INLAND REVENUE DEPARTMENT. (Hansard, 3 March 1930)

Sir H. YOUNG
When the Debate on this Vote was interrupted, the Committee were occupied in an attempt to discover the basis of the agreement under which this sum was being voted for the salaries of the Inland Revenue Department. Owing to an increase on the original Estimate, we are now asked to vote a sum of £30,000. The explanation given is that this further provision is to meet the cost of a revision of the Civil Service bonus at a cost of living figure of 70 for the full year. It will be within the recollection of the Committee that the Financial Secretary explained that the Civil Service bonus is on a sliding scale, which slides with the cost of living—

The DEPUTY-CHAIRMAN
This particular sum in the Supplementary Estimate is due to the revision of the Civil Service bonus and is in respect of the salaries and expenses of the Inland Revenue Department. The only Department responsible for this increase is the Treasury, and the Inland Revenue Department is not the Treasury. A sum in respect of this bonus has come up upon the various Supplementary Estimates. It is obvious that we cannot have a discussion of the subject upon every Estimate. I do not want to be too rigid or too harsh in my Ruling, and, if the Committee wish it, I am prepared to allow a short discussion on the Inland Revenue Vote, but 170 that must be the only discussion upon this subject. If the Committee wish that, I am prepared to allow it, but, strictly speaking, it is not in order, because the Department whose Vote we are now discussing is not responsible for this matter.

§ Mr. ARTHUR MICHAEL SAMUEL
Without in any way challenging your Ruling, I would point out that this bonus increase touches every civil servant in every Department, and we must have a discussion, I take it, on the principle of it. Therefore, why not allow us to have a full discussion on this Vote; otherwise, the whole principle will go unchallenged and we shall not have an opportunity of getting an explanation as to what it all means. I think the Financial Secretary will agree with me that the matter does come before the Treasury. I remember the subject coming before me when I was at the Treasury. The Financial Secretary to the Treasury is here, and is the person to give us an explanation, and I therefore submit that we should be allowed an opportunity of a full discussion now upon this particular Vote.

The DEPUTY-CHAIRMAN
My Ruling is this, that the only Department responsible is the Treasury. If this were a new Vote coming before the Committee there might be some reason for asking for a full discussion upon it, but I would point out that this bonus arrangement has been in operation for many months, and hon. Members have had any number of opportunities of asking the Government for facilities to discuss it. Strictly speaking, we cannot have a discussion upon any question for which the Department whose Vote we are discussing is not in itself responsible; but, if the Committee wish it, we can have a limited discussion on this Vote in order to allow the Minister to reply. I am prepared to allow that.

§ Captain CROOKSHANK
May I point out, on the point of Order, that the Treasury are responsible for the Inland Revenue Department? Therefore, this is exactly the Vote on which a general discussion might be taken.

The DEPUTY-CHAIRMAN
I have already ruled on the point. The Financial Secretary to the Treasury has introduced a number of other Estimates as representing his particular Department. This Supplementary Estimate is for the Inland 171 Revenue Department, and I have ruled that the Treasury is responsible for the increased sum in the Vote. It is not for me to tell Members of the Committee how they can secure a discussion on such matters, but if they wish a Debate on this matter now I am quite prepared under the circumstances to allow a short Debate.

Sir H. YOUNG
I am grateful for the fairness of your original Ruling and for the indulgence which you have given. I cannot doubt that your practical suggestion will make for the securing of an effective Debate and tend to save time in future discussions. It must be so, because, as I said in my opening remarks, the Committee is occupied in trying to ascertain what the precise agreement is. Until that has been done we do not know whether there is anything to discuss or not. The explanation given by the Financial Secretary, on the last occasion, was that the sliding scale of the bonus slides once every six months, and the bonus for the ensuing six months is determined by reference to the average cost of living for the preceding six months. Adjustment takes place at the end of March and the end of September.
The explanation given was that, in the course of the financial year under review, representations were made to the Chancellor of the Exchequer that the arrangement operated as a hardship on those concerned, because it resulted in the bonus paid during the expensive six months, so far as the cost of living was concerned, being calculated on the less expensive six months, and it was to obviate that state of things that the adjustment was made. There the explanation stopped short. That, of course, leaves very many questions of vital importance still outstanding, and it is in order to put certain questions that I have risen. In the first place, what is the nature of this fresh agreement between the Chancellor of the Exchequer and the Civil Service? Is it merely a temporary agreement, referring to the circumstances of this single year, or is it on a new and lasting basis which is to regulate the fixation of the Civil Service bonus for the future. If that be so, is it to be the case that in future there is to be only an annual ascertainment of the bonus, and 172 if there is to be an annual ascertainment of bonus, upon the average of what period is that ascertainment to take place? Is it to take place upon the average of the preceding six months or the preceding 12 months? Unless and until we understand what the answer is to this question, we do not understand the elements of what the ascertainment is going to be.
That raises a further very important question. The Committee, if it refers to the original Estimates, will see that the bonus is not the same over the whole range of the salaries of civil servants. It is larger on the lower salaries and gradually diminishes until, on the higher salaries, it disappears altogether, and if my memory does not play me false, I think the bonus is adjusted by a sliding scale upwards on the rate of salary so that it disappears on salaries in excess of £2,000 a year. That raises this question: Is this important concession to the Civil Service to extend over the whole range of salaries, or does it only extend to the lower range? The arithmetical measure of the importance of this concession is seen in this Supplementary Estimate, and we want to know whether it extends also to the big salaries as well as to the small salaries. Is this new arrangement, if it be a new arrangement, for the permanent lengthening of the period of adjustment to hold good when the cost of living falls as well as when it rises; is it to operate downwards as well as upwards?
Lastly, the result of this lengthening of the period during which the average is taken for the adjustment of the bonus is this, that the bonus is being paid for a period as long as 18 months after the time at which the cost of living ruled which determines what the bonus is. In short, this arrangement will be very much less scientific and accurate than the arrangement which it supersedes. Whatever it may be—and we do not understand what it is—it will put the actual bonus paid into very much less close relation to the actual cost of living than it was before; it is a move in the direction of greater looseness. As time goes on, it is clear that this sliding scale bonus arrangement is becoming more and more arbitrary and less and less in relation to the actual facts.
Does that not raise the whole question: Would it not be better, rather than to 173 go on tinkering and tampering with the original bonus sliding scale system, boldly to face the question whether the time has not come to have a fixed basis for the Civil Service rates of pay? I know there may be two views on that matter, and that the question whether a fixed scale of pay is better than a scientific bonus might be open to argument, but that a fixed scale is better than a sliding scale system which has become arbitrary and less and less in relation to the facts is not open to argument at all. At any rate, the matter well deserves inquiry and further information from the Financial Secretary to the Treasury.

§ Mr. A. M. SAMUEL
I should like to say, as I said the other night, that I do not so much object to this money which is being added to the smaller salaries of the lower ranks of the Civil Service, because I think the old arrangement might have operated very harshly on the smaller rates of pay, but it is quite certain that what they feared would happen has not happened. They did not wish that their scale of bonus should drop to 65 or 60, and they asked that an arrangement should be made so that it should remain at 70. But if one looks at the food index figure either of the "Statist," or the "Economist," or even the "Times," he will find that the cost of living has made a violent plunge downwards, so that the money wage of the wage-earner goes a great deal further than was thought would be the case when the argument first came into being.
I thoroughly dissent from the idea of breaking agreements. It is a bad system, and, as I said the other night, the maintenance of agreements is the basis of all human intercourse. It is no good entering into agreements with people if, when they find that they run against them, they ask to break those agreements. That is the line of "Heads I win, tails you lose," and it may operate against the civil servants or other people who do not keep agreements more harshly than if they kept them, because what will operate in one case, when we break an agreement for their benefit, might be operated in the other case against them. It is, therefore, on the whole, better for arrangements always to be maintained.
I join with my right hon. Friend the Member for Sevenoaks (Sir H. Young) in 174 saying that I think it is quite wrong that we should continue this bonus system. It is a "Catch as catch can" system, and I think the Financial Secretary to the Treasury should address his mind, in conference with the Chancellor of the Exchequer, to see if the time has not now arrived to sweep away all this bonus system, to re-cast the rate of wages in the Civil Service, and to have a fixed rate of wages, so that whatever Government is in power does not find itself again faced with the necessity of making an arbitrary change in the bonus. I want to know how long this 70 figure is to endure. Is it proposed to re-open this matter within six months, or three months, or 18 months, and do hon. Gentlemen realise that, although the Government is only asking here for £30,000, the principle covers a much wider area and that this figure of 70 reaches through the whole of the Civil Service? The matter cannot be left as if it were only a matter of £30,000.
Finally, does not the Financial Secretary agree—do not let us take a party line about this—that it is quite wrong for us to accept this precedent of breaking agreements, and that the time has now come to make up our minds, once and for all, that if we are making agreements, for good or evil, it is better for the Civil Service, better for the country as a whole, and better for commercial morality that we should keep to these agreements and get away from any opportunity for breaking them? Will the hon. Gentleman give us an undertaking to revise the whole of the system of wages in the Civil Service, so that we may not be asked to vote these bonuses, but see the scales of pay put on a definite footing, properly worked out to meet the necessities of the times? Let us begin again, so that there is no chance for these unpleasant interludes of broken agreements made between two parties, willingly, without any compulsion, and in good faith, yet, notwithstanding that, broken at the first opportunity.

§ Mr. BOWEN
I am rather surprised to learn from the hon. Member for Farnham (Mr. A. M. Samuel) that an agreement has been broken, and I am equally surprised at his objection to something which was done with his full knowledge when he was Financial Secretary to the Treasury.

§ Mr. SAMUEL
So far as I remember, and this is some time ago, this 70 was never accepted by me while I had the honour of occupying the position now held by the hon. Member for Leicester West (Mr. Pethick-Lawreuce). As far as I remember, we offered a compromise rather for the sake of peace, although we did not like to vary an agreement. I am speaking from memory; a year has passed, but I am under the impression that I did not agree to the 70, but to a compromise of 65.

§ Mr. BOWEN
The hon. Member is perfectly correct, and, if he had allowed me to proceed, I should have given him the fullest credit for the effort he made, but there is no difference between what he attempted to prove and what was done by the present Chancellor of the Exchequer. If there is a difference it is this: The staff did not find agreement in the proposal of the late Ministry, but they were pleased to have the agreement they had with the present Chancellor of the Exchequer. The fact that the present Chancellor of the Exchequer gave the staff 70 in place of the 67½ which was offered by the hon. Member for Farnham should not be charged against the Government as a breach of the agreement. As a matter of fact, the negotiations broke off just at the time of the General Election, and subsequently representations were made to the present Chancellor of the Exchequer; and he consented to suspend the drop which was due last September. That was announced in this House at the time, and I am surprised to find that objection is now raised to something which was common knowledge at that period.
There has been no breach of an agreement. What has been done has been done with the full consent of both parties concerned, the Government, or the Treasury, and the staff. Therefore, I suggest that the case against the Government is not nearly like that which the hon. Member has attempted to paint. If he found that his offer was not acceptable to the staff then the staff might say that, if the hon. Member through the Treasury made representations to the staff for a variation of the bonus, it should not be charged against the staff that there has been any breach in the agreement at all. The point is that the cost-of-living bonus 176 has been the subject of discussion for a considerable time. It has not given satisfaction for various reasons; and the attempt has been made over and over again to get the Treasury and the Government to negotiate for a revision of the bonus. The difficulty became acute last Spring. As the Financial Secretary has pointed out, there was Treasury inconvenience because the bonus tended to rise in March when prices were falling and to come down in the winter time when prices were going up.
I will not weary the Committee with a recital of all the details of that difficulty, but it is sufficient to say, in answer to the right hon. and gallant Member for Sevenoaks (Sir H. Young) that the decision of the Chancellor of the Exchequer to suspend the drop last September by no means establishes a permanency. It has been suspended for a period of six months until 1st March. The only difference between that offer and the offer made by the hon. Member for Farnham was that under his proposal the figure of 67½ would have remained up to 31st December, 1929.

§ Mr. SAMUEL
The difference is not that. It is a moral difference rather than a difference of money. I put the money argument on one side for the moment. I dare say that the lowering of bonus did operate harshly in the case of those who received the smaller salaries. But the difference in question now is a moral difference. The initiative did not come from the Treasury. As far as I remember, it was the staff that asked us to vary the agreement, and I say that they were wrong to do so. They had made a bargain, and for weal or woe it is always best in life to keep to a bargain.

§ Mr. BOWEN
I did not wish to enter into the morals of this case; otherwise, I could say very much more than I am saying. Still, as the hon. Member has invited me to make an observation, I will make it. He has said that the agreement was broken. The original agreement was broken by force majeure by this House. A few years ago, when the agreement of 1919 was criticised and challenged on the ground that so much money was given to people who were superannuated, the Government of that day, of which I believe the hon. Member was a distinguished Minister, instructed the 177 Treasury that the staff must consent to a variation of that agreement. Therefore, morals cannot enter into the question. But, if this were an appropriate time, I could go into the morals of the case and show that the cost-of-living bonus agreement as it stands reflects rather seriously on many sections of the Civil Service, from bottom to top. That, however, will probably be a matter for discussion later.
I really rose to inform the House from my knowledge as one of the negotiators that what is happening now is that the bonus is being paid on a figure of 70, which would normally be the figure as a result of ascertaining the cost-of-living index in the usual way. The concession made by the Chancellor of the Exchequer does not go further than 28th February of this year. The next step is not to consider the permanency of the figure of 70 so much as to remember that the whole question is being referred to the Royal Commission and that the discussion of the future of the bonus is sub judice. The matter will have to be represented to the Royal Commission by staff representatives, and probably by the Treasury. The existing scheme is not broken except in what the hon. Member considers an immoral way, but there it stands, and until the Royal Commission has been able to deal with it I suppose that no further change will be made. In the circumstances, I hope that this Committee will not embarrass the Government any further on the subject.

§ Captain CAZALET
The hon. Member who has just spoken has mistaken the motives of speakers from this side of the Committee. We have raised one or two questions in regard to this Vote only in order to elicit some information from the Financial Secretary. I listened to the Financial Secretary's speech the other evening, and I feel certain that anyone who heard the reasons which he gave for this Vote could not possibly have disagreed with him as to the disadvantage under which certain sections of the Civil Service were suffering owing to the method by which the cost-of-living bonus was fixed. As I understood the Financial Secretary, the position was that the bonus which was fixed on the cost-of-living figure for the six months of summer, when the cost of living was low, came into operation during the six months of winter when the cost of living 178 was high, and, in future, I gather that the bonus is to be fixed upon the cost-of-living figure for the six months of winter when the cost of living is high, and that it is to last for the ensuing year. As I understood the hon. Gentleman the arrangement will be that, as each year goes by, the bonus will be revised on the basis of the cost-of-living figure for the six months during the winter when the cost of living is high, and, instead of operating for six months, that bonus will operate for the whole year so as to obviate the disadvantage under which civil servants had previously been suffering. If I am wrong in my conclusions, I would like to be corrected.

§ Mr. BOWEN
The scheme which was proposed was to finish on 31st December, 1929, and the question of operating for another 12 months would not, therefore, arise.

§ Captain CAZALET
I do not quite follow that. As I understand the scheme proposed under this Estimate comes to an end at the close of this financial year.

§ Mr. BOWEN
I thought the hon. and gallant Member was referring to the scheme mentioned by the hon. Gentleman the Member for Farnham (Mr. A. M. Samuel).

§ Captain CAZALET
I was referring to the conclusions which I had drawn from the Financial Secretary's speech. My second point is that the Financial Secretary should tell us what is the relation between the rise or fall in the cost-of-living figure and the demand upon the Treasury. For instance, does this figure of £30,000 correspond to a rise for a period of six months of two points or of one point, or of how many points? I admit that it may not be possible to give an absolutely accurate figure, but I think the Committee would know better what may be expected of us at some future time, if we were told that a rise say, of five points, or a fall of five points, means so many pounds sterling of an increase or a reduction in the Estimates. This Estimate, I understand, refers to a five points rise, but one cannot imagine that five points only represents £30,000 and I should like to know more of the relation between the two figures. The third point is in regard to fixation. Everybody knows that salaries and wages based on the rise or fall in the cost-of- 179 living do not give satisfaction to anybody. We know that when the cost of living has gone down, and wages and salaries have fallen in consequence, nobody is able to find a single article of domestic use which has gone down in price, and, of course, when the cost-of-living has gone up, it appears that every single commodity has been increased in price. We have had experience of that in our constituencies and I imagine that it is much the same in the case of the Civil Service. Therefore, if it is possible, I should think it would be far more satisfactory for the civil servants and for any Government which happens to be in power, that some basis of fixation of salaries should be arrived at so that both the House of Commons and the Civil Service may know where they stand in this matter.

§ Major HARVEY
I do not object to maintaining the scale of the Civil Service at all, but I ask the Financial Secretary to address himself to this point. We find here that the cost-of-living necessitates maintaining the salaries of the Civil Service at a certain level. In fact the cost-of-living remains higher than it was at the time when the salaries were fixed on the sliding scale. I want to know how the sliding scale operates as regards the Civil Service and others; because while it has been found necessary to maintain this increase in the salaries of the Civil Service we find, at the same time, both the Navy and the Army being gradually reduced in pay.

§ Mr. LEIF JONES
In this year's Estimates, which are not yet available, has the Financial Secretary stated the bonus to the full amount of 70 as a basis for the whole year, or is he taking only a Supplementary Estimate now to make it 70 instead of 65, and will it revert to 65 in the winter, unless he brings in another Supplementary Estimate? What is the basis on which he makes his calculation?

§ Captain CROOKSHANK
The Committee are much indebted to your Ruling, because we have tried on previous occasions to raise this question, which, though it represents in this Estimate only a comparatively small sum, over the whole Civil Service it comes to somewhere in the region of £1,000,000. We have to bear in mind the fact that the particular Paper with which we are dealing brings 180 up the total Supplementary Estimates presented to this House to £13,000,000. The hon. Member for Crewe (Mr. Bowen) made the remark that the staff were very pleased with the present Chancellor of the Exchequer for what he had done. That is hardly surprising in the circumstances, as he has taken the bonus at five points higher than it was before. Anybody would be pleased at that, except possibly the taxpayers whom we are supposed to represent, and who have to foot the bill. He criticised the hon. Member for Farnham (Mr. A. M. Samuel), but he did not quite take the point which he was making. The point which the hon. Member for Farnham had in mind was that, if you have an agreement that certain payments are to be made in accordance with the cost-of-living, and if you vary the payments, you technically break the agreement, because people who enter into an agreement have to take the good with the bad. I do not think that the hon. Gentleman quite saw the strength of the argument which my hon. Friend was addressing to the Committee.
When he said that we ought not to be discussing this matter as it was sub judice, because the Royal Commission will have to consider it, he was doing himself a little less than justice. If this Committee expresses the opinion that it would be better to do away with the sliding scale altogether and to get on to some permanent salary basis—and my hon. Friend in front of me did say so—probably most Members of the Committee, if they devoted their minds to that aspect of the problem, would be inclined to agree. If the Committee gave a lead in that direction to the Royal Commission, I should have thought that it would have been of great value to the Commission. Instead of criticising their action, which we are not entitled to do while they are making up their minds on these problems, it is our duty as Members of this House to express our opinion on a point so important as that. If we had any kind of opinion expressed in a general way that it would be better to do away with this sliding scale, and to work out the appropriate scales of salaries for all grades of the Civil Service, I should have thought that the Royal Commissioners, of whom some are Members of this House, would be very 181 grateful, and they would be grateful to the Chair for having allowed it to be discussed.
One question arises out of that which the Financial Secretary should answer. As we have apparently broken away, on this narrow point, from the agreement with regard to the cost of living, is it the intention of the Government that this 70 per cent. rate should be stabilised until after the Royal Commission has reported? That is really the vital point. When I first read of the Government's decision some months ago, I thought that the Government, seeing that the matter was likely to come up for discussion by the Royal Commission, were prepared to give this bit extra to the Civil Service for the moment in order that there should be no discussion between their representatives and the Treasury during the whole period of the sittings of the Commission, and that when the Commission had reported would be the time to go into the matter in accordance with such recommendations as the Commission might make or as the Chancellor of the Exchequer of the day might wish to bring into force. If the Civil Service is to be guaranteed its present bonus on 70 per cent. irrespective of that, the Committee and the country ought to be told so.
I can speak with some personal feeling, because I was a civil servant for over five years, and it has always struck me—it did then, perhaps, more than it does to-day—that this sliding scale, though all right in theory, is actually really rather absurd, because the 70 per cent. applies only to the very lowest salaries, and there is a certain unfairness about it. I have in front of me a table showing how the cost-of-living bonus works. The 70 per cent. bonus applies only to salaries up to £91 5s. a year. After that the bonus is 67, 64 or 61 per cent. When you get to what is, considering the work the civil servant has to do, the comparatively small ordinary remuneration of £350 a year, the bonus is not 70 per cent., but 44 per cent.; and when you get to the higher scales enjoyed by the higher officials in the service it drops away altogether, At £2,000 there is no cost-of-living bonus at all. Even at the £1,000 basic remuneration they get only 21 per cent. bonus.
182 There is a very misleading impression about this 70 per cent. in the minds of a great many people, I am afraid. When the bonus is considered from the point of view of the cost of living, it is very difficult for anybody to get up in this House and say that if you happen to have £91 5s. a year basic salary you ought to get 70 per cent. extra because of the high cost of living, and that if you have a salary of £1,000 a year you should get only 21 per cent. extra for the cost of living, because the cost of living, taking everything into account, is really just as high for the man who gets on to the £1,000 a year scale as it is for the lower-paid man.

§ Mr. KELLY
No.

§ Captain CROOKSHANK
The hon. Member says it is not so.

§ Mr. CHARLES DUNCAN
More is spent on food.

§ Captain CROOKSHANK
It is not a question of taking more food. The capacity of any individual man or woman for food or drink is limited by nature, and we cannot say that a man with £1,000 is going to be able to eat 10 times more a year than the man earning £91 5s. That is a ridiculous statement.

§ Captain CROOKSHANK
I cannot give way now, but if the hon. Member can do so I shall be glad if he will put me right later. We have to consider the responsibilities of civil servants in the higher grades. They have certain responsibilities and a certain scale of living which is inevitable in the position they have earned for themselves, and the cost of living, and so on, in their position is comparatively just as high as it is for those on the lower scale. I should not have thought there could be any argument about that question. What I want to put to the hon. Member is this: Is the Financial Secretary prepared to say that this 70 per cent. basis is going to last until the Royal Commission reports? Has it to go to the Royal Commission or not, or will steps be taken at some future date to put down a Resolution asking the House of Commons to express an opinion on the question whether it would not be better to get away from this old method, which was not used 183 before the War; in fact, it is a relic of what happened during the War? I think hon. Members should have an opportunity of expressing their opinion upon the question whether the whole system of bonuses should be dropped and get down once more to basic salaries and stick to them. The less complicated you make the wage and salary system the better it is for everybody. I have never been able to understand on what basis miners' wages are worked out, and the members of the Civil Service do not know from year to year what they are to look forward to because of these fluctuating amounts in regard to bonuses. I hope some steps will be taken to find out the view of the House on this question.

§ Mr. E. BROWN
I doubt whether hon. Members are right in declaring that they want to go back to a basic salary. I feel it is time we had a scientific basis of calculation adopted in regard to this question. At the present time, you take a pure rule-of-thumb method in regard to a particular range of articles purchased and you calculate the remuneration of civil servants and thousands of other workers on that basis. The basis of the calculation ought to be worked out scientifically, because it is quite obvious that the kind of articles which are suitable for one family are not suitable for another family. What we want to set up is a scientific scale appropriate to all cases. After all, it is better to have a fixed remuneration rather than a system like the present one.

§ Lieut.-Colonel ACLAND-TROYTE
I entirely agree with my hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) that it is time that these salaries were fixed. My hon. and gallant Friend the Member for Totnes (Major Harvey) has referred to the payment of people serving in the Army and Navy, and I hope that the Financial Secretary will be able to explain why this stabilisation has been carried out, in view of the fact that the pensions and pay of the Army and Navy have been reduced. The hon. Member for Crewe (Mr. Bowen) said that this stabilisation of pay was due to a bargain between the Treasury and the representatives of the Civil Service, but he left out of account one very important individual, namely, 184 the person who has to pay, and I think that we, as the representatives of the taxpayers, ought to consider, not so much a bargain made between the Treasury and the representatives of the Civil Service, as the position of the taxpayer. We all know how heavy the burden of taxes is, and this is a matter in which the burden of the taxpayer is being increased, and, therefore, is a matter which ought to be taken into consideration before any bargain.

§ Mr. PETHICK-LAWRENCE
There has been a very interesting discussion on this matter, and there is a good deal of difference of opinion, but, with the exception of the hon. Member for Leith (Mr. E. Brown), there has been almost a concensus of opinion that the time has come when we ought to get back to a fixed scale instead of a scale depending on the cost of living. It would, I think, be improper for me to express an opinion on that point, as the matter is really one for the Royal Commission on the Civil Service. They will, no doubt, weigh up this question from every aspect. They will doubtless weigh up the possibility, which the hon. Member for Leith suggested, of a scientific basis, and also the possibility of keeping to the same cost of living bonus figures as they have been before, and it would be improper for me to prejudge the decision which, after receiving full evidence, they may take.
A number of points have been made by different Members of the Committee, to which I should like to reply. In the first place, I was asked, very properly, by several hon. Members for information as to what exactly this concession amounts to. The concession amounts to an increase of the figure from 65 to 70 for the six months from October, 1929, to March, 1930. and to that alone. After that, the situation reverts to the scale which exists at the present time. I have been asked what will be the position in October? The decision taken last July does not prejudge the issue next year one way or the other, and it will be open to whoever may be in a position to decide at that time either to keep to the sliding scale as it was before or to make a similar concession next year.

§ Mr. LEIF JONES
Does that mean that nothing has been taken in the Estimates 185 to make it 70 next October, supposing that the cost of living figure in October is 65?

§ Mr. PETHICK-LAWRENCE
I would remind the right hon. Gentleman that it is quite uncertain what the figure will be on the old basis and I do not know that it is incumbent upon me to express an opinion on that point. It may very well be that the figure will work out at 70, and the figure of 70 has been adopted for the purpose of working out the actual Estimate for the year; but that does not prejudge what the figure will actually be when the question arises.

§ Mr. LEIF JONES
But it does mean that a Supplementary Estimate will not be necessary at this time next year. It does mean that, if the figure should be 70 on the working out of the sliding scale, or if it should be decided to make it 70, a Supplementary Estimate next year will not be required.

§ Mr. PETHICK-LAWRENCE
The hon. Gentleman the Member for Farnham (Mr. A. M. Samuel) said, as I understood him, that quite recently the cost-of-living figures had been plunging down. I think he was rather confusing the position between cost-of-living and wholesale commodity prices. I have here the cost-of-living figures for the last two years, and though there has been a very slight decline, I do not think he can possibly say there has been a plunging down.

§ Mr. A. M. SAMUEL
Since the hon. Gentleman challenges me, that shows how wrong the cost-of-living calculation is. Here you see the "Times" two or three days ago giving the index figure, and you see a tremendous plunging down in commodities. You should calculate the index upon fact. [HON. MEMBERS: "No!"] The cost-of-living basis should be based upon the prices at which you can buy your food. It is quite wrong to take a cock-and-bull story like the index figure, which gives a wrong picture. In the index figures given by the Ministry of Labour things are included which the working man does not buy at all. It is an accounting system. The system by which the cost of living is calculated by the Ministry of Labour has misled the hon. Gentleman in making his rejoinder to me. The premises on which it was 186 based are false. The index should be based upon the cost of food which the working man has to buy.

§ Mr. PETHICK-LAWRENCE
The hon. Gentleman has stated his case, but I would remind the Committee that, he is really not at all correct. He is confusing two things which are quite distinct. If he had read recently as many of the papers as I have, he would realise that he is confusing the index of the wholesale prices and the retail prices. Everybody who has studied this question knows perfectly well that while the index of wholesale commodities has plunged headlong, the index of retail prices has not. It has fallen very slowly afterwards. That is a phenomenon which is not confined to one particular year, but covers all the years. Ever since the great slump in wholesale prices began, retail prices have fallen very slowly, and that is why the great slump in wholesale prices has done incalculable injury to the trade prosperity of this country. The facts are that if you take the last two years, the fall in retail prices has been very slight. The hon. Gentleman opposite said that he was not concerned with the cost-of-living figures, but, as a matter of fact, the cost-of-living figures are those which his Government for 4½ years, the preceding Conservative Government and the preceding Coalition Government, decided were the appropriate ones. It is really rather absurd, after these figures have been sanctioned for all these years as the one test which should be applied, that the right hon. Gentleman should say they are quite worthless, and that we should go on the wholesale index prices, which are something entirely different. So much for that.
The other argument which the hon. Gentleman used was that what has happened was the breaking of an agreement. I suggest that his argument was not a correct one. What has happened is that an agreement has been varied. There is a very great deal of difference in that. There is all the difference in the world. If I make an agreement with someone, and, against his very strenuous protest, I change the agreement, the right hon. Gentleman would be quite correct to say that I had broken the agreement. If the other party to the agreement asks me to vary it, and I agree to that variation, 187 it is a misuse of words to describe it as breaking the agreement. The agreement has been varied undoubtedly to the advantage of the Civil Service. I have been asked to say what is the total amount involved. The sum was annouced when the change was first made. In the current financial year it amounts to £800,000.
The hon. Member for Chippenham (Captain Cazalet) asked on what the change was based. The sliding scale took an average of six months, and, when the figure was over 65, the cost-of-living for the following six months was on the basis of 70. When it was under 65 but above 60, it was on the basis of 65. It never changed a single point but always five points at a time. The increase represents the difference between basing the Civil Service bonus for six months at 70 and basing it at 65. The hon. and gallant Gentleman the Member for Totnes (Major Harvey) asked how it was that, while this concession had been given to the Civil Service, the Army figure was coming down. The reason is that the figures for the Army and Navy are based on an entirely different average. Whereas the Civil Service basis is a period of six months, the Army and Navy has been sometimes three and sometimes five years. The effect of that is that the Army and Navy rates of pay this year, if they were allowed to operate exactly as they have been arranged, would fall from six per cent. to eight per cent. below standard. The Government have limited this deduction of 2 per cent. to 1 per cent. The drop covers an average of a much longer period of time. I was asked what sort of proportion of this amount went to the higher-paid and what to the lower-paid grades of the Civil Service. Of the £800,000, about £550,000 goes to civil servants who have less than £200 a year.

§ Captain CROOKSHANK
What about the Royal Commission?

§ Mr. PETHICK-LAWRENCE
The Royal Commission will, of course, have the whole issue to decide. They can decide, if they think it desirable, to go back to the sliding scale system either on its old basis or on a new one. They can decide to start civil servants on a fixed basis, not to change with the scale of 188 living at all, or they can decide on some scientific basis such as has been suggested. When I say decide, I mean they can decide to put in their report a recommendation on those lines, and it would be for the Government, with the sanction of the House, to come to a decision whether what the Royal Commission recommended or some other proposal shall be carried into effect. While the Royal Commission is coming to its decision, we have adopted this stop-gap arrangement. I hope, in view of that explanation, that the Committee will give us this Vote.

§ Sir ERNEST SHEPPERSON
I want to ask a question which rather concerns me. The hon. Gentleman has referred to the cost-of-living figure going up from 65 to 70 as from October of last year to March of this year. The hon. Gentleman the Member for Farnham (Mr. A. M. Samuel) was criticised by the hon. Gentleman because he took the wholesale figure, which he assumed had "tumbled" down. The hon. Gentleman states that the cost-of-living is on the retail figure. My concern is, that it is not the wholesale figure or the retail figure, but the figure with which the producer is associated. Since October of last year I have been producing the foodstuffs which are the essential considerations in the cost-of-living figure at far below the pre-War figure.

§ Mr. R. A. TAYLOR
Is it in order for the hon. Gentleman to pursue his argument with so much vigour as to disturb the slumbers of hon. Gentlemen opposite.

§ Sir E. SHEPPERSON
My question is a serious one. As from October of last year to March of this year, the prices of foodstuffs which are really the essential part of the cost-of-living, have gone down below the pre-War level, while at the same time the cost-of-living figure has gone up from 65 to 70. I should like to know how it is that the cost-of-living figure goes up when the rates to the producers are rapidly going down.

Lieut.-Colonel MOORE
I only want to ask one question of the hon. Gentleman. I represent a large but not very vocal body of opinion in this country—the Army officers on retired pay—who get very little in the way of retired pay. I saw a document a few months ago saying that my scale of retired pay was going to be lowered by five per cent. until next April, when it would be revised.

§ The CHAIRMAN
I allowed a question and an answer regarding the Army, but the matter does not come up under this Vote.

Lieut.-Colonel MOORE
I agree with your Ruling, but I notice that the hon. Gentleman has said that the cost-of-living figure for the Civil Service has been stabilised at 70 per cent. for the time being, and therefore I want to know why we, as ex-Army officers, who get a very inadequate scale of pay, are being reduced.

§ The CHAIRMAN
The Minister said that matter would come up for consideration and perhaps revision shortly.

Lieut.-Colonel MOORE
I accept your Ruling absolutely, but I ask: Has the cost-of-living decreased or has it increased? If it has decreased for me, then it has decreased for the Civil Service. You cannot separate us. We all consume the same amount of food, and drink, if we can afford it. That is the point which I wanted to make.

§ The CHAIRMAN
The hon. and gallant Gentleman must make that submission when the time comes. I allowed a question to be put by an hon. Gentleman, and I allowed the Minister to answer the question.

Lieut.-Colonel MOORE
He has not answered my question.

§ The CHAIRMAN
It would be out of order if he did.

§ Sir E. SHEPPERSON
Will the Financial Secretary to the Treasury answer my question?

§ Mr. PETHICK-LAWRENCE
I will answer it in so far as it is relevant to this issue. I cannot decide the question. I have always said that it is regrettable that, while retail prices are falling very little, wholesale prices have fallen greatly, and the producers' prices have fallen very much, owing to the various channels through which the produce has to come before it is delivered to the consumer. I am afraid that I cannot further answer the hon. Member on this Vote.

§ Captain GUNSTON
The farmers have to suffer.