§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a Second time."
§ Sir ROBERT HORNE
I beg to move to leave out the word "now," and, at the end of the Question, to add the words "upon this day six months."
It is a month since the Chancellor of the Exchequer presented his Budget to the House, and in the interval its provisions have been discussed in the House and also debated at large in the Press of the country. The conviction formed in my mind during that period is that reflection has only tended to confirm the criticisms which were made upon the Budget from this side of the House, and the opinions expressed both in this country and other countries—many of them diverse in character—only serve to intensify the apprehensions with which we regard the Budget and its injurious effect upon the fortunes of the country. The Chancellor of the Exchequer has himself afforded us something of a test whereby we may arrive at the merits of his Budget. On the day after he made his speech in the House of Commons he broadcast an account of its provisions in which he said, among other things:The first concern must be to restore and maintain a spirit of confidence and enterprise among those responsible for the conduct of our trade and industry.Has this Budget restored a spirit of confidence and enterprise among those engaged in the trade and industry of this country? On the contrary, it has deepened the depression which already existed and has engendered a feeling almost of dismay. There is no person engaged in either trade or commerce who will not tell you that the effects of this Budget have been more devastating on the spirit of those engaged in industry than in the case of any Budget that can be remembered. It is not surprising that that is so. At the very moment when we had thought we were steadily on the way to a reduction of taxation we are suddenly turned round and confronted with mounting imposts. At a time when America is reducing its taxation by vast 228 sums, and our neighbour and ally France is reducing taxation by £14,000,000 in the year, we, who are already paying immensely greater sums in taxation than either of those countries, are faced with increased burdens and have to compete in the world of commerce with those burdens upon our shoulders.
The Chancellor of the Exchequer seemed in a recent speech to take some consolation from the fact that Germany was not reducing her taxation. I ask the House to observe the amazing contrast between defeated Germany and this supposed victorious and triumphant country. We recall the cautious anticipations which the Chancellor of the Exchequer made with regard to next year, and the probability that he might be able to get on without any increased taxation; but what did the German Finance Minister say in introducing his Budget? He said that in 1931 they would proceed to tax reductions, which were an essential part of the financial reform programme, and he thought it certain they could then take off 600,000,000 marks from the taxes pressing most heavily on industry. We have Germany proposing next year to take more than £30,000,000 of taxation off her trade and industry, while all that our Chancellor of the Exchequer can offer us is the faint hope that he may not increase taxation here. One has only to listen to our friends abroad, and read some of their economic journals, to discover how gravely the outside world regards this retrograde turn in our taxation.
The Chancellor of the Exchequer, in his broadcast speech the other day, contended that this increased taxation was entirely due to obligations which he had inherited from his predecessor. If the right hon. Gentleman had had the slightest regard to fairness, or even if he had had the remotest intention of being accurate, he would have told his listeners of the great burden of taxation which he was imposing on account of the extra expenditure incurred by the present Government since it came into office in relation to a variety of schemes dealing with unemployment benefit, pensions and other matters. [HON. MEMBERS: "Hear, hear!"] Hon. Members say "Hear, hear." I am prepared to face that issue in due course. In the meantime I say that when the Chancellor of the Exchequer is placing before the public a 229 statement of what his Budget does, he ought to explain the truth with regard to these matters instead Of trying to load the whole responsibility for this taxation upon the right hon. Gentleman who preceded him in office.
The main question, and the most critical matter which afflicts us in this country at the present time, is undoubtedly that of unemployment, and I cannot imagine that anyone, budgeting at such a period, would have anything else in mind than the effect of his proposals have upon this very grave question. There are many details in the Finance Bill which we can discuss in Committee, but in the meantime I should like to consider broadly what is going to be the result of the proposals in these financial measures upon unemployment and the trade of the country. The Chancellor of the Exchequer himself realises the weight of that question, and in the speech to which I have already referred he made certain important claims. He said:I have placed no direct burden upon industry. I have put the burden only on those who are best able to bear it. Only 500,000 people in the country will pay more taxation by reason of the Budget.The Chancellor of the Exchequer's attitude towards this selected body of citizens is the most completely cynical thing that I have ever known. It is reminiscent of an incident in the life of a famous continental restaurateur who, on one occasion, had a client who complained of an item in his bill and the restaurateur replied, "Oh! that is all right, I will put it on Lord Rothschild's bill." That is how the Chancellor of the Exchequer deals with this question. When the right hon. Gentleman talks about putting no direct burden upon industry, he entirely ignores the fact that among the 600,000 people he refers to there are those who are connected with the great commercial companies of this country. In addition to the taxation which the shareholders of those companies pay, the companies themselves pay direct taxes upon all that they do not distribute, namely, all the money which they put to reserve. What are those reserves? They are the moneys which the companies save for the purpose of improving their organisation, of modernising their plant, and entering into new enterprises for the development of their business. The result of the action 230 of the Chancellor of the Exchequer in this matter is to put a direct tax upon all those companies so far as their reserves are concerned. The Chairman of the Dunlop Rubber Company, at the annual general meeting, informed the shareholders the other day of the amount upon which, during the last five years, his company had been taxed in respect of those reserves, and it amounted to the colossal figure of £3,700,000.
Not long ago the Chancellor of the Exchequer made a rather harsh gibe about the business people of this country when he said that half the plants in the country were in a state of obsolescence. Why is that? It is not because our business men have no desire to be as modern as their competitors, and it is not that they do not know what is going on in the rest of the world, because, heaven knows, they have plenty of time to read about all the most recent developments in business. The reason as many have testified is that the State has so depleted their reserves that for bad times they have not been able to conserve enough to get the new plant and the new equipment which their competitors have been able to obtain so easily. The Chancellor of the Exchequer so far from placing no direct taxation upon industry, is taking a definite share of the revenues of those companies. If I may again quote the case of the Dunlop Rubber Company, the effect of the extra 6d. put upon their taxation by the new Budget is to deplete what would have gone to the reserves by a sum approaching £30,000. If you spread that charge over all the companies of the country you soon begin to realise that this is a most burdensome tax upon our industries.
It is not enough to confine one's attention to the direct burden of taxation. Let us look for a moment at the indirect burden which the Chancellor of the Exchequer is placing upon industry. When the companies of this country require more money than they have in their reserves in order to extend their business, how do they obtain it? In a general way, they obtain it by going into the money market, offering debenture bonds and so on, and, if the public have sufficient confidence in their organisation, they get the money in that way. Where does the money come from which the public produces for that purpose? It comes from the savings of the public— 231 from the people who have a surplus—and to the extent to which you tax the people of the country by the Income Tax you deplete the very funds which are there to finance industry. The same principle holds good whether you take the money from them by way of the Income Tax on revenues or by duties upon the estates of people who have died. In the latter case, you are making, a direct inroad upon the capital of the country. The Chancellor of the Exchequer understands that perfectly well. At a dinner which was given in honour of the right hon. Gentleman last week by the bankers of London, the right hon. Gentleman told them that the country had been living for the last few years upon its capital. He was talking to experts who knew about this matter. When, however, he addresses the public, he poses as a financier of the greatest purity who is determined to make the country pay its way. But how is he paying the way of the country by the present Budget? He is paying it by increasing the amount which he takes from the capital of the country by a sum of £7,000,000 a year. [An HON. MEMBER: "How would you do it? I am not responsible at the present time for producing the Budget. I am moving the rejection of this one. If I were given the opportunity to present one, I would present a different one from this. What I say with regard to the Chancellor's attitude of paying his way is that he is doing it partly by taking it from the capital resources of the country which otherwise would have been available for the fructification of industry.
We have learnt from a letter in the "Times" not very long ago from Lord Lothian, whom, I am sure, no one would regard in any respect as a person who would put forward a selfish case except in the interest of the country, showing how, in the estate with which he was familiar, the incomings of that estate—a great agricultural estate—from year to year were not more than able to pay its expenses, and when a death took place the amount which was taken by the Exchequer absolutely deprived the agricultural industry, as far as that estate was concerned, of the capital which was necessary to run it. He was not complaining that the landlord had gone with 232 out any revenue, but he said the result was that there was no money upon which the estate could be re-equipped, there was nothing the landlord could put up for the benefit of the farmers, and dereliction in many instances had taken place. I remember hearing a schoolboy who translated the phrase de mortals nil nisi bonum into "when you are dead, they leave nothing of you but your bones." It has been left to the Chancellor of the Exchequer to justify that translation.
May I refer still further upon this matter to a psychological effect of this kind of taxation? The result upon a man who has got an income of £10,000 a year, as was given in an answer by the Chancellor of the Exchequer the other day, is that under the present taxation he has to give up considerably more than half of his income if he is to meet these taxes, and at the same time ensure his capital against depletion at the time of his death. In that respect, I venture to say that what you are doing is to penalise thrift and to punish saving. If you take estates which are larger, for example, a man who has £50,000 a year, if he makes proper provision for Death Duties, and also pays his taxes, his whole income will not be sufficient to meet his yearly obligations. The position in which he is put is that he has either to live upon his capital or give up his capital to the State in order that the State may live upon it. All I have to say, as one acquainted with business, is that any private business that was operated on these principles would not very long survive, and those who attempted to conduct it on that basis would very soon meet with the severe criticism of anyone who knows anything about the conduct of financial affairs business.
Other countries have had experience of the effects of high taxation. The House will remember that during the War the Americans imposed upon themselves very high imposts for the purpose of meeting War obligations. Their taxation was met very fully during the period of war, but when the War was over the American Treasury had the experience of finding that the yield upon the high incomes was rapidly coming down to a low figure, and that wealth was taking means by legal avoidance, not by illegal evasion, to get rid of the obligation to pay that high taxation, which they then regarded as oppressive. The result was 233 that the Finance Minister in America determined to do what he subsequently accomplished. He greatly reduced the taxation, with very beneficial results to the State, and now the highest amount of taxation does not exceed 25 per cent. of the income, as compared with—I suppose I am not exaggerating—some 60 per cent. on the highest incomes here. The Finance Minister of America enunciated the grounds upon which he was moved to make that change in the taxation, and, if the House will allow me, I will read three or four brief passages in which he states the principles which guided him. They seem to me to be apposite to our particular situation, and to show the results which we may expect to follow from the kind of taxation which the country is now about to have to bear. He says:The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business and invest it in tax-exempt securities, or to find other lawful methods of avoiding the realisation of taxable income. The result is that the sources of taxation are drying up; wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people. The spirit of business adventure was being destroyed by excessive surtaxes.And he makes this practical point which will appeal to Members of the House:If failure attends, the loss"—that is to say upon any enterprise—is borne exclusively by the adventurer, but if success ensues, the Government takes more than half of the profits. People argue the risk is not worth the return.I do not, know to what extent the Chancellor has an opportunity of discovering what is going on at the present time, or to what extent people in this country are animated by some of the motives which are described in the paragraphs I have read; but I think it is common knowledge that very large sums of money are going out of this country, quite legally, not upon any ground of illegal evasion, but upon the motive which always will guide human conduct, that is, to make the most of the resources which they have, and not to have to endure greater burdens than they must. Up till now it could be said of this country that there have been no more patriotic taxpayers in the world than the 234 English people, none who more honestly and more completely met their obligations as citizens, but there is no question that the result of this high taxation at the present time, in conditions of very great difficulty and depression, do compel people to make other arrangements for the disposal of their resources, and I venture to say, with great confidence, that although the Chancellor may possibly get the revenue upon which he depends for this year from that taxation, he certainly will not get it the year following.
It has been left to our Chancellor, in contrast with the view of the American Minister which I have read to the House, to discover that high taxation, instead of being a detriment to business, is a stimulus. He thinks it good for business—that industry profits by high taxation. I wonder whether he always thinks so. I had the curiosity to turn up another broadcast speech which the present Chancellor of the Exchequer made to America in connection with the Naval Conference. He said:Our people are the most heavily taxed in the world. We have an Income Tax of 45. in the £ and a Super-tax running up to an additional 6s. in the £. In addition, the duties on estates passing at death range as high as 40 per cent.Did he go on to say that, under this happy stimulus, we had never been in better shape and that we were getting on very well? Did he tell the American nation that the high taxation to which he referred was indeed an excellent tonic, and that he was proposing to apply some more of it in order to increase the health of our people? Not a bit of it. He went on to say:With such a burden as this upon our shoulders …. is it any wonder that we have suffered industrial depression as the aftermath of the War? Nay, the wonder is that we have been able to maintain our position.The truth, spoken by a responsible British Minister in a calm and deliberate moment, addressing another people! How different from the partisan perversion which was flung at us across the Floor of this House in order to justify a Budget which hamstrings industry and which will petrify employment! You can get a much better expression of the facts with, regard to the taxation of business from those associated with the same party as the Chancellor of the Exchequer, 235 but who have a little more connection with industry than he has ever had. On the second day after he had made his Budget speech, there was a Trade Union Congress in Edinburgh, and the President of that Congress, Mr. Watson, who is well known in Scotland, said:Taxation ought certainly to be lightened for industry. The idea of the Government to make everybody happy out of the public purse would be excellent if we could afford it, but industry fills the purse, and to try to make everybody happy by killing industry, through taxation, will not work.I commend that view to the Chancellor of the Exchequer, and I say that the Budget which has been presented to us is an excellent exhibition of the bankruptcy of the financial policy of the right hon. Gentleman. At a time when industry is so severely burdened and when employment is so terribly depressed, all he can do is to strike at them another blow, even after all the buffets they have had to endure through these last dark years.
It is a curious accompaniment of that type of taxation that the Chancellor of the Exchequer should think it necessary to cancel duties which were bringing in £800,000 a year, and should oblige himself to find that money by some other process of taxation. I refer to the Safeguarding Duties. Why should he desire to cancel them, and why should he put himself under the compulsion of finding that money from some other source? Are these duties doing any harm? Has he found anybody who has complained about them? Does anyone say that he has been injured by any of them? They yield the Chancellor a revenue; they do not increase the price of the goods sold under them. Has anyone said that they do? And yet the Chancellor of the Exchequer thinks it necessary to take off these duties, in spite of the fact that the employers and the employés together have made it perfectly well known that they believe that their employment will suffer severely under this process. On the last occasion when we discussed this question of duties, the Chancellor tried to get the House to believe that it was a mere employers' ramp. Does he say so in view of the conjoint action of employers and employés in these various industries which he is proposing to put at the mercy of foreign goods made under cheaper conditions?
236 I am perfectly certain that he is, to put it at its lowest, running a very great risk in thus putting these employments at the mercy of cheaper goods from elsewhere. Apparently, he is prepared to allow people to be driven out of the employment in which they are accustomed to work, and then provide them with some means of public assistance by which they may be sustained in idleness, or public funds for creating employment of a kind to which they have never been accustomed. Is that the kind of policy that we are going to be reduced to because of theories which are antagonistic to the Safeguarding Duties?
I suppose that this is all being done because of the rigidity with which the Free Trade theory is still held among certain members of political parties in this country. So far as I am concerned, if the situation were as Cobden supposed that it was and would be, I myself would be a Free Trader; but, if you vary the premises of a syllogism, surely you will alter the conclusion. If you change the conditions under which the world exists, surely you must get different results. While I am not going to argue to-day the question of Free Trade as against Protection or as against Safeguarding, there is just one consideration that I desire to put to the House. Cobden's whole theory proceeded upon the assumption that, when you were buying cheaply from abroad, men who were put out of work would easily find work elsewhere. It was at a time in the world when work was not so hard to get as it is now, and it also was at a time when there were none of those rigid rules of demarcation as between employment which exist now—when labour was much more fluid. It was also a very different time in this respect, that Cobden never envisaged the position in which, if a man were put out of work through a purchase of foreign material, he was going to be sustained by other funds at amounts which, in many cases, are very nearly equal to his wages. That kind of world was entirely unknown to Cobden, and entirely uncontemplated by him.
Consider the result of that simple fact. Is it not obvious that a cheap foreign purchase may turn out to be very expensive if the result of it is to put out or work men who then have to be sustained out of public funds because they are no longer in employment? At the present 237 time, there is a vast multitude of men who are out of employment for no other reason than that we are buying from abroad the goods which they have been accustomed to make; and those goods are being got from other countries where people are working under lower conditions of life and at lower rates of wages. I do not know whether any trade unionist likes that kind of situation. I do not know how any trade unionist can logically hold the doctrine of Free Trade, because protecting his labour as he does is entirely useless unless he also protects the markets in which the goods made by that labour can be sold. The question, quite obviously, and I ask the House to consider this, is, may it not be, on balance, that buying cheaply from abroad may cost you very dearly indeed, when you consider the amount of money that, you have to spend on unemployment pay and on all these works of public relief which the Lord Privy Seal is constantly bringing before the notice of the House?
There is not only that consideration. Look at the factors in the position. Look at the loss of the goods which would have been made in this country. Look at the loss of the revenue which the Chancellor of the Exchequer would have drawn out of the profits made by the manufacturers. Look at the loss of skill on the part of the craftsman whom you turn on to unskilled labour and the making of roads. Look at the loss of self-respect in the man who has to spend his time in queues outside the doors of Employment Exchanges. Finally, look also at the despair and the broken hearts of many men who have never led anything but a proud and independent life up to the time when this fatality overtook them. When you weigh all these things in the balance, is it not obvious that you are paying very dearly indeed for a creed which every other nation in the world has long ago forsworn?
For my part, I find it very difficult to understand how anybody who thinks it necessary to annul the Safeguarding Duties because of a rigid view of Free Trade has been found to support the Coal Mines Bill. In that Measure you have a more rigid application of a system of protection than is known in any other country in the world to-day. It is quite futile for any member of the Liberal party or of the Government party 238 —[HON. MEMBERS: "Why did you oppose it?"] It went farther than I would ever have sanctioned. Believe me, you can have too much Protection, and if the time were available I should be very glad to enter into a discussion on that subject. To do as is done under the Coal Bill, that is to say, to allow a, junta of coalmasters to fix quotas and prices, and then, not only to sell under the sanction of the State, but to prevent anybody else selling at lower prices than are arranged by their committee, and to make this legislation as part of a policy of Free Trade is to put a very great strain on any process of ratiocination of which I have ever heard. Accordingly, I think that a great change is taking place, not only in the public mind upon this matter, but also in the minds of many people in this House. If people can swallow the Coal Mines Bill, I am sure their minds are open to other ideas.
The Chancellor of the Exchequer was kind, as he thought, to the McKenna Duties. He let them off the cancellation process which he was applying to the Safeguarding Duties, and he did so because they produced revenue. I venture to suggest to him that there are other industries in the same way that are capable of producing revenue, in which an application of Safeguarding Duties would do no harm to anyone, but would do a great deal of good to employment, and bring him an addition to his revenue. Instead of making an attack upon industry by such a Budget as this, he could apply duties which would resuscitate employment in those industries at the same time as they yielded him revenue. [Interruption.]
I do not anticipate that I shall be able to induce either the Government benches or the Liberal benches to take such a view. My right hon. Friend the Leader of the Liberal party and myself were once coadjutors in devising a Safeguarding process. Since then my right hon. Friend has said that the duties were designed to meet a case of emergency. I do next think that the emergency is yet over. So far as I am aware, our condition at the present time is even worse than when the Safeguarding Duties were first applied in the country, and our industries are just as much in need of them now as they were at that time. Since then, however, my right hon. Friend has been unequally yoked with unbelievers, 239 and do not imagine that I should get any support for my suggestion from his benches. There was, however, a passage in his speech on the Budget which was notable, and with which I should like to deal for just a moment. He was obviously very much exercised by the growth of expenditure in this country, and I was not surprised at the attitude that he took, because no man has made more trenchant speeches upon the condition of our trade from time to time than he has, and never during the last few years have I heard from him on these matters anything but the gravest and most serious discussions of the condition at which we had arrived. To-day, as the figures of our trade show, our position is even worse. My right hon. Friend made reference to the social services, and he said:The time has come when all parties ought to consider the desirability of some check being put upon … expenditure."—[OFFICIAL REPORT, 16th April, 1930; col. 2943, Vol. 237.]I venture to take up and reinforce that appeal. But shall we be able to get support from my right hon. Friend and his party upon this matter? Is his situation free, or is it not, on this question At one time, in addressing his party, my right hon. Friend told them that they were in a position of dominance. He said that they held the balance of power in the House of Commons, that what they said must necessarily be adopted. Is he still in that position to-day, or shall we see again a repetition of the ignominy which he had to endure on the Coal Mines Bill? Can we believe that he will be with us in carrying out the motive of his speech? In my view, there is nothing so vital to the interests of this country at the present time as that its expenditure should be checked. The country can no longer afford more expenditure even upon the most meritorious services. If only some message of encouragement on the lines suggested by my right hon. Friend could be given it would do a very great deal to relieve the minds of many people who are in positions of great difficulty and wonder whether any longer they can carry on successful industry in this country under the burdens which have been imposed upon them. Is it not reasonable to bring to an end, for the moment at least, any additions to such expenditure. We have gone far ahead of any other country in these matters. 240 Our expenditure upon social services, as the House well knows, is at least twice as much as that of any other nation, and the truth is that by going on increasing that expenditure, the revenues to support which can only come from industry, we are, in effect, putting a burden upon industry which threatens the very existence of the social services themselves.
I would, therefore, beg the House to look very seriously at the situation in which we are placed. What we are really trying to conserve is something which is very precious to us all, from whatever point of view we look at it, namely, this old land in which we have been born and reared and in which we have developed, and which, with all its imperfections, I am sure that we would not exchange for any other. Even those who most deplore some of the conditions which exist in this country, and who are anxious to take short cuts in making it the paradise which they envisage, recognise that, of all the countries in the world, our civilisation is the most tolerable and the most humane. Cannot we see these matters in unity? Cannot we struggle together to save a situation which is becoming one of increasing daily difficulty? A whisper is going round the world at the present time that Britain's day and power are done and that her sun is beginning to set. In the midst of other literature to the same effect we find a very powerfully written book by an American on our conditions, in which he says of Britain:She is ceasing gradually to be the world's manufacturer, merchant, and banker by which she at first survived and then conquered; she is ceasing to be the mistress of the seas by which she enforced her old prosperity. The world does not need her as of old. So the world will not suffer her as of old. She is floundering in a losing economic battle on two fronts against European and American competition.We need not be too disheartened by that statement, although it would be very unwise to ignore it, or the facts and figures upon which the writer has based the opinions which he has expressed. It was said of Britain in the old days or, rather, of England, that in her wars she only won one battle, but it was always the last one. The last economic battle has not yet been fought. So far as my conviction goes, I am sure that if we proceed upon wise, sound, and prudent lines that battle will end for us as success- 241 fully as the final battle upon other fields, but it will only be won if we recognise and appreciate the fact that in our present circumstances there is a limit to expenditure, even upon most desirable objects, and that if we overstep the limit we run the great danger of undermining the very foundations upon which the prosperity of our country depends.
§ Mr. TINKER
On looking through the Order Paper, I find the names of the three right hon. Gentlemen who are supporting the Amendment, and I wonder what the Chancellor of the Exchequer thinks about them. The first one is the right hon. Member for Epping (Mr. Churchill) who opposes whatever comes from this side. Therefore, there can be no regret at what he has done. The second is the ex-Secretary of State for War, the right hon. Member for St. George's (Sir L. Worthington-Evans), who is in a different category. He reminds me of "Big Bertha," the gun that was used by the Germans. He comes booming along, but he very seldom finds the target. Therefore, not much regard need be paid to him. The third is the right hon. Member for Hillhead (Sir R. Horne), who has been quite true to his colours this afternoon. Whenever I have heard him speak he has been pessimistic. One wonders when we shall get a cheery speech from him. I have listened to him many times, and I must confess that this afternoon he has not done himself the justice that he generally does. I have been wondering what is the reason for the right hon. Gentleman's attitude, and I can only assume that the Budget is very difficult for him to analyse.
The right hon. Member for Hillhead struck the note of demarcation between this side of the House and the opposite side when he spoke of direct and indirect taxation. It is in regard to that question that we are right up against the party opposite. I commend this Budget if only for the line which it has taken on this question. It has gone deeper in regard to direct taxation. I should like to draw attention to several points on which we can stand by the Budget for part of the way, and later I intend to give certain reasons why I cannot accept the Budget as a whole. With regard to direct and indirect taxation I have some figures showing the extent to which we have gone in recent years. In 1913–14, 242 indirect taxation amounted to 42 per cent. In 1924–25, under a Labour Government, we brought the percentage down to 33, but after a period of Tory administration the percentage rose to 35.82 in 1929–30. The present Budget brings the percentage down slightly to 34.47. That one point commends the Budget to me.
The question of direct taxation is not so big as hon. Members opposite would make it appear. At the present time we are paying back by means of interest on War Debt and the Sinking Fund £360,000,000, while on the other hand direct taxation, Income Tax, Super-tax and Death Duties only bring in £407,000,000. We get a balance over the amount of interest on War Debt and the Sinking Fund amounting to £46,000,000. The interest on War Debt goes largely to that class of person who pays Supertax, Income Tax, and Death Duty. Therefore, on balance, in direct taxation we do not get very much from these people, and the question of direct taxation ought not to affect hon. Members to the extent that it appears to do.
I want to point out several ways in which the Budget could be improved. By this Budget we are getting from Estate Duties £83,000,000, an increase in revenue on past Death Duties of about £3,000,000. The Chancellor of the Exchequer ought to have gone deeper in that direction. At least £100,000,000 ought to come from Death Duties, and I should like to give a hint how it ought to be done. When estates are left and there are no direct descendants, no son or daughter, there ought to be more excessive taxation in the way of Death Duties. When death takes place, my feeling is that where there are no direct descendants the country is entitled to more duties from the estate than it gets now. Brothers or sisters or other relatives do not seem to me to be entitled to benefit to the same extent as direct descendants. If the Chancellor of the Exchequer will make a note of this point perhaps he may have an opportunity of getting more in this direction than in the past.
In his recent speech the right hon. Gentleman said that he wanted the country to pay its way, that he did not want to tax too heavily any particular people, and he also stated, and here I find fault with him, that with the taxa- 243 tion that he was imposing by this Budget he hoped that there would be no further need for increased taxation next year. In a full year he will have a surplus of about £15,000,000, and assuming that taxation remains as at present he should get next year a surplus of £14,000,000 or £15,000,000. That is not enough, as I visualise the trend of events. Last night we were dealing with the problem of unemployment, and there was no suggestion from either side how we could deal with the problem. The only way to deal with it is by taking the aged people out of industry. When you take aged people out of industry some pension must be given to them, but the taxation on which the Chancellor of the Exchequer would secure a surplus of £15,000,000 will not meet our requirements for that purpose.
Some time ago I put a question to the Chancellor of the Exchequer on this matter, and it was one of the occasions when he took special delight in answering. I remember the way he turned round on me to knock the stuffing, as it were, out of me by telling me the enormous amount of money that would be required to pay these pensions. I only asked for the modest amount of 25s. per week for each person over the age of 60, and the Chancellor told us that the stupendous amount entailed made it almost impossible to do it. But the only solution of the problem of unemployment is by that means, and here is where I find fault with the Budget. The Budget ought to have made provision in the coming years to meet that demand. I know it would be almost impossible to do it in a year or two, but the right hon. Gentleman ought to be making progress on those lines, and £14,000,000 or £20,000,000 is not in any way sufficient. I think it would require in round figures about £200,000,000 per annum. Cannot that be met? I think it can, and this is where I differ from the Chancellor.
I claim that he has not made provision in this Budget to meet what we think ought to be done, and although I agree largely with the Budget on the lines of direct as against indirect taxation, I want the Chancellor on the first opportunity to make further provision on the lines that I have suggested. I claim that unless he does that, Members on 244 these benches will never be satisfied. We stand clearly for direct taxation and for greater impositions through the Death Duties and the Surtax than are made in this Budget. [An HON. MEMBER: "What about land values?"] I am not an authority on land values, but the wealth in land values is coming from the Income Tax payers, from the Super-tax payers and from the Estate Duties. Something must have accumulated there, and when you talk about land values, I cannot see where you will get any more in that way than by putting a greater imposition on the Death Duties. If you take it from one, there is so much less from the other. The wealth is there, and—
§ Mr. TINKER
I will give the hon. Member some idea where the wealth is. In 1925–26 seven millionaire estates were subject to Estate Duties, one of which exceeded £3,000,000; in 1926–27 there were 10 such estates, three exceeding £3,000,000; and in 1927–28 there were 15 such estates, four exceeding £3,000,000 Therefore, in those three years 32 millionaire estates came to Estate Duty, and eight of them exceeded £3,000,000 each. That is the answer. That is where the money is.
§ Mr. TINKER
Is not all wealth invested largely in that way? When we get a Socialist State, the wealth in houses, in land, and all that, will be the wealth of the country, and it is the same wealth. If they cannot pay, what is to stop the Chancellor taking a portion of the land or estate, to the value of the duty put upon it? The money is there, or it is in other values. We speak of money, but it is only a relative term. If it is in the vaults of the Bank of England, it is of no use at all, and if you are in a country that has gold mines, they would be of no value if there were no corn and so on.
§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)
A moment or two ago my hon. Friend referred to the question of pensions for 245 people over 60 years of age, and he said the money could very easily be found. I listened with very great interest to his explanation of the way in which that £200,000,000 could be raised, but he turned away from that subject. He has returned to it, although not exactly in the same form, and he says, "Here is the money." He tells us that in three years Estate Duty has been paid on £32,000,000, or, say, £10,000,000 a year. They would pay in Estate Duties £4,000,000 a year, so that over the three years, if you took the whole of those estates, you would only get £18,000,000. Will the hon. Member enlighten me as to how he would raise the rest of the £200,000,000?
§ Mr. TINKER
I am giving my right hon. Friend a good start, and if he will follow up that suggestion, taking what he can for the moment, then in time I will come along and tell him where he could get the remainder, because the money is there. The late Financial Secretary to the Treasury, in a very interesting speech on the last Finance Bill, stated the amount of money that was coming into this country—a tremendous amount. I will examine that speech again, and when I have done that, I think I shall be able to tell the Chancellor of the Exchequer where he can get enough money to provide pensions at 60. I have got in the point that I wanted to make, and I earnestly urge upon the Chancellor of the Exchequer to try to meet the unemployment problem by providing means to give the aged people an adequate pension. If he does that, I can say from the Floor of this House that the Labour party stands for a long term of office here. The people outside are looking for that, and a lead given from the Front Bench on this side would go a long way to please our people.
§ Mr. CADOGAN
I have endeavoured to follow the course of the discussions in this House, and, when not in this House, in the OFFICIAL REPORT, upon the Chancellor of the Exchequer's proposals for this year, with the object of discovering whether there is any basic, underlying principle which actuates him in persevering with a Finance Bill which not 1 per cent. of the Members of this House or the nation outside views with any degree of enthusiasm. I think it was on the Report stage of the Financial Resolutions that the Chancellor of the Ex- 246 chequer, in a mood of self-complacency not unusual to him, confided to the House that so long as he retained his present office, there were certain financial canons from which he had no intention of departing. That statement would have carried rather more conviction if any Member of this House had the smallest conception of what those canons were beyond his familiar and obstinate adherence to a system of free imports, which he really cannot ask us to accept seriously in the present condition of industry, and which obtains no genuine support—I say advisedly "no genuine support"—from Members on his own side.
Whatever else can be said against this Finance Bill—and a great deal can be said against it—it cannot be classified as a Socialist Measure. I would remind the Financial Secretary to the Treasury that he and, I think, all his colleagues at the last General Election obtained their majorities on the major pledge of sweeping the capitalist system away, whatever that may mean. I admit that a large percentage of the electorate were induced to believe that it had some significance and that the extinction of the capitalist system would bring to a wide public a measure of prosperity beyond the dreams of avarice. But the Chancellor of the Exchequer is not sweeping the capitalist system away. He is merely trying to prove that it will not work, and he gives the excuse that he has no mandate to do otherwise. That is another piece of evidence, if it were required, of the hopeless anomaly of a minority Government, because he is using the capitalist system in a way which must bring distress to our industries.
I entertain serious doubt whether there is a Socialist financial policy at all. It has certainly never been divulged in this House, beyond certain obscure implications, and even so no two Socialists are agreed as to how the priceless boon of a Socialist State is to be purchased. We have heard, in the course of the recent discussion of the financial proposals of the Chancellor of the Exchequer, a great deal about the redistribution of wealth. The redistribution of wealth will not increase or decrease the sum total of the purchasing power of this nation. It will certainly decrease your revenue, unless the Chancellor of the Exchequer flings 247 his net wider or uses a net with a smaller mesh, but that is exactly what every Socialist is pledged to resist.
I am quite prepared to agree with the Chancellor of the Exchequer that the redistribution of wealth may be to the benefit of the community, but always provided that it is effected, not by the increase of taxation, but by the increase of wages, when and if industry is capable of hearing the increased charge. If you increase wages you increase the efficiency of the working man, and so his output, Aid therefore the increase of wages, far from prejudicing industry, would help to rehabilitate our export trade. But when you redistribute wealth by squandering the nation's resources on free gifts and doles to those who are either incapable or unwilling to bring something back into the common stock, the nation is by that amount the more permanently impoverished.
The right hon. Gentleman the Chancellor of the Exchequer, ii-ho has acquired the reputation, especially outside England, of being a jealous and vigilant custodian of the nation's wealth, is reluctantly, I hope, employing it in a way which must be repugnant to his original predilections. He has been overborne by certain of his colleagues, and he has been constrained to find an enormous amount of new revenue in order to implement their lavish and preposterous pledges. The situation is rendered the more pathetic by the fact that the self-same colleagues, far from being satisfied or pleased with present favours, are accusing him of not making sufficient incursions on the hoarded wealth of the idle rich. Whether this accusation is justified or not, I do not know, but certainly one of his colleagues in one of her less felicitous speeches, announced that this was only a start down the slippery slope of the dole, that this was only a trial trip. Whether the Chancellor of the Exchequer chastised his colleague for indiscretion I do not know, but the incident serves to prove that if only the hon. Member for Bridgeton (Mr. Maxton) will have some patience, he will see Socialism in our time.
As to the sweeping away of the Capitalist system, of which we heard so much at the recent elections, I am not sure that I realise what this fantastic 248 proposal entails, and I doubt very much if anybody else does either. It has never been tried, because we can scarcely count the Russian experiment, because, if we do, we remember that Lenin himself, before he died, said that he had very grave misgivings as to whether he should abandon the system altogether. Even those Labour Members who talk vaguely about sweeping away the capitalist system do not seem to be agreed as to what to do, how to do it, and how to proceed when you have done it. A short time ago I listened in this House to a very startling speech from the Minister of Transport, who announced that nationalisation in practice would bear no sort of relation to the exiguous nonsense which used to be spoken on Socialist platforms generations ago. He was somehow going to weave the best features of the capitalist system into the texture of the Socialist experiment. He was going to enlist business men into his service. How far the captains of industry would have accepted that invitation, remained to be seen. They could hardly be expected to do so if nationalisation was going to take the crude form advocated by the hon. Member for Bridgeton and his friends.
§ Mr. CADOGAN
It is a paraphrase, I cannot give you the exact words, but I think that is the substance of what he said. The Minister of Transport is not the only occupant of the Front Bench who is becoming rather shaky in his allegiance to opposition to the capitalist system. Not long ago the Lord Privy Seal became almost mawkish in his sentiments about the bankers and the banking system, in spite of the fact that his colleague in distress, the Chancellor of the Duchy of Lancaster, was exhausting all the vocabulary of vituperation on that system, to which he probably owes some part of his affluent circumstances. We are evidently not going to have our curiosity satisfied on this occasion; we are not going to be initiated into the occult mysteries of Socialist finance. We are asked, like the public during the days of the South Sea bubble, to pin our faith to some enterprise the nature of which will be subsequently disclosed.
249 It is ungenerous of the Chancellor of the Exchequer and his colleagues to have abused the capitalist system which they are now using themselves. It is founded on well ascertained scientific principles which have been violated in almost every line of this Bill. The first is an elementary one that you must cut your coat according to your cloth. That is in direct antithesis to the new gospel preached by the Minister of Health that the nation can afford anything that it wants. The second, equally important and elementary, is that you cannot conduct the finances of this country without having regard to the circumstances of other countries, and, particularly, to the circumstances of those countries which are our keenest competitors. That is a principle for which no true Socialist has regard for one moment. The third principle, equally important, is that in taxation there comes a point beyond which it is unprofitable. This Finance Bill, if it is placed on the Statute Book, will prove the validity of that principle. It is of course expressed in the homely phrase that you must not kill the goose that lays the golden egg. The Socialists undoubtedly think there is no limit to its endurance and that nothing can impair its fecundity. The Chancellor of the Exchequer evidently thinks it is, like Keats's nightingale,…. not born for death, immortal bird,No hungry generations tread thee down.The hungry generations will tread the Chancellor and his colleagues down unless they conduct the nation's finances on sounder principles. I would remind him of the observation made by the Lord Privy Seal some time ago that he had discovered that the difference between the platform and the board room was the difference between the practical and the unpractical. I do not know whether the Chancellor of the Exchequer has realised that also. He must have found it a devastating reflection. I wonder if he has discovered the difference between his platform and the board room of the Exchequer. His colleagues laugh in his face and say that this is only the first instalment of this lavish and wasteful expenditure. No wonder he looks rather more morose than usual; no wonder he suffers the arguments of hon. Members on this side none too gladly. I do not 250 believe that there is a single Member of this House who, if he was honest to the dictates of his own conscience, or the dictates of common sense, or above all the dictates of sound political economy, would go into the Lobby and vote for this Bill.
§ Sir HERBERT SAMUEL
The hon. Member who has just sat down, in his general condemnation of the Government and all its works, and of this Budget in particular, has used the not unfamiliar illustration of the goose and the golden eggs. It brings to my mind a reference to another goose made by the great French Finance Minister, Colbert, who said the art of taxation consists in so plucking the goose as to get the greatest possible amount of feathers with the least possible amount of hissing. That is a maxim which the Chancellor of the Exchequer has pursued not without success in his present Budget, for his Budget has not been received with that vehemence of outcry that might have been expected for a proposal which imposes such very heavy burdens. The Finance Bill which is before us for Second Reading is long and elaborate; it has some 50 Clauses for the most part complicated and technical and not always comprehensible, but the Budget itself is simple. There is a simplicity about it—I do not say a sweet simplicity—but a sour simplicity. Its simplicity is a refreshing contrast to the Budgets presented to the last Parliament by the right hon. Gentleman the Member for Epping (Mr. Churchill). Those were things of shreds and patches, of shifts, subterfuges and evasions, and it is a happy thing that the Budget of this year is on wholly different lines. The right hon. Gentleman the Member for Epping left behind him great obligations with very inadequate resources to meet them. His testamentary disposition when he quitted office might have been the same as that of Rabelais in his famous will:I owe much, I have nothing, the rest I leave to the poor.That is precisely the situation as left by the right hon. Gentleman the late Chancellor of the Exchequer. The burden of the rating relief which the present Chancellor has to meet is exceedingly heavy. Yesterday we had a most interesting speech from the right hon. Member for Edgbaston (Mr. Chamber- 251 lain), in which he referred to the fact that his Government had provided no less than £24,000,000 for the relief of rates and that this was an immense alleviation to industry. He gave illustrations of a firm of iron and steel makers who had been so relieved in their rating obligations, that their prospects of success in trade had been greatly enhanced. I will give one or two other instances of rating relief to show how the sums of money which we in the House of Commons are called upon to find to-day have in fact been dispensed. That rating relief was scattered broadcast, not only to prosperous industries but irrespective to all industries.
I will give four illustrations, taken from the rate books at the time the Bill was passing into law, of the amounts that would be received by particular firms. Courtaulds, with a profit of £5,171,000 in the previous year, and with a dividend of 15 per cent. tax free received from the rating relief of the late Government £5,000 in Coventry, £10,500 in Wolverhampton, £9,000 in their factory in Fleet, and many other similar sums elsewhere. The Dunlop Rubber Company, with a profit of £2,000,000 and a dividend of 20 per cent., received in their Birmingham factory alone £7,500. Coats, with a profit close on £4,000,000 and a dividend of 20 per cent., received over £23,000 in rating relief. Gramophones Limited, with a profit of £1,100,000 and a dividend of 55 per cent., received £11,500. So one could go through a long list to show how this immense boon to industry, and no doubt it was a great boon to many a depressed industry, was so distributed as to impose on the taxpayer an immense burden which cannot be justified by the expenditure. Talk of the dole I Here is a characteristic dole coming from a Conservative Government.
The right hon. Gentleman the present Chancellor of the Exchequer is determined to pay his way and to meet his obligations. Perhaps he is doing even more than that. If there is the smallest improvement in trade his present Budget is likely to yield a surplus next year, and perhaps a considerable' surplus the year after. It may be that the right hon. Gentleman, who now appears in the character of the wicked witch, may then throw off his cloak and appear, as in 1924, in his true character of the fairy god- 252 mother, dispensing gifts, and then proceed, all radiant, to a General Election. Whether that will be so or not, time alone will show. This is a simple, straightforward Budget. It is a prim Budget, but it is also a grim Budget. It imposes an exceedingly heavy additional burden on the taxpayer. The right hon. Member for Hillhead (Sir R. Horne) referred to the reductions that are being effected in taxation by other European countries which have taken part in the Great War. It is true. But mark, we are the only one of those European countries that has not repudiated its obligations. It would not be difficult for us also to reduce taxation if we had so depreciated our currency as to have got rid of two-thirds, three-quarters, or four-fifths of our pre-War obligations and war loans as these other countries have done. If that had been done here, what would have been the consequences? It would have meant that every person who had savings invested, no matter in what securities, would have lost the greater part of them. Every annuitant, for every £ that he had expected to receive in his old age, would be receiving 2s. or 3s. Every hospital, every institution with invested funds, would have lost most of its endowments. Every trade union, every friendly society would have lost the greater part of its accumulated funds.
I think this country is proud of the fact that it is willing to bear this immense burden of taxation rather than do what other countries have done and pay only 2s. or 3s. in the £. We are paying 20s. in the £, and shillings which have not been reduced in value to a penny or twopence. In addition to that, we are providing for the disabled from the War, for the widows and the orphans and the wounded, vast sums on a much higher scale than other European countries, a charge which, though diminishing, still amounts to over £50,000,000 a year. We have made an immense effort to improve the housing of the people, and, with the aid of subsidies, we have secured the building of over a million houses.
§ Sir H. SAMUEL
Every Government in turn, and the last Government were wise enough to follow the example of their predecessors. Further than that, we not 253 only have found £300,000,000 a year in interest on our vast Debt but we have made a stupendous effort, thanks to the great surpluses in the years immediately following the War, for which the right hon. Gentleman the Member for Hillhead was partly responsible, and have repaid out of revenue no less than £900,000,000 of War Debt. I do not think there is any country in the world, now or at any previous time, which has made so heroic a financial effort to meet its obligations and to fulfil its duties, and it is a great tribute to our democracy that the present Government, a Labour Government, should not yield to the temptation to put aside these obligations with regard to debt but has done even more than previous Governments to fulfil its liabilities.
I cannot express any concurrence in the plan that was laid down by the late Chancellor of the Exchequer a couple of years ago in regard to the National Debt. He provided for a fixed debt charge of £355,000,000 and he said that, if that charge continued for 50 years, it would dispose of the whole of the debt altogether. Does he really think that is a feasible and practical plan which has the smallest chance of being carried to the issue which he contemplates Does he really imagine that, in the fiftieth year, the Chancellor of the Exchequer of that time will be called upon to find £355,000,000 in interest and Sinking Fund and in the following year he or his successor will find nothing? That is the proposal—£355,000,000 for 50 years and then a dead stop, everything disappears, debt, interest and Sinking Fund, like the "One floss Shay" of Oliver Wendell Holmes, built to last for a 100 years, and when the final hour struck at the end of the 100 years, the whole shay was built with such perfect symmetry that all of it fell to pieces simultaneously. It is a wholly impossible plan. One may ask why the right hon. Gentleman adopted it. The reason is quite simple. Under cover of this gigantic effort to which he drew the attention of the nation, he himself raided the Sinking Fund. He reduced the provision for debt from £364,000,000 in 1926–27, and £378,000,000 in the following year, to £355,000,000 when he started the new debt charge and, while the nation stood open-mouthed at his eloquence, he stole from the till of the National Debt some £20,000,000 for 254 other purposes. I do not suggest that we should reduce the present provision for the Sinking Fund, but I greatly question whether the nation ought to be called upon to increase it year by year as fast as the interest diminishes until in the fiftieth year we have a Sinking Fund of some £300,000,000 or more. I do not think that is really a practicable financial policy.
I have said, and many speakers have emphasised the obvious fact, that this is a grim Budget. How heavy the burden of taxation is I do not think hon. Members opposite have yet completely realised. In 1919 I was president of the Royal Statistical Society, and I devoted the annual presidential address to an examination of what was then, and what had been before the War, the rates of taxation on different levels of income. The Colwyn Committee on National Debt and Taxation in 1927 took those figures as a basis, modified them slightly and brought them up to date and made a similar calculation. A few days ago the Chancellor of the Exchequer, in answer to a question by my hon. Friend the Member for North-East Bethnal Green (Major Nathan), gave a further set of figures so far as direct taxation was concerned. This is what they showed. I will give two sets of figures. An income of £10,000, drawn half from investments and half from earnings, will pay under this Budget £2,000 odd in Income Tax, £1,300 in Surtax, and, if there is insurance against Death Duties, taking the age of the tax-payer as 45, £800 in insurance—a total of £4,269. An income of £50,000, drawn entirely from investments, will pay £11,100 in Income Tax and £14,600 in Surtax, that is to say, a total of £25,600, and the sum needed to provide against Death Duties, if the recipient were to make that provision, was £25,349, so the total taxation on an income of £50,000 will be £50,987. Of course, as 4 matter of fact, the recipients in cases of that kind do not insure against Death Duties. They leave it to their heirs to provide as best they can, but the actual burden upon incomes of that character is of the extent I have mentioned.
Two questions arise with respect to this heavy direct taxation. First, is it just, and, secondly, is it expedient from the social point of view? With regard to justice, I think it is not unjust. When 255 hon. Members opposite, with the Chancellor of the Exchequer at their head, say they go where the money is, I think that is a sound argument, and, if large sums have to be found, they must be found mainly from the wealthy classes. When the common phrase is used that the burden is placed on the shoulders best able to bear it, that is quite sound doctrine, and, when it is pointed out that our social system is full of inequalities, that you find luxury side by side with penury, and that if large additional revenues have to be obtained they must be obtained from those who are in a position to spend upon luxuries, that is an argument that cannot be gainsaid. Nor does the complaint that is frequently made in criticism of this Budget, that the burden is placed on less than 2 per cent. of the taxpayers, in itself seem to me a very cogent argument against it. It was shown some time ago by Professor Clay, in a paper read before the Manchester Statistical Society, based on Inland Revenue Returns with regard to the Death Duties, that 64 per cent. of the wealth is owned by 2 per cent. of the population. If 2 per cent. own two-thirds of the wealth, it is not unjust that this very small fraction should be called upon to contribute very heavily to the needs of the State. The Government of which I was a member in days gone by recognised these principles when they differentiated between earned and unearned income, graduated the Income Tax and imposed steeply graduated Death Duties. Therefore, I suggest that this taxation is not to be impugned on the ground that it is unjust.
When the question is raised whether it is expedient, we come to another set of considerations. I feel that this heavy taxation is a hindrance to industrial enterprise. The individuals who are drawing large incomes from investments and who spend them in luxurious wastefulness are, after all, not the only ones who are called upon to pay this taxation. The business man, on whom we rely to engage in fresh ventures, is heavily handicapped. If he fails in some enterprise—and he cannot be certain of success—the whole loss falls upon him. If he is successful, half of the profits go to the Exchequer, and, if he saves the other half, his heirs again will have to forfeit half of that, if he is taxed at the higher 256 rate. That must be a hindrance—I do not like to use the word "adventurous." but to enterprising business heads. In old days the merchant adventurer was a most valuable element in the State, and in these days the industrial adventurer ought to be one of those who can render the best service, but if he is told, "If you lose on your venture you bear the whole loss, and if you succeed we take half of your gains at once and possibly a half of the rest later on," it is a great deterrent to businesses to engage in fresh developments. If the business world comes to realise, as I think it does already, the full weight of this taxation, and the possibility that it may continue for long years to come, our industrial organisation must suffer.
There is a very familiar Latin quotation about bees. I will not quote it in Latin, because Latin quotations are out of date. Hon. Members opposite think it incumbent upon them to pretend not to understand them, even when they do, and Members on this side pretend to understand them even when we do not. There is an old quotation attributed, though doubtfully, to Virgil, "You bees make honey, but you make it not on your own behalf." The bee is a highly intelligent creature within its scope but, if it realised that all the honey that it made was ultimately to be taken by others from the hive, it would probably not be so busy as it proverbially is. When it is a Question, not of bees but of business men, and not of honey but of money, it is useless for the State to expect that business men will go on indefinitely working with the same activity if they feel that the profits are not for them. The Colwyn Committee has frequently been quoted in support of the proposition that direct taxation does not really hinder, to any serious extent, the development of industry, and the hon. Lady the senior Member for Blackburn (Mrs. Hamilton), in a very interesting speech on the Budget Resolutions, quoted that very important Committee in that sense, mentioning the names of the various authoritative business men and financiers who made up its membership. But that quotation had a very limited scope. The Colwyn Committee, when dealing with this particular point, used these words:We conclude with regard to the supply of capital from individual and corporate savings, that industry has suffered materially 257 from the effect of high Income Tax and Super-tax.Income Tax and Super-tax being now raised very considerably, that detriment will be increased. I know that hon. Members opposite think, and several of them have said in this House in these Debates, that, after all, the capital is there; there are the factories, there is the land, there are the houses, there is the machinery. You tax it, and it can make no difference. It is fixed so that the owners cannot take it on their shoulders and export it abroad. Yes, but 100 years hence or 50 years hence these present factories, houses, the machinery, and even the land, so far as drainage and fencing and building is concerned, will practically be of no value. They must be replaced by each generation. If your financial system is such as to prevent the provision for that replacement, you are doing an exceedingly grave injury to the industrial system of the country.
The right hon. Gentleman the Member for Edgbaston yesterday mentioned that £195,000,000 is provided each year out of income by companies for reserves. An additional 6d. is being placed on all that accumulation. It is true that that only amounts to about £5,000,000 a year, but it is no flea-bite. If it were the first 6d. it might indeed not matter, but there is already 4s. in the £ taken from those reserves—£40,000,000 a year—and the deduction of £45,000,000 a year from the reserves which are available for reinvestment for the replacement of wasting capital is an exceeding serious matter.
Again, with regard to Death Duties. These high rates of Death Duties will almost certainly lead to avoidance on large scale, if, indeed, that is not already done. Here, again, I will quote one sentence from the Colwyn Committee:In our opinion the rate of Estate Duty on large estates, is, from the point of view of the effectiveness of that rate, already dangerously high.Certainly, the continuance of these Death Duties must lead property owners to transfer their property to their children, to run the risk of the fate of King Lear, and to endeavour to live for the necessary three years in order to escape the transfers being taxed as gifts inter vivos. All these considerations are of great gravity and must command 258 the attention of the House of Commons. Further, I feel convinced myself that the present heavy rates of direct taxation do have an effect upon prices, and upon the cost of living, and that the lag between the fall in wholesale prices, and the fall in retail prices, which is so marked a feature of our present economic situation, is largely due to the heavy rates of taxation which fall on all those who are engaged in the intermediary processes. I cannot understand how it can be contended in any quarter that this high rate of taxation has no effect upon industry and upon social welfare. I should have thought that it was obvious that if some super-Rockefeller were to come forward and relieve us of the whole burden of our present taxation the effect must necessarily be an immense increase in the demand for ordinary commodities, in employment, and a fall in prices; and, on the other hand, if some Government found it necessary to double our present taxes and to spend the money upon war, that that would be an immense burden upon industry and cause a further increase in prices and in the cost of living. The conclusion is—and I should have thought it was quite obvious and beyond dispute—that heavy direct taxation is a very grave burden, and, while it may be worth while to incur it for the sake of the goods it will buy, it is a drag upon industry and a clog upon employment.
Indirect taxation, in my view, is still worse. It may have a less psychological effect, but it has the same or a worse indirect effect. The rates of indirect taxation are already high. It is untrue to say that the working-classes do not contribute largely to our present revenue. The taxes upon sugar, alcohol, tobacco, and entertainment bring in vast sums, and, in addition, they have to pay the local rates which fall upon their wages with quite disproportionate effect. The working man who has to pay 3s. or more every week, directly or indirectly, in rates upon his house in a town is called upon to bear a charge which is graduated the wrong way. It is repressive taxation, which places upon him a far heavier burden in proportion to his income than upon any of the more well-to-do classes of society. It is true that he gets very often his moneys' worth in the form of schooling for his children and so forth, but it is untrue to say that the working 259 classes do not pay, and pay very largely, for the educational and other social services.
Of all the means of providing revenue by taxation, the very worst is the indirect tax which is raised by means of tariffs, looking at it from the purely fiscal or revenue point of view. Here you have a tax upon foreign imports which brings in a certain revenue, and which, in our view, must sooner or later raise the price to the consumer above what it otherwise would be. The Exchequer gets only so much of that tax, which has caused an increase of prices, on imported articles. All articles consumed whether imported or home produced, are raised in price. The people pay doubly. They pay both on the home product and on the imported article. The Exchequer gets only one portion of the sum in which the people are mulcted and the rest goes into private pockets. Obviously, this tax, again by raising the cost of living, falls heaviest upon the poorest.
The contribution of the right hon. Gentleman the Member for Epping to this discussion has been the suggestion that it might be wise to put an all-round tariff on all imported finished manufactured articles. I have been watching the right hon. Gentleman's political career for some years past with close and friendly interest, and I see him gradually completing his curve until he will soon be where he started from many years ago, and will appear even more of a Protectionist than he was when he was first a member of his present party. But does the right hon. Gentleman imagine that it will be possible to stop there, to accept the principle of Protection, to put a tariff upon imported finished manufactured articles, and to do nothing more? Will the farmers of Great Britain, will the agricultural Members of Parliament endure that for a single instant? And what of the formidable Lord Beaver-brook? Is he likely to accept this doctrine to apply Protection and accept it as a sound principle for every one except those who would benefit here and abroad by the imposition of food taxes?
I shall be greatly interested to learn, if the right hon. Gentleman takes part in this Debate, what is his present attitude towards this most important and very formidable agitation which is con- 260 tinuing actively in the country. Does he agree with it or does he not? If he does not agree with it, is he ready to bring his great powers of eloquence, and his unfailing energy to combat what I am sure in his heart he must agree is a great danger to this country and to the Empire at large? If we find that this country is saddled with a Protectionist policy, and takes its place among the Protectionist countries of Europe, it will be the right hon. Gentleman who will be largely responsible for that consummation. I cannot understand how hon. Members who are continually emphasising the inferior economic conditions of the Continent can urge that we should adopt precisely the same system which has helped to maintain them in that position. The right hon. Gentleman the Member for Bewdley (Mr. S. Baldwin) speaking in the country only a few days ago—and he has often quoted these facts before—said:So far as our competitors in Europe are concerned, our standard of living is much the higher. Germany pays about three-quarters of the real wages we pay in this country. France pays about half.Yet you are proposing to adopt the very fiscal system which has these results. As far as the exports of manufactured goods are concerned, and that is a vital question for the country, we have, in proportion to our population, nearly twice as much as any Protectionist country in Europe or elsewhere. As far as shipping is concerned, our shipping is greater than that of all the European countries put together. As far as the financial strength of the nation is concerned, it has shown an immense power of recuperation as compared with that of Protectionist countries. Yet after all these comparisons in favour of the one great Free-Trade country of Europe, you wish us to abandon our system and adopt a principle which has resulted in such inferiority in so many directions. It appears to me to be crass folly.
The right hon. Gentleman the Member for Hillhead, who has been dealing with this matter this afternoon, referred to the measure of support that we gave to some provisions of the Coal Mines Bill as being conclusive proof that we ought to adopt a Protectionist policy in general—a most empty argument. Because State action may be right in one case, it does not follow that State action 261 is right in every case. Certain provisions in the Coal Mines Bill, I would remind the right hon. Gentleman, were precisely on the lines, as it finally left this House, which we, had been advocating for many years past, and we were glad to welcome their appearance in the Bill.
§ Mr. CHURCHILL
Did not the right hon. Gentleman deliver a most scathing and devastating attack on the whole character and provisions of the Coal Mines Bill?
§ Mr. CHURCHILL
The right hon. Gentleman will remember surely that he told us that it was the crowning violation of all the fundamental principles of Free Trade.
§ Sir H. SAMUEL
If the right hon. Gentleman had not been inaccurate in his quotation, it would have been exceedingly effective, but I said nothing of the sort. If he will be kind enough to verify his allegation and to quote my actual words, I shall be most interested to have repeated to me words which must have been spoken-without my knowledge in the process of somnambulism, because consciously I am certain I have never used such language.
Mr. DEPUTY-SPEAKER (Mr. Robert Young)
We are not discussing the Coal Mines, Bill, but a passing reference to the Coal Mines Bill is not out of order.
§ Sir H. SAMUEL
I was merely answering what had been said by the right hon. Gentleman the Member for Hillhead, and, as he was not called to order in the course of his speech, one would assume that his observations were not irrelevant. The point I was on when the right hon. Gentleman interrupted me just now was in reference to his own suggestion that the right way to meet the present financial situation was not by the proposals in this Finance Bill, but by putting on a general tariff on imported manufactured goods. The sug- 262 gestions is that we on these benches are bound to accept that proposition, because we supported certain proposals in the Coal Mines Bill with regard to amalgamation, and certain other things. My reply is that State action in one direction does not necessarily involve State action in every direction, and the fact that the right hon. Member for Hillhead thinks it is necessary to have State action for the purposes of protection in fiscal matters does not lead him to say that it is necessary to nationalise all industries.
You may be in favour of State action for the purposes of education, or land, or for the purposes of the Factory Acts, or the Mines Regulation Acts. The old Liberal laissez faire thinkers were opposed to many of these forms of State action, but we support them, and have Encouraged them; in fact, we have been responsible for many of them, but it does not therefore follow that because we are on this line we must go on and interfere with our foreign trade, and then go one step further and nationalise all our industries. The right hon. Gentleman said that the Liberal party were tied to a hide-bound theory and paid no attention to the real present-day needs of business. All that that really means is that we should adopt the view that the immediate and narrow interests of any particular trade is to dictate the policy of the country as a whole, that we should leave out of account the wider considerations and the more distant effects of our policy. He made a reference to Cobden, and said that if Cobden had lived to-day he would have taken a different view. On the other hand, we hold that the need for the fullest possible freedom of trade is much greater now than it was 50 or 60 years ago, that the economic condition of the world and of this island makes it more than ever essential that we should have the largest possible measure of international trade. Our country may conceivably have been more self-contained in an earlier generation, but, crowded as it is now with its present population, is cannot possibly live except by a vast export trade in manufactured goods, and in order to maintain that vast export trade it is essential to have freedom of imports. I must apologise for having been led into a somewhat lengthy digression.
§ Sir H. SAMUEL
If, therefore, it is agreed that the burden of this Budget and its taxation is heavy and injurious, that the alternatives of indirect taxation or of tariffs would not improve the situation but make it worse, the obvious conclusion is that Parliament should exercise all its influence and authority to secure a reduction in the burden of expenditure. [Interruption.] May I ask the right hon. Member for West Woolwich (Sir K. Wood) not to interrupt. The task to which we should address ourselves is not how to meet deficits, but how to avoid them; not where we can lay new taxes but how to lessen the taxes that already exist. When we come to this branch of the subject, hon. Members above the Gangway say that the Liberal party is in favour of a great increase of expenditure for relief works for unemployment. That is not true. We have never favoured relief works; we strongly oppose them. We advocate no increase in expenditure for the purposes of the unemployed. Our suggestions have been, and still are, for measures of development which are in the nature of investments, which will bring their own revenue, especially with regard to the development of roads and bridges which will bring their own revenue through the increasing income of the Road Fund, and also through the increase in site values which should be used to meet the interest and sinking fund of such a loan.
Our complaint against the Government is that they are doing far too little in that direction. The proposals of the Lord Privy Seal yesterday showed that only £29,000,000 is being devoted to roads and bridges, and the programme is spread over a period of years, whereas the state of the country requires an expenditure of perhaps five or six times that amount. The present is the moment when these enterprises should be put in hand, when money is cheap and labour over-plentiful. We strongly urge that this policy will not involve any increase in the burden of rates and taxes. The Chancellor of the Exchequer has aroused much disappointment amongst the ranks of his own supporters below the Gang-way representing the Clydeside. Their protest is, I think, legitimate. Expectations were held out which have not been 264 fulfilled. On many occasions before the General Election I pointed out that the Chancellor of the Exchequer and his party were making promises to the people which would involve an expenditure that could not possibly be met. We had a careful analysis made of these promises, and we found that at the lowest figure they must cost over £200,000,000 a year. I challenged the right hon. Gentleman on many occasions on the public platform to say whether such lavish promises could be justified, and he replied on one occasion, when he spoke at Plymouth. There he said:Even accepting Sir Herbert Samuel's figure of the ultimate cost of social reform schemes of £220,000,000 if he (Mr. Snowden) were compelled to find the money he would be able to do it. Very large reserves of untaxed resources would be available for a Labour Government when called upon to meet the cost of Measures passed by a popular Parliament.
§ Mr. SNOWDEN
The right hon. Gentleman has not read the whole of what I said. I have had that passage thrown in my face so often recently that I have looked up the report of the speech. The first part of the speech was that, "if I were compelled to find the money," and so on. Then I went on to say that I believed there were young men in that meeting who might live to see the day when we should have to spend in certain circumstances the sum to which the right hon. Member has referred.
§ Sir H. SAMUEL
I am not sure that the millions of electors who voted for the right hon. Gentleman and his party were thinking solely of the interests of their grandchildren. The only report I have seen of the speech was in the "Times," and it does not contain the paragraph to which the right hon. Member has referred. If it had I should, of course, have read it to the House. I have not come across that, paragraph before. Now the Chancellor of the Exchequer takes a very different course, and, speaking at the Leeds Chamber of Commerce not long ago, he said:I will sanction no expenditure, especially at a time like this, which I do not believe to be imperatively necessary. There are many things I should like to do, but we must wait to do many things we should like to do until we are in a position better to afford them.265 With that I entirely concur. I do not like to use the old phrase that this is an appeal from Philip drunk to Philip sober, because it might be thought that I was making a personal reference which is very far from my mind. The appeal is from the right hon. Gentleman in opposition to the right hon. Gentleman in office, and it is clear that these expectations were really not justified, and that the successes which were won by the Labour party on the strength of them were successes which must now bring their retribution in the form of disappointment and disillusionment. Hon. Members above the Gangway who are now emphatic in denouncing expenditure and pleading for economy, spoke in a very different key a year or two ago, as my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) pointed out when he spoke on the Budget Resolutions. I remember that the whole country was placarded with great posters about "Conservative old age pensions" and the vast numbers of people who were to benefit from them, and the vast amount of money being spent.
Even now, in these days, they are advocating a policy with regard to naval armaments which must mean a further increase in national expenditure and, therefore, a further increase in taxation. If it does not mean that, I do not know what conclusion is to be drawn from the speech of the right hon. Member for Epping last week on the Naval Conference, when he strongly reprobated the action taken by the present Government as being unsafe in the interests of this country and the Empire, or what is meant by the action of some 100 Members of the Conservative party who have put down a Motion for the rejection of Part III of the Naval Treaty. That necessarily means a large increase in expenditure as long as they adopt that policy, and I suggest that their mouths are closed in criticism of a Budget of the kind which is now before the House. I trust that the Government will pursue unflinchingly the line of peace and disarmament and understanding. If every country doubles its armaments none of them will be any stronger, and all will be poorer. If every country halved its armaments none would be any weaker, and all would be richer. We support the Finance Bill because it makes provision in a moderate degree 266 for the armaments of the country, contemplates further reductions in the future along this line, and we trust that by practical economy Parliament will be able to give relief to the nation and reduce the great burden of taxation which now falls upon the people
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)
We have listened to a very interesting and careful speech, such as we are always accustomed to hear from the right hon. Member for Darwen (Sir H. Samuel). In what I have to say I shall make some reference to the arguments he has used, but I have no doubt that my right hon. Friend the Chancellor of the Exchequer will deal more fully with the points he has brought forward.
In this Measure we have the nation's Budget for the year. As I understand the attitude of hon. Members opposite, they take exception both to the bill and to the method of footing the bill. In these matters it is very easy to generalise but much harder to be precise. Precision is just what we do not get from hon. Members opposite in their criticisms. They are opposed—and to some extent the right hon. Member for Darwen agrees with them—to the volume of expenditure. But very few of them condescend to tell us to which items of expenditure they take exception. We talk to-day of the large size of the Budget, but it will be perfectly clear to Members in all parts of the House that this is mainly due to the aftermath of the War. In the matter of War Debt interest and war pensions, we have an item which is solely due to the War, and which it would be very difficult for anyone to reduce. I do not believe that hon. Members, who form the principal Opposition, desire either to repudiate the rate of interest on War Debt, or to cut down the pensions given to men who took part in the War and who suffered as a result of the War, or to the dependants of those who lost their lives in the War. That is a tremendous section of the expenditure of this country, and if we turn to America, which was one of the illustrations used by the right hon. Gentleman the Member for Hillhead (Sir R. Horne), we find that War expenditure there, compared with the expenditure of the nation as a whole, was a minute fraction of what it was in this 267 country, while if we turn to France or Germany, to which he also referred, we find that it is true, as the right hon. Gentleman the Member for Darwen reminded us, that in those countries they have, by inflation, repudiated in one case four-fifths and in the other case nearly the whole of their debt.
Turning to the question of money raised for rate relief, that is, definitely, one of the obligations with which Members of the late Government have saddled my right hon. Friend the Chancellor of the Exchequer. Then, there is the Army, Air Force and Navy. Do hon. Members opposite desire to cut down expenditure there? On the contrary, they are not satisfied with the reductions which we have made, and we have the spectacle of a division of opinion in their ranks. I gather that they are vying with one another as to how great an objection they take to the Naval Treaty, and, as far as I can see, if they had their way, the Estimates for the Navy would exceed the Estimates which we have to meet by something like £4,000,000 or more in the current year, and a still larger sum in the years that are to come. They take that view, in spite of the fact that the First Lord of the Admiralty definitely told us, in the Debate last week, that we were not worse off in relative strength as a consequence of the Treaty and that the sole reason why we were able to reduce expenditure was that there was to be a corresponding reduction on the part of all three of the principal naval Powers.
That only leaves two items—one that of the social services and the other that of the Sinking Fund. Here, again, I would like Members of the Opposition to be a little more precise. One or two of them have ventured to say specifically that they take exception to the money spent on the social services, but what do they propose to reduce? We know that when they were in office they cut down the subsidy on house-building and, in consequence, slowed down the production of houses. [HON. MEMBERS: "No!"] I do not want to go into that question, but we all know perfectly well that in the year after the right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain) cut down the subsidy, the number of houses built fell by half. We 268 know that they cut down the expenditure on milk for expectant mothers. [HON. MEMBERS: "They did not!"] They did cut down that item and everybody knows that to be the fact. Are those the things which they object to our putting on again? Are those the social services which they wish us to withdraw? The fact is that this House, with the concurrence of the great mass of the people, has during the earlier months of this Session voted for the social services for which the Chancellor of the Exchequer has to make provision in this Finance Bill, and if hon. and right hon. Gentlemen opposite wish to challenge us on those items, we are ready and willing to meet the challenge.
Then there is the matter of the Sinking Fund. As far as the £355,000,000 is concerned, I do not imagine that anyone who supports the right hon. Gentleman the Member for Epping (Mr. Churchill) can take exception to that, because it was his own provision, but exception is taken to the additional £5,000,000 which the Chancellor of the Exchequer proposes to add to the Sinking Fund in order to meet the deficit on the preceding year. I notice that the right hon. Gentleman the Member for Epping, in the course of some of his written words on the subject, expressed the view that the Chancellor of the Exchequer would be well advised to "leave the old year behind him and to let its deficit roll away with it." But deficits do not roll away in the manner which the right hon. Gentleman seems to imagine. If you leave burdens unprovided for they have a way of hitting back at you which perhaps the ex-Chancellor of the Exchequer does not realise, and, as I pointed out when speaking on this subject previously, the effect of the idea of the ex-Chancellor of the Exchequer was that the rate of interest which this nation has to find for its loans went up until, when he left office, it had reached the neighbourhood of 5 per cent. It is now down again to a little over 4½ per cent. A high rate of interest on Government loans, or low Government credit, was the price which the nation had to pay for the rule of the ex-Chancellor of the Exchequer. Hon. Members opposite cannot get away from the fact that that was the price we had to pay for the failure of the right hon. Gentleman the Member for Epping to make 269 good the raids which he carried out on the Sinking Fund.
But, after all, it is not so much the magnitude of our expenditure as the way in which that expenditure is to be met which is the subject of this Measure, and, as we proceed with our discussions, it becomes more and more clear that the principal Opposition have two grounds of complaint against the finance of my right hon. Friend. In the first place, they would have preferred indirect to direct taxation. The right hon. Gentleman the Member for Hillhead, in his speech this afternoon, confined himself mainly to the question of the duties which are being removed by the lapse of time, and which the Chancellor of the Exchequer has not renewed in this Measure. Whatever effect those duties may have from anindustrial point of view, they have a microscopic effect on the finances of the Budget as a whole. It would be necessary to have a far more ambitious scheme than any which has been put before us during recent weeks to produce any effect on the finances of the country. On this matter we find a great divergence of opinion among Members of the Opposition. We have had the campaign of Lord Beaverbrook, supported by the most recent recruit to the Conservative party in the House, the hon. Member for West Fulham (Sir C. Cobb), for full-blooded taxation of food without the submission of the question by referendum to the people. If hon. Members opposite are going to do that, if they are going to put substantial taxation on all importation of food, or even if they are going to confine it to importation of food from foreign countries, they might very well raise a considerable part of the finances that have to be found to balance the Budget of this country. If it is, frankly, their policy to pay the expenses which this country has to meet, by taxing and raising the prices of food, then we know where we are, and, again I say, we are perfectly prepared to join issue with hon. and right hon. Gentlemen opposite.
As far as I understand it, however, that is not the policy—not the present policy, at any rate—of the Leader of the Conservative party. The right hon. Gentleman has had many policies with regard to Protection. He has turned many times, but the trouble of the party opposite is that when father says "turn," they do 270 not all turn, or, if they do, some turn one way and some another. If we are to judge from the speech of the right hon. Gentleman the Member for Bewdley (Mr. S. Baldwin) last night, he now favours directly a tax upon iron and steel. We have yet to learn what the users of iron and steel say to that proposal, and, in particular, what the shipping interests will say to it, but the question which I would address to Members of the Conservative Opposition is: Are they all agreed upon it? May we take it that now, at last, we have it as a perfectly firm part of Conservative policy that, when the time comes, they are prepared to put a definite tax upon iron and steel? No doubt, there will be plenty of time for them to make their policy a little more definite. They are going along with a good many divisions, and the General Election is sufficiently far ahead for them to be a great deal more clear of what their policy will be before the time comes to submit it to the electorate. But, apart from what their policy as to tariffs may be, whether it is now to be dignified by the name of Protection or whether the right hon. Gentleman the Member for Bewdley is still able to see the difference between what is called Safeguarding and what has hitherto been known as Protection, the question with which we are concerned here is what effect would that policy have on the Budget?
A tariff may, conceivably, have the effect of bringing in revenue. It may, conceivably, have the effect of keeping out foreign goods; but in so far as it does one, it fails to do the other. Assuming that it fails, in some measure, to keep out foreign imports and raises taxes, who is going to pay those taxes? Innocent members of the Conservative party may say that the foreigner pays the tax, but the right hon. Gentleman the Member for Epping knows better. He has told us, frankly, on many occasions when he played about with Protective taxes during his tenure of office, that he always admitted that the foreigner did not pay the tax and that it was paid either by increasing the price or by intercepting a fall in price which would otherwise have taken place. Let us be quite clear, therefore. If it is, for instance, suggested to put a tax on iron and steel, which is a finished product from one point of view, and an unfinished product from another, those who use iron 271 and steel, whether they be further manufacturers, such as shipbuilders, or shipowners, will have to bear the brunt of that duty; and if they are finished articles, the consumer will in some shape or form have to bear the price. That brings us to understand what is the real object of Members of the party opposite in endeavouring to raise revenue through indirect as against direct taxation. It is the good old phrase "broadening the basis of taxation," which is a very charming way of saying "putting the tax on the narrow backs." We on these benches are entirely opposed to that policy, and we say that if you want to base taxation correctly it has to be based on direct and not indirect taxation.
Hon. Members opposite say further that if you are to have direct taxation, you ought not to put it on the backs of the wealthy; you ought to distribute it more equally over the whole of the population. They say that that would have shown our sincerity and honesty in the matter. Let me say in passing that had we done what they suggest, they would have taken a different line. They would then have taken shelter behind the widow and orphan, and because my right hon. Friend has been careful not to place the burden on the narrow backs, they are deprived of that shelter, which they otherwise would have made use of. But they say that it is not the well-to-do of whom they are thinking in themselves; what they are thinking of is industry, and there the right hon. Gentleman the Member for Darwen to some extent shared their view. I had on a previous occasion the pleasure of crossing swords with the right hon. Gentleman on this issue, and I do not want to take up the time of the House in discussing this point in great detail, but there are one or two things which I feel constrained to say even now. Of course, I agree with the right hon. Gentleman that if we were unnecessarily to put a burden on to direct taxation, and if we were to drain away the proceeds of that direct taxation, we should do certain other things. We should be reducing the purchasing power of the people and at the same time withdrawing means which were going to add to the capital for industry, but of course, the fact is that when you tax people for purposes of the State, you are not doing that at all. What you are doing is 272 to withdraw money from the people who pay Income Tax and the other direct taxes, and using that money by the State. It all really turns upon whether the uses to which, through the medium of the State, the money is put, are better or not so good as the uses to which private individuals who are possessed of great wealth put it for themselves. It is when we come to that that we cannot take a general view; we have to examine the facts.
It cannot be contended that all the uses to which those possessed of great wealth put their money are of the very best order. On the contrary, a great deal of money which is spent by the wealthy classes is neither beneficial nor spent inside this country at all. I contend that a great deal of the money that is spent by the State is put to very much better uses than when it is left, not to fructify as hon. Members put it, but in many cases to be spent without great benefit to the nation by those who have it. With regard to the reserves of companies, there is a great deal of misunderstanding on this point. It, would appear from What has been said both by the right hon. Gentleman the Member for Hillhead and the right hon. Gentleman the Member for Darwen, that a company having a profit decides to divide it into two, one fraction going to reserve and the other to dividends, and that because Income Tax is put on the whole to that extent the amount put to reserve is deficient. That is not a fact. That is not what really happens. A company has to decide how much money it needs, and it puts that money to reserves, and whether the Income Tax be 4s. or 4s. 6d. in the £, the company if it wants to build up its capital resources can put the requisite money to reserves in that way. [Interruption.] With the balance it provides the ordinary shareholders with dividends. The idea that the tax necessarily decreases the reserves has no real foundation in fact, because the company is at liberty to modify, say, from 20 to 18 per cent. the dividend it pays to ordinary shareholders. In the case quoted by the right hon. Member for Hillhead of the large amount of tax paid, that was a case in which very large dividends had been and have been paid on many occasions by the company. I do not 273 pretend to have dealt with this question fully—[Interruption.] If I were to deal with it fully, Members of the Opposition and other parts of the House would have every reason to complain that I was taking up too much time, and depriving others of the opportunity of speaking.
Quite apart from the effect on industry, it is said that this taxation of one class is unjust. As a review of this month says,Though the proposals of the Chancellor are financially sound, they are morally indefensible.It is assumed that they have been adopted for vote-catching purposes, but that is not correct. The reason is that we are perfectly prepared to defend them on the sound principle that when you have to find the money, you are justified in placing the burden on the broadest backs. In saying that, I do not for a moment suggest that when men of great wealth have to cut down their expenditure, and to reduce items which they have been in the habit of spending they are not put not only to inconvenience, but what to them is real hardship, and that it represents a considerable change in their social habits. It is not a complete answer to them to say that the money is being put to very valuable purposes, because compulsory charity is not something of which any people are particularly fond.
To-day, however, we are passing through a transition period in the history of this country. About 100 years ago we had the great Industrial Revolution. That made tremendous changes, and one of the sad things about it was that, whereas it was a revolution to enable men to produce much more largely than they had done before, and to be able through machinery to spare a great deal of labour, it brought very great hardship and suffering, and made a lasting mark of misery and bitterness upon a great section of our population. We are passing to-day through another period that may justly be called the second industrial revolution, and I put it to those men and women of great wealth who are being called upon by my right hon. Friend to bear the great bulk of the additional burdens to-day that, though to them in the first instance it may seem a hardship that they should 274 have to make changes in their habits of life, really it is their privilege that by this means they are enabled to avert the kind of thing that happened in the first industrial revolution. I put it to them in fact that through their means there is being provided the resources which will enable this country to go through the second industrial revolution with undiminished vigour and life, and enable the nation to come out in the end not impoverished, not weak, not embittered, but full of hope for the future.
§ Sir D. HERBERT
In the course of a not very long speech, I hope to make some remarks about a matter which has not been touched upon yet, and which I may perhaps, describe as the evasion Clauses in the Finance Bill. These are Clauses intended to stop gaps in our taxation system, and which enable those who are liable to pay certain taxes to escape paying their due share. So far as I can give this Bill my sympathy, I will support it, but I want to make reference to these Clauses because there are points in them which ought to be reconsidered before we come to the Committee stage. I would not have it understood that I am a supporter of this Bill in its general principles as containing the Chancellor's Budget for this year. I would be the last to regard myself as having any right to speak on questions of high finance but I would like to make one or two observations on how this Bill and the Budget appeal to me as a man who is somewhat closely in touch with people who are in business, and with what one may describe as the ordinary man-in-the-street.
The Financial Secretary to the Treasury made one or two laudable attempts from his own point of view to answer some of the criticisms of the Budget, and to support the basis upon which the Budget has been fixed. These theoretical arguments, however, are really of no use whatever to those who move about in the practical circles which are affected by the Budget proposals. In my experience, it is not much use for the Chancellor of the Exchequer to tell some of us as he did in the House the other day with great satisfaction, about the remarkable way in which the Estate Duties are keeping up in regard to large estates, or about the remarkable way in which the yield of the Super-tax is being kept up. It is not 275 much use for him to tell that to some of us as proof that these heavy duties are not driving money out of the country, when we in fact and in practice are every day coming across men who are taking steps to distribute their fortunes in their lifetime so as to avoid these Death Duties.
§ Sir D. HERBERT
Certainly—if they come to me. I know that the Chancellor of the Exchequer will say, as I believe every Chancellor has said, that, so far as the law allows a man to do a thing, he is perfectly justified in doing it. I am merely calling attention to facts. In this case no question of morals enters into it, because if a man does it inside the law he is thoroughly justified in doing it. I am sure that everybody else in a similar position to myself can see this thing going on and can tell the Chancellor that if it has not been going on extensively in the past—though, indeed, it has been going on extensively—it is going on very much more extensively now, and quite definitely as a result of this Budget and the financial policy of the Government. It is no good hon. Members opposite saying we are not putting a burden upon industry. It is no use to say it is not a burden on industry when those engaged in industry are trying to get money for their enterprises and find it is refused on the very ground of the financial policy of the Government. It is no use saying it is not a burden on industry when those engaged in industry say that as a result of it they have to cut down their production, cut down the number of people they employ, or their wages, or the time during which they are employed. It is no use to say that the Safeguarding Duties should be taken off—to tell that to the lace workers of Nottingham, who know that when the Lace Duties are removed they will lose their jobs or have to work half-time.
In trying to find what is the policy at the bottom of this Finance Bill, I can see none except that which certainly has been stated very clearly by many hon. Members opposite, though I am not quite sure that I can find any occasion on which it has been stated plainly by the Chancellor of the Exchequer. At any rate, he has made speeches in this House which justify one in feeling that to some 276 extent, at any rate, this suggestion has been at the bottom of his financial policy: To bring about a redistribution of wealth by taking it from the rich and giving it to the poor. If that is the programme, and as far as I can find out it is the only real justification to be found for this Budget, surely it must be clear to everyone that in carrying out that redistribution of wealth we are lessening the total amount of wealth in the country, destroying at least half of it in the process. A great part of this Debate has dealt with matters which have not, strictly speaking, had very much to do with the Finance Bill, but has been directed to what is supposed to be the policy of one particular party, but that idea of taking away from the rich in order to give to the poor, and destroying half the wealth in the process—
§ Sir D. HERBERT
I was not surmised to hear what I was saying being laughed at by some of the back benchers opposite, but I am surprised to hear it laughed at by some of those sitting on the Front Bench. If you destroy the capitalist, or take away from him the greater part of his wealth and use it in such social services as those to which so much of our revenue is being devoted, I do not think any practical intelligent business man, to whatever party he belongs, will say that you will not destroy a great part of the wealth in the process. I think I remember having heard the Chancellor himself say something to the effect that it might be worth losing some money in order to bring about a more equitable distribution.
§ Sir D. HERBERT
If I have not done so, I withdraw the accusation so far as the right hon. Gentleman is concerned; but in business circles throughout the country the policy which I have suggested is regarded as the policy of the party in office, and the Conservative party will have no lack of confidence in putting before the country its alternative, which is to increase the wealth of the poor and the wealth of the Country as a whole without making anybody poorer than they are at the present time.
As I said, I wish to make a few observations on the evasion Clauses. The first 277 observation is one which has been made justifiably upon every Finance Bill for a great many years past, and that is that the Clauses are very difficult to understand and, indeed, quite unintelligible to the ordinary person's intelligence, and almost unintelligible to trained lawyers. Although that criticism applies to this Bill, I hope we shall have some opportunity of improving it, and that in doing so we may count on the assistance of the learned Attorney-General. He made a speech a short time ago to which I should hardly like to refer if it had not been mentioned in a letter to the "Times." It was a speech made on an occasion of a social nature in the City of London a week or 10 days ago, when the Financial Secretary was also present. The learned Attorney-General then spoke of the scandal—I think he used that word—of the unintelligibility of the Income Tax Acts and Finance Acts, and said that it was the duty of Parliament to see that this legislation was put in such a form that it could be understood by the persons affected. When we come to the Committee stage, I hope we shall have his assistance in making these Clauses more easily understood. A little while ago I asked the Financial Secretary a question to which he could not give me an answer at once. I do not know whether he can answer it now. I asked him whether the expression "contract of assurance" in Clause 12, or the phrase "contact similar in character to a contract of assurance," is intended to apply to any form of assurance which is not in any sense life assurance. It would help me if he could give me an answer now.
§ Sir D. HERBERT
I hope that the hon. Gentleman or the Chancellor of the Exchequer will give some sort of answer to the question before we come to the Committee stage. This shows the difficulties to which the House is put and the impossibility of our being able, in spite of our very best endeavours, to make these clauses intelligible.
§ Mr. PETHICK-LAWRENCE
The hon. Gentleman has written me a letter on the subject, and I wish to deal with his question with care and not in a hasty way across the Floor of the House. I think 278 he will be better pleased if I do that than if I attempt to give him a ready answer.
§ Sir D. HERBERT
I am much obliged to the hon. Gentleman, but, all the same, I do not think it ought to be difficult to say "Yes" or "No" to the question whether it is intended to go beyond policies which are in some way concerned with the contingency of death. I am bound to state my views on some of the questions which arise on this Clause. I hope it may turn out that what seems to me to be the intention of the Clause may be correct, and that it is not intended to go beyond life assurance. I quite understand that it is intended to cover what are known as endowment life assurance policies, those policies which are made use of to the greatest extent for the very purposes we are trying to prevent, but I regret that at the moment I do not know how far, or whether at all, it is intended to cover such a policy as a leasehold redemption policy or a sinking fund policy effected for business reasons.
In any event, one of my criticisms of this Clause is that it is far too long. There are several points in it where I would defy anybody, unless he knew what had been in the mind of the draftsman, or the instructions which had been given to him, to say what was the intention or the effect of the Clause. We begin in the most unfortunate way by referring to a contract of assurance or a contract similar in character to a contract of assurancebeing in either case a contract under which a capital sum is expressed to be payable in the future in return for one or more antecedent payments.If and so far as this is not intended to go beyond life assurance policies, all classes of life assurance policies, it surely would be very much simpler instead of that long rigmarole to speak of a policy of assurance already defined in an Act of Parliament, so that the definition could be referred to. If it is intended to include in this Clause some transactions which are not covered by that definition of a life assurance policy, it would not be difficult to include those particular transactions by some other words to say that they would be treated as life assurance policies.
I do not want to do anything which may suggest that I am dealing with Com- 279 mittee points, but on the consideration of the Financial Resolution some of us tried to find out what was the intention of the Government and the scheme they had in their mind, and we failed. We were told to wait for the Bill. When we get the Bill and read it, we are almost as far off as before from finding out the intention of the Government; and so I hope that I shall not be accused of trying to anticipate the Committee stage if, without asking for definite answers, I do raise a few matters which undoubtedly will require consideration. On Clause 12, may I point out how the unsatisfactory drafting of that Clause is shown by a passage in Sub-section (3, c). The object of this is to exempt certain policies from the operation of the Clause. Now usually on the outside of every policy there is to be a notice "that the assured is advised to read his policy." I do not know whether the Chancellor of the Exchequer or the Financial Secretary to the Treasury hold assurance policies on their lives and have followed that advice, but if they read any kind of assurance policy, they will find that it does not pledge them to continue payments for any number of years. The form of every life-policy is that it is a policy for one year, and one year only, with a right of renewal each following year at the option of the assured if he chooses to pay another premium. In the circumstances when we find an extraordinary sentence like this we feel obliged to look a little more critically at the drafting of the whole Clause.
I would like to draw attention to the exception in Sub-section (3, b) of Clause 12 which proposes to exempt from the operation of this Clauseinterest on money borrowed mainly on the security of a contingent interest in any property.It is difficult to give a definite meaning to this word "mainly" or to decide whether money borrowed on the security of a contingent interest and a policy is borrowed mainly on the security of the policy or mainly on the security of the contingent interest. I think the whole Clause ought to be re-drafted. Great hardship might arise from the words limiting this particular exemption so that it should only apply if the policy has been taken out only to provide against the contingency; though I agree 280 it should not apply except in so far as the policy is not for a greater amount than the value of the contingent interest requiring to be protected.
§ Mr. WALLHEAD
On a point of Order. May I ask whether these are not really Committee points which are out of order in a Second Reading Debate?
§ Mr. SPEAKER
The hon. Member is dealing with the Clauses of the Bill. The hon. Member would certainly be out of order if he were not dealing with the Bill.
§ Mr. WALLHEAD
I was not suggesting that the hon. Member was not dealing with the Bill. I was suggesting that he was dealing with points that would be better raised in Committee.
§ Sir D. HERBERT
I have apologised already in advance for having to deal with these Clauses in this way, but I am following a precedent which has been followed in this House for many years on the Finance Bill, though this year it has not been followed by the Financial Secretary. When we have had these complicated Financial Bills before us on previous occasions I have a clear recollection of the Financial Secretary to the Treasury on the Second Reading going through the different Clauses clause by clause and explaining the intention and effect of them, and I wish that the Financial Secretary on this occasion had been good enough to take the House into his confidence, and tell us what is really meant by these Clauses. As that has not been done, I think that is all the more reason why I should put certain questions. I will go back to Subsection (3, b) of Clause 12, which deals withinterest on money borrowed mainly on the security of a contingent interest in arty property, if the antecedent payment in question was made under a contract entered into in order to provide against the failing of that interest and to serve as additional security for the loan.Without going into details, it is difficult to explain what that means, but it is possible as it is drawn for a very unfortunate position to arise which I feel sure cannot be intended. It will be best explained by an example. May I quote as an example a case which has become known to me, and which is typical. It is the case of a youngish man, say, 30 years of age who, under a 281 will or trust is entitled to, say, £100,000 if he lives to attain the age of 40. If he wants to raise money for the purpose of business, or anything else at the age of 30, he has no security upon which he can raise it without insuring his life. He insures his life, and by that means, on the joint security of his life assurance policy and his contingent interest at the age of 40 in this fund, he can raise a large sum of money. That insurance can be effected in two forms. In the first form, for the mere purpose of enabling him to borrow money on security of the contingent interest of £100,000, all that he has to do is to take out a policy which shall be payable only in the event of his death before attaining 40 years of age, and in no other circumstances. The other course is for this young man to take out an ordinary full life policy payable at his death.
Which of those two courses is the most desirable? I am sure that the Financial Secretary would not advise anybody in such a case to adopt the wasteful expedient of insuring merely against the contingency of his death before the age of 40, when, if he did live to that age, he would lose all the premiums: by far the better and more thrifty and business-like way would be to insure his life under an ordinary whole-life policy. I hope it will be made clear in Committee what the Government means, and I hope the Clause will be so redrawn as to make it perfectly clear that a man shall not in a case of this kind be penalised, and lose the benefit of these Clauses, because he insures his life under an ordinary policy payable at death, instead of merely taking out an extravagant and expensive policy against death before a certain age.
I want to make a few observations on Clause 18, which will want considerable amendment in Committee. It is headed: "Power of special commissioners to obtain copies of registers of securities." I suggest that it is careless drafting where a notice has to be served on a body of persons to supply copies of "any register." It does not—as it should—say "any register under their custody or control." Then it says that in case of default on the part of that body, then "the clerk or secretary" of that body is to be subject to some heavy penalties. These bodies of people upon whom the liability rests to supply copies have very 282 likely 100 or more clerks. Then I should like to know what is the meaning of the words "the clerk or secretary of the body in question," and why should it be "any clerk or secretary." But if it is a body of persons who is responsible for furnishing the copies, why should not that body of persons be the people liable to the penalties for default? Further, I suggest that when the original penalty for failure to supply the copies is a penalty not exceeding £50, it is a little savage that it should be £50 and not "not exceeding £50," but the full £50 without any discretion, for every day of failure after the first failure to comply. I admit that those are Committee points, and I do not want to say any more about them now.
Now I come to the group of Clauses headed "Private Companies," beginning with Clause 29. I suggest that we have almost more unsatisfactory drafting here than in Clause 12, and, indeed, more unsatisfactory drafting than we had in the old one-man company Clauses of previous Chancellors of the Exchequer in other years. I hope that the Chancellor of the Exchequer will reconsider these Clauses before the Committee stage is reached. These particular Clauses propose to deal with certain transactions carried out through the medium of a controlled private company, and they go into a somewhat lengthy and complicated definition as to what attributes make, what is called here, a private company come within the Clause. In the first place, to use the words "private company" is very misleading when it is intended to apply to something quite different from the well-recognised private company, properly so called, used in the Statutes and defined by the Companies Acts.
These particular companies have been dealt with previously in Finance Bills, and the difficulty of trying to define what companies were to come within the ambit of the Bill was one of the biggest difficulties in the Bills of 1922 and 1927. In 1927 the matter was thrashed out with the greatest care when the right hon. Gentleman the Member for Epping was Chancellor of the Exchequer, by a number of people representing all sorts of business interests in the City and Members of this House, until at last we did get definitions which were accepted by 283 the Stock Exchanges and different bodies of business men of what constituted a company which was in such a sense controlled that it could be and was made use of for tax avoidance purposes, and was not a genuine business company. I think it is a criticism worth making that that definition, having been arrived at after all that trouble, should not be made use of here. That definition, as far as I know, has worked satisfactorily in the three years which it has been in existence, and should be adopted here instead of giving an entirely new definition, and one which I suggest is unsatisfactory and difficult to understand. I suggest that it is only a slip and an unintentional error when I find here an expression such as that which we criticised that we were dealing with the Financial Resolution, as to values of "total assets." The expressions "total assets of the company" and "total income of the company" occur, and when a tax is to be levied on that basis, surely it is not intended to levy the tax according to the total assets without considering the liabilities on the other side.
I apologise for having had to deal in advance with matters which will have to be dealt with more carefully in Committee, but I want to make an emphatic protest against the course which has been followed on this occasion with regard to the Budget Resolutions and, indeed, in regard to the introduction of this Bill on its Second Reading. We complained, on the Financial Resolutions, that we could get no information as to what was really the intention of the Chancellor of the Exchequer, and we were told to wait until we got the Bill. We were to wait until we got the Bill. Now we have got the Bill we find it almost impossible to know what it means, and so far we have had not the slightest assistance given to us from the Front Bench.
In that connection there is another matter on which particularly I ask that we should have some answer from the Government and some explanation of their intention. Here is a thing, which may be perfectly harmless, but about which, under the circumstances which have happened, not only this year but in previous years in regard to financial procedure, I 284 feel a little unhappy and suspicious. I refer to the last words of Sub-section (1) of Clause 7. That Clause provides that Income Tax for 1930–31 shall be charged at the rate of 4s. 6d. in the £1, and then it goes on to say that in the case of Surtax it shall be charged:at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine.Those words appear, of course, in the Financial Resolution, and are repeated here in the Bill. They refer to Sur-tax for the year 1930–31. I want to know whether it is suggested that that Clause, if passed in its present form, founded correctly as it is upon the Resolution which has been passed by this House, will enable Parliament to fix a higher rate of Sur-tax in the future—that is to say next year—than this year without another Financial Resolution. If that is intended, I should like to know it. I am perfectly certain that, when the result comes to be considered, it is a matter that will have to be given very careful attention by this House, if, indeed, we are to continue to be a House of Commons which has any control whatever over the expenditure of the country. I hope, indeed, it is not intended to raise the Sur-tax under that without any other Financial Resolution, but, if it is not intended, then I want to know what is the reason for putting in those words here, where there is no reason for them at all. If Sur-tax for this year is not to be fixed until next year, what is the use of encumbering the Finance Act of this year by putting in that Sur-tax next year shall be as fixed hereafter? I am glad I remembered that particular matter, and I hope that on that and the other matters to which I have drawn attention we shall get some help before the Committee stage is reached.
I hope I have not spoken with any undue heat with regard to some of these matters. I have been critical of what has been happening, but I can assure the right hon. Gentleman that as I have done in past years, so far as my little help can be of any assistance, I shall give it most gladly to prevent avoidance of taxation in any way which is not justified, but I feel at the same time obliged to try my hardest to see that in stopping those gaps—which very often does not result in getting a very large sum of 285 money—we do not create unnecessary hardship or penalise people who have no business to be penalised, where there is no intention of anything in the nature of improper avoidance of tax. We must indeed try once more—and I am sure we shall get an opportunity here—to make this Bill, if it passes into an Act of Parliament, go out in much clearer and more easily understood language than that in which it has been submitted to the House.
§ Mr. W. J. BROWN
I rise for the purpose of trying to express to the House the view of this Budget and Finance Bill which is held by my colleagues who sit with me on this bench. But, before endeavouring to do that, I should like to make a few observations on the speeches of the right hon. Member for Darwen (Sir H. Samuel) and the right hon. Member for Hillhead (Sir R. Horne). The first half of the speech of the right hon. Member for Darwen was an exceedingly lucid, competent and indeed charming defence of the Finance Bill, and the policy that underlies it. The second half of that speech consisted of contentions which, if they were carried to their logical conclusion, ought to have led the right hon. Gentleman into whole-hearted opposition to the Finance Bill. My Latin is not sufficiently good to enable me to produce a quotation which will effectively hit off that situation, but, if I may put it in plain language, I would say that the impression produced on my mind was that "he who sits too long upon a fence will hurt his crutch." I do not think I have seen a more competent exhibition of sitting upon the fence and of an appeal to those benches and then to these benches, and even indeed to this bench, than we have had from the right bon Member for Darwen.
There are two points in the latter part of his speech on which I would like so comment. He spoke especially about the results of high taxation upon enterprise. He put it that at present the Government says to the business man, in effect: "Go ahead, and, if you fail, you must bear the consequences, and, if you succeed, we shall tax you to the extent of one-half the profits you make as the result of your success." He quoted for us another Latin tag, kindly translating it for us into English, about bees who make honey not for themselves but for others. I would like to ask the House 286 to consider, not what the Government says to the business man, but to the workmen who comprise nine-tenths of the population of this country. The Government says to the workman, "You shall put into industry, not your money, but your life. If you succeed, the maximum that you shall get is a wage upon which it will be difficult for you to make ends meet, a wage that condemns you to permanent poverty. If, on the other hand, you fail, there shall be left to you the cold hospitality of the streets with the possibility of help from our incomparable social services." If we apply the analogy of the bees to that situation, I would make this observation, that it is time that the bees in human society discovered a method of dealing with the drones as the bees in apiaries have already found a method of doing.
The speech of the right hon. Member for Hillhead seemed to me to illustrate the state of hopeless confusion into which Conservative thought in this country has fallen. I would like to take three statements he made and put them together and see how they look when placed in juxtaposition. He said that the money which was levied upon by the Government in direct taxation was taken out of the pool that would otherwise be available for the purposes of industry. He said, secondly, that, when taxation exceeds a certain point, the problem of tax evasion by all kinds of methods, including the method of investment abroad, became a serious one. Finally, he criticised the Chancellor for announcing his intention of repealing certain protective duties that now exist.
At the present moment, we are exporting capital from this country, with taxation at its present level and without it going any higher, at the rate of £150,000,000 per annum. As the result of that export over a long period of years, we have accumulated oversea investments to the extent of £6,000,000,000. At no time has the right hon. Member for Hill head deprecated that export of capital; at no time has he or his party endeavoured to prohibit or to limit that export of capital. Yet he and his party object to the import of foreign goods which is made inevitable by the fact of that oversea investment of something like £6,000,000,000. It is idle for the Conservative party to support a system which lends itself to the investment of British 287 capital on a large scale overseas, which carries with it the concomitant of receiving goods in interest upon that overseas investment, and then to propose the imposition of tariffs to keep out that stream of foreign goods which is rendered necessary by that oversea investment which he supports. If he is at once politically honest and also politically acute, I hope the right hon. Member for Hillhead will either drop his Tariff Reform proposals, or, alternatively, make new proposals for the taxation of the income upon oversea investments to extinction point with the result of precluding further export of capital from this country.
§ Mr. GRANVILLE GIBSON
Will the hon. Member inform the House from what countries and what amount of commodities are coming into this country from money invested abroad, which are made under inferior labour conditions and at lower wages than ours?
§ Mr. BROWN
To a very large extent, it takes the form of agricultural produce which is ruining our agriculture here at home. If we had not allowed the system to be developed which the right hon. Gentleman the Member for Epping (Mr. Churchill) supports, we should never have reached in this country that complete lack of balance between industry and agriculture which is one of the biggest single problems confronting our community at the present time.
Leaving the speeches which have been made by various hon. and right hon. Members, I will attempt to state the views of those who sit on these benches about the Budget. The first observation to be made about this Budget is that it is a unique Budget. It is unique in many ways, but especially in this respect, that it is a two-year Budget, and not a one-year Budget. In introducing the Budget, the Chancellor of the Exchequer made it clear that he did not contemplate, unless unforeseen circumstances arose, the necessity for a further increase in taxation next year, and we are justified, therefore, in treating this Budget and Finance Bill as a considered statement of the Government's financial policy for this year and next year. The Government have already been in office for one year, so that the total period covered will be three years. The Budget, 288 whether it is for one year or for two years, does two things. In the first place, it settles the distribution of the burden of taxation between the well-to-do classes and the poorer classes in this country; and, secondly, it determines what amount of money shall be available to the Government for purposes of social reform during the period covered by the Budget. We are entitled, therefore, to ask how the present Finance Bill affects both of these points. I will deal with them in the order in which I have mentioned them.
With regard to the first, it is not disputed in this House that there is a tremendous inequality in the distribution of the national income of this country. I have in my hand a pamphlet, from which I shall quote more than once, in which the present Chancellor of the Exchequer says that 2 per cent. of the population own 80 per cent. of the public wealth. I have here also an analysis of the distribution of wealth, by a very well-known economist, who devotes special attention to the inferences to be drawn from the incidence of Estate Duties in the year 1929. He points out that, during the 12 months ended March, 1929, there were left 121,580 estates of a value of not over £10,000, which accounted for £116,700,000. In the same year there were 8,088 estates of over £10,000, which accounted for a total sum of £365,000,000. It will be seen that the overwhelming volume of wealth in that table is represented by the 8,088 estates of the total value of £365,000,000, and the economist whom I am quoting makes the observation that about 6 per cent. of the 1928–29 estates thus accounted for nearly 70 per cent. of the entire property of all who died in that year. He adds:It is equally true that, taking Great Britain as a whole, about 6 per cent. of its families possess nearly 70 per cent. of its land and its capitalThe mal-distribution of wealth in this country has been enormously aggravated during the last 10 years, partly as the result of the gold standard policy, for which the right hon. Gentleman the Member for Epping shares an inglorious responsibility with our present Chancellor of the Exchequer. There has been a sharp appreciation in the proportion of the national income taken by the rich and well-to-do, and a sharp depreciation in the proportion taken by the wage- 289 earning class in this country. I do not want to bother the House with more than two or three figures, but these figures are so important that they ought to be mentioned. Comparing 1927–28 with 1921–22, the proportion of the national income, which went to the landlords rose from 11.3 per cent. to 15 per cent. The proportion that went in profits and dividends, during a period of industrial slump, rose from 44.5 per cent. to 49.5 per cent. The proportion that went in salaries rose from 17.1 per cent. to 25 per cent.; and the proportion that went in weekly wage-earners' incomes fell from 27.1 per cent. to 10.5 per cent.
§ Mr. BROWN
I am just going to explain; I anticipated that question. The figures I have given do not purport to represent the whole income of this country. They do purport to be drawn from the 20,000,000 incomes in this country, or, rather, the £3,100,000,000 which during the year 1927–28 was assessable to Income Tax; that is to say, the last figure, which will probably have excited the most attention, does not cover the whole income of weekly wage-earners, but it reflects that part of the income of weekly wage-earners which is susceptible to Income Tax. [Interruption.] From these figures, I draw the deduction that the mal-distribution of income, which was bad enough 10 years ago, has become substantially worse, and I would ask what there is in this Budget which does anything substantially, not merely to overtake the mal-distribution that existed in 1921, but to deal with the increased mal-distribution which has occurred during the last 10 years. My answer is that I can see nothing in the Budget, honest as the Budget is, based as it is upon the principle of paying our way, and free as it is from the kind of device resorted to by the late Chancellor of the Exchequer—I cannot see anything in the Budget which attempts to get to the point to which I have just drawn attention, or which makes any substantial attempt to deal with that situation.
The next question that I ask is, why is it that the Budget does not make an attempt to deal with that particular point? Is the explanation the one that has been hinted at both from the 290 Government benches and from the Opposition benches, that you cannot increase direct taxation more steeply without killing the goose that lays the golden eggs? If that contention is advanced, I would quote against it, not only speeches which the present Chancellor of the Exchequer has made on that very point in the past, but the whole experience of the Income Tax and the Death Duties during the last 50 years. In 1878, the Income Tax stood at 3d. in the £, and the assessable income for tax during that year amounted to £578,000,000. In 1928, the tax was 4s. in the £, that is to say, its amount had been multiplied by 16, and yet, so far from that increase having acted as a deterrent to a rise in revenue, the assessable income for 1928 was £2,400,000,000, or over four times what it was in 1878, when the Income Tax stood at 3d. in the £.
Turning to the Estate Duties, one finds the same kind of experience. Between 1920 and 1928, estates of a value of over £10,000 rose from 5,165 to 8,088, and this was during a period of acute industrial depression when employers were living on their muscles and when workmen from one end of the country to the other were called upon to accept sweeping reductions in wages as a condition of enabling the rich to survive. Nevertheless, during that period, there was an increase from 5,000 to 8,000 in the number of estates at death in excess of £10,000; and the total value of these estates shows a, similarly remarkable increase, from £254,000,000 in 1920 to £365,000,000 in 1928.
The next possible explanation is that, although it is not true that we are killing the goose that lays the golden eggs, the Chancellor of the Exchequer has by some means become convinced that we are in danger of killing it if we go any further. With regard to that, I should like to quote from a pamphlet written by the right hon. Gentleman—not years ago, before our party had attained to a knowledge of the responsibilities of government, not before, in the words of the right hon. Gentleman the Member for Epping, we were fit to govern—
§ Mr. BROWN
May I withdraw that? The right hon. Gentleman has never said that we were fit to govern. That is true. 291 His blindness to obvious fact is one of his chief disqualifications for ever hoping himself to govern again. I cannot understand the lack of generosity on that Front Bench. When you have a Government who are doing your work so effectively as ours are, why cannot you let them alone, instead of embarrassing them? This is the quotation that I would like to read. The right hon. Gentleman, under the title of "Where the Liberals and Tories are wrong," wrote:Here we get at the real difference between the financial policy of the Labour party and that of the other parties. The other parties regard national taxation as a regrettable necessity. They try to restrict it as much as they can. They maintain that taxation is a burden on industry, that it discourages enterprise, and restricts necessary capital savings. The Labour party takes quite the opposite view.That is a plain rejection by the Chancellor of the Exchequer of every argument in that vein either from the right hon. Member for Darwen or the right hon. Member for Hillhead. The Chancellor of the Exchequer goes on to say:While they admit that taxation, when used for wasteful purposes, is in the highest degree harmful, they contend that wise expenditure is the most economical form of spending; that large incomes and estates left to the personal use and disposal of the holders are, on the whole, not used in a way which gives the greatest amount of social utility; that national revenue can be used so as to secure a juster distribution of national wealth; that taxation can divert the national income into more useful channels; that the expenditure of national taxation can be used to stimulate trade and industry; and they agree with the old economists that taxation, instead of discouraging individual effort tends to stimulate it.If English means anything, we must dismiss the explanation that the Chancellor of the Exchequer has become converted to the view that what has been said by the right hon. Member for Darwen or the right hon. Member for Hillhead is true, and we are still left at a loss for an explanation of the Budget.
What are the consequences of the Budget in terms of limitation upon the power of the Government to carry out their own programme? We are told by the Chancellor of the Exchequer that he expects this year a surplus of £2,236,000—in round figures, two and a quarter million pounds. You cannot get very much social reform on two and a quarter 292 million pounds, certainly nothing on the scale contemplated by "Labour and the Nation," or by the election programme which was printed and sent to almost every household in the country. What about next year? I want to remind the Chancellor of the Exchequer that in earlier Debates in this House and upstairs when we were dealing with Unemployment Insurance Bills and so on and we were asking for more generous provision to be made for unemployed men and women, we were told that that was impossible because we were still working upon the finance of the right hon. Member for Epping. We were told, "Wait for the first Budget." We have waited for it, and it discloses a surplus of two and a quarter million pounds for the present year.
What about next year? On the back benches we are not in so good a position to estimate in detail what the yield of this Budget will be next year, but to the best of my ability I have tried to make a calculation. Add £3,000,000 for normal increases in revenue, subtract £3,000,000 for normal increases in expenditure, allow for savings on armaments at the same rate as this year, which was about £2,000,000, and after making the most handsome allowances for the conversion of high debt interest into low debt interest, I cannot see a larger surplus emerging next year than £14,000,000, unless there are projected, but as yet unplained, wholesale decreases in expenditure upon armaments which the attitude of the Government on the Army, Navy and Air Force Estimates has not so far led us to expect. With £14,000,000 you may do more than with two and a-quarter millions, but you cannot with £14,000,000 satisfy one-tenth of the expectations aroused by our own programme at the last election.
§ Mr. BROWN
There are other considerations which have to be added to what I have said. There is uncertainty about the size of the unemployment figures, and the demands that they may make upon the national purse. There is the problem of India, which may call for a very large military expenditure. Taking the most favourable view, I cannot see a bigger surplus than £14,000,000 next 293 year, and that surplus, which by then will have covered a three-year period, cannot satisfy one-tenth of the expectations aroused in the country by the terms of our own election programme. I will mention one item. In "Labour and the Nation" and in our election programme we pledged ourselves to get old folks out of industry by means of a pension scheme. The lowest estimate that I have heard of the cost of such a pension scheme is £16,000,000. It is clear that the surplus that would emerge from next year's Budget would be inadequate even to provide for that item in our programme, and that is only one item out of many to which we are committed. Certainly this Budget puts very severe limits on the measure of reform that our Government can embark upon, and it carries enormous implications in regard to the treatment of the unemployment problem.
We are committed as a party to widespread schemes of national development, to be provided for out of State funds. The State can only finance schemes of that kind in one of two ways, either by direct taxation or by loan. Clearly, this Budget allows no margin for the financing of large scale schemes of national development out of revenue. If it were contemplated to finance those schemes out of loans, I cannot imagine the Chancellor of the Exchequer devoting an additional £5,000,000 to the reduction of debt, when that £5,000,000 would suffice to pay the interest on a development loan of £100,000,000. The conclusion to be drawn from this Budget in regard to unemployment is that we can drop any hope of any comprehensive State scheme for attempting to deal with the unemployment problem. That is the conclusion to be drawn from the Budget, unless the figures can be given an entirely different construction by the Chancellor of the Exchequer. I apologise for keeping the House so long, but I have tried to state argumentatively the view that we hold on this bench about the Budget.
I come now to what I conceive to be the only other reason that can be advanced for the unsatisfactoriness of the Budget from the Socialist point of view. That conceivable reason is that the Government and the Chancellor of the Exchequer have reached the considered conclusion that a more ambitious Budget could not hope to pass through this 294 House and that, therefore, it is better to have a modest Budget which can go through the House than a very ambitious Budget which might involve the Government in defeat. If that is the reason, I want to reply to it. The Government are doomed to defeat already. Do not make any mistake about that. The Government are doomed to defeat because right hon. and hon. Members upon that side of the House—
§ Mr. BROWN
They have announced, in places where men meet, that they are waiting for the unemployment figure to reach the two million mark, and then: "Out you come!" On the unemployment issue the Government, cannot depend for support from hon. and right hon. Members on the benches below the Gangway opposite. [Interruption.] Allow me to put my point. I do not see that the Government can depend for support from that quarter, because that party have also to think about their position in the country. If the Government are doomed to defeat, sooner or later anyway, they had better determine the time of their defeat and the issues on which they will be defeated, and not leave those issues merely as a matter of electoral tactics, to be determined by right hon. and hon. Members opposite in circumstances which are going to present our party with a tremendous problem when it goes to the country.
There is only one broad mistake that a Labour Government can make, and that is not the mistake of being too courageous but the mistake of being too timid. I repeat what I said a few weeks ago, the foreign record of our Government has been a brilliant one, but the issues upon which the next election are going to be determined are not what the Government have done in Egypt, not what they have done—[Laughter.] I fail to see what room for merriment there is in that observation. I am putting to the House the serious submission that in a country where poverty and unemployment 295 are rampant the issues that settle the fate of Governments are in the main domestic issues and a Labour Government, a minority Labour Government, will do better to utilise their position to formulate class issues in this country upon which they can fight, than play up to elements on the opposite side of the House, restrict their programme and go out eventually with their position compromised by the engagements and entanglements into which they have entered, and without a clear fighting issue to put to the country to enable them to rally the working masses of the country upon their side. This Budget is not merely bad finance from the Socialist point of view but I think it is bad tactics even from the party advantage point of view, and I would urge the Chancellor of the Exchequer, together with the rest of the Government, on other issues as well as this, to remember that they have the priceless advantage of the initiative and to utilise the advantage of the initiative to the fullest extent.
To the extent that this Budget increases direct taxation and increases Death Duties, we welcome it. To the extent that it imposes a burden of additional taxation upon the wealthy rather than upon the poor, we welcome it. To the extent that it is an honest Budget, instead of a series of dishonest subterfuges, we welcome it. But as an instrument of Socialist financial policy, it is a defective instrument, a timid instrument, and an instrument which disappoints those of us who sit upon this bench.
In my view there is real ground for believing that we have entered in this country upon what may be called the Kerensky period in British politics. [Laughter.] That remark also seems to be a matter for mirth, but if anybody had suggested the same thing in Russia a very little time before the Revolution came, it would have been met with the same hysterical mirth there, but it came. There are grounds for believing that we are in the Kerensky period in British politics, and the great lesson that Lenin taught in regard to periods of that kind is that a Socialist-Labour organisation will fail if it tries to go through that period on the policies laid down for it by its hereditary enemies. It is inherent in the nature of periods like that that every 296 issue formulated by a Socialist-Labour Government ought to be a, class issue related to the needs of the working masses of the country. Instead of pursuing a policy of continuity, of rationalisation, and all the policies that have been left to us as a legacy by hon. and right hon. Members opposite, we ought to be pursuing our own policy. The Budget falls short of what we think desirable and practicable; we regret its timidity, while we welcome its honesty so far as it goes.
§ Mr. BRACKEN
It would ill become a new Member of this House to intervene in the dispute between the nominal Member of the Socialist party who at present occupies the post of Chancellor of the Exchequer and the primitive Member of the Socialist party who has addressed the House in such an agreeable manner, but I do not share the hon. Member's views that we have yet approached the Kerensky period in this country. It may be so to-morrow, when we know that the Chancellor of the Duchy has separated himself from his more distinguished colleagues on the Government Bench. I was greatly interested by the observations of the hon. Member for Watford (Sir D. Herbert), who said that this Bill was one of infinite complexity. I agree. I have no particular knowledge of legal terminology, and I have to depend for my knowledge of this Bill on the remarks of the Chancellor of the Exchequer in the various speeches which he has made since the introduction of his Budget.
I would first like the Chancellor to tell us what explanation he has for the rather paradoxical statement that this Budget imposes no new burden upon industry. An increase of 6d. on the standard rate of Income Tax yields between £5,000,000 and £6,000,000 a year, and that is taken directly from the reserves of public companies in this country. The President of the Board of Trade says that this is an insignificant sum, but I must remind him that it is equal to the whole authorised capital of the Bankers' Industrial Development Trust, which is the power-house of the Lord Privy Seal's schemes for rationalising industry. If it is insignificant, then the Lord Privy Seal's scheme is equally insignificant. It would pay interest at 6 per cent. on £100,0010,000 of fresh capital for British industry, and anyone who knows the condition of our heavy industries 297 to-day would agree that the infusion of such a sum would be a very great benefit.
Again, do the new Estate Duties impose no burdens upon industry? Take the case of the many British companies whose capital mainly consists of bricks, mortar, and machinery. Under the new and penalising taxation of the Chancellor, anyone who owns shares in or is the proprietor of such a company must inevitably en-cash every available asset in order to provide for the demands of the taxgatherer. Then again, the new and quite disingenuous insurance schemes in this Bill will add to the difficulties of any proprietor or any large shareholder in a limited company in England whose executors are called upon to produce a sum in cash.
It is absolutely incredible to me how the Chancellor can say that this Budget imposes no new burdens on industry. Take agriculture. At the present time no one could persuade any British investor to put a shilling into agriculture, and the Chancellor now comes along with his Estate Duties and takes away from agriculture huge sums which he is going to spend on doles or pensions or some other social services which will be mainly enjoyed by townsmen. What is going to become of agriculture? Where is the money to be found that is to be taken away and distributed as doles among a large part of the population who have no interest in agriculture whatever? This is our most ancient and most vital industry, and it is perishing before our eyes, and yet the Chancellor of the Exchequer will roam around the country and say, "My Budget imposes no new burdens on industry." I wonder if this new form of Couéism is going to please the farmer, the labourer, and the landowner who will be taxed out of existence.
Another and more extraordinary contradiction in the Chancellor's broadcast on 15th April was when he said that, barring any unforeseen calamity, or any large increase of expenditure, the new taxation which he intended to impose would be sufficient to meet next year's expenditure. I do not know what is the meaning of that elastic pledge, but evidently a large number of people in the country attach importance to it. In another passage he said that he hoped before this Parliament ended to redeem 298 the Labour party's pledge to remove all food taxes and all protective duties. This will cost something more than £30,000,000, and where will the money be found? In administrative economies? We all know that the Chancellor of the Exchequer confided to the British Bankers' Association a very sad story. He said, in effect: "I came to the House of Commons and put my great office in commission. I said to the 615 Members, 'Show me how to economise,' and I got no answer."
I suppose that the reason was on the whole that we are all so humbled by the eminent and autocratic Chancellor that we could not suggest any answer, but it is indeed a confession of impotence on the part of the Chancellor of the Exchequer. Many people in this country, however, may say to him, "Why did you, knowing the financial position of the country, sanction new schemes for social services which cost the country £19,000,000 a year" They may also say to the Chancellor, "Why did you give £300,000 to a few financiers in the City to underwrite a British Government 5 per cent. loan?" They might also say, "Why did you take a leading part in drafting a Coal Bill which will destroy any benefit which might be expected from de-rating and which is going to add infinitely to the difficulties of the Treasury?" All these difficulties have now been entered into, and there is very little good in re-capitulating the many opportunities to economise which the Chancellor of the Exchequer has had. Nevertheless one must comment upon the spirit in which the Chancellor approached the question of economy. He came, he saw, and he capitulated.
The stark character of this Bill must add enormously to the Lord Privy Seal's difficulties. At the present moment he is doing his best to induce employers, on grounds of patriotism, to offer employment to people all over the country, and no one will envy his task when he goes to an employer and asks him to take on more workmen at the present time. He will say, "Address your remarks to the Chancellor of the Exchequer, who has imposed a huge fine on my estate, increased my Super-tax, and raided my reserves, and so it is impossible for me to find money now to employ further labour. It has all gone into the maw of Somerset House."
299 An even fiercer fate would await the Lord Privy Seal if he approached anyone connected in any way with the industries benefiting from Safeguadinrg or from any other form of protective duties. Some of these trades are almost broken. Some of them are in limbo or in purgatory and waiting for the nod of the Chancellor of the Exchequer. It may be quite true that these duties have not fulfilled the full anticipations of those who imposed them, but the wonder is that, during these awful years of industrial depression, they have provided so much employment at fair wages for a very great number of workers in this country; and I think the inhumanity of the Chancellor's action will deserve long to be remembered. At a time when the United States Congress are considering the final stages of a tariff Bill which will impose 90 per cent. tariffs on the value of all lace goods and embroidery entering the United States, the Chancellor of the Exchequer sweeps away the livelihood of some thousands of people in Nottingham.
I wonder whether the trade unions of this country are wise in giving support to such a policy. We may be told that the reason why the trade unions support the Chancellor of the Exchequer is that their political leaders venerate the memory of Mr. Cobden, but they should remember that Mr. Cobden did not venerate the trade unions. He said:Depend upon it, nothing can be got from fraternising with trade unions. …. I would rather live under the Bey of Algiers than under the trade unions.8.0 p.m.
I would rather live under the Bey of Algiers than under the Bey of Downing Street. I hope the House will not pass this Bill without drastic Amendment. Listening to the speech made this afternoon by the right hon. Member for Darwen (Sir H. Samuel), I think he would agree that we would cast off the last shred of our functions as keepers of the public purse, if we allowed this Bill to go through in its present form. The main object of the Chancellor seems to be to turn this House into a sort of soup kitchen. That may or may not be a practical policy, but we in this House should not abuse the industrialists who provides the soup when we consider the policy 300 that this House has adopted in the last 12 years towards the whole question of industrial obsolescence. This House of Commons has taken away, under its Finance Bills in the last 12 years, £500,000,000 from the reserves of public companies in England. If these companies were taxed at the American rate, we should have had £250,000,000 to spend in re-equipping our industries and launching campaigns in foreign markets, yet there are people who say that the industrialists of this country are an extremely backward race. They may be, but one of the main reasons is not only the policy of the present Chancellor of the Exchequer but that which all politicians have adopted since 1918. There is another and very important contradiction in the public statement made by the Chancellor of the Exchequer—I think it was at the Bankers Association—when he said that this country was living on its capital and that was the only reason why he had to impose this new taxation upon industry and upon all the people who had to bear it. It is a curious form of argument if the Chancellor believes that private individuals can continue to live on their capital under his penalising taxation and the country continue to be prosperous so long as the State's accounts are properly drawn up under the best book-keeping system, an orthodox system which the Chancellor of the Exchequer admires, and which has come down to us from long generations.
We have all listened to the high-sounding appeals both from the Chancellor of the Exchequer and from the Lord Privy Seal that we should put away the defeatism which is all over this country and avoid the psychological depression. I think this Finance Bill will contribute more than anything to that defeatism. I do not think there is any doubt that Income Tax is regarded as the barometer upon which the public finances of England are judged. The Chancellor of the Exchequer has increased the defeatism which is now prevailing throughout the world with regard to the future prospects of England, and, in doing that, he has rendered a great dis-service to this country and has earned the censure of this House.
§ Mr. STRAUSS
I am very pleased that the duty has fallen upon me of congratulating the hon. Member for North Paddington (Mr. Bracken) upon his maiden speech, not only because it was an able one but because he represents a constituency which my father represented in this House for many long years. I would therefore offer him, for this double reason, my congratulations on a speech which was a most courageous one, and I am convinced that Members will look forward to hearing many more contributions from him.
The burden of the speeches which have come from the other side, I think, may be fairly said to be this: that the Finance Bill which is before the House to-day will injure industry by the additional taxation which it imposes. In this, there is more assertion than argument. The arguments which were used in regard to this increase of taxation might equally have been used in regard to any increase from a lower to a higher rate, and there has been practically no evidence brought forward to justify the argument. It has been stated by the right hon. Gentleman the Member for Hillhead (Sir R. Horne), who, by the way, stated that the effect of this Finance Bill was to depress the industries in this country—I cannot think of anything that would do so more than the speech he made this afternoon, or have a more depressing psychological effect on the industrialists of the country—that industry to-day found it difficult to obtain new capital where it was needed, and he argued that this was the result of the Finance Bill. Is that really so? There is no doubt that many industries in the country to-day are unpopular with the investor because he has lost faith in the leaders of those industries. On the other hand, as we know, in the last few weeks there have been large loans raised in the London market and large sums have been subscribed which shows that there is no immediate shortage of cash for investments where investors like to put their money.
The argument goes, I think, that the annual savings of the country will not be sufficient, after the inroads made upon them by the taxes imposed in the Finance Bill, to keep the industries of the country in a healthy, vigorous condition, and will not be sufficient to provide for ex- 302 panding trade. That is the argument. If it were so, and if it could be shown to be so, then there would be that adverse effect on trade as a result of this Finance Bill. None on this side would deny that it is possible to reach a limit of taxation, under private enterprise, which might damage the industries of the country. Has that limit been reached? I have made a calculation, as accurate as possible, and I have come to the conclusion that the total taxation in the country to-day proposed under the new Finance Bill is rather less than 19 per cent. of the total income of the country. On the other hand, the percentage in the two years 1921 and 1922 was 22, so that it would appear that the gloomy picture painted by hon. Members opposite as to the inevitable effect of the taxation proposed in the Finance Bill is somewhat exaggerated.
Let us for a moment consider the figures of our annual savings and see whether this additional taxation will really have such a serious effect on them as to render insufficient capital for investment in new industries and for keeping present industries going. The figure accepted by the Colwyn Commission as to the annual savings was £500,000,000, but the important fact is that they agree that no less than one quarter, in fact more than one quarter, £135,000,000 goes in new issues raised in this country for foreign investments. It appears from that that there is ample margin in our annual savings for investment in Great Britain. Although some of those investments abroad will be beneficial to trade in this country, it is equally true that many of them will be of no use whatever and some of them may be detrimental. It would appear, therefore, from these figures which were accepted by the Colwyn Commission, that there is a considerable margin in our annual savings if they are used in the most economical way to supply all the necessary capital that can be needed for industries here.
On the other hand, if the contention is correct that this additional taxation really would so diminish the annual savings of this country as to endanger the supply, the necessary logic of that would be that we could so nurse our annual savings as to see that they are not wasted and do not go in direc- 303 tions which bring no benefit to trade and employment, but that they shall be used in the best interests of the country as a whole. I hope that some day a national investment board will be set up, when I trust we shall have the support of those hon. Members opposite who have put forward this argument.
One word in passing about the loss of capital that may arise, as suggested by the right hon. Gentleman the Member for Hillhead in money invested abroad. Money invested abroad does not evade taxation unless the owner goes abroad with it. It was again shown, in the evidence before the Colwyn Commission by witnesses of the Treasury, that in their experience the Treasury lost very little in that respect. It must be remembered that the years 1920 to 1924 were the years when the threat of the Capital Levy was over the industrialists of this country, and if ever there was a period when money might have gone abroad in order to avoid payment of taxation that was the time. The witnesses said that they had experienced little loss in that direction. The total loss from 1916 to 1924 to the British Treasury was only £1,000,000. Looking at it from the national point of view, the departure of those people to foreign climes, who are actuated by such an antisocial spirit as this, would, I suggest, be no loss but a benefit to this country.
The money that is proposed to be raised under this Finance Bill will be spent, on the social services. It is definitely going to be spent in this country. In other words, that money, which would otherwise have been put into the annual savings pool, will be diverted and will be spent instead. Hon. Members opposite say that is going to be bad for industry. I suppose it would be theoretically possible to divide exactly the annual income of the country between the amount saved and the amount spent, and to say that this exact proportion will bring the greatest benefit to the country. Are hon. Members prepared to say that the division of income in 1929 was the best? Obviously, if half the amount were spent that was spent last year, industry would be seriously affected. Is it not possible that, if rather more is spent and rather less saved, that might benefit industry. Particularly so when we are suffering 304 under the blight of over-production and under-consumption, one would think it would in all probability lead to an expansion and not a contraction of industry.
The other argument that is used by hon. Members opposite is that putting an additional burden on a small section of the community is unfair and undemocratic. Is that really so? I do not think it is generally realised what a large proportion of the national taxation is already borne by the wage-earners. Under this Bill the amount that will be raised from the Beer Duties, which is spent chiefly by the working people, will bring to the Exchequer £16,000,000 more than will the Super-tax. The tax on tobacco, which will raise £63,000,000, again largely paid for by the working people, will actually be £12,000,000 more than is spent on education from the national Exchequer. But look for a moment at the other side of the picture. There are 95,000 people who are fortunate enough to pay Super-tax. Their total income is £530,000,000. They pay in Super-tax £64,000,000, leaving them with £466,000,000. Assuming that they pay Income Tax on the whole of their incomes at the standard rate, which, of course, they will not do, they would still be left with £3,540 each on the average.
The true relative position between the burden paid by the poor man and that paid by the wealthy can only properly be estimated on the basis of the proportion of their income which the working man and the wealthy man have to pay, and those figures were also given in the Colwyn Report. They produce really startling results. From the figures in that Report, we find that a wage-earner who earns £2 or £3 a week actually pays a higher proportion of his income to the Treasury than the man who is earning £1,000 a year. I am taking the case of a married man with three children under 16. A man who earns £2 a week pays 11.9 per cent. to the Exchequer, while a man who earns £1,000 a year pays only 11 per cent. Further, a man who earns £5,000 a year is only paying just double the proportion of his income to the Exchequer than the man who is earning £2 or £3 a week pays. The former pays 23.2 per cent. Those figures include provision for Death Duties which, of course, fall chiefly on the wealthy sections of the community.
305 In view of these figures, showing the huge proportion which poor men already contribute to national taxation and the relatively high burden which they are forced to bear, it seems incredible that the suggestion should be seriously put forward that they should bear a yet higher proportion, to the advantage naturally of the wealthy man. It seems strange to me that those who suggest that it is unfair that an additional burden should be put on the rich man, on account of the wealth he possesses, will never say it is unfair that that rich man should enjoy the advantages over his fellow citizens which that wealth gives him. But it is plain surely that, if it were not for the big discrepancies in the division of our national wealth, there would be little need for increased services and little need for the additional taxation which it is proposed to apply under this Bill. One agrees, of course, with the statement of the right hon. Gentleman the Member for Darwen (Sir H. Samuel) that, if the taxes to be raised were used for the prosecution of a further war, it would be a complete waste of our national resources and would be quite unjustifiable; but the strange thing is that hon. Members opposite who oppose the levying of taxation to-day to deal with urgent social reconstruction were perfectly willing, and even eager, to impose very much higher taxation in the year 1914–1918 for the purposes of slaughter and devastation which, of course, was wasteful in the extreme.
§ Mr. STRAUSS
My criticism is that hon. Members were perfectly willing to use the national resources of money, to say nothing of the national resources of life, in the prosecution of a war—
§ Mr. STRAUSS
I am afraid I should be out of order in entering into that argument at the moment, but the fact remains, and it is for the very reason that we on this side believe that the money to be raised by this Bill will not be used for purposes of destruction or waste but will be used to bring about some small measure of greater happiness to the community as a whole that we give it our support.
§ Mr. MARJORIBANKS
Many of us will be accused by people in the country of being financially interested on one side or the other, and the controversy might seem to range around those in the House who have or have not £900 a year. I remember that the Chancellor of the Exchequer caused a great deal of merriment amongst his own supporters when he remarked upon the alternate amusement and horror amongst the ranks of Tuscany when he announced that the Income Tax was going to be increased by 6d. As a matter of fact he was looking at our benches. He did not have an opportunity of remarking upon the attitude of the tribes of Gath and Askalon opposite. One of the most amusing things I have seen in the House was the look of horror on the faces of Members opposite when they were told that 6d. was going to be put on the Income Tax and before they heard the qualification. But, when the qualification was made, the mists rose and universal merriment pervaded the ranks opposite. If we are to get an impartial view of this Budget, we must get away from prejudice. One must use a little imagination and consider what the attitude of the impartial historian who reads the OFFICIAL REPORT will be as regards the Budget in 20, 30 or 40 years time, when he considers it as one of the land-marks in the decline and fall of the Socialist party. When he considers it, what will he think about it? [Interruption.]
Are we the only side of the House to interject remarks? When the last speaker was on his feet there was a sub-committee on the other side and the present speaker was taking part in it.
§ Mr. DEPUTY-SPEAKER (Mr. Dunnico)
The hon. and gallant Gentleman has no right to rise except on a point of Order.
I apologise, Sir, but I resent a remark that was made to me across the House.
§ Mr. MARJORIBANKS
I think that the historian of the future will regard this Financial Statement as being one of the dullest and simplest financial statements on record. He will have to look a little more closely into it to see the really interesting aspect of this Budget. This Budget is merely a statement of a very 307 simple position—a deficit on last year's Budget and an estimated increase of expenditure during the current year to be met by a burden upon the shoulders of a comparatively few who will be able in the next year to bear it. That is the Budget in its simplest form. That is the solution which the right hon. Gentleman has to offer for the financial position of the country. But is it really a solution? Is it anything more than a barren mathematical equation? Is it a solution for more than 12 months? Does it offer to anybody any hope of restoration either on the old lines of policy advocated on this side of the House, or, on the other hand, from the point of view advocated by our friends of the Mountain opposite?
My view is that the Budget solves nothing, suggests nothing and makes no experiment whatever. It is a hand-to-mouth policy dictated by the expediency of the hour. The historian of the future may well be tempted to dismiss this Budget as a great challenge refused and a great opportunity missed. But he will be unwise to do so. He will be well advised to look at the details of the Budget, when, I think, he will be aghast at some of the contradictions it contains. Here is a Chancellor of the Exchequer of undoubted courage and great sincerity, and well known to be of a saving temperament, a man who regarded £2,000,000 a year grasped from a defeated enemy as a great financial triumph and for which he received the well-deserved honour of the Freedom of the City of London, and yet we find this same man throwing away £250,000 which was collected from his new friends of the turf, because, forsooth, it was a blemish upon the Statute Book, and because it was introduced by my right hon. Friend the Member for Epping (Mr. Churchill). He throws away £750,000 purely because it was designed to protect British industry and also because it was collected against every kind of canon of economics of which the right hon. Gentleman is aware and from the foreigner. Here you have the amazing position of a skinflint Chancellor who counts every penny and yet throws away £1,000,000 and places additional burden upon the British taxpayer and therefore on British industry. Why? Because he is so inveterate a foe of gambling that he 308 refuses to regard it as a source of financial revenue, and because he says it is utterly impossible to tax the foreigner.
As regards the protection and the safeguarding of British industry, was any inquiry made before these, duties were taken off? Before they were put on a great many inquiries were made. This attitude is taken by a wage-earning Chancellor of the Exchequer, a Chancellor of the Exchequer who is proud to come from the wage-earning class and is inclined to despise everybody else as guinea pigs. Did he consult the wage-earners of the trades before taking off the duties? It is rumoured that he refused to receive deputations, and in this there is a certain amount of reciprocity, for undoubtedly he would have failed to have received a hearing had he gone down to address the wage-earners of those trades which he has now thrown open to foreign competition. There is in all this a certain logic. There is even a certain logic that in the whole of the Budget there is not a suggestion that this country is a great country and the motherland of a world-wide empire. A student of the OFFICIAL REPORT for the last two or three months would say that the attitude of the Chancellor of the Exchequer in regard to the West Indies had caused considerable consternation. In the view of a late colleague of the right hon. Gentleman, it has wrought havoc in the West Indian sugar trade. Yet there is not a statement of policy or an explanation in regard to the latter by the right hon. Gentleman except one sentence of scornful irritation when he said there was yet time for him to change his mind.
In all this one might regard the Chancellor of the Exchequer as one who has produced this measure by logical deduction from his principles, but if you apply the microscope closer to the policy of the right hon. Gentleman, you will find aspects which are totally devoid of logic. One read with amazement, considering his well-known attitude on temperance, that the Chancellor of the Exchequer had entered into some kind of corrupt bargain with the brewers who undertook not to pass on his tax to the public because it was really so slight. One is really surprised at the Chancellor of the Exchequer being a party to so corrupt a bargain, and, when he gives 309 as his reason for not making the taxation higher the fact that the brewer might give beer to the public which was not so strong, one is positively amazed, because to an advocate of temperance this would be a consummation most devoutly to be prayed for. Of course, the limit comes when he says that if you go beyond a certain point it will be a loss to the revenue because the duty is fixed upon specific gravity, and, though a reduction of one or two points in specific gravity may not be detected by the beer drinker, it may make millions of difference to the revenue. I think the right hon. Gentleman under-estimated the perspicacity of the ordinary beer drinker, but he does acknowledge that drink is a legitimate source of revenue. If the right hon. Gentleman says this about drink, why should he disagree about gambling? I cannot see the difference between these two forms of deplorable expenditure.
All these distinctions do not blur the right hon. Gentleman's philosophy which appears in every line of every speech he has made on the Budget. His mind is full of barren, unprofitable distinctions. He makes distinctions which cannot really be made between the consumer and the producer, between the taxpayer and the employer, and between the wage-earner and the capitalist. What is there really in his great claim that he has placed no direct tax upon industry? The reason for his applying his form of direct taxation is that you can tax, and you appear to tax, the really rich man who is able to pay. Does not this direct taxation fall in indirect form with very great severity upon the poor; the servant who is dismissed because the Chancellor of the Exchequer has taken his wages, and the motor mechanic who is dismissed by his firm because the Chancellor of the Exchequer has taken away from the public the price of a new car? Accusations will be made by such people against the Chancellor of the Exchequer during the coming year, and I am sure, however loud their cries may be, they will not change the fixed ideas of the right hon. Gentleman, who derives his philosophy from a sort of mixture of Victorian Free Trade and the fallacies of surplus values and class warfare which come from Karl Marx.
310 There will be a certain amount of sympathy with the Chancellor of the Exchequer in coming generations when they consider his position in this Budget. A great many allowances will have to be made for the right hon. Gentleman. Anybody who has any sympathy with him will inquire what other course the right hon. Gentleman could have taken. In the first place he could have been courageous. He might have broadened the basis of taxation and thereby prevented the growing financial irresponsibility of the people as a whole. That would not have been against the right hon. Gentleman's inherent principles, but, of course, it would be very bad electioneering, because the right hon. Gentleman knows as well as anyone that whilst it is illegal and a crime to offer a man a glass of beer for his vote, you can offer him £4,000,000,000 drawn from these parasites, these blood suckers, and keep within the law. He might have taken another course, if it had not been against his inveterate principles. We are the largest importing country in the world, and we have an enormous amount of unemployment. Had he not been tied down by his principles he might have raised considerable revenue out of the foreigner, and in doing this he would not have been doing anything repugnant to a great many hon. Members of his own party. The right hon. Gentleman knows it, but, being hemmed in on one side by political expediency and on the other side by his own principles, the right hon. Gentleman can only do what he has done, and by doing this he has set a term upon his position as Chancellor of the Exchequer.
This Budget has pleased nobody; that is apparent from the speech of the hon. Member for West Wolverhampton (Mr. W. J. Brown) which was received with such sympathy. The right hon. Gentleman cannot reconcile his two statements. The first was that in all probability he was not going to put new taxes on next year. How can he reconcile that with his second statement, that this is only the beginning of this line of policy; and we must remember that the second statement was made after the speech of the hon. Member for Bridgeton (Mr. Maxton). That, with the speech of the hon. Member for West Wolverhampton, is one of the most remarkable episodes in these Debates. It is perfectly obvious that the 311 hon. Member for Bridgeton looked to the Liberal benches and was filled with scorn. If the Government have gained supporters in that quarter they have lost their own zealots, the only members of their party who really meant what they said at the last Election. As the hon. Member for Bridgeton looked with scorn upon the Liberal benches, one could almost hear the old Roman poet saying:Non tali auxilio, nec defensoribus istis."
§ Mr. ARNOTT
We have listened to several speeches from hon. Members opposite this evening. The Debate began on a note of woe from the right hon. Member for Hillhead (Sir R. Horne) and we have had just now the even more solemn utterance from the hon. Member for. Eastbourne (Mr. Marjoribanks). The chief criticism of the Budget is on two grounds. First, that it taxes a very small number of the community, the rich people; secondly, the criticism that it does not touch these people at all, but really taxes the poor. Hon. Members opposite say that the rich people will not pay out of their own pockets but will draw from their reserves, and to that extent they will paralyse industry and increase unemployment and, by increasing unemployment, reduce wages, so that the ultimate burden of this taxation will not fall on the small minority but on the whole mass of the people. One of these criticisms must be wrong. Either the Budget taxes the whole people of the land, in which case they approve of it, or it taxes the small number, in which case they disapprove of it. Obviously it cannot do both at the same time. That is one contradiction, but there is a still greater contradiction.
The right hon. Member for Hillhead in his speech interpreted correctly, I suppose, the opinion of his party in regard to the Budget. Every argument the right hon. Member used was a Cobdenite argument; 95 per cent. of his speech was an exposition of the arguments adduced by Mr. Cobden and Mr. Bright when they occupied seats in this House and made speeches throughout the country. The burden of their argument was this, that if you are going to restore prosperity to the country the way to do it was by a reduction of taxation. The belief which formed the basis of their philosophy was 312 that the individual can spend money much more wisely than the State and, therefore, it was to the maximum advantage to leave as much money as possible in the pockets of the private individual and spend as little as possible through the agency of the State. They were opposed to every form of social service and to all expenditure on military purposes, not merely because they had a horror of war but because they believed it was wrong to take money from the individual by taxation and spend it in any way whatever.
That is exactly the kind of speech which has been made by the right hon. Member for Hillhead this afternoon. Another hon. Member also said that Cobden in his day had no affection for trade unions. That is perfectly true, and it is amazing, after hearing all these things, that the Labour party is to be lectured for its adherence to the Cobdenite doctrine. We have never pretended to accept that doctrine. We have opposed protection and tariffs, but we do so on quite other grounds to those of days gone by. The right hon. Member for Hillhead, after pointing out that taxation imposed upon the rich would in its final result diminish the amount of capital available, make capital more costly and raise the rate of interest, tend to diminish industry and cause more poverty, after saying all these things, began to deal with other aspects of Cobdenite teaching and advocated the retention of the Safeguarding Duties. He explained that by telling us that certain circumstances had changed to a remarkable degree since Cobden's day, particularly as regards the provision now made for unemployment. In those far-off days, he told us, the man who was out of work had the sole responsibility of finding employment. There was nothing in the nature of an insurance scheme, and this was one of the circumstances, he said, which made the conditions of to-day very different to the conditions of that time.
The hon. Member for Eastbourne has been much concerned about what the historian of the future will say about this Budget. If the historian of the future is not better read in the historians of the past than hon. Members on the benches opposite, it will not matter very much what he thinks. The right hon. Gentleman the Member for Hillhead has 313 forgotten entirely the condition of this country at the time when Cobden began his agitation. The repeal of the Corn Laws took place in 1845 and the Poor Law Commission on the old Poor Law reported in 1832 or some 12 years earlier. The agitation of Cobden and his followers was carried on for at least 20 years before it reached success; and every argument used to-day against unemployment insurance and social services, was used in those days against the old Poor Law, which did provide for the unemployed by compelling farmers to employ them and subsidising the farmers for that purpose. Anyone who has read any history at all or who has paid any attention to the anti-Corn Law agitation and similar movements proceeding at the same time, knows that one of the arguments used by so-called reformers in those days was directed against the very point to which the right hon. Gentleman the Member for Hillhead called attention. It simply is not true that there was no provision for the unemployed man at the time of Cobden's agitation. The Cobdenites were opposed to that provision. They took exactly the same view of social reform and social services as the right hon. Gentleman, and the conditions at that time as a matter of fact were similar, in many respects, to the conditions which exist to-day. One of the chief ways in which the taxes raised then were expended was in the payment of the interest on debt incurred in waging war, and the same thing applies to-day. It has been pointed out in this and previous Debates, that a large proportion of the revenue from taxation goes to meet the expenditure on debt incurred in waging the late War.
There is another aspect of this matter. The right hon. Gentleman, the Member for Hillhead complained bitterly that our taxation was much higher than that of the United States. The reason is obvious. The United States did not incur anything like the amount of debt incurred by this country during the War. It is true that France and Germany incurred similar debts, but Germany and France got rid of their debts by a process of inflation—you can call it inflation or repudiation. Do hon. Members opposite advocate the reduction of taxation by a process of that kind? We can easily reduce taxation by adopting similar methods, but a much more straightfor- 314 ward method, the method of the capital levy, was denounced by hon. Members on the benches opposite. If a proposal of that kind had been adopted the annual taxation would be very much less. But the obligations have to be met in one way or another. The present Chancellor of the Exchequer meets them by one method, and the difference involved is one more of degree than of principle. The right hon. Gentleman the Member for Epping (Mr. Churchill) and the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) employed the same methods and were subject to the same denunciations. When Sir William Harcourt was Chancellor of the Exchequer and introduced the Death Duties for the first time, he was subject to precisely the same denunciations as the present Chancellor of the Exchequer. Nay more, every one of these proposals was denounced by the party in opposition at the time as being likely to paralyse the whole of our industry and cause universal depression in the country.
Without going back to the days of Cobden I can remember quite well a Budget introduced in this Chamber when the Income Tax was 1s. in the £ and it was pointed out that sooner or later a tax of that magnitude would paralyse our industries. But those taxes have grown since then and nothing seems to have happened on account of them. It is impossible to suggest that unemployment is due to these taxes, because unemployment existed before the taxes were imposed, and it exists to an even greater extent in other countries where the taxation is considerably less than ours. It is no use telling us of how low taxation is in Germany or the United States, when we know that the unemployment problem in those countries is as serious as our own, and is, indeed, of even greater magnitude than ours. The reason for unemployment of course lies very much deeper than questions of taxation or tariffs, and I hope that if the hon. Member for Eastbourne is going to write the history of the present day he will make it sufficiently attractive to ensure that his successors on the other side will read it, and will realise the blunders into which the spokesmen of the Conservative party have fallen this afternoon.
§ Captain CAZALET
The Chancellor of the Exchequer a few days ago said that there was a fundamental and unbridgeable difference between his views and those of hon. Members on these benches. I think that statement is perfectly true, and that the speeches to-day have borne it out. We believe that any additional taxation beyond what is absolutely necessary is injurious to the trade and industry of this country. We sincerely believe in the old dictum that the more money is left to fructify in the pockets of the taxpayers, the better for the industry of this country. The Chancellor of the Exchequer takes a diametrically opposite view. He positively relishes and enjoys imposing additional taxation on a small section of the community; he thinks direct taxation a positive benefit to industry, and when he comes to Estate Duty or Death Duties he waxes lyrical on the social benefits to be conferred on the country by the imposition of such taxes. [HON. MEMBERS: "Hear, hear!"] I am very glad to get that sentiment supported by hon. Members opposite, but where an industry or an individual is prosperous and doing well, that is sufficient for the Chancellor of the Exchequer to come down in a predatory raid and extract some of the profits. We are now told that this taxation is for the benefit of the poor and needy. It is, of course, a very laudable and Christian sentiment for the needy to be provided for out of the pockets of the rich, but the time has come when those who are more fortunate, either by their skill or their industry, or through the careful savings of their ancestors, should be considered as well as the poor. If one quarter of the attention, time, trouble and sympathy that he gives to the unemployed were paid by the Chancellor to the employed in order to keep them in employment, it would be far better for the trade and industry of this country.
We have heard a good deal in these Debates about the uneven distribution of money. Everybody on these benches desires to see a greater degree of wealth distributed over a larger number of the population. [HON. MEMBERS: "Question!"] That surely is the only method by which the country as a whole can grow richer, and I can hardly imagine anybody questioning that. There is a point—and I think that that point in taxation has been reached—when by making the rich 316 poorer we do not necessarily make the poor any richer. In the United States of America a higher standard of living is enjoyed by a greater proportion of people than in any other country, and yet in that country there is, on the one hand, the greatest number of millionaires, and on the other hand, the greatest disparity between the rich and the poor.
There is perhaps one section of the community who will be grateful to the Chancellor of the Exchequer because of the increase in those Duties. They are those members of a family who have not yet had their portion of the family fortune, for I am certain that the action of the Chancellor of the Exchequer will be more potent in getting them their share of the parental pile than any demands on their own pockets. We have had quoted to the House the case of a gentleman who was left a landed estate of 30,000 acres, and who was called upon to pay £200,000 in Death Duty. The estate has for the last few years brought in practically nothing. What was the position? He could, of course, try to sell the land, and, if he could not find a purchaser, he could hand over 20,000 acres at £10 an acre to the Government. Who would benefit by that? Would the heavily mortgaged farmers benefit, or would the country as a whole benefit by having a large number of farmers mortgaged up to the hilt, who have not sufficient or adequate capital with which to carry on their business efficiently? We can only take it that this is one more blow aimed at the agricultural districts of this country because they would not respond to the specious promises of the Socialists at the last Election. Some years ago I made a comparison between the amount of taxation paid by an individual in this country who was receiving the same salary as the Chancellor of the Exchequer—who will not, I am sure, consider himself overpaid—and that paid by a similar individual in the United States. I found that a man in that position in this country paid in Income Tax and Sur-tax somewhere between £1,200 and £1,500 a year and that in America he paid under £200. These calculations were made before the decrease took place in the United States, and before the increase took place in this country, so we have the position to-day in which a man with £5,000 a year in this 317 country pays 10 times that which a man of similar income pays in the United States. The disparity between the degree of taxation levied in this country and the United States is not often realised. I do not think that the Chancellor of the Exchequer has yet realised the full extent of the harm and depression which his Budget has caused. If one takes the so-called luxury or artistic trades, such as furniture, theatres, music, magazines and paintings, one finds that those who carry on these businesses have never experienced such a slump as they are experiencing at the present time. [An HON. MEMBER: "And they never built so many cinemas!"] I am informed that in certain cases even the cinemas have suffered since the introduction of the Budget, but in almost every one of these instances orders have been restricted or cancelled since the introduction of the Budget. These observations are made on evidence which has been given to me by the people who have suffered.
As a result of the Budget, the savings of this country will be reduced; yet no one had paid more adequate tribute to the necessity of savings than the Chancellor himself. It will retard a trade recovery, and it will lead, as the Lord Privy Seal admitted yesterday, in the gradual exodus of money from this country and prevent foreign money coming to this country. It may very well damage a favourable Conversion Loan, and last, but not least, it will lose the Chancellor the good will of a large proportion of the taxpayers. They may be a small class, but it is upon their good will that a satisfactory revenue depends. The individual can always get the better of the Treasury. The Treasury may move surely, but it moves slowly, and if we alienate the good will of a large number of the people who contribute a large proportion of the revenue, the Treasury will be quite helpless.
I have listened now for six years to the speeches of the right hon. Gentleman the Chancellor of the Exchequer and have admired the cogent logic of his statements, but really it is a little irritating to hear the Chancellor speaking to-day as though he were the only authority in financial affairs, and that any views which were not in accordance with his own cannot possibly have a stratum of truth. Further, the Chan- 318 cellor of the Exchequer always desires to have the best of both worlds. If things turn out satisfactorily, it is due to the Socialist policy which he has pursued at the Treasury; but if they are not satisfactory, then he disclaims all responsibility and blames the Conservative party, and in particular my right hon. Friend the late Chancellor of the Exchequer, who, however, is quite able to take care of himself in these matters. I am sure that if the Chancellor could only attribute the Wall Street collapse of last November to the personal speculations of hon. Members on these benches it would almost compensate him for its result.
In one sentence in the OFFICIAL REPORT the other day he disclaims all influence upon or control over the Bank of England, and in the next sentence claims the credit for having produced conditions for the low Bank Rate. Everybody knows that by his action in reducing the number of Treasury bills available he was largely instrumental in causing a low Bank Rate, but if money is cheap it is also scarce, because no one wants it, and if the Chancellor is priding himself on having produced the conditions which fostered cheap money, what argument is there in support of the extravagant 5 per cent. Conversion Loan which was issued three months ago? I have not met a single banker, economist, financier or industrialist who did not admit that that 5 per cent. Conversion Loan was a great mistake. I suppose the Chancellor took such advice as was available to him, but the right hon. Gentleman the Member for St. Ives (Mr. Runciman), both in this House and outside, and other economists also, warned him that we were entering upon a period of cheap money. In spite of that the Chancellor issued this extravagant loan at 5 per cent., thereby imposing an additional burden of many millions on the taxpayers of this country for a period of 15 years, and incidentally putting many hundreds of thousands of pounds of profit into the coffers of some of the big corporations and banking establishments.
There is a body of opinion, and a growing one, that the policy pursued by the Chancellor and the Bank of England has been largely responsible for the increase in unemployment and the trade depression. It is maintained that a policy of deflation has been going on in this country for the last four years, connived 319 at, consciously or unconsciously, both by the Treasury and the Bank of England, and that it has been accentuated during this year of the right hon. Gentleman's tenure of the Chancellorship. The other day the Chancellor of the Exchequer, in replying to criticism that his policy had restricted credit, said that probably the best single test we could have was to be found in the bankers' deposits in the Bank of England, and he quoted them, and added:The figure for April was thus £2,620,000, or about 4 per cent. better than the figure for April last year."—[OFFICIAL REPORT, 1st May, 1930; col. 437, Vol. 238.]That is a fact which no one will deny. On the other hand, I have here the figures of the deposits of the London Clearing Bank for the months of January, February and March, and they show that in January they were £41,000,000 down on last year, in February £63,000,000 down, and in March £57,000,000 down. If we look at the same time at the gold deposits in the Bank of England during the first three months of this year and the first three months of last year, we see that they have hardly altered—not more than an odd million or two. The deduction to be drawn from these figures is that the reduction can only have been made by the Bank of England selling securities in order to make the Bank Rate conform to the discount rate, and that in itself is a policy of restriction of credit. I realise that arguments can be put forward in opposition to these statements, but the net result is that, though money may be cheap, there is such uncertainty both as to the present and to the future of our country that no one wishes to borrow money to put it into any industrial venture in this country.
My last point deals with Safeguarding. I have been brought up as a Free Trader, and still believe that the arguments in support of the Free Trade theory usually win the day. All my life I have listened to arguments in support of Free Trade, but I have seen those arguments, which are not reputed satisfactorily, perhaps, by rhetoric or oratory, refuted by the stern sequence of economic facts and events. [Interruption.] It grieves me to have upset my hon. Friends on the Liberal benches. I have seen unemployment increase. We are told: "Look at Germany and look at the United States. 320 They are highly Protectionist countries, but they have millions of unemployed. If that is the argument, that there is unemployment in those countries because they are Protectionist, surely we can refute the Free Traders with their own argument. This country is Free Trade, and therefore we ought to get the benefit of Free Trade. It is a poor consolation to the unemployed in this country to tell them that there are unemployed in Germany and in America, and therefore they must not expect anything different in this country.
Not only do we see increased unemployment, but a divergence, and a growing divergence, between the wages enjoyed by people in sheltered industries and those in the unsheltered industries. We have been losing markets throughout the world, and other countries are putting up their tariffs against us. We do not want Safeguarding or some degree of Protection in order to foster inefficient industries. We do not want Safeguarding in order to create "rings" and monopolies through which the public are to be exploited. We desire a measure of Safeguarding because we believe it will increase production and lower overhead expenses and thereby enable us to produce more cheaply. We want it as an instrument with which to be able to bargain, and in order to be able to guarantee a good standard of life to those who are engaged in the export and the unsheltered trades. Supposing the argument is right that by putting on Safeguarding Duties you decrease the total wealth of the country, because you make the whole country pay more for particular articles. We claim that that is only a temporary effect, and we claim that it is better that the total wealth of the country should, for a short period, be decreased if in that way we can secure adequate employment and wages for certain sections of the community. [HON. MEMBERS: "If."]
Let us take the question of the lace workers. [Interruption.] It is easy for hon. Members opposite to deride our anxiety, but why should they claim a monopoly of all the virtues? We are just as sincere in our beliefs as they are, even though it may be perfectly possible to prove that Safeguarding has, I do not say led to, but has been accompanied by an increase in the imports during the period it has been in operation, that only 321 means that when we do away with the duty the imports will be all the greater If there are men and women unemployed in the lace industry to-day, if we take off the duty there will be still mere unemployed. Will that benefit anybody? If there were other trades and industries flourishing to which those men and women could look for employment, there would be some force in the argument, but even if there were jobs available elsewhere, they could not go to them because there is no housing accommodation for them. We believe that Safeguarding will ensure a definite livelihood for various sections of the community, and that it will lead not to increase but to decrease prices. I regard this Budget as cold, callous and calculating. It is cold in its application, callous in its regard for the workers, and calculating and irritating to those who are trying to encourage a return of trade and industry to this country. I believe that the additional taxes in this Budget were penal in their conception, and I believe they will be disastrous in their consequences.
§ Sir DONALD MACLEAN
I was very interested in listening to the speech of the hon. and gallant Member for Chippenham (Captain Cazalet). I noticed from his preliminary observations that he was at one time a Free Trader and I was hoping that he would have preserved some of his original righteousness, but, after the speech he has just delivered, I shall be able to give him full marks as a Tariff Reformer. Several speeches have been made in this Debate which might easily have been delivered on the introduction of the Budget. Some of the points made about the Budget are scarcely in accordance with the traditions of what really is a Budget. The Chancellor of the Exchequer is bound by the Estimates laid before the House in Committee of Supply. Many of the points which have been made in this Debate have already been dealt with, and, therefore, it is no use talking about matter relating to social theory and practice. The Chancellor of the Exchequer has to find the money for the Estimates for the year, and, therefore, it is only competent for us to criticise the whole scheme and the enormous cost which is involved. It is quite unfair to attack the Government of the day because they do not happen for the moment to be 322 applying their different social theories and matters of that kind.
This House, after all, is more or less a practical working machine. Hon. Members have to address themselves to the questions raised in the course of the Budget and leave theories and beliefs alone. We have heard a great deal in this Debate as to the virtue of Protection as an alternative to the present method of raising the nation's necessary revenue. I wonder how far it is realised that there are more articles taxed now, and that there is a larger measure of Protection in our national finance at the present moment than there has been since the great Budget of Mr. Gladstone in 1860. Therefore, if it is true that there is any benefit to be derived from Protective measures, it ought to have shown itself before now.
Hon. Members have expressed the belief that we need not worry much about money and how much we spend, and they contend that the more money we spend the better it is for the country. That, argument has also been fairly tested, because if you look at the Budgets of the last few years it becomes more and more apparent, in fact it is glaringly obvious, that if large expenditure benefits a country through State channels, it ought to be reflected in the general condition of the country, and indeed it is so reflected. Perhaps the House will permit me to give a few figures. The national expenditure in 1924–25, for which the present Chancellor of the Exchequer was responsible, amounted to £795,000,000. The next year it was £826,000,000, the year after, £842,000,000 and then £838,000,000. After that, there was a drop to £829,000,000 and there was a rise last year. We do not know exactly what the total expenditure will be, because it has not been returned to us, but the estimated expenditure was £837,000,000. Now the House is faced with the appalling sum of £884,000,000 for this year. If huge expenditure is going to benefit the country, then we ought to be feeling the benefit of it to-day.
Another point which has never been met, but which has been very much canvassed in other debates, on which I take a distinctly different view from many hon. Members opposite is that direct taxation, levied as it has been for the past few years, does not really do any 323 damage to industry. I think that the right hon. Gentleman the Member for Darwen (Sir H. Samuel) pretty well exploded that argument this afternoon. I find that the Colwyn Committee have been very much misquoted this afternoon but, anyhow, from the ordinary commonsense point of view, it is ridiculous to deny that in the case of profits which normally in well-conducted businesses go back into development, if you take a very large and increasing proportion of those profits for the purposes of State expenditure, you have not got that money to put back into industry. There is not the slightest doubt that very heavy taxation has a real deterrent effect upon the development of industry.
These theories have been tried out to some extent, and we find ourselves to-day—though I do not take the pessimistic attitude of some speakers—faced with the fact that the country is certainly in a very difficult financial position. Is there something else we have not really tried? There is one very old-fashioned remedy. It is only a partial one, I admit, but there is certainly no sign of it being rigorously applied to-day. At the Box, where the present Chancellor of the Exchequer stands, there have been Chancellors in the past—Sir Robert Peel, Gladstone, Sir Michael Hicks-Beach, Sir Stafford Northcote, Goschen—the whole range of them. I am glad to find some obvious signs of hereditary instinct in regard to that first and most important quality of some of those Chancellors of the Exchequer in the present Chancellor of the Exchequer, namely, a desire to administer the finances of the country with a rigid application of economy in the various Departments. I am astonished when I hear hon. Members, for whom I have great respect in their political views and personal character, and their general capacity as Members of this House, sweeping aside all those not merely traditions, but long years of experience, with a grand gesture and saying that it does not matter.
In the most interesting speech which we had from the hon. Member for West Wolverhampton (Mr. W. Brown), as far as I could see, he regretted, not that the Budget was £884,000,000, but that it was not nearly twice that size. It was a perfectly astounding position to take up. 324 Why, the whole experience, not only of this country but of all other countries, shows what a most important thing it is that this House, as well as the Chancellor of the Exchequer, should exercise their powers of enforcing economy on the spending departments of the State. There is against that not so much a position of non-acquiescence, as a position which is really negative. It is even said that we do not spend enough. We spend hundreds of millions more than this country can really afford. There are some social services which, I am proud to think, as a humble back bencher many years ago, I assisted in putting on the Statute Book. They are absolutely necessary parts of the national system, and the money for them must be found. It is not charity, but a rising standard of citizenship and mere justice. But in the application of those doctrines we must enforce economy.
Let us take the actual facts of what happens in our Estimates this year. I took the trouble to see that stout volume containing the Estimates of the year. I advise hon. Members who take an interest in this to get a copy of it from the Vote Office, and to read the memorandum prepared by the Financial Secretary to the Treasury. That memorandum is in the best form I have seen for several years. When I was standing at the Table in Opposition, I used to urge upon the financial authorities of that day the importance of presenting the memorandum so that Members could see at a glance where the increases of expenditure were. I congratulate the Financial Secretary on the admirable way in which that memorandum has been presented. But what does it show? It shows 10 classes, and in every one there has been a large increase—not of a mere £100 here and there, but very great increases. In only three of those classes is there any instance of a realised decrease, and each one is an automatic decrease. There is the automatic decrease in regard to the ex gratia grants to Ireland, an automatic decrease in connection with War realisations—the zinc contracts with Australia having come to an end—and then there is the automatic decrease always associated with the sad memory of the numbers of War pensioners who have died.
Taking the Estimates as a whole, they show alarming increases, [An HON. 325 MEMBER: "Not the Navy!"] I am taking only the Civil Service. We have that state of affairs which really calls for close inquiry and alarm. We know it is said that if you increase the services, you must increase the staff, but it ought to be done only after the most careful scrutiny. I say that amongst the many suggestions made for increasing our financial stability and our resources, there is still a great deal to be said for the old Roman maxim, laid down pretty well 1,000 years ago, that one of the best sources of revenue for a State is the practice of economy in the administration of its finance.
§ Mr. MATHERS
I think that the Debate which has taken place to-day gives the Chancellor of the Exchequer a very easy task in replying to it. In the first place, it must be agreed that those Members on the benches opposite who have been complaining about the extent of the taxation that is being levied, are showing a very different attitude from that which they were urging upon the House some little time ago, when legislation was being proposed that would involve burdens upon the taxpayers. At that time, no doubt because of the opportunities of gaining certain party advantage in urging expenditure along what were very beneficent lines for the people, they were urging us to go in for greater expenditure, and thereby add to the burdens on the taxpayer. I ventured to say in one of these Debates that I thought they were urging us along that line, but that they were looking forward with very great misgiving to what the Chancellor of the Exchequer would have to propose in the Budget. First of all, it must be agreed, I think, that increased taxation was necessary in order to meet the deficit caused by the bad book-keeping of the late Chancellor of the Exchequer. In view of the fact that a General Election was coming on in the year in which his Budget was presented, he indulged, as our present Chancellor was able to show, in an over-estimate in the yield of certain taxes. It has fallen to his successor, the present Chancellor, to have to meet that deficit, and no complaint can be made about the fact that increased taxation has had to be levied.
Complaint is made that the present Budget is vindictive in its application to a certain section in the community. 326 One might be inclined to retort that, if for four and a half years the late Chancellor of the Exchequer had the opportunity of applying taxation in a way that suited his particular friends, there cannot be a great deal of complaint about the same thing being done now, when there has been a change of government and a change in the complexion of this House. I want, however, to make the claim that taxation in this Budget is not being applied vindictively, but on wise and sound lines. It seems to me that we can accuse Members on the other side of the House of thinking far too much of themselves and of being much too audacious. A number of Latin tags have been flying about to-day that I do not profess fully to understand, but there is one very simple French saying, attributed to Louis XIV, which I think fits in with the thought that I am trying to express. He said: "L'état, c'est moi." It seems to me that the Conservative party of the present day are trying to make out that they are the whole of the people, that they only ought to be considered.
That is a big assumption when it is remembered that those for whom a special plea is made by hon. Members opposite, with respect to the burden of taxation that is being placed upon them by this Budget, are only a very small, and, in a proper estimate of things, a very unimportant section of the people of this country. It is claimed that they have a very great deal of the wealth of this country. We are entitled to ask how they came by that wealth, and how that wealth was produced, irrespective of whose hands it is in at the present time. When we get down to fundamentals, we are forced to a realisation of the fact that wealth can only be produced by the application of labour to our natural resources. Why, then, should our opponents complain about the taxation that is levied to-day? Years ago they had the opportunity of preventing the heavy taxation that is being levied to-day. We put forward, from a thousand platforms in the country, propositions that would have made it unnecessary to have such an enormous Budget as is now presented to us by the Chancellor of the Exchequer. We proposed a Capital Levy, and, if those wealthy people had used their political powers wisely, when they had the whole of the Tory party behind them, 327 they would have gladly assented to the idea of having a Capital Levy and removing this burden of taxation by one big cut, rather than going on year by year paying for it.
In contradistinction to Latin or French, there is an old Scottish saying that might be used here—" Better a finger aff than aye waggin'." That is exactly the position in which our friends of the wealthy classes are placed when they look forward to a Capital Levy. [HON. MEMBERS: "Translate! "] For the benefit of the Sassenach, it might be translated in this way. The burden of the National Debt has grown to such proportions that it forms a great big swelling, which requires treatment year by year with a poultice. If those who are responsible for maintaining that great swelling are not prepared to have it dealt with by the surgeon's knife of a Capital Levy, they must continue year by year to provide the poultice that is represented by £350,000,000 or thereby in taxation to meet the charges upon the National Debt.
§ Mr. MATHERS
I agree that it is not a literal translation, but I must suit myself to the intelligence of this House, and to its capacity for comprehending what I am trying to explain. What are we asking these wealthy people to pay for? We are asking them to pay for security for their wealth. I think we are entitled to remind ourselves that this generation has made sacrifices to secure that wealth in the hands of the people who hold it at the present time—that that wealth has been secured to them by very great sacrifices, made in large proportion by men who at the present time are going about unemployed. If there is to be security for that wealth, there must be security for those men who made the sacrifice, and not only have we to provide for the deficit incurred by the late Chancellor of the Exchequer, but we have to provide for the social services that will prevent difficulties in this country, that will help to smooth the process of keeping life in in many of our citizens. I claim that, if that relief is denied, much greater risks are run by the holders of the wealth than they run in the form of the possibility of ruin which they try to 328 tell us is placed upon them by the heavy exactions of this Budget. I have no wish to enter into the controversy as to whether Free Trade or Protection would take us out of these difficulties. I have only risen to put forward these one or two points, which I think are worthy of consideration, and I am certain that, as I said at the beginning, the Chancellor of the Exchequer will find it quite possible to defend, and will have an easy run in defending, this Budget against all comers.
§ Sir ASSHETON POWNALL
This Debate has covered, as is usual on these occasions, a great deal of ground. My remarks will be almost entirely confined to the question of the Budget. A good many hon. Gentlemen opposite have set me rather a bad example. As a case in point, there is no mention of a Capital Levy in the present Budget, although the party opposite are now the largest party in the House of Commons, and, if they can get sufficient support, nothing is impossible for them. I want to deal with one small point that was dealt with by the Financial Secretary when, two or three hours ago, he expatiated at some length, and with some little gift of imagination, on alleged differences between those of us who sit on these benches. I cannot help remembering what I have seen this afternoon in the "stop press" of the evening newspapers with regard to his hon. Friend—I do not know whether he is now his colleague in the Government—the Chancellor of the Duchy of Lancaster, or the late Chancellor. I do not know which he is, but if we look to the Front Bench opposite to-morrow we may find a vacancy there. If the Financial Secretary looks over his right shoulder he will find 15 hon. Members who normally vote with his party, but who abstained from doing so last night. Since he spoke he has had an opportunity, perhaps, of hearing a speech from the hon. Member for West Wolverhampton (Mr. W. J. Brown) which, I think, will show that the degrees of loyalty are somewhat strained in his own party. [HON. MEMBERS: "What about Beaverbrook?"] I think the maxim about the mote and the beam appropriately applies to the party opposite when they talk about loyalty in our party. Perhaps the hon. Member will think of these things a little before he starts to lecture us on loyalty. [HON. MEMBERS: 329 "Now come to the Budget!"] Yes, I now propose to come to the Budget.
The Budget was a very great disappointment to me, for the reason that two or three years ago it was my privilege, in one of the Debates on the Finance Bill, to speak immediately before the present Chancellor of the Exchequer. I said that the only practical saving that I could see in the next few years was the posibility of converting, from 1929 onwards, the very large sum of between £2,000,000,000 and £3,000,000,000 of 1927–1947 War Loan, on which we are paying 5 per cent., to a lower rate of interest. The present Chancellor of the Exchequer followed me in that -discussion and said that, broadly speaking, he agreed with the arguments that I had put forward. I hoped that that was a little straw showing how the wind was blowing, and I hoped that this Budget would not have brought in any fresh measure of taxation but that the right hon. Gentleman would have kept on the taxation, Safeguarding or whatever it was called, that already existed, and that we might, now that the bank rate is so much down, the lowest it has been for many years, have entered upon a big scheme of conversion of the 1927–47 War Loan, which would of itself have saved many millions, almost tens of millions, of pounds. That was the statesmanlike way of treating the present financial problem, but the right hon. Gentleman, partly, I agree, because of the millions which he had spent last autumn in various ways was, unfortunately, unable to adopt that course, which would have given the country as a whole a sense of confidence that, unfortunately, it has not got at the present time. The possibility of converting on a 4¼ per cent. basis would have given the world as a whole a measure of confidence in British finance that an increase of taxation does not give.
Many documents have been quoted in this Debate. I happen to have a document, which I do not think has been quoted, to which I am sure hon. Members opposite will listen with interest, if they have not already read it. It is a report from the General Federation of Trade Unions on the effect of taxes upon prices. It is extremely well expressed from my point of view. Instead of being a report from the trade unions 330 before the Budget, one might have thought that it was a report of the Conservative party on the Finance Bill after the Budget. That is the highest compliment that I can pay to it. I am not going to trouble the Committee at length with quotations from the report, but there are a few passages relevant to our Debate which are of special interest at the present time. Here is one:The Super-tax is in the nature of a draft exacted in advance. It anticipates the Death Duties and reduces the amounts extractable from them. It follows that the higher the Super-tax, the lower may be the yield from Death Duties.I commend that statement to right hon. and hon. Members opposite, because they increased both Super-Tax and Death Duties. Going on to speak about the burden of taxation, it says:That such exactions do weaken both will and power, cannot be doubted.The power to save, it is not doubted, are weakened by financial exactions such as this Budget proposes. The Report goes on to speak about weakening the will to save. It says:That excessive taxation has psychological consequences and weakens the will to save, seems to be demonstrated by the growth of spendthrift habits amongst the richer members of the community.The Report then points out that resentment engendered by taxes not only induces extravagance at home, but leads to various evils, which it enumerates, and it proceeds to say:If this is true, the destruction of self-interest in savings can only result in national disadvantage.There are many similar paragraphs, but I will quote only the last paragraph in the Report:It is important that the workers of Britain should realise where the burden of all taxation ultimately falls, and to what extent it prevents the accumulation of that capital which is necessary to maintain and expand that industry by which they live.I do not think that I have ever seen the position better put than in this document issued by the Trade Union Congress two months ago. [HON. MEMBERS: "Not the Trade Union Congress!"] Well, the General Federation of Trade Unions.
§ Sir A. POWNALL
There are four authors. I will read their names: Mr. 331 Sime, Mr. Birchenough, Mr. Frayne and Mr. Appleton. I am not so conversant with trade union organisation as some hon. Members opposite, but the General Federation of Trade Unions is a name that I know quite well as an organisation in the trade union world, and I should have thought that it was or sufficient influence to carry weight with the majority of hon. Members opposite. [HON. MEMBERS: "We know them!"] I am sorry, because I was hoping for a measure of conversion among hon. Members opposite.
I recognise the difficulties that the Chancellor of the Exchequer has had in the framing of the Budget and also with the events of the past year. The right hon. Member for Darwen (Sir H. Samuel) gave a figure of something over £200,000,000 which his party have worked out as being the total cost of the promises made so glibly from the hustings a year ago. Our own estimate was in the nature of £250,000,000. The Chancellor of the Exchequer has so far only given extra benefits to the tune, I think, of £25,000,000. In other words, there were 10 expectant recipients of doles and nine out of the 10 have been disappointed. Only one of the 10 has received the benefit that the £250,000,000 might have given him, whereas only £25,000,000 have been forthcoming. I can quite understand the rebellion in the party opposite in regard to that. May I call attention to a statement of the Prime Minister in connection with this question? It is generally admitted that large sums of the £25,000,000 will go in what the Financial Secretary called compulsory charity. That is a new word. Social services we have called them in the past, but in the future we will call them "compulsory charities." As regards compulsory charity, this is what the Prime Minister said:There was some danger of pauperisation in the Labour policy, but that could easily be avoided.The Chancellor of the Exchequer knows how difficult it is to avoid it. A great deal of the extra £25,000,000 is going literally in pauperisation. The Prime Minister also said:The greatest risk that the Labour Cabinet will have to run in the development of its industrial policy will be the 332 temptation to offer doles instead of prosperity.When yesterday we were discussing unemployment we knew quite well that the present Government have not given us prosperity, but they have given us 600,000 more unemployed than there were a year ago, and this Budget is a method of trying to finance doles. In other words, the danger which the Prime Minister saw a few yeas ago is now materialising at the expense of the country as, a whole, which has to find tens of millions of pounds extra, which it can ill afford, because the Prime Minister has not had the courage to try to put prosperity in the place of doles. That, I think, is not an unfair way to summarise it.
What is the position with regard to the future? We know that, as regards the Continent of Europe, wages are far lower than they are here. I am not going into the question of Protection and Free Trade, but in Australia, where they have wages 50 per cent. higher than we have in this country, they have high tariff walls, but our difficulties with regard to finance are greatly increased by the much lower labour costs that they have on the Continent. They have much lower taxation there also, and how are employers going to get into their stride again if they are handicapped not only by higher labour costs but also by the excessive burden of taxation, which was quite heavy enough in years past, but which has been increased by this Budget I Therefore, I hope that during these Budget Debates we may have the chance of upsetting the Government on this issue.
§ Mr. LOGAN
I want to deal with this question from a different aspect entirely from that from which it has been dealt with by any other speaker to-night. The Chancellor of the Exchequer, who is a finer Chancellor, and one of whom we have never had the like before in this country—[HON. MEMBERS: "Hear, hear!"] Hon. Members opposite know it. The very fact of the poverty of the benches opposite to-night proves it. I have made a note that for nearly four hours only five Members of the Tory party have been there, and the nation is financially ruined! Only five Tory Members out of 250 present in the House, and the whole nation going to ruin! I 333 know there is great excitement in that part of the country from which I come, the Scotland Division of Liverpool. The rise in the Income Tax has caused perturbation among them, and they are afraid, these landed gentry whom I represent, that the Death Duties which they will have to pay will mean confiscation and the ruin of their estates. They will not need to go to America to run racing studs, because they are all giving tips in the Scotland Division to make a living.
A right hon. Gentleman opposite the other day, when dealing with the difficulty of raising money for the Budget, complained of the tax on industry and said they had also to pay for National Health Insurance, and he added, "I would not pay it if I had the money." Might I tell him that when Members opposite want to make their fortunes, they make them with the help of the working people, but when unemployment comes along, they want to know why they have to pay for the people who went down to the sea in ships to protect their trade when they wanted their lives to protect it. We have coolie labour in Liverpool, Chinese labour, and Lascar labour, and we have a rank and file, out of 45,000 in my division, walking the streets, the best men that this land ever gave to the mercantile) marine, and they are going to the Employment Exchanges, and Poor Law institutions, and public assistance committees. What for? Not to add to the burdens of the Budget, but to get the bare means of subsistence, which you are bound to give to those that are alive. I walked through the Lobby of this House the other night, and I visualised the great poverty of the people that I represent and the great wealth shown in the corridors of this House when two Noble Ladies walked through with ermine coats—
§ 10.0 p.m.
§ Mr. LOGAN
I beg pardon. It has been asked in this House to-night why we should have to meet the burden of expenditure such as we have to meet, and I am very glad to be able to say that we have to meet that burden, because our people have to labour and to toil. The hon. Member for Eastbourne (Mr. 334 Marjoribanks) gave us a Latin quotation. There is a Latin quotation in "Robert of Sicily," if I can remember my early schooldays and my university training at Borstal, and that Latin quotation said:Deposuit potentes de sede exaltavit humiles.He hath put down the mighty from their seat and hath exalted those of low degree.You are face to face in this House with a problem that you must meet. In my early days I remember reading about the consternation that there was in this country when the Right Hon. W. E. Gladstone had to raise his first Budget of £90,000,000. To-day you are confronted with a Budget of £884,000,000. I heard to-night one of the economists of the modern school talking of the 1929–47 stock being put on to the market, and being floated, and saying that there would be millions of money saved thereby. Would the Tory party dare to float 1929–47 stock on the market to-day? They know it is a good proposition to put forward for the Labour Benches, but it would not be practical politics for the Tory party to dare to do it at all. Let us face facts. You have got to find the money, and where are you going to find it? You may talk of 1929 stocks, but what stocks have the people got? Some of you ought to be pilloried in the stocks. On the question of finance in the Budget, I do not wish to be personal at all, but I want you to realise if you can, how important it is—
§ Mr. LOGAN
I want Members to realise the importance of this matter is so very great that the responsibility must be shared by all alike in this House. I am not concerned with the question of Free Trade or of Tariff Reform, but I am concerned with the interests of those people I represent, and who can only get the full maintenance according to the manner in which you deal with these things. I feel that this is a magnificent Budget, that it is as far as in the present position one in the Labour party on the Front Bench dare go. But believe me it is not as far as I would like to see it go, and not as far as those outside would like to see it go. It Shows on our part a reserve, an equanimity, and that there is a natural aptitude for knowledge regarding figures 335 on this side that the breaking point would be reached if taxation were any greater than it is to-day. We know that with the advance of time we shall have a change, and that as all great cities have increased in value with their growth, so the national finances will increase and enable us to deal with the matter. The value of the City of Liverpool has increased wonderfully. It was bought about 400 years ago for a matter of £500. Three years ago one yard of that land was sold for £350. So that the question of taxation need not trouble you at all. I am sorry that I have made so many mistakes to-night, being unaccustomed to speaking in the British House of Commons, but, with all due respect, I say that this is a great Budget, a Budget which gives great hope to the people, and I trust that Members on the opposite benches will give us some further proof that they have knowledge of what they are speaking about.
§ Mr. GRAY
I have only a small contribution to make to what has been a particularly interesting Debate showing the divergent views of the three parties in this House. Our friend's above the Gangway do not think it is right that taxation of the rich should be increased. I presume, apparently, they think it is quite right to increase it upon the poor. It is evident that though they object to any increase in direct taxation, they have not the slightest objection to increasing the vast multitudes of duties on the varied commodities which the mass of the people have to buy. That they have shown very clearly. We, on these benches, welcome this Budget, because in the main we recognise it as a Budget along the lines of regular Liberal tradition. We are interested to observe the divergent views that emanated from the back benches opposite. It would not be far wrong, perhaps, to say that there is a much wider gap between the back benches and the Front Bench on the other side of the House than between that Front Bench and the benches in this part of the House. I want to ask the House to consider whether there is any real foundation for the big attack that has emanated from the Conservative benches on the ground that you are really taxing the rich people for the benefit of the poor. I do not think there 336 is the slightest justification for that statement, and I would ask the House to try to get the figures of this Budget into a somewhat clear focus.
What is the cause of the expenditure we have to meet? There is £355,000,000, the largest sum in the Budget, to meet the charge on the Debt and the Sinking Fund. There is £175,000,000 to cover the defence services and War pensions. There is, roughly, £100,000,000, which represents the administrative services of the country, contributions to local taxation account, justices, revenue officers and general administration. Then there is a, further figure of £150,000,000, which represents the money spent on the social services, about which we hear so much. That £150,000,000 covers the whole of the expenditure on the Health Ministry, education, old age pensions, unemployment insurance and all the social services. If you take these figures, you realise that, after all, the total social services do not represent quite one-fifth of the total expenditure we are incurring in our Budget to-day. Does the House realise that you can pay for the whole of the social services by the Beer Duty, the Sugar Duty and the Tobacco Duty? These duties, I think the whole House will admit, are duties which fall on the whole mass of the people, and in some senses fall very much heavier on the poorer sections of the population than on the rich, but you can pay to-day for the whole of your social services by these three broad, indirect taxes.
I am not going to suggest for a moment that all other expenditure belongs purely to the rich, because you cannot separate any one part of public expenditure or revenue unless you take purely the Surtax, which is the only tax that really falls naturally on the wealthy people. Income Tax is paid by a man earning £3 10s. a week if he is a single man. One would hardly regard him as a particularly wealthy man. But we are faced with this simple proposition, that the bulk of the money in this Finance Bill which has to be provided for to-day is required to maintain intact those financial resources which Members on this side of the House are so anxious to see retained. We are not altogether rendering the best service to our country when we suggest, as it is frequently suggested, I think without justification, from this side of 337 the House that there is, even with this Labour Government, any risk whatever to the great financial resources of the country and to the industries which, after all, are providing that revenue. It is possible that right hon. Gentlemen above the Gangway may look with a certain amount of suspicion at the back benches opposite, but one feels inclined to say there is not the slightest risk with right hon. Gentlemen on the Front Bench. One is inclined to give the advice, "Agree with thine adversary quickly while thout art in the way with him lest at any time the adversary deliver thee to the judge, and the judge deliver thee to the officer and thou be cast into prison. Verily thou shalt not come out of thence till thou hast paid the uttermost farthing."
The proposition that I want further to put to the House is that, if we are going to deal, as I think we have to deal, and the sooner the better, with the great financial problem with which we are faced, we have to realise that it is the problem of the Debt. I think we might make a much more determined effort to deal with that Debt than we have done in the past. Here, one is bound to point out that the record of the last Administration is most unfortunate. The late Chancellor of the Exchequer has a very able and versatile genius. I first knew him when he was making those pertinent and powerful speeches in defence of Free Trade, I am not at all sure that I may not yet hear him making the best speeches in defence of Protection, though that will not be saying very much. I sincerely hope he is a better bricklayer than he was a Chancellor of the Exchequer. The criticism I want to address particularly to his finance is in relation to this question of the Debt. When he came into office in 1925 the total deadweight Debt stood at £7,597,000,000. In the year when he went out of office it stood at £7,500,000,000, a reduction in those four years of £97,000,000. But when you examine the figures a little closer you find that the other liabilities of the State had increased by about £50,000,000, of which £28,500,000 represented an addition to the debt of the Unemployment Fund. The right hon. Gentleman also received an amount of money from resources which in commerce we should probably have described as 338 invisible resources. He received about £15,000,000 out of the Road Fund. He managed to get an extra half year in one year of Schedule A, and that brought him in another £15,000,000. I believe there was a sum of £13,000,000 that he made over the transfer of the currency reserve from Treasury notes to Bank of England notes.
When you total up those sums, in actual fact in the whole period of his administration the net result is that he did not decrease the Debt at all, but increased it. I know that in part it originated from the issuing of fresh loans at less than the nominal rate. I hope we shall not continue that practice in the future at all. In the conditions of our finance it is a most absurd practice. In effect, if you take the total Debt, I believe we have paid off £1,000,000,000, and only reduced it by £300,000,000, the bulk of it due to the issuing of various loans at less than the nominal rate, which means that you have to repay it at the full rate and that you do not get any Income Tax on the capital appreciation. We should be well advised to make strenuous efforts to reduce the National Debt, and I suggest to hon. Members on this side, who largely represent the financial interests of the City and the country, that it would be well worth their while to join hands with the Treasury and the Chancellor to see whether some definite effort might not be made to wipe out the great burden of the Debt. That might be done. The Chancellor might consider whether it might not be worth our while to make a loan, which would be free of all taxation, present and future, at a very low rate of interest. I think that if measures of some kind or another were taken, we could relieve the taxpayers of this country of a good deal of the burden that falls upon them from that Debt. We have to admit part of the criticism which has come from these benches in regard to the burden of direct taxation on industry.
I followed the argument of the Financial Secretary to the Treasury and I confess that I was interested, but not convinced. His argument, if I heard it rightly, was that the Income Tax charge on the whole of the profits of a business was not a charge on the business, because whatever it required for reserves, it 339 applied to its reserves and therefore took the balance of the tax on the whole of its profits out of what was left, after reserves, available for dividend. It seemed to me to mean that we could avoid a burden upon the industry by a tax upon its full profits because all that it would do would be to reduce the dividend. I would point out to the Treasury that that does not cover the whole of the facts, because you have industries which have not paid dividends for years but which are still paying Income Tax. They have to pay their tax on whatever margin of paper profits they may show, although they may not have a penny piece to distribute in dividends and no adequate sum to put aside to assist the reserves or the development of their business.
I know that it is impossible to release the reserves of businesses from taxation in the present Financial Bill, but it would be well worth the while of the Treasury to consider whether the whole relationship of the incidence of Income Tax to industry might not be re-considered, and whether we should make Income Tax what it was really meant to be, a tax upon the individual income or a tax upon the income of the individual, and collect it from the company or the business at the source, so that when the individual who received it was not liable to tax, he would be entitled to reclaim. I think that in so far as Income Tax is Income Tax on distributed profits, most of hon. and right hon. Gentleman on this side of the House would agree that it is not really a direct tax upon industry. If we could so reorganise the Income Tax levied in this country that we left it entirely off the reserves of business—I admit that it would require an entire reorganisation—
§ Mr. MACQUISTEN
Is not the hon. Gentleman aware we are the only country that is taxed upon profits?
§ Mr. GRAY
The hon. and learned Member need not trouble to give me the names of the countries. I am one of those individuals who think that we are not necessarily bound to copy other nations. We ought to follow out an idea 340 if it is sound and right, and I believe that this idea is sound and right. It would involve the taxing or the bringing under Income Tax what are classed as capital or appreciated profits. It would require an entire reorganisation of the whole system and I think it would be worth while the Chancellor of the Exchequer giving the matter his consideration.
The hon. and gallant Member for Chippenham (Captain Cazalet) told us that he was a free trader but had become a safeguarder. What interested me was this, that he had the remarkable audacity to take the stock argument of the tariff reformer and attribute it to the free trader. He thought our argument was that because there was unemployment in protectionist countries it was due to a protectionist tariff. That is not our argument; that is the argument of the tariff reformer. They say that the unemployment in this country is due to free trade, and that if we had safeguarding we should get rid of unemployment. That is an astonishing proposition. If it has any meaning at all it means that if we restrict imports we create additional employment. [HON. MEMBERS: "Hear, hear!"] The astonishing thing is that the party above the Gangway who were responsible for the Government of this country for four and a-half years, tell us that they easily have solved the problem of unemployment. All they had to do was to shut out enough imports and provide work for the people who are unemployed. If they really believe that they have not realised the difference between additional employment and diverted employment. They may have made a little diverted employment by their tariffs but they have not proved that diverted employment is additional employment.
§ Mr. GRAY
I admit that the present unemployment is in the main additional unemployment. On the other hand, it is not additional unemployment merely to divert people who were drawing funds from another source on to the Unemployment Fund. The point is this, the whole trend of employment and imports always move together. If you have a large volume of imports you have no unem- 341 ployment; if you have a drop in imports you get a rise in unemployment. This is not merely due to the War or since the War, because it covers the whole period of your statistics. The reason is perfectly obvious. When trade is brisk and full and free you have a large and free movement of goods; when it is depressed you have a lesser movement and both imports and exports become depressed. I congratulate the Chancellor of the Exchequer on having produced on the whole a Liberal Budget, but I still wish to stress the point that it is essential in our administration and in all our financial arrangements that we should exercise the utmost and strictest economy, using the word in its fullest and broadest sense, and in seeing that when money is spent it is always spent to the best advantage.
§ Mr. CHURCHILL
There will be general agreement that the hon. Member who has just addressed the House ought to take a free and frequent part in our financial discussions, and I can assure him that when it comes to the prolonged stages of the Committee on the Finance Bill we shall welcome his expanding and discursive but useful contributions to a searching examination of the proposals which will be placed before us. The hon. Member ended upon a note of economy. There he is greatly to be congratulated for his courage because he follows a leader, or I believe he follows a leader, whose place is empty at the moment—though I believe his seat is reserved for him when he returns—and whose programme at the last election was the expenditure of borrowed money, up to £200,000,000, to be spent on curing unemployment by building roads and bridges—[an HON. MEMBER: "And other things!"]—'and other things. Whatever may be said for or against such a programme, it cannot be called economy, and the proof that it can hardly be called economy is that the right hon. Gentleman the Chancellor of the Exchequer, even with the strongest incentive and compulsion to act upon it, has not done so now that he is in possession of proper and official information and knowledge. The hon. Member also furnished the Chancellor of the Exchequer with a complete scheme for the revision of the Income Tax. I hope that will have the right hon. Gentleman's Attention at an early stage, and that we shall hear to- 342 night some of his first thoughts upon that interesting addition to his labours. Lastly, the hon. Member embarked on some comparisons as to the progress made in reducing the nominal deadweight total of debt. I shall not follow him there, further than to say that if he seeks to have a real, or even a partial comprehension, of our present financial system, he must at the outset realise that comparison of the nominal deadweight total of debt have absolutely no connot-able relationship with its actual burden.
This Debate has been marked by carefully considered speeches on both sides, but I cannot feel that there is left to me at the present time any large new field of argument further than what has already been presented on the Budget. What is the first great fact before us? Deep anxiety reigns throughout this island about our financial, economic and industrial position. Every class and every party shares in those anxieties. Unemployment has risen to figures unprecedented even on the morrow of the General Strike. Everyone knows that the short favourable season of the year is rapidly passing away, and that we have before us an autumn and a winter, in which these alarming figures will steadily rise. Trade has fallen off in an extraordinary manner during the worst months, I believe, that have been recorded in normal times for many years. There is a feeling of great despondency in the business and commercial and industrial circles throughout the country. As to remedies, it must be admitted that there is also great doubt and difference of opinion. I never remember a time when one felt the country so much under the influence and oppression of what I would call the down-and-out and under complex, when there was so little resilience, so little real accord or strong conviction over a wide area of public opinion as to the proper method of immediately dealing with our difficulties.
Though there may be great doubts as to the remedies, and although there may be universal accord at the evil, there is a pretty general agreement that the right hon. Gentleman's Budget is not the right way to help at this particular moment, and is not the right treatment that should be administered to our problems at this juncture. We have heard again and again of the evils of direct taxation. When the Conservative speakers put that 343 forward, they are usually met with derision from the other side of the House, but to-day the right hon. Member for Darwen (Sir H. Samuel) used a great many exceedingly searching sentences upon this subject. He said that high direct taxation was a hindrance to industrial enterprise, that it discouraged industry adventuring, that it was a great deterrent to trade, and that industrial organisation must suffer. He used all these terms about the effect of the pressure of high direct taxation upon trade and industry. Therein, of course, he differs from the Chancellor of the Exchequer with his life-long doctrine that high taxation of the idle rich is an actual stimulus to trade and industry, and exercises a bracing effect upon our affairs.
Whatever may be the actual and direct effect of heavier taxation upon trade and industry, I believe it true to say that the psychological reactions are more harmful still. I spoke the other day in an employment Debate of the mysterious gap that existed between producer and consumer in every country in the world. We do not know how to bridge that gap, but all experience has shown that one of the most helpful methods and one of the most certain methods of narrowing the gap is by promoting confidence, enterprise, hope and audacity in the industrial and economic life of any community. In so far as the right hon. Gentleman's Budget has played a part in our immediate misfortunes, although I would by no means attribute all these misfortunes to his Budget, it has played a part undoubtedly in its effect on confidence and on enterprise, of being a real aggravation of the conditions of unemployment and of trade which exists at the present time. Among the psychological effects of this Budget there is undoubtedly the fact that it is conceived in an unfair spirit. I am well aware of the argument that is put by the Socialist representatives below the Gangway, that the rich have the money and that it ought to be taken away from them and given to the poor.
But that is not the position of this Parliament or this Government, nor is it the position which in any way has been accepted by the great mass of the electors of this country. No, Sir, they have not taken that view, but the Chancellor of the Exchequer, who sits there to deal 344 with the actual financial problems of the time, deals with them on that basis. It is a most unwise thing, a foolish step, to produce a Budget of pains and penalties which is deliberately and obviously aimed at taxing only those from whom he is quite sure he can never receive a vote. [Laughter.] Hon. Members opposite laugh at that. They make a great mistake in not realising the interdependence of the whole of this community, a vast complex community, which is so interdependent that if any one healthy part suffers that suffering will be spread over every part of the body. In contracting the range of the Income Tax, and at the same moment increasing its burden, the right hon. Gentleman showed a class bias, a partisanship, which ought never to have obtruded itself into his calculations. I say nothing at the moment, except to mention it, of the breach of faith involved in his treatment of the pre-War insurance policies, or-of the astonishing argument put forward by himself and the President of the Board of Trade, the latter of whom said, "What does this matter to us? We have got the money." Therefore, apparently, it was of no value to keep faith with those who had contributed it.
Generally speaking, an atmosphere of insecurity and of depression has been engendered and fostered by the Budget of the Chancellor of the Exchequer. If the direct taxpayers, who are the sole object of his attentions at the present time, respond willingly, according to all the traditions which have sustained the revenue of this country, undoubtedly their response and the success of these schemes of taxation, will be used as an argument for a further aggression upon them, for further inroads upon them in future Budgets. The effects of this Budget upon trade and industry will have their repercussions on the revenue, and they will be reinforced by other direct effects upon the revenue itself. Already the balance of the Budget has been destroyed by the increase of unemployment which has resulted since it was introduced. Already the right hon. Gentleman is borrowing, and will be forced to borrow, very large sums upon the Unemployment Insurance Fund, which has been running into the heaviest expenditure since he declared his Budget provisions for the year, and no one can doubt that new expenditure is looming up in the 345 future. The raising of the school age alone is casting a heavy financial shadow over the Exchequer, and, generally speaking, there can be no security, or sense of security, for the classes upon whom the right hon. Gentleman has thrown, and intends to throw, whatever burdens it is his duty to dispose of.
I believe that the limit of direct taxation, if not actually reached, is in sight at the present time. I know that that view is treated with great derision on the opposite side of the House. Figures were quoted by the right hon. Gentleman the Member for Darwen who took an income of £50,000 a, year, and showed that, if provision were made for the payment of the Death Duties on such an estate, the actual annual charge upon that income of £50,000 a year would be £50,958. When we talk of the old saying of the right hon. Gentleman that we must not look at what he has taken away but at what he has left, in this minus quantify of £958 a year there is very little left even for him to get fat upon. After all, a revival of trade and industry is the only solution of our difficulties. No other event can enable us to escape from our present position. We have never had in late years the normal expansion of the Income Tax which is the due of any Chancellor of the Exchequer. There has been an almost complete arrest of that expansion.
I am going to recur for a few minutes to the figures to which I have referred more than once, and which I suggest the Chancellor of the Exchequer might examine for himself, with regard to the profits which have been made in past years and in recent years by what are called the depressed industries. I have discovered the figures since I last referred to the matter. Let the House listen to this. In 1913 the profits of the following industries—mining, iron and steel, engineering, metals excluding motors, cotton, wool, bleaching and dyeing and railways—that great group of industries, amounted to £133,000,000. Translating that into present money values, it represents something in the neighbourhood of £210,000,000 or £220,000,000 a year. What were the figures in 1928? The figures for the same industries in 1928, which is the latest year for which I have them—perhaps the 346 right hon. Gentleman can supplement them—showed that, whereas the profits were £219,000,000 in 1913 the comparable yield in 1928 of that same vast group of basic trades was only £96,000,000. What are the conclusions which may be drawn from that? [Interruption.] I have tried my best to help the state of trade and the depressed industries, and that was one of the main incentives of the course adopted in the granting of rate relief for those very industries. At the moment, however, I am discussing them from the point of view of the Chancellor of the Exchequer who wants a high yield of Income Tax. Is it not perfectly clear that here you have these enormous industries employing great numbers of people carrying on a very great business, but a very large proportion of them not reaching a profit-making condition, or only reaching a very small profit-making condition, and consequently cutting down the revenues of the Exchequer, and depriving the country of the normal yield of the Income Tax expansion. It is that fact which, more than anything else in my opinion, should attract the attention of those who wish to give good guidance to the country at the present time.
The remedy is to raise these industries to a more generally profit-paying level. If you are able to do so, £10,000,000 or £20,000,000 of additional Income Tax will come into your revenue and enable you possibly to reduce the rate and even further increase the yield. If the right hon. Gentleman were able to reduce the rate of the charge and lighten the burden and restore the confidence which is required, it does not follow by any means that his revenue would fall off in proportion to the reduction of the rate of the charge. He might, if the circumstances turned in a favourable manner, find there would come back to him overflowing revenue as the result of the actual reduction in the charge levied. If it be true that the limits of direct taxation are being approached at the present time—and the pledge, if it be a pledge, which the Chancellor has given that he will not add to the direct taxation next year indicates that he himself is far from disassociating himself from that view—it seems to me—and I repeat what I said upon the Resolution—that we shall be driven to a tariff for revenue purposes. I have mentioned as one possibility which, in my opinion, ought to be con- 347 sidered, and which we should certainly have considered as a purely revenue matter if we had been in power, a duty, and a high duty, upon imported finished manufactured goods.
Taken in conjunction with these figures which I have just mentioned, it must be seen that if the imposition of such a tariff had the effect of stimulating and reviving industry and bringing it up to a profitable level, you would not only get one yield of tax from the duty, but you would get a second yield from the fact that businesses which are now being conducted and are paying nothing to the revenue because they are making no profit would have reached a profitable area, and that benefit would pass to the Income Tax. [HON. MEMBERS: "How can you get both?"] Hon. Gentlemen have not followed my argument at all. I am sorry, but I cannot trespass too long on the House and go back upon it. I was pointing out that the duty which would be collected upon these goods would be reinforced by the Income Tax. The Customs Duties which would be collected at the port on this trade by a tariff would be reinforced if the trade were stimulated—[HON. MEMBERS: "Oh!"] Hon. Members may deride it, but let them follow the argument. It would be reinforced by a further addition to the Income Tax.
The right hon. Gentleman asked me on the Resolution to say what my view was as to who would pay the Import Duties. That is a perfectly innocent question. I can answer it at once. Our experience of the Safeguarding Duties has shown quite clearly that there is no absolute rule. Even in these few small duties which have been placed on selected industries, there have been examples shown where it has been proved that the foreigner has reduced his prices by more than the amount of the duty in order to get into the market. That is the fact and one which must be taken into consideration. But even supposing that the consumer pays, it might be well worth his while to pay if at the same time there were a revival of energy and vigour in all our industrial plants and centres, and if a sense of domination and expansion were restored to British industry. I am quite content in this matter to quote the Leader of the Liberal party. 348 He is not here to-night, but he was our Leader in the days when the scheme of Safeguarding was first conceived and brought into reality. What did he say in his formal letter to Mr. Bonar Law on the eve of the 1918 Election? He said?I should say that we must face all these questions with new eyes, without regard to pre-War views or to pre-War speeches. I shall look at every problem and consider it from the point of view of what is the best method of securing the object at which we are aiming, without any regard to theoretical opinions about Free Trade or Tariffs.11.0 p.m.
No one could ask for more than that, and I would ask the Prime Minister, if he were here—I do not think it is much use asking the Chancellor of the Exchequer—why, in the plight in which we stand, and which causes every one trouble and anxiety, has he not thought it worth while to consult, on some of these questions, his new Economic Council which was set up with so much consequence and importance? Why, for instance, could he not have asked his new Economic Council, "Do you think it would be a good thing at the moment"—for, after all, we are practical people—"to sweep away all the Safeguarding Duties, or would it be a good thing to let them alone for a little time at any rate?" Why could he not put that question to this Council? He is not bound by the answer, I quite agree; his Government is responsible; but why could he not put to this new body, which the Government set up and behind which largely they sheltered themselves at the time, such a question as this: "If we have to raise £50,000,000 more, what is the best way in which we can get it without making the conditions of trade and employment worse?" There are also questions connected with currency, connected with the use of public credit—very important questions, very grave and anxious questions, which in my opinion could not in any way be injured if they were remitted for impartial consideration to a body of practical business men and financiers of high repute, such as has been gathered together in the Economic Advisory Council. But the Chancellor of the Exchequer will have none of this. In the right hon. Gentleman we are face to face with a dual personality. Everyone knows the famous example of Dr. Jekyll 349 and Mr. Hyde. [Interruption.] On the one hand, we have the severe Treasury pedant, accepting with double joy the narrowest doctrines and dogmas of departmental officials, and on the other hand we have the Socialist agitator endeavouring to excite the masses to the pillage of the wealth of this country. There is, however, this difference between the case of Dr. Jekyll and Mr. Hyde when these two personalities are combined in the Chancellor of the Exchequer, that whereas society gained a great deal by the generous and virtuous actions of Dr. Jekyll and suffered from the brutality and violence of Mr. Hyde, in the Chancellor of the Exchequer we are in the unfortunate position of suffering both from the pedantry of Dr. Jekyll and from the venomous greed and partisanship of Mr. Hyde. It is the pedantry of Dr. Jekyll which has led him to present himself so decorously before the Bankers' Institute, making them ceremonious speeches, full of orthodox platitudes, as to the importance of sustaining the capitalist system, and we have this further aspect of Dr. Jekyll that in order to gratify his narrow and doctrinaire views he not only exposes the whole of the trades protected by the McKenna Duties to prolonged uncertainty, and is leaving them with renewed uncertainty, but is signalising his contribution to our unemployment problems this year by allowing the Safeguarding Duties to lapse. His colleague, the Lord Privy Seal, who sits next to him, with a pensive air, admitted only yesterday the prejudicial effects caused to employment in this country and that his own task was rendered more difficult by the uncertainty in regard to these duties. There may well have been occasion when the right hon. Gentleman could have afforded to indulge his views and his hostility to these forms of taxation, but surely, with unemployment bounding up and with everybody worried and anxious as to what can be done, he might have thought of some more urgent task to undertake at the present time than to farce the hostility and the labour of removing this protection from these small industries, which have now grown largely dependent upon them.
This brings me to the speech of my right hon. Friend the Member for Darwen—a most important contribution to our 350 Debate. I am bound to say that whenever I am listening to an able speech by the right hon. Gentleman I am always reminded of a book that I used to read, called "Mrs. Caudle's Curtain Lectures." Here there is a difference, because Mrs. Caudle had only one husband, but the right hon. Gentleman and the Liberal party have, on each side of the House, I will not say suitors, but at any rate personalities to whom they are able to impart their wisdom. The right hon. Gentleman said of the Chancellor of the Exchequer that his Budget was trim and grim. So also was the right hon. Gentleman's speech. Professedly impartial, the wise statesman, who takes the middle, temperate position between Conservative reaction and Socialist impatience, contributes a, sound, cool, detached, impartial review of the situation. That is the picture which the right hon. Gentleman would like to claim for his attitude. Alas, I cannot countersign his claim. The right hon. Gentleman, acting under the orders, no doubt, of his absent chief, represents, not an impartial tribunal, but a nobbled umpire. He is the unjust judge, the arbitrator who has a fine string of specious, sonorous arguments and reasons to give in support of his judgment, but who gives his judgment according to the party from which he hopes to derive the greatest advantage. I am afraid that the right hon. Gentleman and his friends, still less his leader, are not in a position to take decisions upon the merits of any question. Their decisions have to vary with the ebb and flow of the political combinations which they are considering or rejecting.
§ Mr. CHURCHILL
I congratulate the hon. Gentleman on having achieved at least a tu quoque; it is something indeed in the art of repartee to get to that primitive stage. Let me not allow my comments upon the right hon. Gentleman's speech to rest solely upon the foundation of assertion. Let me offer some proof. The proof is found above all things in the references which he has made to-day to his attitude upon the Coal Bill. To-day the right hon. Gentleman said, in effect—I am not actually remembering his words—"We had, of course, to suggest some Amendments to particu- 351 lar Clauses of that Bill." But was that the language which he used to the House when it was first being presented? He made us the most impressive speech, in which he described this Bill as inverted Protection. Everyone knows that he hates Protection as much as anything in the world, but I suppose inverted Protection is an even more vicious form of it. Here is one of the worst things that could possibly happen, the worst form of Protection, and in a leaflet—
§ Mr. CHURCHILL
Naturally, he struck it out after the arrangement had been made. But here, in a leaflet written by some gay and jaunty soul, under the rare and remarkable heading, "Why I have joined the Liberal Party," published by the Liberal Publication Department, I find:I cannot understand how the Labour party could have brought itself to give to the coalowners, by law, the power of restricting output,and so on.Every home in England would have to pay more for every bag of coal if the Government got its way. Who showed up this rotten proposal? Not the Tories. Everybody knows it was the Liberals, especially-Lloyd George and Herbert Samuel.
§ Mr. CHURCHILL
I will. It goes on:If the bad features of the Bill are altered, and we are saved from dear coal, it will be the Liberals we shall have to thank.The main provision has not been affected. I do not wish to get into a detailed argument, that would not be in order, on this point. But I am not afraid of it, and there will be another opportunity. When this Bill comes back to us from the House of Lords, this "rotten Bill," we shall hear the right hon. Gentleman exerting himself to prove that all the evil features have been driven out and that it only remains for the Liberals and Socialists to unite together to ask the House of Commons to assert its rights. There is the impartial umpire, who, after the manner of his kind, swings from one side to the other according to some occult or secret arrangement made behind the 352 back of Parliament. [An HON. MEMBER: "What about the Budget?"] I am coming to the Budget, and I dare say the hon. Gentleman will be glad. I say this Budget is a Budget of negation and dismay. It places heavy burdens on the country, and it places them in a manner calculated to cause the utmost despondency and alarm. But, although it places these heavy burdens, there is nothing to show for them. The right hon. Gentleman has piled on new expenditure and has nothing worth while to show for it. I do not know if the House remembers that the hon. Member for West Wolverhampton (Mr. W. J. Brown) made a long and interesting speech. I think there was great justice in his complaint. I disagree with the hon. Member on most topics, but his complaint was that the Chancellor of the Exchequer and the Government had defrauded the electors; they had promised all sorts of indulgences and amenities and improvements and reforms in the social sphere; that they were not able to discharge any of these undertakings, and had no intention of attempting to do so. That was his bitter complaint. He said, "Look at your speeches and look at your promises. The statements which are now made mean that we have to drop any hope of any comprehensive scheme for dealing with unemployment." But much more has to be dropped. We are at the end. We have heard about the widows' pensions, the improvements made in the Unemployment Insurance Fund, and some small benefit to civil servants in regard to their pay, but that is all there is left of "Labour and the Nation." The right hon. Gentleman made a speech which has been quoted by the hon. Member for West Wolverhampton. I think it was during the election, in which he indicated that £200,000,000 was not beyond what might well be within the scope of practical finance. He had better be careful how he speaks of his allies. It is no matter what he says to me, but he had better be careful there. He may find that he has involved the Government, not for the first time, in considerable difficulties. The right hon. Gentleman raised this point and he was interrupted by the Chancellor of the Exchequer, who brought out the fact in a part of his speech which was not apparently quoted in the "Times" or any newspaper in which we have a re- 353 port. He said it was time, but he added that there might be young men in the hall who would live to see this scheme of improving the social services realised. The right hon. Gentleman made a cogent retort when he said he did not think they would have given their votes to the Socialist party if they had known that all the benefits of "Labour and the Nation" were to be reserved for their grandchildren.
There is no surplus in view. The right hon. Gentleman suggested that £14,000,000 might be available, but there is an additional charge in respect of rating relief. If there were a surplus in view, the Chancellor of the Exchequer, by his own folly, needlessly adding to his difficulties, has pledged himself to remove £40,000,000 of indirect taxation. The McKenna Duties, the rest of the Safeguarding Duties, the Sugar Duties and so forth, all are to be swept away. There are £40,000,000 to be swept away before we get to any constructive social programme even if a surplus were in view. Napoleon said to his soldiers, "From the top of these Pyramids 40 centuries are looking down on you." The Chancellor of the Exchequer says to the Clyde, "From the trough of the Treasury £40,000,000 are gaping up at you." This story is drawing towards its close. The Government is utterly bankrupt in ideas. It is content to live on the capitalist system and bask in its pleasures and amenities while at the same time it snarls at it and from time to time inflicts limited but still serious injury upon it. The Government is prolific in surrenders but it is devoid of a single helpful, constructive plan. Shiftless, profuse, futile, spiteful, it is drifting to speedy dissolution amid general indifference to fast gathering contempt.
§ Mr. SNOWDEN
I will endeavour to bring back the Debate to the serious argument that characterised it before the comic interlude which has just entertained the House. I suppose it is inevitable in a Debate upon a Finance Bill embodying a Budget the provisions of which have already been discussed at great length, that little should be said which is new or original. Although no new matter has, I think, been introduced into the discussion this afternoon, we have had a number of speeches which have presented old points in a very 354 attractive way. May I call the attention of the House to the Amendment which we are asked to approve. That Amendment proposes that the Finance Bill should be read a Second time upon this day six months, which is, in effect, a Motion for the rejection of the Budget. What would be the effect of the acceptance of this Amendment by the House? [HON. MEMBERS: "A new Government."] The last thing that the party opposite want at the moment is to take the place of those who are sitting upon this bench. They are anxious for the time being that others should have the responsibility of taking the country out of the mess in which they left it and it will take, I suppose, some little time before the party has cemented its internal differences and decided under which King they will serve when the General Election comes. The right hon. Gentleman the Member for Hillhead (Sir R. Horne), who opened the Debate this afternoon, spoke with quite unusual restraint, and that may possibly be due, if rumour is for once true, to his contemplating that greater responsibility may rest upon him in the future.
The main criticism which has been brought once more against this Budget is that it has a detrimental effect upon industry and is calculated to aggravate the industrial situation. The right hon. Gentleman who opened the Debate made a statement which has often been repeated in the course of the Budget discussions. "While we are," he said, "increasing taxation, our industrial competitors are reducing theirs." America, he told us, is reducing her taxation, but he refrained from giving us any details as to the reduction of taxation in America. He was a little more rash in his reference to Germany. Germany has not reduced taxation. [HON. MEMBERS: "He did not say so!"] I will come to what the right hon. Gentleman said in a moment. What the right hon. Gentleman did say in regard to Germany, was that Herr Moldenhauer, in his recent Budget speech, said that he hoped that he might be able to reduce taxation in about 18 months' time. We will wait and see about that. Further reference has already been made to the fact that France has reduced her national indebtedness by four-fifths, and that in Germany it has been practically wiped out altogether. Moreover, we have remitted, or 355 rather the late Government remitted, debts to France and Italy to a sum which, if I was in possession of it, would relieve me from the necessity of increasing taxation for the purposes of this Budget. In nearly all the speeches which have been made from the other side of the House an attempt has been made to deal with what I may call the trade factor which will follow as the result of the increased taxation imposed by the Budget. The right hon. Member for Hillhead and subsequent speakers have referred to company reserves. I will refer to that matter later, but I want to make this point in reply to the right hon. Gentleman. He said that company reserves are moneys put aside for the purposes of re-equipment and expanding works. Is that so. Under the Income Tax law provision is made for depreciation—
§ Sir R. HORNE
Not adequate. Companies are forced to take the amount of depreciation which the Treasury officials allow, but any company which went upon the basis of making only the amount of depreciation which the Treasury allows would be very foolish. Every company of any merit that I know makes a far larger allowance for depreciation and in addition makes the reserves which are necessary for the future development of the company.
§ Mr. SNOWDEN
The right hon. Gentleman's point was this, that company reserves are put aside for the purpose of re-equipment and expanding plant. Is that so? Is it wholly so? Instead of putting aside adequate sums to reserve for the purpose indicated by the right hon. Gentleman, companies in the days of prosperity have paid away their profits in huge dividends and bonus shares and that is very largely responsible for the financial position in which they are now. Let me give one or two cases, which can be paralleled by scores and hundreds of similar cases. The right hon. Gentleman was at one time associated with Baldwins, Limited. In 1918 that company, instead of conserving its profits for future needs, paid a 23½ per cent. dividend. In 1919 it paid a 25 per cent. dividend; in 1920, it paid a 25 per cent. dividend. For the last six or eight years they have not been able to pay a single penny of dividends and have had 356 to undergo a drastic reconstruction and a writing-down of a large part of their capital. Take John Brown's. In 1918, they paid a 25 per cent. dividend; in 1919, a 25 per cent. dividend; in 1920, a 23½ per cent. dividend; and, for years later, no dividend at all. Take the Consett Iron Company. In 1918, instead of putting their huge profits or a considerable part of their huge profits to reserve for future need, they paid an 80 per cent. dividend; in 1919, they paid 53½ per cent. and 150 per cent. of a scrip bonus. And such companies are now—the Ebbw Vale Company is somewhat similar—in a condition of lack of equipment, of inefficiency in matériel so that it is quite impossible for them to compete successfully of the markets of the world. Had they done as the right hon. Gentleman the Member for Hillhead says—
§ Sir R. HORNE
I am not connected with any of these companies, but I would advise the right hon. Gentleman to be very careful, as a Minister of the Crown, in what he says in regard to their equipment. There is one in particular which I happen to know, and the account of which he has given is entirely inaccurate.
§ Mr. SNOWDEN
I never suggested that the right hon. Gentleman had any association with any of these companies except the first which I mentioned.
§ Sir R. HORNE
The right hon. Gentleman was very careful to refer to years during which I had no connection with it at all.
§ Mr. SNOWDEN
The right hon. Gentleman says he had no connection with the company in the years which I quoted. His connection with it, then, has been in the less prosperous years. [Interruption.] During the prosperous years of the War and the years after there were certain branches of the woollen trade in Yorkshire which were making thousands per cent. increased profit on their turnover.
§ Mr. SNOWDEN
Thousands per cent. upon their turnover—[Interruption.] Exactly the same thing has happened in the cotton trade. In the early years of 357 the War the cotton trade did not share in the general prosperity. In the later years it had a very prosperous time. What happened? Nobody knows better than the hon. Member who tried to interrupt me just now that companies were floated at two, four, five and 10 times the intrinsic value of their capital. Money was put into these concerns, and a large part of it has already been lost. The same money cannot be used twice over, and if this had been properly invested at the time, it would have been available for the reconstruction of the industry.
§ Mr. HAMMERSLEY
I only want to ask the right hon. Gentleman one simple question. In the circumstances which he has related, where these large profits had been made, does he contend that it was not right that they should pay these dividends?
§ Mr. SNOWDEN
Probably, owing to my lack of lucidity, the hon. Member has not seen my point. My point is that, instead of distributing these huge profits in dividends, they ought to have placed a very much larger part of it to reserves, and then to-day they would have been far better able to face the present position. It is no wonder that these companies to-day find a difficulty in getting new capital, because they have destroyed public confidence. Reference has been made to a remark which I made in a public speech a few days ago that we had been living on our capital. That was a reference to national finance, and had not a general application. It was referring to the financial policy of the late Government, a policy which, instead of meeting bills as they accrued, instead of meeting expenses out of revenue, used up their capital resources.
I have been quoted very often to-day with the object of trying to show that I had at different times expressed different views as to the effect of taxation on industry. There is no inconsistency in what I have said. The right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain) quoted a sentence of a speech which I made a few years ago at Liverpool before the Chamber of Commerce. I remember that speech very well. I used the words which the right hon. Gentleman quoted with reference Lo the burden of taxation on industry, but I also added in that speech that the limits 358 of taxation had not yet been reached. Of course there is a sense in which taxation is a burden, and a very heavy burden, on industry. In the last few days quotations have been made from a radio talk that I gave to the American public a few weeks ago, in which I referred to our high Income Tax, Estate Duties and Super-tax. The purpose of that talk was to try to impress on the American people, during the sittings of the Naval Conference, the grave waste of expenditure on armaments. Five-sevenths of the expenditure of this country is for war and military purposes. [HON. MEMBERS: "Not true!"] I do not know that it is worth while to answer that observation.
§ Mr. SNOWDEN
Including pensions! Of course. Is not that part of the war? Did war pensions exist before the war? There are war pensions, our annual expenditure on the Army, the Navy and the Air Force, and the War Debt. If the hon. Member who interrupted me is capable of doing a simple sum in arithmetic, let him add those sums together—[HON. MEMBERS: "Do not be offensive!"]—and he will find that my statement is perfectly correct. Five-sevenths of our total national expenditure is for war purposes, and I was only pointing out that as a result of this high expenditure we had this heavy burden of taxation. I went on to point out that if the sums that we devote to these purposes could only be used for other purposes what a transformation we could make in the condition of this country. Taxation, when raised for unremunerative purposes, is certainly a burden, but taxation which is used for remunerative purposes, which gives a return, is probably, as I say in the extract which has been quoted, the best and the most economical form of spending.
Take the question of what hon. Members call the taxation of capital in the form of Estate Duties. I do not remember any arguments or criticism of that kind being made five years ago when the late Conservative Government increased the duties upon estates. If it be a crime to-day to take from capital in the form of Estate Duties, surely it was a crime five years ago. [HON. MEMBERS: "Hear, hear!"] I am very interested to hear that hon. Members opposite think it was 359 a crime then. Let us go a little further back. In 1920 a Conservative Chancellor of the Exchequer made the biggest addition to the Estate Duties that has ever been made in a Budget, and he escaped the criticism to which I am subjected. This criticism proceeds on the assumption that the revenue that is derived from the Estate Duties is thrown entirely into a bottomless pit. What is the fact? The amount that is received in Estate and Death Duties is not exactly, but almost, equal to the sum set aside for debt redemption.
§ Mr. SNOWDEN
No, including war savings certificates the amount set aside for the Debt is over £70,000,000 a year. The right hon. Gentleman, when he introduced the new fixed debt charge, calculated that in the ensuing four or five years the amount for these purposes would be between 170,000,000 and £80,000,000 a year. What happens when Debt is paid off? It goes back into the investment market and therefore it becomes capital available for the encouragement and the aid of industry. Taxation to-day is no higher, in proportion to the wealth of the country, than it was 100 years ago; in fact, the figures are almost exactly the same. Incidentally, may I say that I do not know whether Mr. McKenna has changed his view or not, but I remember that he once stated that this country could not stand an annual taxation of more than £1,000,000,000. I adhere to my views upon taxation. I stand by every word of the quotation made by the right hon. Gentleman the Member for Edgbaston yesterday in regard to the need for capital savings. Nobody but a fool would say that we do not need capital savings. I recollect that John Stuart Mill once said that the capital of a country ought to be re-created every 12 years. Without some such process the capital now invested in all these undertakings would depreciate almost to nothing in the course of the next few years. Nobody can ignore the necessity for capital savings, but I submit that this Budget is not going to interfere with capital savings.
I have said on a former occasion that saving is largely a matter of individual habit. Some people will save out of small incomes, but other people have not 360 the saving habit, and, whether their incomes be large or small, they will not save. I do not believe that the person who has the saving habit will cease to save because of this little addition to our taxation. The fact has been mentioned on the other side of the House in the course of the discussion that savings are not equal to the pre-War figure. I think that change is largely the result of the relaxation of old customs and old ideas due to the War. There is not, especially among well-to-do people, the same disposition to save as was formerly the case. [An HON. HEMBER: "There is no inducement!"] They would rather spend it in luxury. I am tempted to quote from a recent number of the official organ of the Tory party. [An HON. MEMBER: "Which organ?"] There is only one official organ of the Tory party, and it is the "Daily Express." There is an article dealing with the woes of a party which arrived at Victoria Station from the Continent. They had come back penniless, having lost all their money at the gambling table. [Interruption.] The right hon. Gentleman the Chief Tory Whip says that one of my colleagues was there. It he was there he was not alone. I should certainly not have read this to the House from the official organ of the Tory party if it had not been for what the right hon. Gentleman said. In the same paper there is a description of what happens at these gambling tables when baccarat is played:Each player becomes banker in turn, and some of those who did so last night at Le Touquet were Sir Robert Horne and Mrs. Dudley Ward. Sir Philip Sassoon, I am told, looked sardonically on.The hon. Member for Leigh (Mr. Tinker) in his interesting contribution to our Debate, regretted very much that I had not made in the Budget a larger provision for the social services. I am afraid my hon. Friend holds a mistaken view as to the purposes of the Budget which is shared by some others. The only interpretation I could place upon his mild criticism was that I ought to have levied taxation to bring in £100,000,000 or £200,000,000 without any idea as to how it was going to be spent, to say, in effect, "Here is £100,000,000 or £200,000,000, do what you like with it." My hon. Friend and those who think with him 361 should realise that the purpose of the Budget is to provide for the expenditure which Parliament has approved, whether great or small. It is the business of the Chancellor of the Exchequer to provide what is necessary or else to shed all responsibility.
Have we reached the limits of taxation? Some of my hon. Friends have suggested that there remains, say, 50 per cent. of fortunes running into millions which might well be appropriated, and that there remains something in the income of a man with £50,000 or even £20,000 a year which might also be appropriated. I am prepared to maintain that, within limits, the taxation of large estates and large incomes is, as I have already said, sound finance, and good for the State, and that the limits have not yet been reached. But, when I am asked to do the whole thing at once, I am reminded of what one right hon. Gentleman opposite interjected when I was announcing the increase in Estate Duties in my Budget speech. He said, "Why not take the lot?" Let me tell him a story about a woman in my part of Yorkshire. A neighbour went in one day and found her in a dying condition. She asked, "Whatever is the matter with you?" "Oh," was the reply, "I was out of sorts and went to the doctor and got a bottle of medicine. The first dose did me so much good that I drank the lot, and it is going to kill me." The moral of that is that small doses—reasonable doses—applied at regular intervals—[Interruption]—may produce good results, but if the medicine is taken all at once it will kill the patient.
The right hon. Gentleman the Member for Hillhead said this afternoon that what is wanted in industry is a restoration of confidence. His speech, when read abroad, is not calculated to raise the prestige of British industry throughout the world. He said that there was a widespread impression throughout the world that this country is down and out; and the party opposite are more responsible for that than anybody else in this country. For the last six years they have kept the industries of this country in a state of uncertainty. [Interruption.] They have been holding out to them the prospect of artificial protection, and the industries have not put forth any effort to right themselves. At the present 362 time this Protectionist agitation, the hope or expectation that by and by they are going to get relief, is doing more than all the rest to prevent the revival of industry.
What else could I have done? The right hon. Gentleman the Member for Hillhead and the right hon. Gentleman who spoke last said the same thing—that it would be much better to raise revenue by taxes on imported goods. I readily admit that you can raise a vast amount of revenue by that means. If you put a 33⅓ per cent. duty upon imported food, you could probably raise from £100,000,000 to £200,000,000 a year. If you put a similar duty upon all imported manufactured or partly manufactured articles you might raise something like half that sum. But what is this? It is the old Protectionist dodge in relation to taxation. The purpose of it is to take taxes off the rich and put them on to the poor. Sixty years ago 70 per cent. of the national taxation was raised by indirect taxes. The rich escaped, and the poor had to bear the burden; and that is one of the aims of this Protectionist movement. As has been pointed out many times in the course of the Debate this afternoon, that form of taxation takes away from the consumer far more than it brings to the Exchequer. There is no other course which I could have adopted which would have done less injury to industry than the course which I have adopted. I do not share the views of right hon. and hon. Members opposite as to the unpopularity of this Budget. The right hon. Member for Epping (Mr. Churchill) is quite an adept at trying to catch popular support by political moves, but he very often miscalculates the chance of the opportunity. It is not for him to talk about using taxation alterations in order to catch votes. Practically the only remission of indirect taxation that he made during his five years of office was in his last Budget, when he repealed the Tea Duty, simply and solely in the expectation that it would prove an electoral asset to the Tory party. I repeat that there was no other course that I could have followed which would have been so sound, so honest, so calculated to maintain the credit of the country and at the same time less calculated to inflict any injury 363 upon British industry. It is quite true that the King George's head of Protection always crops up with the party opposite. [HON. MEMBERS: "King Charles' head!"] King Charles' head. I am not going to argue that question now. It crops up in every Debate. It does not matter what the subject may be, hon. Members opposite are so obsessed by this question that by some means or the other, they manage to drag it in. Upon a suitable occasion I shall have no hesitation in meeting hon. Members
§ opposite upon that question, but at the moment we are discussing the Finance Bill. What the House of Commons has to decide is whether they are going to give their support to this Budget or whether they are going to reject it and adopt what would be the alternative policy of relieving the rich of their taxation and transferring the burden to the backs of the poor.
§ Question put, "That the word 'now' stand part of the Question."
§ The House divided: Ayes, 282; Noes, 206.367
|Division No. 300.]||AYES.||[12.4 a.m.|
|Adamson, Rt. Hon. W. (Fife, West)||Duncan, Charles||Jowett, Rt. Hon. F. W.|
|Adamson, W. M. (Staff., Cannock)||Ede, James Chuter||Jowitt, Rt. Hon. Sir W. A.|
|Aitchison, Rt. Hon. Craigie M.||Edmunds, J. E.||Kedward, R. M. (Kent, Ashford)|
|Alexander, Rt. Hon. A. V. (Hillsbro')||Edwards, E. (Morpeth)||Kelly, W. T.|
|Alpass, J. H.||Elmley, Viscount||Kennedy, Thomas|
|Ammon, Charles George||Evans, Capt. Ernest (Welsh Univer.)||Kenworthy, Lt.-Com. Hon. Joseph M.|
|Arnott, John||Foot, Isaac||Kinley, J.|
|Aske, Sir Robert||Forgan, Dr. Robert||Lang, Gordon|
|Attlee, Clement Richard||Freeman, Peter||Lansbury, Rt. Hon. George|
|Baker, John (Wolverhampton, Bilston)||Gardner, B. W. (West Ham, Upton)||Law, Albert (Bolton)|
|Baldwin, Oliver (Dudley)||Gardner, J. P. (Hammersmith, N.)||Law, A. (Rosendale)|
|Barnes, Alfred John||George, Megan Lloyd (Anglesea)||Lawrence, Susan|
|Barr, James||Gibbins, Joseph||Lawson, John James|
|Batey, Joseph||Gibson, H. M. (Lancs. Mossley)||Leach, W.|
|Beckett, John (Camberwell, Peckham)||Glassey, A. E.||Lee, Frank (Derby, N. E.)|
|Bellamy, Albert||Gossling, A. G.||Lee, Jennie (Lanark, Northern)|
|Benn, Rt. Hon. Wedgwood||Gould, F.||Lees, J.|
|Bennett, Captain E. N. (Cardiff, Central)||Graham, D. M. (Lanark, Hamilton)||Lewis, T. (Southampton)|
|Benson, G.||Graham, Rt. Hon. Wm. (Edin., Cent.)||Lindley, Fred W.|
|Bentham, Dr. Ethel||Gray, Milner||Lloyd, C. Ellis|
|Bevan, Aneurin (Ebbw Vale)||Greenwood, Rt. Hon. A. (Colne).||Logan, David Gilbert|
|Birkett, W. Norman||Grenfell, D. R. (Glamorgan)||Longbottom, A. W.|
|Blindell, James||Griffith, F. Kingsley (Middlesbro' W.)||Longden, F.|
|Bondfield, Rt. Hon. Margaret||Griffiths, T. (Monmouth, Pontypool)||Lovat-Fraser, J. A.|
|Bowerman, Rt. Hon. Charles W.||Groves, Thomas E.||Macdonald, Gordon (Ince)|
|Broad, Francis Alfred||Grundy, Thomas W.||MacDonald, Rt. Hon. J. R. (Seaham)|
|Brockway, A. Fenner||Hall, F. (York, W. R., Normanton)||MacDonald, Malcolm (Bassetlaw)|
|Bromfield, William||Hall, Capt. W. P. (Portsmouth, C.)||McElwee, A.|
|Bromley, J.||Hamilton, Sir R. (Orkney & Zetland)||McEntee, V. L.|
|Brooke, W.||Harbord, A.||McKinlay, A.|
|Brothers, M.||Hardie, George D.||MacLaren, Andrew|
|Brown, C. W. E. (Notts. Mansfield)||Harris, Percy A.||Maclean, Sir Donald (Cornwall, N.)|
|Brown, Ernest (Leith)||Hartshorn, Rt. Hon. Vernon||MacNeill-Weir, L.|
|Brown, W. J. (Wolverhampton, West)||Hastings, Dr. Somerville||Malone, C. L'Estrange (N'thampton)|
|Buchanan, G.||Haycock, A. W.||Mansfield, W.|
|Burgess, F. G.||Hayday, Arthur||Marcus, M.|
|Burgin, Dr. E. L.||Hayes, John Henry||Marley, J.|
|Caine, Derwent Hall||Henderson, Rt. Hon. A. (Burnley)||Marshall, Fred|
|Cameron, A. G.||Henderson, Arthur, Junr. (Cardiff, S.)||Mathers, George|
|Cape, Thomas||Henderson, Thomas (Glasgow)||Matters, L. W.|
|Carter, W. (St. Pancras, S. W.)||Henderson, W. W. (Middx., Enfield)||Melville, Sir James|
|Charieton, H. C.||Herriotts, J.||Messer, Fred|
|Chater, Daniel||Hirst, G. H. (York W. R. Wentworth)||Middleton, G.|
|Church, Major A. G.||Hirst, W. (Bradford, South)||Millar, J. D.|
|Clarke, J. S.||Hoffman, P. C.||Mills, J. E.|
|Cluse, W. S.||Hollins, A.||Milner, Major J.|
|Clynes, Rt. Hon. John R.||Hopkin, Daniel||Montague, Frederick|
|Cocks, Frederick Seymour||Horrabin, J. F.||Morgan, Dr. H. B.|
|Compton, Joseph||Hudson, James H. (Huddersfield)||Morley, Ralph|
|Cove, William G.||Hunter, Dr. Joseph||Morris, Rhys Hopkins|
|Daggar, George||Isaacs, George||Morrison, Herbert (Hackney, South)|
|Dallas, George||Jenkins, W. (Glamorgan, Neath)||Morrison, Robert C. (Tottenham, N.)|
|Dalton, Hugh||John, William (Rhondda, West)||Mort, D. L.|
|Davies, E. C. (Montgomery)||Johnston, Thomas||Moses, J. J. H.|
|Davies, Rhys John (Westhoughton)||Jones, F. Llewellyn- (Flint)||Mosley, Lady C. (Stoke-on-Trent)|
|Day, Harry||Jones, Henry Haydn (Merioneth)||Mosley, Sir Oswald (Smethwick)|
|Denman, Hon. R. D.||Jones, J. J. (West Ham, Silvertown)||Muff, G.|
|Dickson, T.||Jones, Rt. Hon. Leif (Camborne)||Muggeridge, H. T.|
|Dudgeon, Major C. R.||Jones, Morgan (Caerphilly)||Nathan, Major H. L.|
|Dukes, C.||Jones, T. I. Mardy (Pontypridd)||Naylor, T. E.|
|Newman, Sir R. H. S. D. L. (Exeter)||Shaw, Rt. Hon. Thomas (Preston)||Tillett, Ben|
|Oldfield, J. R.||Shepherd, Arthur Lewis||Tinker, John Joseph|
|Oliver, George Harold (Ilkeston)||Sherwood, G. H.||Toole, Joseph|
|Owen, Major G. (Carnarvon)||Shield, George William||Tout, W. J.|
|Palin, John Henry||Shields, Dr. Drummond||Trevelyan, Rt. Hon. Sir Charles|
|Paling, Wilfrid||Shillaker, J. F.||Turner, B.|
|Palmer, E. T.||Shinwell, E.||Vaughan, D. J.|
|Perry, S. F.||Short, Alfred (Wednesbury)||Viant, S. P.|
|Pethick-Lawrence, F. W.||Simmons, C. J.||Walker, J.|
|Phillips, Dr. Marion||Sinclair, Sir A. (Caithness)||Wallace, H. W.|
|Picton-Turbervill, Edith||Sinkinson, George||Wallhead, Richard C.|
|Pole, Major D. G.||Sitch, Charles H.||Watson, W. M. (Dunfermline)|
|Potts, John S.||Smith, Alfred (Sunderland)||Watts-Morgan, Lt.-Col. D. (Rhondda)|
|Price, M. P.||Smith, Ben (Bermondsey, Rotherhithe)||Wellock, Wilfred|
|Pybus, Percy John||Smith, Frank (Nuneaton)||Welsh, James (Paisley)|
|Quibell, D. J. K.||Smith, H. B. Lees (Keighley)||Welsh, James C. (Coatbridge)|
|Ramsay, T. B. Wilson||Smith, Rennie (Penistone)||West, F. R.|
|Rathbone, Eleanor||Smith, Tom (Pontefract)||Westwood, Joseph|
|Raynes, W. R.||Smith, W. R. (Norwich)||White, H. G.|
|Richardson, R. (Houghton-le-Spring)||Snell, Harry||Whiteley, Wilfrid (Birm., Ladywood)|
|Riley, Ben (Dewsbury)||Snowden, Rt. Hon. Philip||Whiteley, William (Blaydon)|
|Riley, F. F. (Stockton-on-Tees)||Snowden, Thomas (Accrington)||Wilkinson, Ellen C.|
|Ritson, J.||Sorensen, R.||Williams, David (Swansea, East)|
|Roberts, Rt. Hon. F. O. (W. Bromwich)||Stamford, Thomas W.||Williams, Dr. J. H. (Llanelly)|
|Romerll, H. G.||Stephen, Campbell||Williams, T. (York, Don Valley)|
|Rosbotham, D. S. T.||Stewart, J. (St. Rollox)||Wilson, C. H. (Sheffield, Attercliffe)|
|Rowson, Guy||Strachey, E. J. St. Loe||Wilson, J. (Oldham)|
|Salter, Dr. Alfred||Strauss, G. R.||Wilson, R. J. (Jarrow)|
|Samuel, Rt. Hon. Sir H. (Darwen)||Sullivan, J.||Winterton, G. E. (Leicester, Loughb'gh)|
|Samuel, H. W. (Swansea, West)||Sutton, J. E.||Wise, E. F.|
|Sanders, W. S.||Taylor, R. A. (Lincoln)||Wood, Major McKenzie (Banff)|
|Sawyer, G. F.||Taylor, W. B. (Norfolk, S. W.)||Young, R. S. (Islington, North)|
|Scrymgeour, E.||Thomas, Rt. Hon. J. H. (Derby)|
|Scurr, John||Thorne, W. (West Ham, Plaistow)||TELLERS FOR THE AYES.—|
|Sexton, James||Thurtle, Ernest||Mr. Parkinson and Mr. Charles|
|Acland-Troyte, Lieut.-Colonel||Cockerill, Brig.-General Sir George||Gunston, Captain D. W.|
|Ainsworth, Lieut.-Col. Charles||Colfox, Major William Philip||Hacking, Rt. Hon. Douglas H.|
|Albery, Irving James||Colman, N. C. D.||Hall, Lieut.-Col. Sir F. (Dulwich)|
|Allen, Sir J. Sandeman (Liverp'l., W.)||Colville, Major D. J.||Hamilton, Sir George (Ilford)|
|Allen, W. E. D. (Belfast, W.)||Courtauld, Major J. S.||Hammersley, S. S.|
|Allen, Lt.-Col. Sir William (Armagh)||Courthope, Colonel Sir G. L.||Harvey, Major S. E. (Devon, Totnes)|
|Amery, Rt. Hon. Leopold C. M. S.||Cranborne, Viscount||Haslam, Henry C.|
|Ashley, Lt.-Col. Rt. Hon. Wilfrid W.||Crichton-Stuart, Lord C.||Henderson, Capt. R. R. (Oxf'd, Henley)|
|Astor, Maj. Hon. John J. (Kent, Dover)||Croft, Brigadier-General Sir H.||Heneage, Lieut.-Colonel Arthur P.|
|Atkinson, C.||Crookshank, Cpt. H. (Lindsey, Gainsbro)||Herbert, Sir Dennis (Hertford)|
|Baillie-Hamilton, Hon. Charles W.||Croom-Johnson, R. P.||Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.|
|Balfour, George (Hampstead)||Culverwell, C. T. (Bristol, West)||Horne, Rt. Hon. Sir Robert S.|
|Balfour, Captain H. H. (I. of Thanet)||Dalkeith, Earl of||Howard-Bury, Colonel C. K.|
|Balniel, Lord||Dalrymple-White, Lt.-Col. Sir Godfrey||Hudson, Capt. A. U. M. (Hackney, N.)|
|Beamish, Rear-Admiral T. P. H.||Davidson, Rt. Hon. J. (Hertford)||Hurd, Percy A.|
|Beaumont, M. W.||Davidson, Major-General Sir J. H.||Hurst, Sir Gerald B.|
|Betterton, Sir Henry B.||Davison, Sir W. H. (Kensington, S.)||James, Lieut.-Colonel Hon. Cuthbert|
|Bevan, S. J. (Holborn)||Dawson, Sir Philip||Jones, Sir G. W. H. (Stoke New'gton)|
|Birchall, Major Sir John Dearman||Duckworth, G. A. V.||Kindersley, Major G. M.|
|Bird, Ernest Roy||Dugdale, Capt. T. L.||King, Commodore Rt. Hon. Henry D.|
|Bourne, Captain Robert Croft||Eden, Captain Anthony||Knox, Sir Alfred|
|Bowater, Col. Sir T. Vansittart||Edmondson, Major A. J.||Lamb, Sir J. O.|
|Bowyer, Captain Sir George E. W.||Elliot, Major Walter E.||Lane Fox, Col. Rt. Hon. George R.|
|Boyce, H. L.||Erskine, Lord (Somerset, Weston-s-M.)||Leigh, Sir John (Clapham)|
|Bracken, B.||Everard, W. Lindsay||Leighton, Major B. E. P.|
|Braithwaite, Major A. N.||Falle, Sir Bertram G.||Lewis, Oswald (Colchester)|
|Brass, Captain Sir William||Ferguson, Sir John||Little, Dr. E. Graham|
|Briscoe, Richard George||Fermoy, Lord||Llewellin, Major J. J.|
|Brown, Col. D. C. (N'th'l'd., Hexham)||Fison, F. G. Clavering||Locker-Lampson, Rt. Hon. Godfrey|
|Brown, Brig.-Gen. H. C. (Berks, Newb'y)||Ford, Sir P. J.||Locker-Lampson, Com. O. (Handsw'th)|
|Buchan, John||Fremantle, Lieut.-Colonel Francis E.||Lymington, Viscount|
|Buckingham, Sir H.||Galbraith, J. F. W.||McConnell, Sir Joseph|
|Bullock, Captain Malcolm||Ganzoni, Sir John||Macdonald, Capt. P. D. (I. of W.)|
|Burton, Colonel H. W.||Gault, Lieut.-Col. Andrew Hamilton||Macquisten, F. A.|
|Butler, R. A.||Gibson, C. G. (Pudsey & Otley)||MacRobert, Rt. Hon. Alexander M.|
|Cadogan, Major Hon. Edward||Gilmour, Lt.-Col. Rt. Hon. Sir John||Maitland, A. (Kent, Faversham)|
|Carver, Major W. H.||Glyn, Major R. G. C.||Makins, Brigadier-General E.|
|Castle Stewart, Earl of||Gower, Sir Robert||Margesson, Captain H. D.|
|Cautley, Sir Henry S.||Grace, John||Marjorlbanks, E. C.|
|Cayzer, Sir C. (Chester, City)||Graham, Fergus (Cumberland, N.)||Mason, Colonel Glyn K.|
|Cazalet, Captain Victor A.||Greaves-Lord, Sir Walter||Meller, R. J.|
|Chadwick, Capt. Sir Robert Burton||Greene, W. P. Crawford||Merriman, Sir F. Boyd|
|Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)||Grenfell, Edward C. (City of London)||Mitchell-Thomson, Rt. Hon. Sir W.|
|Christie, J. A.||Gretton, Colonel Rt. Hon. John||Monsell, Eyres, Com. Rt. Hon. Sir B.|
|Churchill, Rt. Hon. Winston Spencer||Gritten, W. G. Howard||Moore, Lieut.-Colonel T. C. R. (Ayr)|
|Cobb, Sir Cyril||Guinness, Rt. Hon. Walter E.||Morrison, W. S. (Glos., Cirencester)|
|Morrison-Bell, Sir Arthur Clive||Rode, Rt. Hon. Sir James Rennell||Titchfield, Major the Marquess of|
|Muirhead, A. J.||Ross, Major Ronald D.||Train, J.|
|Newton, Sir D. G. C. (Cambridge)||Ruggles-Brise, Lieut.-Colonel E. A.||Tryon, Rt. Hon. George Clement|
|Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)||Russell, Alexander West (Tynemouth)||Turton, Robert Hugh|
|Nield, Rt. Hon. Sir Herbert||Salmon, Major I.||Vaughan-Morgan, Sir Kenyon|
|O'Neill, Sir H.||Samuel, A. M. (Surrey, Farnham)||Wallace, Capt. D. E. (Hornsey)|
|Oman, Sir Charles William C.||Samuel, Samuel (W'dsworth, Putney)||Ward, Lieut.-Col. Sir A. Lambert|
|Ormsby-Gore, Rt. Hon. William||Sandeman, Sir N. Stewart||Wardlaw-Milne, J. S.|
|Peake, Capt. Osbert||Sassoon, Rt. Hon. Sir Philip A. G. D.||Warrender, Sir Victor|
|Penny, Sir George||Savery, S. S.||Waterhouse, Captain Charles|
|Percy, Lord Eustace (Hastings)||Shepperson, Sir Ernest Whittome||Wells, Sydney R.|
|Peto, Sir Basil E. (Devon, Barnstaple)||Smith, R. W. (Aberd'n & Kinc'dine, C.)||Williams, Charles (Devon, Torquay)|
|Pilditch, Sir Philip||Smith-Carington, Neville W.||Wilson, G. H. A. (Cambridge U.)|
|Power, Sir John Cecil||Smithers, Waldron||Windsor-Clive, Lieut.-Colonel George|
|Pownall, Sir Assheton||Somerville, A. A. (Windsor)||Winterton, Rt. Hon. Earl|
|Purbrick, R.||Somerville, D. G. (Willesden, East)||Withers, Sir John James|
|Ramsbotham, H.||Southby, Commander A. R. J.||Wolmer, Rt. Hon. Viscount|
|Rawson, Sir Cooper||Spender-Clay, Colonel H.||Wood, Rt. Hon. Sir Kingsley|
|Reid, David D. (County Down)||Stanley, Maj. Hon. O. (W'morland)||Worthington-Evans, Rt. Hon. Sir L.|
|Remer, John R.||Steel-Maitland, Rt. Hon. Sir Arthur||Wright, Brig.-Gen. W. D. (Tavist'k)|
|Rentoul, Sir Gervals S.||Stewart, W. J. (Belfast, South)|
|Reynolds, Col. Sir James||Stuart, Hon. J. (Moray and Nairn)||TELLERS FOR THE NOES.|
|Richardson, Sir P. W. (Sur'y, Ch'te'y)||Sueter, Rear-Admiral M. F.||Sir George Hennessy and Sir|
|Roberts, Sir Samuel (Ecclesall)||Tinne, J. A.||Frederick Thomson.|
Bill read a Second time, and committed to a Committee of the Whole House for To-morrow.
§ The remaining Orders were read, and postponed.368
§ It being after half-past Eleven of the Clock upon Tuesday evening, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
§ Adjourned at Sixteen Minutes after Twelve o'Clock.