.

Mr. PETHICK-LAWRENCE

It is a Resolution introduced in a Committee of Ways and Means, with the intention of finding how to raise the revenue which the other Acts of the Session have seen fit to decide should be raised. The Chancellor of the Exchequer who introduced into the Finance Bill all kinds of social reforms would be exceedingly illogical—[Interruption]. Hon. Members, when they have been here a little longer, will realise that, through the Estimates and through the Bills which become Acts of Parliament, we agree to certain expenditure, and the Budget is the opportunity of finding how to foot the bill, and nothing else. [Interruption.] That applies equally to the irrelevancies that came from behind me and those to the right hon. Gentleman the Member for Epping, who was Chancellor of the Exchequer in the late Government.

Sir BASIL PETO

Will the hon. Gentleman kindly bear in mind the statement of his chief yesterday with regard to the taxation of land, that: It will be, to use s phrase of Mr. Asquith's, a potent instrument of social re-form."—[OFFICIAL REPORT, 14th April, 1930; col. 2680, Vol. 237.]

The CHAIRMAN

Really, that is an observation in reference to suggested legislation other than on the Budget.

Sir B. PETO

It was in the Budget speech.

Mr. PETHICK-LAWRENCE

My right hon. Friend mentioned the new valuation which would be available for financial purposes later on, and any ether form of taxation or impost can be mentioned, perfectly properly, in the Budget speech, but that is something entirely different from the question of expanding or reducing the actual expenditure on sccial reform, which forms the subject of the irrelevancies which have come from behind me and also from those in front of me. Whether we have too much or too little of such expenditure is a quesjon which is outside the Budget.

The right hon. Gentlemar the Member for Epping, having very little to find fault with in the Budget itself, proceeded to attack some opinions whit it the Chancellor of the Exchequer had had before this Session began. He explained how he would raise revenue, if necessary, not in this year, but in the year after. I was very much interested to see that he produced a new version of Protection. There are in the party opposite adherents of Safeguarding and of the McKenna Duties, and there are certain Members who are faithful to the ideal of Empire Free Trade, but the right hon. Gentleman produced a new nostrum, an 8 per cent. revenue tax. He said, though he was still thoroughly opposed to Protection, that he was prepared to see, if it were necessary, an 8 per cent. revenue tax on all imported manufactured goods, finished and unfinished.

Mr. CHURCHILL

I never suggested the percentage. I said that in Holland there was an 8 per cent. tax.

Mr. PETHICK-LAWRENCE

The right Gentleman expressed approval of what he said was being done in another country, which had an 8 per cent. tax. I imagine he would not commend an Excise tax of the same amount, and I am, therefore, rather at a loss to understand how that differs from full-blooded Protection. If we are to have a revenue tax imposed on foreign imports, as distinct from any tax on home manufactures, that seems to me quite definitely Protection. I commend that as another variant of the Protection proposals which we hear on all sides from hon. Members opposite. Warming to his job, the right hon. Gentleman attacked the Chancellor for his proposals with regard to Income Tax and Surtax. I have always noticed hitherto that, when there is any proposal to raise Income Tax, a fairly safe way of taking cover is for hon. Members opposite to say it is not for themselves that they are worried, but for the widow and orphan. They are thinking of the widow with £200 or £300 a year and the orphans with perhaps a similar amount. The Chancellor of the Exchequer has cut away all the ground from those who would take shelter behind the widow and the orphan by the additional exemptions which he has given to the lower incomes. Up to nearly £500 a year for a single person, and nearly £900 for a married man with three children, and with an earned income, the addition to the ordinary rate of tax will produce no addition to the taxation which they will bear.

Deprived of that means of putting their case, hon. Members opposite have based their claim on the alleged injury to industry. The right hon. Gentleman gave two grounds for thinking that we ought not to put a higher tax on big incomes because of the danger to industry. In the first place, he said that there are a great many fairly well-to-do people who have saved a certain amount of their income, and that which they saved they put into industry. It seems to me to be a rather big assumption that, because people of means may put aside a certain amount and save it, therefore what they spend on themselves is to be exempt from additional taxation.

The right hon. Gentleman went further and developed another argument. He said it was necessary to help the extremely rich, because the extremely rich were those who were able to command large resources and practically start and run and develop big businesses. The quarrel which we have with that theory is that during the last few years it has failed to function. Let me give two illustrations. During the War no one will deny that both coal and cotton industries were highly prosperous. Enormous sums were made, running into tens and even hundreds of millions. We all know owners of cotton factories who made enormous profits and retired. They did not keep the money that they had made and reinvest it in them when these industries came on bad times. If they had done that, the industries would not be in the position that they are in at present. What they did was to skim off the whole of the enormous profit. In many cases they sold out to other people, who came in at inflated prices, and that is the reason why those two industries are in their present parlous condition. It is not a good argument for reducing taxation that very large profits may be used in certain cases to help industry when it needs capital.

The hon. Member for East Aberdeen went back to a still older argument to support his claim. He said that it stands to reason, if you increase taxation, that you reduce purchasing power and, therefore, strike a smashing blow at the industries of the country. I expected the hon. Member to have a little more perspicacity. It is true that, if you take a certain sum of money in taxation and sink it in the sea, you would thereby be reducing purchasing power, but, when taxation is used either for expenditure by the State or in the case of Social Services, in so far as it is used beneficially and wisely—I perfectly agree that it must be used wisely by the State or in the Social Services—it gives not only equal purchasing power, but an equal stimulus to industry with the luxurious expenditure which it displaces. If it is used wisely, it is more beneficial to the community, because it encourages staple trades instead of luxury trades.

Mr. BOOTHBY

Will the hon. Gentleman explain how the £5,000,000 for the further reduction of the Sinking Fund increases purchasing power?

Mr. PETHICK-LAWRENCE

I will deal faithfully with that point, but I am at present on the other aspect of the question. I wish to make it perfectly clear that I am not advocating taxation for the sake of taxation. That is the mistake of some of my hon. Friends behind. The business of the Chancellor of the Exchequer is to find just as much taxation as is really required to meet expenditure and not a penny more. That is what my right hon. Friend has done.

Finally, I would remind hon. Members opposite that it was the declared view of the Colwyn Committee that money raised by way of direct taxation did not enter into the cost of industry. The right hon. Gentleman the Member for Epping made a remark that when they made no profits there was no tax. That really seems to be the whole matter. I want, however, to look at this question of the higher taxation of incomes from a slightly different aspect. We on these benches, when we sat over on the other side during the last Parliament, always took the view that the then Chancellor of the Exchequer was wrong in taking 6d. off the Income Tax in 1925, and in reducing the Super-tax as it was then called. We took the view that that action was not justified, and we maintained that view during the last Parliament. Why did we do that? Not because we had any love for taxation, but because we considered that the right hon. Gentleman improperly curtailed necessary expenditure in consequence of that action, and also brought the finances of this country into discredit by the various devices and subterfuges to which he resorted. We always took that view, and I do not know at what point the Chancellor of the Exchequer began to realise that we were right, but certainly towards the end of the last Parliament he had to admit that if he had seen in the year 1925 what was coming—[Interruption.] I meant the Chancellor of the Exchequer in the last Parliament. I made it perfectly clear to whom I was referring. The right hon. Gentleman who was the Chancellor of the Exchequer in the last Government realised, before Parliament was out, the mistake he had trade. Of course, he said it was not his fault.

Mr. CHURCHILL

I said that if I could have foreseen the General Strike and the coal stoppage, I should not have felt justified in making an addition to taxation.

Mr. PETHICK-LAWRENCE

I do not deny that. The right hon. Gentleman, like a bad bridge player, blames his cards.

Mr. CHURCHILL

I blame the crooked deal.

Mr. PETHICK - LAWRENCE

The right hon. Gentleman never realised that a great deal of his troubles was of his own making, but had he not pursued the policy which he did, an entirely different result would have taken place. The fact was that the right. hon. Gentleman, before the end of the last Parliament, recognised quite clearly that, making into account the facts of 1926, it would have been better had he left the taxes as they were before he made his remissions in 1925. He went on to say that he considered the reversal now would be a mistake. That has not been our view because we think the devices Lad subterfuges to which the Chancellor of the Exchequer in the late Government was put, and the false economies which he was called upon to make, were injurious to the well-being of the State. Therefore, my right hon. Friend the Chancellor of the Exchequer felt obliged, when he was bringing in his Budget, to put back some of the burden which the right hon. Gentleman the Member for Epping had, in our opinion, improperly removed.

10.0 p.m.

I want to compare the position. When the right hon. Gentleman says industry will be crippled, the State will be ruined by this heavy burden of taxation, going back to War-time burdens, I 10.0 p.m. want to give a few figures to the Committee to show that that statement is entirely incorrect. We have had reductions of Income Tax on-ward from 1921, and the state of trade did not improve and has not improved as a result of those reductions. What are the actual facts? My right hon. Friend the Chancellor of the Exchequer in presenting this Budget compared the position of Income Tax payers to-day, as they will be after his new proposals, to the position during the last year when the proposals of the Income Tax and Super-tax were in force. I am making a different comparison. I want to compare the position of the Income Tax payer and the Surtax payer after my right hon. Friend's proposals with the position they occupied when the right hon. Gentleman the Member for Epping came into office. In 1924 a man with a wife and three children and £1,000 of earned income paid £106 in Income Tax—I am omitting the shillings and pence. Under the proposals of my right hon. Friend, he will pay £69. A man with £5,000, of which earned income formed the larger part, paid £1,396. Under the proposal of my right hon. Friend he will pay £1,257, nearly £100 less. A man of £10,000—[hiterruptiart.] There are so many interruptions. While I am reading figures I hope that hon. Members will be quiet, and then they will hear them instead of saying they are wrong. I am comparing the Income Tax falling upon the man with a wife and three children in the year 1924–25 before the right hon. Gentleman the Member for Epping took off the 6d. on Income Tax, with the Income Tax and Surtax under the proposals of my right hon. Friend. I say that a man with £1,000 paid in 1924–25 £106 odd. Next year he will pay £69 odd; that is a reduction of some £37.

Mr. CHURCHILL

Is that the result of the proposals of the Chancellor of the Exchequer in this Budget?

Mr. PETHICK-LAWRENCE

I have said so.

Mr. REID

rose—

The CHAIRMAN

Mr. Pethick Lawrence!

Major ROSS

When the hon. Gentleman has given way, is he entitled to get up again when another hon. Member has taken advantage of his giving way?

The CHAIRMAN

Mr. Pethick Lawrence!

Mr. REID

Will the hon. Gentleman give us the figures for last year so that we can compare 1924, which was the first year of a Labour Government, with the results of the Conservative administration and the results of the new Socialist Ministry?

Mr. PETHICK-LAWRENCE

I am giving figures to show certain results. I will be perfectly fair and straight. Hon. Members can obtain all the figures they want. [HON. MEmBERs: "Give them to us."] All the figures they want have been given in the White Paper, but I am giving the Committee something in addition in order to illustrate a certain point. The point I am illustrating iq this: I am comparing the taxation for the year 1930–31 with that of the year before the 6d. was taken off the Income Tax. The late Chancellor of the Exchequer argued that we were putting on industry some monstrous burden and were going back to the burdens of war time. We say that that is all nonsense, and that we are doing nothing of the kind. Over a certain range of incomes the tax days. is less than the tax was in those day?

Mr. CHURCHILL

Is the Financial Secretary attributing these reductions to the Budget that was introduced yesterday?

Mr. PETHICK-LAWRENCE

I never suggested anything of the kind. I am not trying to mislead the Committee. I am perfectly straight. The Committee knows well that the Chancellor of the Exchequer is imposing additional taxation. There is no attempt to disguise the fact. What I said was that my right hon. Friend has put back part of the burden which the late Chancellor of the Exchequer took off, and that although he has put on that burden, he has not put on a monstrous burden but only part of the taxation which ought never to have been taken off. That is my point. Let me illustrate it with figures. In 1924 an income of £1,000 paid £106 in taxation. Next year it will pay £69. On £5,000 the tax was 21,346; under this Budget it will be £1,257. On an income of £10,000 the tax was £3,571; under this Budget it will be £3,457. In the two latter cases there will be a difference of about £100. It is not until you get practically to an income of £15,000 that you find a rise in the tax. It was £5,946, and it will be £5,957. So that the total war burden that we are putting on is, for practically all persons with less than £15,000, smaller than the burden of 1924.

The Committee must remember also that during the past few years there has been a very great drop in prices. Wholesale prices have dropped something like 25 per cent. Therefore the incomes of these people, right through the scale to the point named, will really enable them to purchase more after this Budget has passed than they were able to purchase before the 6d. was taken off the Income Tax.

The other attack that the late Chancellor of the Exchequer made on the Budget was with regard to the Sinking Fund. That brings in the point about which the hon. Member for Eastern Aberdeen was so anxious to hear. The late Chancellor of the Exchequer said in effect that it was better not to trouble about the Sinking Fund so much, that what was really important was to reduce taxation. Before I discuss that question, I would like to discover what really is the policy of the late Chancellor of the Exchequer. He decided to institute a new procedure, to fix a. sum of £355,000,000 to cover all the service of the debt. Of course that admirably suited his own purpose, because in the two years that came into his own province he got off very lightly in regard to the Sinking Fund, and in the following years there was a very much larger amount to be found. It was a most convenient proposal to the late Chancellor of the Exchequer, and I commend the sagacity of the unjust steward.

I am not now very clear whether the late Chancellor of the Exchequer blames the present Chancellor of the Exchequer for that. If my right hon. Friend had taken no account of the deficit for last year, there would have been quite legitimate complaints on that score. After all, it has always been the policy—even the late Chancellor of the Exchequer gave it lip service—that where there was a deficit in one year, you could not afford entirely to disregard it, but had to meet it in subsequent years. Let the Committee consider the position. A Chancellor of the Exchequer decides to take another course. He introduces a Budget. He entirely overestimates revenue and underestimates expenditure. He is quite reckless in bringing in Supplementary Estimates. At the end of the year he comes to the Committee and says, "Yes, we have a deficit of 10, 20, 30, 40, 50 millions, and we are going to take no account of it as all. We are going on again in the following year as if nothing had happened." Surely the Committee would have a very serious complaint to make against the right hon. Gentleman. Hon. Members opposite would be the first to make that complaint. Therefore, I think that my right hon. Friend, the present Chancellor of the Exchequer, was perfectly justified and correct in saying that this £14,510,000 had to be found, and that he had to put it on the expenditure of the following years. It has nothing to do, as the hon. Member for East Aberdeen seemed to think, with the surplus available for de-rating.

Mr. CHURCHILL

Would the hon. Gentleman answer the question that I put, as to the rate at which the cost of the present Debt is calculated this year?

Mr. PETHICK-LAWRENCE

I think it is 3 per cent. As I said when interrupted, I would like to know whether what I have described really represents the policy of the late Chancellor of the Exchequer and of the Conservative party. I think the hon. Member for the City of London and the hon. Member for Twickenham (Sir J. Ferguson) would look very much askance at the policy which the late Chancellor professes, and I should be very surprised if the right hon. Gentleman's views really found an echo in the Conservative party as a whole. I noticed in the "Times" this morning an article representing exactly the opposite. The "Times" said: The Death Duties are a direct raid on capital. Yet the Chancellor of the Exchequer proposes to increase the yield of these taxes, which are already far too high, by no less than £12,500,000 a year, for the purpose of providing himself this current revenue. The £12,500,000 is a myth which the leader writer of the "Times" has invented for himself. The facts are £3,000,000 in the current year and £7,000,000 in a full year. But in any case it is not correct to say that these figures represent an additional frittering away of capital resources on expenditure which ought to be met out of income. The exact contrary is the ease when all the facts are taken into consideration. When we go back to the Budgets of the late Chancellor of the Exchequer—not the year which was partly his and partly that of my right hon. Friend hut for the four years for which he was solely responsible—we find that he applied nominally £182,000,000 for the Sinking Fund as against the £200,000,000 which would have been devoted to that purpose on the basis of £50,000,000 a year. That was £18,000,000 short, on paper, over the four years. Those who remember the Budgets of the right hon. Member for Epping know that his paper figures were often very different from the figures that would pass a chartered accountant.

I take into account also £13,500,000 which were pure book-keeping transactions. That brought up the total figure to over £30,000,000. In addition to that, he took the actual amount expended on Saving Certificates interest instead of the amount of the accrued interest, income, thereby allowing the interest to increase during his period of office by £30,000,000, so that against the provision of £50,000,000 a year the debt increased for these reasons by no less than £60,000,000 in the course of four years and the real average of his reduction of debt through the Sinking Fund instead of being £50,000,000 was only £35,000,000. The Chancellor of the Exchequer this year is proposing to devote £55,000,000 to this purpose, so that he is £20,000,000 better in that respect than his predecessor. If £3,000,000 in the current year and £7,000,000 in a full year are considered to be a frittering away of money which ought to form part of capital, there has to be set against that then the £20,000,000 better debt provision that is being made this year.

Mr. CHURCHILL

An absolute travesty of the facts.

Mr. A. M. SAMUEL

I deny that the £13,500,000 was a book-keeping transaction.

Mr. PETHICK-LAWRENCE

I remember the Debates on this question, and the right hon. Member for Epping admitted that it was a book-keeping transaction.

Mr. SAMUEL

I do not admit it.

Mr. PETHICK-LAWRENCE

It was a pure book-keeping transaction, and anyone who knows anything about accounts knows that it was. What has been the result? I have alluded to one result already, namely, that of the Economy Act, by means of which the right hon. Gentleman tried to make ends meet. What has been the result upon the credit of the country? It is the habit of hon. Members opposite to say that under a Conservative Government the credit of the country stands high and that under a miserable Labour Government, who do not understand industry, the national credit falls. [Hox. MEMBERS: "Hear, hear! "] I am glad to hear hon. Members opposite cheer. Will they cheer when they hear the figures? What are the facts? When my right hon. Friend ceased to be Chancellor of the Exchequer in 1924 and the Labour Government went out of office and the right hon. Member for Bewdley (Mr. S. Baldwin) became Prime Minister, Consols stood at 58½. When the right hon. Member for Epping had done his fell work, and the Dissolution took place, Consols had fallen to 55.

Mr. A. M. SAMUEL

Money was pouring into America.

Mr. PETHICK-LAWRENCE

When the Labour Government took office, Consols had fallen to 54½. To-day, after 10 months of my right hon. Friend, they stand at 561/[...]. Take the Funding Loan. What are the facts? When the right hon. Member for Bewdley took office the 4 per cent. Funding Loan stood at 91, and when he went out of office it stood at 88[...]. To-day, it has gone back to 91[...]. That is the difference between the right hon. Member for Epping and my right hon. Friend. Under the right hon. Member for Epping the credit of this country went steadily down but under the honest finance of my right hon. Friend it has gone steadily up.

Sir HILTON YOUNG

The Financial Secretary to the Treasury is entitled to the sympathy of the Committee in the performance of a very difficult task. He has met with active criticism from this side of the Committee and with even more active criticism from the other side of the Committee; and we know that these domestic difficulties and interruptions afford him the most embarrassment. At any rate, he has done his best to meet the want described by my hon. Friend behind me, and to supply the one speech in support of the Budget. He has done his best in a sense of loyalty, and in parts no doubt he has succeeded, but not perhaps so well in the final passage of his speech in which he referred to the price of gilt-edged securities as an evidence of the credit of the Government. Has it occurred to him that there is perhaps another explanation why gilt-edged securities have recently risen in price? Is it not sometimes the case that gilt-edged securities rise in price when confidence in industry is so little that people are not ready to entrust their funds to industry and find a more secure form of investment in other ways? One feels inclined to say:

"Oh sacred simplicity"

but we really must not attribute simplicity on this matter to the Financial Secretary after so long a term at the Treasury. What we admire most about the Financial Secretary is his positiveness. He is positive when he is right, and he is positive when he is wrong. He is sometimes even more positive when he is wrong than when he is right; so much so that those of us who are humble students and admirers of his methods have come to look upon his positiveness as the measure of his error. And in connection with his observation on Safeguarding surely this was the case?

Other Members of the Committee are more qualified than myself to speak of those Duties such as lace and cutlery which are to be actually repealed this year. Let me do, what other Members may not be entitled to do, and give one brief piece of personal testimony upon one of those Duties of which I have had long experience; a Duty which is not to end this year but which is warned for abolition next year—the Wrapping Paper Duty. I am acquainted with an undertaking where a large investment of money has been made on the basis of this industry, bringing a large increase of employment on the Medway without any increase in the price to the industry. What Free Trader objects to that? What is there in the Free Trade theory to object to in that?

As one who comes to our modern fiscal controversies brought up as a Free Trader, let me say that I am fully conscious that it would be ignoring the facts of the day if one did not see this Budget as a step in a direction which will make a revenue tariff impossible of avoidance in the future, and, with such judgment as one can bring to bear upon these topics, I do not see how anybody who understands the bases of the free Trade and Protection controversy can hesitate to pass his judgment that, on balance of considerations, the raising of the revenue which the Government require by a revenue tariff would be more advantageous in the interests of the economics of the country as a whole than to raise it in the way proposed in the present Budget.

There is another reason for criticism in the arguments advanced by the Financial Secretary. He contended that the direct taxes in the Budget would, in the main, be taxes upon luxuty expenditure and that the distribution of the proceeds in the form of State assistance, maintenance and so on, would he beneficial, by increasing the spending power of the nation. We are familiar with the argument. Put in that way, there would seem to be a basis for the argument, but the premise is wrong. Direet, taxes of the sort imposed by the present Budget. are not taxes upon luxury expenditure. They are in their very character taxes upon the most beneficial of all the activities of the industrious part of the community and that is the activity of saving. If it were possible to distinguish between luxury expenditure and other expenditure, there would be some basis for the contention which has been advanced, hut, as it is, the hammer of this Budget falls with undiscriminating shock upon the most beneficial of all the activities of the well-to-do part of the community as well as upon luxury expenditure. The Financial Secretary challenges us on the subject of the deficit. That is a matter which surely ought to be above the bitterness of party strife. It is surely a matter for a scientific decision as to what is the true policy of the State in dealing with deficits. If I may venture a personal view it is this—that there can be no hard and fast, cast-iron rule for dealing with this matter but that the circumstances of every year should be dealt with in accordance with what those circumstances are.

There is no magic or spell about the fact that failure to redeem debt accrues in deficits of past years added to the obligation to redeem debt in the ensuing year. The matter should he viewed solely in the light of what the circumstances are in the new year, and you ought to redeem just as much as you think you can redeem. One might take a humorous view of the sacrifice which the Chancellor of the Exchequer is making, in this respect, of what those who understand his psychology know so well to be his preconceived opinions—which are of the most high and dry conventional orthodoxy. I confess, however, that the spectacle of the right hon. Gentleman voluntarily sacrificing himself, in the role of the Ancient Mariner, with the corpse of a deficit tied round his neck, is not necessarily convincing as something which is beneficial to the finances of the State. In fact I wonder whether the right hon. Gentleman would be so keen to take this sacrifice upon himself, and to keep this deficit so conspicuously before the eyes of the public, if the albatross had been a, bird of his own slaying and not of the slaying of the right hon. Gentleman the Member for Epping (Mr. Churchill).

When we come to his statutory provision for making it a binding rule that the Chancellor of the Exchequer is always to deal with the debt of the year before, it is impossible not to doubt the wisdom of that proposal. After all, it is the obligation of the Chancellor of the Exchequer not to incur a deficit, and if he does incur a deficit, if he is not tied by that obligation, any more than by an obligation to redeem it next year, you cannot make things more certain by the accumulation of obligations. It is better, on the whole, to leave the matter to common sense. In dealing with what is in the Budget, and what is not in it, one may express a passing word of regret that almost the highest hope that could be formed on this occasion had been dashed by the impossibility, which the Chancellor of the Exchequer finds, of dealing at this time with the matter of conversion.

Conversion of the Debt is the best hope, in fact the only good hope, of saving to the taxpayer under a Socialist Government, and at the present time circumstances are on the whole very adverse. We have a great slump, due in part, no doubt, to a tidal wave of depression which goes round the world at irregular intervals, but accentuated as regards this country by local conditions and by a lack of confidence, coupled with uncertainty about the future, under a Socialist Administration. We have a slump, but that particular cloud brings with it normally the silver lining of cheap money, which the Financial Secretary looks upon as a testimony to the credit of the country.

We might have been able to take advantage of that cheap money, but I am afraid it is to be recognised that we are not in the dark why the Chancellor of the Exchequer has not been able to take advantage of it on this occasion. I know not what other reasons he might give, hut to an onlooker who regards all the conditions of the case it must be apparent that conversion of the Debt is not favourable at the present time because it is not favourable to go to the investors as a whole and ask them to subscribe for fresh loans by way of conversion at a time when you are piling upon the Income Tax payers of the country burdens of whose fairness and necessity the country is not convinced.

I have not found in the speech of the Financial Secretary any very acute understanding of the deep-seated disquiet which the Budget has given and which has been expressed from these benches with good temper and with moderation. Let me, before the Debate comes to its close, seek to impress upon the Committee the circumstance that there are many minds in the country who do not doubt that this Budget is a crisis in the economic history of the nation, and who maintain the thesis that taxes of the sort which are imposed this year are indeed a heavy burden upon industry, that they impose upon industry a destruction and a waste of the essential raw material of industry, namely, capital, and that they impose upon those who are responsible for the conduct of industry sacrifice and disorganisation, which are contrary to the best interests of the country. Destruction, waste, sacrifice, and disorganisation.

I have been looking for words to describe the effects of the Budget, and I failed to find adequate words until I looked up a great master of descriptive rhetoric to supply me with appropriate words. Needless to say, it was the Chancellor of the Exchequer himself. Being at a loss to put sufficiently clearly to bring home to this Committee my profound conviction of the mischief which high taxation does to industry, I was fortunate enough to find an utterance that may have passed from the Chancellor's mind, although it was quite recently made, when, forgetful for the moment of his cares as a prominent leader of the Socialist party, he was discharging his more persuasive part as a champion of the nation in the face of the whole world when broadcasting to the United States of America. So let me appeal as the ancient Macedonian did. The ancient Macedonian appealed from Philip drunk to Philip sober. Let me appeal from the right lion. Gentleman as a leader of the Socialist party to the right hon. Gentleman as a leader of the United Kingdom. He said: Our people are the most heavily taxed in the world. The average amount of national and local taxation works out at about £100 per family. We have an Income Tax of 4s. in the £"— and he spoke these words as a Chancellor of the Exchequer who was in a few weeks to raise it to 4s. 6d. in the £

a Super-tax running up to 6s. in the £"— so soon to be raised on the basic rate from 6d. to ls.higher— and, in addition, duties on estates passing at death ranging as high as 40 per cent"— so soon to be raised to 50 per cent. Then, after this most feeling description of the burdens of the country, he proceeds to draw the moral—the moral, that is, for the people of the United States: With such a burden as this upon our shoulders, with all the destruction and the waste and the sacrifice and the disorganisation of industry and society that it implies, is it any wonder that we have suffered industrial depression? Nay, the wonder is that we have been able at all to maintain our position. A Daniel come to judgment! How grateful we, with our imperfect talents, feel that our case should be put for us by an opponent better than we can put it ourselves. Having no qualms when he came to the peroration at the end of his Budget speech—if I may say so, the conventional peroration in which the maker of a Budget speech recites his confidence in the industries and the future of the country—had the right hon. Gentleman no doubts about the extraordinary discontinuity of argument and logic between the substance of his speech and his pious aspirations about our trade at the end?

There are two great features in the Budget of this year which will signalise it in the history of Budgets. The first is that, more than in any scheme for raising expenditure that has ever been presented to a responsible tribunal, it piles the accumulated burden arbitrarily and in a penal manner upon a particular class in the country. That is vicious for two reasons, which should be stated as clearly as may be. The argument advanced to-day by the Financial Secretary to the Treasury has ignored the circumstance that, when the right hon. Gentleman the Member for Epping reduced the Super-tax, it was compensated at the time by an increase of Death Duties, which made the balance equal for that particular class of taxpayer. It seemed to me one of those misstatements at the time that scarcely needed correction, because anybody with tire smallest acquaintance with the fiscal system of the country could correct it for themselves.

Mr. PETHICK - LAWRENCE

I thought that I made it clear that I was talking about Super-tax and Income Tax. With regard to Death Duties, I thought that I made it clear that I set the increase of these against the Debt redemption.

Sir H. YOUNG

I am afraid it is rather late in the day to try to maintain that in our scheme of taxation death duties are required only for the redemption of debt. What I was saying was that the first inherent vice of this new scheme of taxation is this accumulation of burdens on a small class. That is vicious first of all because of the interests of the community as a whole. It is the saving class, the class which provides the capital, which provides the leadership, which provides the energy which provides the enterprise. [Interruption.] There is no reason to be mealy-mouthed about it. It does not provide it all, but it provides most of it. It does not provide it because of any natural superiority on its part, but partly because of the advantage of circumstances; but it does provide the greater part of the energy, enterprise, initiative, capital and leader ship which a nation cannot do without. Certainly it is vicious in the interests of the State to accumulate the burdens upon a small class, because the only way of bringing to bear an effective body of criticism as a check and control upon fresh expenditure is to make the expenditure felt by all taxpayers equally. That is not done in the Budget. It might have been done. By one of those rather cruel jests at which the Chancellor of the Exchequer is a specialist, he led those of us who have an affection for statecraft to think for a moment that he really was going to increase indirect taxation and to bring a sense of responsibility to the wage earners as much as to the taxpaying class. I confess he took me in for that sad moment, and he has what satisfaction he may derive from that little deceit. But he could have done it. He could have got the money from beer, if he had been willing to enforce that primary principle of statecraft that you should spread the responsibility for taxation, the sense of expenditure having to be met, over the whole body of taxpayers.

The burden does not go on to the indirect taxpayers, it does not even go on to the large number of the lower range of incomes subject to Income Tax. It is obviously a point of which the Chancellor of the Exchequer is particularly proud—that he has been sufficiently adroit in his politics to avoid sacrificing votes by attacking the lower ranges of income; but there speaks the politician and not the statesman. The real statecraft would have been to make the whole range of Income Tax payers feel it. As a matter of fact, I do not think it is going to do the Chancellor of the Exchequer any good in the long run, and for this reason, that I do not think anyone will be taken in by the gesture he has made in saying there is to be no increase of taxation next year. No increase of taxation next year unless there are large schemes of expenditure—and then starts the chorus from the Clyde! After what we have heard to-day, has the Chancellor of the Exchequer any right to hope that he is going to avoid fresh large schemes of expenditure in the course of the year? It is a very fragile hope, and Income Tax payers as a body know it. They know that there will be a fresh bill to be met next year, and that the exemption which they secure this year from these fresh burdens will be a very fleeting and temporary advantage.

So much for the interests of the State. But, indeed, I do not see why, in the great council of the nation, no voice should be raised for a class of taxpayers, however small, however unpopular, even a class so small and so unpopular economically as the class of big Income Tax payers. They are a minority, a particularly defenceless minority. [Interruption.] Yes, the advantages which they derive from this taxation is nil. Their power to resist it is absolutely nil, in modern democracy; they are, as a matter of fact, the most defenceless class in the State under existing conditions, but I have no reason for supposing that they are an unuseful and unhelpful class. They provided those ingredients in a healthy and prosperous nation, but they are particularly defenceless in a modern democracy.

You are giving to the whole nation, and to all the nations of the world, an example of injustice. It is injustice that you should attempt to raise your taxation on one class of the community. You are inflicting on that class a sense that the State is asking too much from them. There is one serious consequence. You risk losing the co-operation of the taxpayer in the collection of the Income Tax. That is not a thing to be laughed at. I Ihave had some experience of the Income Tax in countries where there has never been the willing assent of the taxpayer in regard to the collection, and it is in those countries that the Income Tax is useless as a revenue-producing tax. The Income Tax is only useful in this country, because up to now it commands the moral assent of the payers of Income Tax, and it would he an act of political folly so to overburden its usefulness as to risk the loss of that invaluable asset to the revenue of the State.

Lastly, I think this Budget Debate comes, as I say, at a crisis. It marks, we hope not a turning point, but what may be a turning point unless the country pulls its economic common sense together, and starts upon a new life. One cannot but be conscious that, through all the difficulties which the country has had to face since the War, what has kept us going was the hope on the part of those who were the real steel behind the industrial machinery of the country—the hope of a return to normality, and, among other forms of normality, in particular, a return to a reasonable burden of taxa- tion. The actual circumstances of the day have been bad enough, but hope has kept us going, and we have not lost hope. The country has become conscious how a certain course of government, and a certain course of extravagance and fresh taxation may deprive it of hope, and it is the task of all of us to try and prevent that disaster happening to the country. We shall try to do what we can to prevent the passage of such mischievous proposals as those in this Budget, and we encourage ourselves, even though we feel that this blow is dealt to hope, in the belief and trust that the undying courage and strength of the country will not allow hope to die just for one thing, but that it will be maintained to be revived when the country returns to more prudent courses in the future.

Dr. BURGIN

I suppose it is true to say that there is no one who hears a Budget speech who does not gasp with thankfulness that something else was not included in it. It is a long time since anyone spoke from the Liberal benches, and I should like to have made some corn-meta from the point of view of those of my colleagues on these benches. There is much in the Budget which we very naturally and whole-heartedly applaud. We have thought of some adjectives with regard to the Budget proposals as a whole, amongst them being "stern," "severe," and "unimaginative," but there is a certain asceticism about this Budget which is, perhaps, rather in line with the needs of the country to-day. The country, perhaps, needs some stern sort of call such as the Chancellor has presented in the Budget. The hon. Member for East Aberdeen (Mr. Boothby) described its architecture as mediteval, but I should prefer to say it was Gothic in its simplicity.

Perhaps a criticism—it is rather made by me in the nature of comment than of criticism—is that the increases in Income Tax, Surtax And Death Duties may in practice be found to fall all on the same individual. I do not say that the Chancellor of the Exchequer has not succeeded in finding the very large amount of money which was required by means that, at least, have the merit, of being within a very narrow compass and not involving a dozen and one duties on a number of different articles. Those of us who are Free Traders and know the dislocation of business involved by the imposition of any taxes, whether revenue or protective, must at least be thankful for the fact that the ambit of the taxes in the Budget is narrow and restricted.

It is not so much my business to speak of the Budget as a whole as to direct a specialised line of inquiry to certain of the legislative proposals foreshadowed. There are in the Budget speech and Budget proposals references to certain amendments in the law dealing with such matters as the taxation of for signers who trade here through agents, and the taxation of companies, shares in which are held by owners of land, and other proposals of that kind. It might, perhaps, assist the deliberations of this Committee if I were to put certain questions to the Chancellor of the Exchequer which arise out of the consideratim of these provisions. I want to put this thought before the Committee. It is a very natural desire that we in this country with a high taxation should desire to see that foreigners who take advantage of the privileges which we offer should at least bear their proper shore of taxation in respect of the trade they do within the area of these islands.

It has always been a sore point that your dressmaker's traveller from Paris should arrive here, hire a room in a West-end hotel, show a collection of articles, book a large number of orders and return to Paris and never pay a halfpennyworth of Income Tax. [An HON. MEMBER: "That is Free Trade!"] It has nothing to do with Free Trade. It is a question of whether there are at present loopholes in our fiscal law which permit of something of an unfair competitive character from the point of view of taxation. That is nothing to do with the question of prices. I am merely referring to people who are able to do this and pay a different rate of taxation from other people. I wish to follow the subject out in practice. An attempt has been made—and the Chancellor and his advisers are, of course, familiar with it—to tax the resident agent here on behalf of the foreign principal abroad. I noted with great care the words that the Chancellor of the Exchequer used in his speech in dealing with this subject. I observe he said it was proposed to endeavour to make reciprocal arrangements with foreign countries so as to provide that there should only be liability to taxation where the agent either sells from stock or is empowered to conclude contracts on his principal's behalf and does, in fact, habitually exercise that power."—[OFFICIAL REPORT, 14th April, 1930; col. 2675, Vol. 237.] Unless the Chancellor of the Exchequer proposes to go considerably beyond that, he will be making no change in the law whatever. It is the law to-day that, if an agent keeps a consignment stock here, and sells from stock, the foreign principal becomes chargeable to Income Tax. It is also the law that, if an agent has power to conclude contracts here, his foreign principal is trading here, and is, again, liable to tax. If, therefore, those words are merely general words, no doubt we shall see, when the Finance Bill is introduced, the details which the Chancellor of the Exchequer has in mind for attempting to tax foreign principals; but, if they are nothing more than saying that, wherever there is consignment stock and the agent concludes the contract, the principal is liable to tax, we have not advanced one whit beyond the law as it is administered to-day.

In a day when we are all suffering painfully and consciously from the effects of unemployment, I wish to stress this point of view. In the Luton Division of Bedfordshire, which I have the honour to represent, where a large trade is done with foreign countries in straw plait and straw hats generally, there is an increasing tendency for the agent of the foreign principal to be completely frozen out of business. As soon as the local inspector of taxes sends in his form, and makes it known that, in some circumstances, the agent for the foreign principal may be taxed on behalf of his principal, there is a tendency for the principal to endeavour to deal with the whole of his business on mail order lines from his foreign city, and thus for the local agent in Luton to be entirely excluded from his employment as agent.

I could furnish the Chancellor of the Exchequer and his Department with a dozen such instances from Luton in recent times, in which the only effect of the endeavour of the local inspector of taxes to tax the foreign principal has been that the local agent and his staff have been put out of employment. That is not, of course, the object, intention or desire of the Chancellor of the Exchequer, and I am only putting in a word of warning that, wherever under a high rate of taxation you endeavour to include the foreigner, you may in practice put out your local Britisher from his job as buying or selling agent. Exactly the same effect has been shown very widely in regard to companies. I do not wish to go at large into the subject of foreign companies, but I do want to say that sometimes, where it has been held that a company trading here is in some circumstances liable to English Income Tax, we have found that company removing its whole centre and place of business to Sweden, Brazil, Egypt or some other country, and, as a result, the whole of the trade connected with that company has escaped from these Islands. I am not opposed to the idea of making the foreigner pay the tax, but I am asking that, where the amount of tax payable is high, we should be very careful, in framing our Inland Revenue laws, that we do nothing to interfere with the wide international character of our trade, and that we do not penalise the foreigner to our own disadvantage. We must think of our own folks first in a matter of this kind, and I call attention to this matter from that point of view.

There is only one other point upon which, at this hour, I will venture to raise a question, and that is with regard to companies. I am most anxious to know what the meaning of the word "company" is in the Resolutions which deal with this subject. The Resolution dealing with Estate Duty in cases where the deceased person had transferred property to a company refers in every other line to "a company," and I would ask the Chancellor of the Exchequer whether that means an English company incorporated under our Companies Acts, or does it include—

it being Eleven of the Clock, the CHAIRMAN left the Chair to make his Report to the House.

Committee report Progress; to sit again To-morrow.