AMENDMENT OF LAW.

HC Deb 29 April 1931 vol 251 cc1647-83

Question again proposed, That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with Finance."—[Mr. P. Snowden.]

Sir HERBERT SAMUEL

The chief point that springs to one's mind as one surveys the Budget proposals this year is the enormous strength which they indicate in the financial position of this nation taken as a whole. Here we are in a time of extreme trade depression—as grave a trade depression as the modern history of the country records—with a substantial proportion of the whole of our working-classes unemployed, and yet we are able, in the first place, unlike many of our neighbours, to meet all our liabilities. We pay 20s. in the £, and our shilling is worth a shilling and not only 2d., as in the case of many of our Continental neighbours through the depreciation of their currencies. Even if all the borrowing for the Unemployment Fund—this is taking the most extreme case—were to be regarded as a permanent charge upon the State, and even if it were regarded as fresh borrowing within the year, and irrecoverable in the future, still out of the resources of the nation we have been able not only to pay for all our annual expenditure, but to put by a certain margin, though not a very large one, for the repayment of Debt. That is a most remarkable feature in these difficult times, and I should like to ask hon. Members above the Gangway whether there is any Protectionist country which can point to results such as this, whether there is any Protectionist country with which they would desire to exchange our system of finance.

Heavy taxation there is undoubtedly, increased enormously since the War, but the income of the nation has increased much faster still. There has been circulated to Members of the House, and to the public at large, a memorandum on our economic situation by a body of leading Protectionist manufacturers who have taken to themselves the grandiloquent title of the National Council of Industry and Commerce. Their chairman is Sir William Morris. This paper is an able statement, of the present facts. I have not examined in detail the figures that they give, but, for the purposes of this argument, I will accept them as they are stated. It is a presentation of the facts with regard to income and taxation designed to emphasise the heaviness of the burden that rests upon the people and to justify a strong plea for economy and for reduction of taxation. Therefore, these figures are not likely to err on the side of minimising our liabilities or exaggerating our resources. These figures show that, up to the latest year that has been given, our taxation, national and local taken together, has increased since before the War by no less than £816,000,000, a colossal sum. But in the same period the national income, according to this authority, has increased by £2,100,000,000, so that after deducting the whole of our increased Imperial taxation and the whole of the increase in local taxation, there is left in the body of the nation a net increase of income of no less than £1,300,000,000. Of course, the unfortunate fact of the situation is that it is not always the people who get the increase who have to pay the taxation. It may be Peter who pays, and Paul whose income has been enlarged.

There is a further fact to be borne in mind in this connection which has not, I think, so far been mentioned in these Debates either by the Chancellor of the Exchequer or by any other speaker. I hope that my right hon. Friend the Member for Epping (Mr. Churchill) will be taking part in these discussions—in a position of greater freedom and less responsibility, and he will, no doubt, pay tribute to the manner in which the Chancellor of the Exchequer has met the deficit for de-rating which he bequeathed to him. The right hon. Gentleman took the credit for relief of rates to the extent of some £26,000,000 a year and left to his successor the debit of finding about one-half of the expenditure that was involved, and of the deficit of this year, £12,000,000, is a direct inheritance from the right hon. Gentleman. This is the point I wish to make. When it is pointed out how large an increase there has been in the burdens made by the Chancellor of the Exchequer upon the nation, it should be borne in mind that all this is not net increase in the burden of the taxpayer, including in the term of "taxpayer" the ratepayer; £26,000,000 of it is transferred.

The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)

£35,000,000.

Sir H. SAMUEL

It was originally £26,000,000. It has increased to £35,000,000 so the Chancellor of the Exchequer tells me, and this ostensible increase in the taxes imposed by the Chancellor of the Exchequer upon the nation is counter-balanced by a reduction in the amount of rates that are paid by certain classes of ratepayers. It is true that the relief has been, in our view, most unfairly distributed, and that an immense part of it goes to industries that are highly prosperous and which were in no need of relief. As the rain falls on the just and unjust alike, so the rating relief of the right hon. Gentleman has been given to the prosperous as well as to the needy. But the fact remains that this large sum of £35,000,000, which is always included among the items of increased taxation, is neutralised by the fact that there is an equivalent relief to local rating.

There was one omission, and a somewhat notable and regrettable omission, from the speech of the Chancellor of the Exchequer. I agree with the right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain) in what he said yesterday that it might have been expected that the Chancellor of the Exchequer would speak to the House on the subject of the borrowing for the Unemployment Fund. There you have a fund for which about £35,000,000 had to be provided last year from the Exchequer, and which has been swallowed up in the enormous expenditure upon unemployment benefit. The finances of the State and the finances of the Unemployment Fund are now very much intermingled, and it would, I think, have been useful if the right hon. Gentleman had told us what his view was with regard to this sum of £35,000,000 for which he has had to borrow during the course of the year. He has on previous occasions said with emphasis that he does not regard this as money lost to the State which is not to be recouped in the future.

Mr. SNOWDEN indicated assent.

Sir H. SAMUEL

The right hon. Gentleman indicates his assent to these observations. I think the Committee would have been glad to learn precisely what his view was on the subject and to have been informed if it is the Treasury view that this is not to be regarded as a permanent increase to the deadweight of national Debt, but, by some means and at some time, is to be recovered from the revenues of the Unemployment Fund.

This Budget will be welcomed on these benches for one reason among others. It has, I hope, given the coup de grace to the suggestion that we can only meet our financial needs by the device of a tariff for revenue. There are a good many persons who have said that an increase in direct taxation is not possible, that it would be too great a burden upon industry, and that the only other resort to which any Chancellor of the Exchequer could turn would be a tariff upon imported articles of one class or of many classes. This Budget gives the refutation to that plea. There is still in reserve very large resources to which the Chancellor of the Exchequer may turn without departing from past precedents of our finances and to which, if the extreme case of necessity arose, he might have recourse without adding to the heavy burdens of high direct taxation or establishing a so-called tariff for revenue. Of course, we all know that this phrase of "a tariff for revenue" is wholly insincere. It may be that the ostensible purpose of the tariff might be revenue, but we all know, from the past records and the present principles of those who advocate it—or almost all of them—that Protection is its aim, and further that Protection would be its certain result.

Only to-day I read in the Press that a committee of the Birmingham Chamber of Commerce—the Imperial and Local Finance Committee—presented to the council of the chamber a report yesterday in which they regretted that the Chancellor of the Exchequer has not taken the opportunity of introducing a revenue tariff, and in the innocence of their hearts they describe the purpose of a revenue tariff as being this: Has not taken the opportunity of introducing a revenue tariff with a view to reducing the import of manufactured articles which can be made in this country and provide additional employment. That purpose may be right or it may be wrong, but it is obviously a gross insincerity to try and secure its acceptance on the ground that it is a revenue tariff. A revenue tariff means a tariff which will not necessarily have any protectionist effect, but which is a fiscal device in order to bring in revenue alone, such as a Tariff upon goods not produced in this country—coffee or tea—or a tariff which is accompanied by a countervailing excise. Those are tariffs for revenue. A tariff which is introduced with a view to reducing the import of manufactured articles is purely a protectionist tariff and nothing else.

When hon. Members, such as my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft), pray in aid the names of Mr. Keynes and Sir Josiah Stamp, I would like to ask them whether they are prepared to accept the reasons given and the limitations suggested by those gentlemen on the tariff which they have advocated. Both Mr. Keynes and Sir Josiah Stamp have said that the purpose of that tariff is to raise prices. Will hon. and right hon. Members above the Gangway go to the country and say that the purpose of the tariff which they propose is to raise prices? If so, it will be a most important element in our fiscal controversy, and, at last, we shall be able to have a controversy on the basis of candour and sincerity, because hitherto they have been denying that Protection will raise prices. Of course, they are concerned to point out that they will not raise the cost of living and that they do not desire to raise the cost of production.

Secondly, both Mr. Keynes and Sir Josiah Stamp have advocated a tariff which shall be purely temporary and which they regard as an evil: a temporary emergency tariff to meet the mere circumstances of the moment. Are hon. and right hon. Members above the Gangway, and is my right hon. Friend the Member for Edgbaston, prepared to say that the tariff that he proposes is to be only temporary, and that as soon as prices have risen to the level of 1929, if they do so rise, the tariff is to be auto- matically repealed? That is Mr. Keynes' proposal, and, unless hon. Members above the Gangway are prepared to accept it in those terms and on those conditions, they have no right to suggest that those authorities are allied to them or support the policy which they propose.

The reasons that were given by the Chancellor of the Exchequer against the so-called tariff for revenue were unanswerable, and it is unnecessary for me to add a single word, because they could not have been more concisely and more effectively expressed. The complete condemnation which he gave of that proposal and the approval with which his observations were met by hon. Members opposite showed quite clearly that the Labour party, at all events, will not introduce this so-called tariff for revenue. Certainly, the Liberal party so far from supporting it would fight it, from whatever source it originated, with the utmost energy and with all the resources at their command. The Conservative party have repudiated it as a whole. Here is a quotation from the late chairman of the Conservative party, my right hon. Friend the Member for Edgbaston, who, speaking when he was chairman, on the 20th February, used significant words at Birmingham. I would invite the special attention of the Committee to the quotation because it is clear and specific, it comes with very great authority from the right hon. Gentleman who was lately chairman of the Conservative party in the country, who is to-day the chairman of the Finance Committee of the Conservative party, and is leading on their behalf the discussion in the House on the Budget. He said: What we propose is Protection, pure and simple: Protection all along the line. We are going to do it promptly and we are going to do it effectively. A 10 per cent. tariff all round would be of no more use to the iron and steel trade than a sick headache. The right hon. Gentleman's phrase was emphatic if it was not altogether elegant. I am not going to mention any figures, but I will say that the emergency tariff, if it is to be of any use, must protect, and whatever we are going to do it will not be anything so crude and so feeble as a 10 per cent. tariff all round. I think the Committee will agree that I have substantiated the point I was endeavouring to make, that neither the Labour party, the Liberal party nor the Conservative party is prepared to advocate a traiff for revenue, and I hope that that proposal will disappear from our fiscal and financial controversies henceforth.

The Chancellor of the Exchequer has avowedly adopted one or two ingenious and temporary expedients in order to make his Budget for the year balance. Like his predecessor and like Autolycus, he is "a snapper up of unconsidered trifles", and the result has been that he has been able to balance his Budget without any severe increase of annual taxation. But he has only been able to do that by anticipating that there will be adequate economies in one direction or another in the course of the year to counterbalance the Supplementary Estimates which will be almost inevitable. He laid emphasis on the work of the Economy Committee. We on these benches who were responsible for proposing to the House the appointment of that committee felt not a little gratification that the Chancellor of the Exchequer should now rely so much upon the proposals that it may make.

He also made a very significant reference to the possibility of economies with regard to unemployment insurance. No savings in that direction can be made which would inflict hardship on those who are out of work through no fault of their own and for whom no further opening is available and who already, most of them, have little enough to live on in order to keep body and soul together for themselves and their families. But there may be, as we all know, abuses in certain directions, and I feel sure that the whole nation, irrespective of class, would desire real abuses, if they are established, to be remedied. I am quite certain that the feeling among the working-classes, the ordinary self-respecting hard-working artisan or labourer, does not approve laxity or abuses in the distribution of unemployment benefit. I earnestly trust that when the report comes up, if it is fair, impartial and reasonable, its recommendations will be received with unanimous acceptance and that the Government will not hesitate to rise to the height of their national duty and put into force, unpopular as they may be in certain quarters, such recommendations as may be made.

I am not sorry that the Chancellor of the Exchequer should not have proposed further increases of taxation in order fully to cover contingencies in the coming year. If he had asked the Committee to impose additional duties upon tobacco or beer or other commodities, which would have allowed an ample margin for possible increases of expenditure here and there to cover Supplementary Estimates and to leave at the end a large surplus to meet wholly unforeseen contingencies, he might have been praised for adopting a very prudent and orthodox method, and the Committee might have agreed to that taxation for that purpose, but I think that in the course of the year he would have found it much harder than he may now to insist upon economies in one direction or another. It is a good thing for the nation that the Chancellor of the Exchequer should be harassed, that he should not know where to turn in order to make ends meet and that when various proposals for increased expenditure come to him he shall be able to say: "My Budget only barely balances, and I cannot afford this increased expenditure. We must effect economies; otherwise, the Budget of next year will be greatly imperilled."

An overdraft at the bank in the case of some people is an excuse for reckless extravagance. They say: "I have an overdraft and whether it is a little more or less does not matter very much." But with most people an overdraft at the bank is a much greater incentive and stimulus to economy than a surplus; and so it is with the Treasury in this year. I can imagine that during the next 12 months the fact of the somewhat precarious nature of the balance will be an incentive to the right hon. Gentleman, and possibly to hon. Members behind him, to abstain from excessive expenditure and to insist upon further economies. The expedited payment of Income Tax next January will undoubtedly be a great hardship to a great number of people. It will be felt if not as a grievance at all events as a serious financial inconvenience, and perhaps the taxpayer will say that the only thing to be said in its favour is that it is a far better alternative than an increase in the amount of money that has to be provided during the year.

I am sorry that the Chancellor of the Exchequer did not say anything on the question of the taxation of company reserves. In a year of heavy expenditure and inadequate revenue it may not be possible to give the relief which is desired, but we should have welcomed an indication that the matter was occupying the careful attention of the Chancellor of the Exchequer. We on these benches moved an Amendment on the Budget last year raising the question of Income Tax on company reserves, which is an important matter to the whole of industry in the country. But it is extraordinarily difficult to devise—[Interruption]—an Amendment which is thoroughly watertight, and the Colwyn Committee did not recommend this reform at all; in fact, they reported against it mainly for the reason that it was so difficult to frame any form of words which would be fully satisfactory, and, when some of my hon. Friends put down the Amendment they declared, when moving it, that it was recognised as imperfect—[Interruption]—and not such as they would desire to see in that form—[Interruption]. Hon. Members above the Gangway seem to be rather amused, but is it not the case that very often an Amendment is put down in the course of the Budget discussions for the purposes of debate. Hon. Members above the Gangway have taken the same course themselves—[Interruption].

Mr. LOVAT-FRASER

May hon. Members in this part of the Committee participate in the discussion between the right hon. Gentleman and hon. Members above the Gangway?

Sir H. SAMUEL

I beg the hon. Member's pardon, I was saying that the question of the relief of company reserves from Income Tax is a matter which requires the attention of the Committee and of the Chancellor of the Exchequer, but that it is a question upon which it is exceedingly difficult to frame a fully satisfactory Amendment. However, I hope in the course of the Debate that we shall be told the attitude of the Government to the principle and whether they think there is any practicability of carrying this much desired reform into effect.

There are two other minor points to which I desire to refer. I see that the net revenue of the Post Office has risen to the high figure of £12,000,000. It is satisfactory from the point of view of the general taxpayer that so large a surplus exists for the relief of other taxes, but, on the other hand—I speak now as an old Postmaster-General—I suggest that it is not a desirable form of taxation to impose what is, in effect, a tax upon communications. In the exigencies of the moment it may not be possible to suggest a reduction, but I hope that the Chancellor of the Exchequer will bear in mind the necessity of allowing as much as possible of the Post Office revenue to remain in the business and to be used for Post Office development, particularly on the telephone side; and where possible to give further facilities to the public in the way of improved Post Office communications.

We are glad to observe that the Chancellor of the Exchequer so far from raiding the Road Fund is proposing to reinforce it by a loan. That is what we on these benches have been proposing for many months, indeed, for some years. From the time when we made our first inquiry we suggested that the proper course to pursue in times of bad trade was to raise large sums by means of loans and pay interest and sinking fund on the loans from the accruing revenue of the Road Fund. That is the course suggested in a most interesting report made by the League of Nations International Labour Office, which appointed a committee, representative of a number of countries, to inquire into the question of public works in times of unemployment. This wholly impartial body reported in clear and definite terms that the consensus of opinion, gathered from a large number of nations who were members of the League, was that it is a right and proper course to borrow capital which is idle in times of industrial depression and use it for public works. I am glad that the right hon. Gentleman, who hitherto has been somewhat antagonistic to this course, has declared that in this particular instance for the purposes of the Road Fund he is prepared to adopt that course.

Lastly, we rejoice that the right hon. Gentleman is proposing to carry into effect a reform which has been advocated by us for so many years—the taxation of land values. If only this country had been provident enough in 1848, when John Stuart Mill advocated a tax on these lines, if only this method had been adopted 70 years ago, what a princely revenue would now be accruing to the State and local authorities without hardship to anyone?

Lieut.-Colonel FREMANTLE

What about agricultural land?

4.0 p.m.

Sir H. SAMUEL

That is a side issue. It is the enormous increase in urban sites which is important and which would have brought in a revenue. As long ago as 1891 Mr. Gladstone, in endorsing the Newcastle programme, approved of this reform, and if it had been carried out then, it would have been of enormous advantage to-day. My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) will speak upon this matter, in which he has a very special interest—[An HON. MEMBER: "He turned it down."] He was in bad company in those days. He cast his bread upon the waters many years ago, and it is now returning to him after many days. As my right hon. Friend the Member for North Cornwall (Sir D. Maclean) said yesterday, we on these benches will support these proposals, because in regard to the taxation of land values they will take a necessary first step toward the adoption of a reform for which we have very long contended, and which is generations overdue. We rejoice that the Budget is able to exhibit the vast financial resources which this country possesses under its Free Trade system, and, not least, we accept the proposals of the right hon. Gentleman because he relies for the balancing of annual finance not upon further taxation but upon further economy.

Mr. CHURCHILL

I shall not attempt to follow the right hon. Gentleman into the two topics to which his speech was mainly devoted, namely, a well-rehearsed lecture on the advantages of Free Trade, and a somewhat laboured exposition of the rather delicate tactics which he and his friends found it necessary to pursue in pressing the Government for the relief of taxation of company reserves. I shall deal with the general question of the Budget, and the House will, naturally, not be astonished if I say that I listened to the Budget speech with amusement, which almost rose into hilarity. I could hardly believe my ears as I heard the Chancellor of the Exchequer unfold a long series of proposals which were virtually an acceptance, in fact and in form, of the financial measures and expedients which I devised and practised, and which he derided and condemned. As one by one those familiar shapes arose from the other side of the Table, and as I recalled to memory all the criticisms and scathing censures he had lavished upon each of them, I wondered whether I had not, perhaps, left behind some of my old Budget notes, and that one of his able secretaries had, by mistake, put them into the Chancellor's famous red box. Certainly, no Minister I have heard has ever given the House such an example of self-stultification. The opinions which he expressed were so recent, their form was so violent, the pattern of their reversal was so symmetrical and perfect, that whatever may or may not be said about his Budget speech, it will certainly abide for generations as a unique curiosity in Parliamentary annals.

Like his predecessor, the right hon. Gentleman was confronted with a financial emergency which he hoped would be of short duration. Like his predecessor, he was precluded from raising a large revenue by the easy and comparatively painless method of a general tariff for revenue. Like his predecessor, he recoiled from imposing further heavy direct taxation. Like his predecessor, he hoped for better times. Like his predecessor, he took capital assets to tide over what, he believed was a temporary emergency. Like his predecessor, he adopted a fixed Debt charge of £355,000,000 in satisfaction of all services and claims upon the Debt and the amortisation fund. Like his predecessor, he excluded from his calculations of the net sinking fund all borrowing by the Unemployment Insurance Fund. Like his predecessor, he called in aid a reserve—and it is a reserve—by expediting instalments on various Schedules of the Income Tax. Like his predecessor, he utilised a duty upon oil to meet, but, like him, only partially to meet, the expense of providing relief on rates to manufactures and agriculture.

Even the very form in which these accounts are now presented to Parliament in the exclusion of the self-balancing revenue and expenditure, in the separation of the Sinking Fund from the ordinary expenditure of the year, even down to the intensified blue colour paper for the Financial Statement—in every step the right bon. Gentleman has followed meekly, and, I might almost say, reverently, those very footprints which the last tour or five years of his life have been spent in abominating. To-day I do not have to say "Ditto to Mr. Burke." I am even more fortunate. Mr. Burke has said "Ditto" to me, and I need not at the outset confess that these spontaneous tributes are gratifying to me in my present loneliness. I did not expect them so soon. But this is an age of speed. Every year the pace of life and the pace of motion increase, and so, I suppose, time's revenges have gone in for record-breaking.

The right hon. Gentleman's acceptance and endorsement of my financial administration has entailed, I gather, a similar conversion in the Liberal party. No critics were more severe or more unfair in the last Parliament than my Liberal critics of finance. Their authority on financial questions is great, and they do not proceed except upon the basis of life-tong established principles. They have followed out all the doctrinaire and orthodox theories of finance to their logical conclusion, and, consequently, when they have given their impartial opinion, not mixed up with the struggle between Conservatives and Socialists, it naturally carries special weight in the minds of the public generally. But what has happened to all those opinions now? I gather that they have all now become, in the main, favourable or, at any rate, instead of denouncing these practices of the Chancellor of the Exchequer as the worst violation of every principle of sound finance, the right hon. Gentleman passed them off airily as ingenious and convenient temporary expedients.

What is the explanation? What process of ratiocination has been at work? I do not see the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) here to-day, but it is clear that what has happened is that "When father turns, all turn." I accept their tributes, belated though they be, for what they are worth. I suppose a favourable verdict is always to be valued, even if it comes from an unjust judge or a nobbled umpire. The Committee will see that it would be somewhat difficult for me, in all the circum- stances, to take a highly controversial line, and I am, therefore, sincerely grateful to my right hon. Friend the Member for Edgbaston (Mr. Chamberlain) for coming forward with what I must regard as prophetic magnanimity to relieve me from a long-drawn task of criticism and opposition to this Budget which it is, undoubtedly, the duty of those who sit on this side of the House to fulfil. It falls to me only to make from time to time a few comments upon the strange scene of our finance this year, and I am very glad to be able to do so with complete freedom from all considerations except the merits and demerits of the case.

I shall set myself to test this Budget upon two main questions: first, how far are these proposals in themselves sound or unsound, wrong or right; and, secondly, how far is the Budget, taken as a whole, appropriate to the serious situation in which we stand? Upon the first question, I have already recapitulated the extraordinary resemblance and continuity of method and of outlook between the financial policy of the present Socialist Administration and the financial policy of the late Conservative Government. I use the word "Government" advisedly, because the Chancellor of the Exchequer does not produce the Budget in the name of a great party without having carefully submitted it to the principal colleagues on whom that party relies. In the late Cabinet I had the very great advantage of the presence of no fewer than three ex-Chancellors of the Exchequer—an unpopular breed, no doubt, but none the less powerful for that. And it was my custom and my duty, not only to secure the assent of the Cabinet to the annual Budgets, but to discuss their details long in advance with the Prime Minister and with my two eminent and fraternally united colleagues. I do not recall any differences that developed between us upon the many difficult decisions with which we were confronted.

Therefore, I say that in all the resemblances which this Budget bears to previous Conservative Budgets, the Chancellor of the Exchequer, at a cost, no doubt, of a complete personal tergiversation, has at any rate placed himself upon solid ground and ranged himself with most respectable authority. But there are not only resemblances in this Budget; there are differences upon which a considerable structure of legitimate and consistent criticism ought to be founded. Some of these differences I shall endeavour to explain. Like the Chancellor I shall begin with the fixed Debt charge. We thought in 1928 that the reinstitution of the fixed Debt charge, which was sanctified by principles avowed and practised by Mr. Gladstone and Sir Stafford Northcote—we thought that the reinstitution of the fixed Debt charge to cover the interest, the sinking fund and the detachment of savings certificates, was a far better way of dealing with this oppressive problem of the Debt than by making a provision from year to year of such sums as were actually needed on these Debts. The fixed Debt charge removes from national finance a whole series of erratic and uncontrollable fluctuations which in one year give an appearance of a false economy and in another year the appearance of an equally false extravagance.

We preferred as far as possible to separate controllable from uncontrollable or partially controllable expense, and we established a fixed Debt charge of £355,000,000 which, if it was adhered to for 47 years more, would completely extinguish our National Debt. This method, no doubt, deprived the base and ignorant of a certain number of cheap scores from time to time upon the fluctuation in the total of our expenditure, but it had the great advantage of focusing before the eyes of the House and the country the preventible and optional expenditure of the Government in any year, free from the confusing external facts. The right hon. Gentleman was not content with this provision of £355,000,000, and on his assumption of office he set himself a far higher standard; he went out of his way, and needlessly, as we told him at the time, to add the deficit of the 1929 Budget, to add his deficit of my 1929 Budget—I think he had as much almost to do with the deficit as I had with the Budget—he went out of his way needlessly to add that deficit to the Debt provision of the next three years; and in a frenzy of self-righteous animadversion he actually set a Clause in the Finance Bill, to act for all time as a warning to Chancellors of the Exchequer, whereby automatically, unless the House intervenes, the whole deficit of any year would be added to the Debt provision for the next year. I was rude enough in the Debate last year to describe this Clause as mere eye-wash. Looking back I cannot feel that that term erred at all, except, no doubt, in lack of ceremony. The first and only Chancellor of the Exchequer to fall under the ban—for it is now to be removed by the hand that set it up only a year ago—is the right hon. Gentleman himself. We have all heard of how Dr. Guillotine was executed by the instrument that he invented.

Sir H. SAMUEL

He was not!

Mr. CHURCHILL

Well, he ought to have been. We know of the engineer who was hoist by his own petard, the stricken eagle which nursed the pinion that impelled the steel, and we see a much more perfect example in the right hon. Gentleman sitting in his place to-day. Being of an amiable disposition I will forbear further to aggravate the wound which he has himself inflicted. I will content myself with recording the important fact that this fixed Debt charge of £355,000,000, in the setting up of which I was greatly aided by my right hon. Friend the Member for West Birmingham (Sir A. Chamberlain), pursued over the years across all their varying conditions, taking the rough with the smooth and the good years with the bad years, is in fact recognised by all parties as an adequate provision for our release from the frightful burden of the National Debt.

It has never been the custom for the borrowings for the Unemployment Insurance Fund to be set off against the net sinking fund. The Chancellor of the Exchequer has taken to this somewhat devious and questionable practice like a duck to water. Not the slightest difficulty this year in getting him to keep these two ideas in quite separate compartments in his mind. But surely the figures involved alter the case? I have always held the view that the Unemployment Insurance Fund, resting as it does upon important revenues of its own, could carry within certain limits a reasonable loan account of its own, and that was the position in our time. But when, either through grave national depression or partly through lax administration, the loan charges rise to £70,000,000 or £80,000,000 or perhaps £100,000,000 in a very short time, it is perfectly evident either that the cause of the expenditure must be curbed by economy, or that some entirely new provision for funding this ever-growing debt will have to be brought into effect.

Next I come to the Oil Duty. I may claim this Duty as being a great success. It has produced, up to the present, practically no increase in the price of petrol. All that it has done is to intercept for the Exchequer the relief which would otherwise have come to the motoring public from the fall in price. All the administrative difficulties were surmounted in the original tax. There is nothing to be said against the tax, except that all taxes are bad. There is nothing to be said against the tax half as bad or a quarter as bad as what the Chancellor himself said yesterday. I think he is justified, before all tribunals except his own, in increasing this Duty upon this occasion. We shall now be deriving more than £25,000,000 of revenue from the Petrol Tax, and that is a very fair set off—it comes within £10,000,000 of the total expense of all the rating reliefs which the right hon. Gentleman inherited. He is getting from this tax alone £25,000,000, towards the £35,000,000 that he had to provide. There is a certain gap, I agree. After this year, when the £4,000,000 in reserve are used up, there will be this gap of £10,000,000; but in the main the cost of that immense relief of transference of expenditure from the most invidious form of taxation upon industry to the Exchequer, has practically been borne and sustained by the Petrol Tax. So I hope that any future howlings on the subject will be kept within the reduced limits within which they would be proper.

Then there is the provision for expediting the instalments under the various Schedules of the Income Tax. When we applied this principle to Schedule A it yielded £17,000,000 in the single year, as against the £14,000,000 which I estimated. I am sure that it was the right thing to do at the time, and I was not aware, while the process of collecting it was going on, that any exceptional hardship was being inflicted. At any rate, there were hardly any complaints, hardly any difficulty in collecting it. For two successive Budgets I looked hungrily at the other Schedules. The right hon. Gentleman must not suppose that I did not, with appetite in my eyes, examine all these possibilities. Why did I not avail myself of them? It was because I was warned of the very serious differences which existed between applying this principle to Schedule A and applying it to the other Schedules. My advisers who first made me aware of the possibilities of Schedule A, when I discussed the other Schedules produced arguments which alarmed me so much that I left them severely alone. It was pointed out that there were great numbers of small people who could not get the same accommodation from their banks for the six months that the majority of Schedule A taxpayers are able to secure, and that the payments would come in just at Christmas time, when so many heavy charges fall upon the small householder.

We had last night from my hon. and gallant Friend the Member for Kelvingrove (Major Elliot) some figures of great interest upon this point, and I think it would be a very good thing if the Chancellor of the Exchequer and some of his advisers had the opportunity of looking at those figures, which perhaps are not fully found in the report. Only very serious reasons deter me from availing myself of this method, and those serious reasons confront the Chancellor to-day. He has rushed in where I feared to tread, and I have no doubt that he will encounter a very keen and considerable outcry and resistance, and that there will be many cases of real hardship and embarrassment resulting from this, the necessary treatment and mitigation of which may affect to some extent the yield of the tax this year.

With regard to the £20,000,000 of transfer from the exchange account, I agree that the establishment of the International Bank and the arrangements for the payment of contributions which constitute the wealth of that bank in dollars, render this sum of money available. But that this money, originally borrowed money, the produce of an unbalanced War-time Budget, should be used to defray current expenditure instead of being devoted to the cancellation of Debt, even beyond the limits of the fixed Debt charge, will be held in all quarters to be a violation of the canons of sound finance, and it strips the Chancellor of the Exchequer of every vestige of financial orthodoxy.

There remain only the land taxes about which we are to hear to-morrow or Monday. Until we know precisely what those taxes are it is of course impossible to discuss them, but I hope that the right hon. Gentleman is not going to throw out a complicated scheme, in a speech or in a paper, and expect the House to form its judgment and opinion upon that without some reasonable interval for the study and examination by experts and actuaries and accountants of these highly-complicated and technical projects. I shall not attempt to discuss the matter this afternoon, because it has, of course, nothing whatever to do with this Budget, or the next Budget or any Budget for which the right hon. Gentleman is likely to be responsible. If these land valuation proposals are empty of money they are quite full of polities, and I only express the hope that their political aspects will be studied with as much care on this side of the Committee, as they have evidently been studied on the other side.

When we saw with what interest and stress and eagerness the right hon. Gentleman fastened upon these proposals, and how he saved them up for the end as the rare and refreshing fruit, the dessert that was to conclude the somewhat restricted meal which he provided—when we saw that, it was made quite clear that he is using these taxes, not for any fiscal or financial purpose, but as a means of arrangement and negotiation with the party below the Gangway on this side and in the vain hope of satisfying hon. Members on the benches below the Gangway opposite. Of course, these are very old ideas. I think that the right hon. Gentleman below the Gangway told us what Mr. Gladstone said in 1891 upon this subject, and we have all seen for 50 years their merits and demerits canvassed. Well, that is all that Socialism gets out of it. The right hon. Gentleman used these taxes as a means to show that, if he had ceased to be a Socialist, at any rate be was a good old-fashioned Radical. Poor unlucky I.L.P.! Forlorn New Party men! Socialism in our time as dead as mutton! But, never mind. Radicalism, not in the Chancellor of the Exchequer's time but some time or other, may, perhaps, hold out some glittering possibility. There is their consolation prize. If they are content with that, if they are satisfied with that, if that is all they are requiring now, then all I can say is that the influence of the Parliamentary atmosphere must be of a most potent character.

In the short time that I propose to trespass further upon the indulgence of the Committee I come to the second inquiry and the larger aspect of the Budget, namely, its wisdom and opportuneness as a whole. The task of a Chancellor of the Exchequer is always thankless. If he taxes he is abused by the victims. If he fails to tax he is insulted by the pedants. If he is simple, he is clumsy; if he is ingenious he is tricky. If he spends it is a rake's progress, and he can only save by dismissing persons from their employment. Whatever course he takes he must encounter not only fierce criticisms but valid criticisms, and no course which he can take can possibly avoid those criticisms. It is only upon very broad lines that the action which he takes can be fairly judged.

How, then, stands the Budget as a whole? There is a unity of conception about this Budget. The note which it strikes is clear. Its simplicity has not been obscured to any serious extent—apart from these land tax proposals which are not really a part of the Budget—by the kind of spiteful partisanship to which sometimes I have had to draw the right hon. Gentleman's attention as being a disfigurement upon his attractive public career. Its purpose is modest. Its purpose is none the less sensible. I do not think myself, and I am giving my personal opinion, that the Inland Revenue estimates, apart perhaps from stamps, are inflated. The Income Tax estimate is not a guess. Samples of 30,000 firms are passed under review. The most elaborate logarithms and curves are drawn to show all the different results of varying rates of collection and so forth. The officials are of the highest competence and their estimates hardly ever err, except on the side of safety, and I do not believe that the right hon. Gentleman is the kind of Chancellor who would screw up the figures without the most careful regard to the facts.

There are, no doubt, great uncertainties overhanging some of our external receipts. I do not dwell upon those uncertainties partly because of their gravity and also because I hope that they will clear themselves up in a satisfactory fashion. If they do not, then they will entail an entire recasting of our present financial affairs, but there is, undoubtedly, in the proposals of this Budget a gap between permanent revenue and permanent expenditure of anything from £30,000,000 to £40,000,000. At present that gap is filled only with hope and good resolutions. But one thing is vital to the right hon. Gentleman's policy this year and to the Budget which he has introduced, and that is resolute economy. The right hon. Gentleman owes it to Parliament and owes it to himself to vindicate this daring Budget—and I do not say that it is a wrongfully daring Budget because I think that he has dared in the public interest and not in any personal or party interest—by effecting the reductions in expenditure upon which alone its solvency depends. In this he should be aided, and will, I am sure, be aided by all parties in the House.

The Budget marks a very great decision. It is not the decision which the right hon. Gentleman paraded so eagerly on Monday. This Budget will not be memorable for the political manoeuvres connected with land taxation proposals or land valuation proposals. It will be memorable for the fact that the Socialist Chancellor of the Exchequer, in spite of party pressure, in the teeth of the whole doctrines of his life, has declared by action, which is louder than words, that in the present circumstances the limits of direct taxation have been reached. There is the message in the Budget imparted to us by lips whose reluctance to utter it is the measure of its irresistible force. There is the bleak revelation, thrust silently but brutally before British Socialism. That is the all-important recognition which the Chancellor of the Exchequer has made of facts and of his contact with realities, and it is a recognition, made not only by the Government, but, as I gather, by their Liberal allies. We do not know all the reasons by which the Chancellor of the Exchequer has been actuated, but we can judge from his action how grave and urgent some of those reasons must have been. Looking out behind the scenes upon the whole field and structure of British trade and industry, he has come to the conclusion, greatly against his party interests and feelings, that the most burdened and most loyal class of taxpayers in the whole world have reached or nearly reached their breaking point—

Mr. HOFFMAN

In present circumstances.

Mr. CHURCHILL

All right, in present circumstances—and that further pressure, at this juncture, would result possibly in an even more widespread collapse of enterprise than that which we are now confronted with and would possibly be coupled with an actual diminution and would certainly not be attended by any proportionate increase in the yield of the taxes themselves. He has had the courage—and he has never wanted any kind of courage as we have seen—he has had the courage, and, I will add, the public spirit, to set aside his own convictions, to defy his party's pressures, and to do what he deems to be his duty to the country.

Very far-reaching conclusions can be drawn from that, decision of the Chancellor of the Exchequer. It spells the doom of all those airy, visionary Socialist programmes of creating some new Utopia through the agency of the tax-collector. It reveals the bankruptcy of the Socialist programme. It reveals more than that. If the social services of this country, freed from abuses as they ought to be, are to progress, as I trust they will, in the immediate future, it can only be through the institution of systems of indirect taxation on a far greater scale and in a far higher proportion than anything that has yet been contemplated. I agree with my right hon. Friend the Member for Edgbaston in what he said yesterday. The compulsive need for revenue must bring the tariff. The tariff brought, by the need of revenue, must become the agency by which the growing importance of the home market will be emphasised. The institution of the tariff will afford occasion for striking those new bargains with foreign countries which are necessary and which, wisely handled, may play an important part in welding together the production and consumption of our Empire, before the present process of dispersal and disintegration has reached its fatal end.

When we survey the various alternatives which were before the right hon. Gentleman, I cannot myself say that he has not judged rightly. Suppose that he had put £20,000,000 or £30,000,000 on the direct taxpayer—he could have used the plausible argument of the Revenue returns of last year—he would have had loud cheers of triumph and of appetite from the benches behind him; he could have used this sum of money to gain the encomiums—I believe that is the word—of the financial purists for the great provision which he had made for the Debt, but he might well have struck a deadly and possibly a fatal blow, at a most critical moment, at the whole trade and business life of our country.

He has taken the right course; he has rejected that alternative; he has endeavoured to nurse the country round a most dangerous crisis in its illness. I cannot regard his action as other than a friendly and responsible gesture. He has sought to gain a breathing space. Do not let us throw that breathing space away. Precious, fleeting months must not be wasted by British industries. Often we have heard them say, "Leave us alone." Well, anyhow for a space, they are left alone. The cloud of the Budget which overhung all business affairs for the last few months is lifting. The arrangements and the policies adopted by or forced upon the various party leaders have apparently removed the probability of a general election. There is no power behind this Government to carry any serious legislative projects of a revolutionary or injurious or violent character into law. They have lost confidence in themselves, and, however wisely guided they have been, they have abandoned contact with all those distinctive, characteristic themes to which the birth and vitality of their party have been due.

Party politics, pushed to extremes, seem for the time being to have reduced themselves to something very like deadlock and equipoise on all sides. The State, for good or ill, in the next 12 months will have little to contribute, in national guidance or misguidance, to industry. One can certainly say of such a situation as one can say generally of the Budget, "It might well be worse." Let us make sure that the strength and resourcefulness of all our citizens is exerted in that interest while they are, at any rate for a space, freed from uncertainty, and, while British politics axe coming to their senses, let us see what British industry can do for itself.

This is no time for complacency, nor is it a time for despair. I am deeply concerned, not only about our world position, but about the continuing ability of this island to afford the means of expanding livelihood for its immense population. Never, even in the darkest days of the War, except perhaps in April, 1917, during the culmination of the submarine crisis, have I personally felt so much anxiety about public affairs, but my faith is also strong that we shall recover, that we shall not be the last of the nations to find our way through the perils and perplexities of the present world situation, that the resources and resiliency of our Empire will not be unequal to our trials, that faction will fade as difficulties deepen, that unity and design will emerge from confusion and futility, and that we shall not be reprived, at any rate through our own fault, of our future and of our inheritance.

Captain HAROLD BALFOUR

We have listened to the speech of the right hon. Member for Epping (Mr. Churchill), with which I feel we are all in hearty agreement as regards the certainty that in the long run the country will get out of its present difficulties, in spite of politics, politicians, and political parties. The Chancellor of the Exchequer has put forward an optimism as regards a trade revival which I am sure everybody on this side hopes will be fulfilled. Nobody concerned in industry could object to the optimism which the Chancellor has shown, did they really feel that that optimism for the next 12 months was likely to be justified. I think that that optimism was most clearly demonstrated in his estimate of £4,000,000 more from the Stock Exchange Stamp Duties, when the Stock Exchange barometer of to-day is more depressed than it has been at any time since the slump of 1921.

Putting off the evil day is very good if you are going to face up to the ultimate issue in the long run; and to spurn the weapon of tariffs, which the right hon. Member for Epping has just spoken about, is excellent if you are consistent in your actions throughout. But when we see the Chancellor of the Exchequer spurning that weapon of tariffs and putting what is a highly protective tariff on petrol, in view of the fact that home-produced petrol and home-produced oils are free of duty, and foreign oil is to be taxed still higher, when we see the Chancellor of the Exchequer party to a Government which protects one of the basic industries of this country, the coal industry, which protects the gas industry, which protects the electric light industry, by fixing the minimum charge at which an essential raw material for these commodities is to be sold, one begins to wonder whether his consistency is logical. Economy is excellent, and all parties have given lip-service to economy, but it is necessary to face up to that issue.

Yesterday, the Financial Secretary to the Treasury asked three questions, when he was twitting this party with a lack of the application of the principles of economy in the plans which they have put before the country. He dealt with the question of the Unemployment Insurance Fund, and said to us "What are you going to do with the annual charges of that fund? Are you going to put them on to the rates? If you take off the men who are not actuarially entitled to benefit, are you going to put them an the rates, or on the Exchequer, or are you going to reduce the benefit?" Those were his three questions. All unpleasant and difficult questions must be faced up to, and I would say most definitely that we must reduce this fund to a sound basis. Those who are uninsurable from an insurance point of view must be put on to some form of Exchequer scheme, which would be administered not in the way of shovelling out money regardless of claims or of the right to entitlement to that money which exists at the present time, and that that money should not be shovelled out freely, carelessly, and happily, as it is to-day, without some quid pro quo from those who are receiving the money of the taxpayers.

Mr. MAXTON

That is not facing the question.

Captain BALFOUR

The question how that is to be done will very largely, I suspect, be found in the report of the Royal Commission on Unemployment In- surance, a report to which the Chancellor of the Exchequer says he is going to pay grave attention, even though some hon. Members opposite may not so wish.

There is one point that I would like to touch on in the proposals before the Committee, and that is the Land Tax. The Chancellor of the Exchequer said that certain Conservatives would meet this fear of the land taxes fairly and squarely, and that on all sides of the House he anticipated that this tax would be welcome. One cannot welcome something that one does not know of, but let me say for myself and some of my friends that there are those in this House who knew not 1910. The gladiators of our Front Benches who fought in 1910 are beginning to take up the position of 1910 again, and the old battle cries have started again. There are some of us who do not want to prejudge that issue. We say that if there could be some fair and reasonable scheme which would enable the urban site values which have been built up as a result of moneys provided by ratepayers, one would look at that scheme on its merits and not according to 1910.

We must not judge the position now by the prejudices of 1910, but by the exigencies of 1930. Let me say that my friends and I feel that if this touches agricultural land, it must be opposed bitterly and in every stage, that if it touches land which is used for agriculture still, even though it be alongside a main road, we must oppose it bitterly and in every stage, that if it touches land the value of which has gone up through development of private enterprise, we must oppose it bitterly and in every stage, and that if it is land which has an increased value through urban development, we could only recognise some form of fair taxation of the increment if that land could be proved by some definite sale to have an increased value.

The right hon. Gentleman the Chancellor of the Exchequer is faced by this deficit of £23,000,000, but I could not help feeling what comfortable words he spoke for everybody when he said that on the basis of some foreign Budgets and commercial practices, instead of a deficit of £23,000,000, the year would have closed with a surplus of £43,000,000. That, indeed, is a comfort to those who are in peril with their banks, who are improvident in their homes, and who are affected with debt or doubt or financial trouble, because you have only then to turn to the Chancellor of the Exchequer's words, and say, "If I do not pay what I owe, if I do not fulfil my obligations, really I am a very rich man and quite comfortably off."

5.0 p.m.

One cannot but wonder what the political significance of the present Budget will be, whether all the hon. Members on the back benches of the Labour party will be pleased with the lead given them by the Chancellor of the Exchequer. History repeats itself, and you can usually find in history the parallel to every present situation. The Chancellor of the Exchequer seems rather like Moses, leading the lost tribes across the desert. For two years we have watched that slow trek across the desert towards the Socialist Utopia which hon. Members opposite are trying to achieve. For two years they have sought the Promised Land, always led by the Chancellor, who has had one of his colleagues on his left, either the First Commissioner of Works or the present Chancellor of the Duchy of Lancaster, always willing to sing a Socialist song to cheer them up and to conjure up the mirage of the beautiful Promised Land. For two years the trek his gone on across the desert, ever swept, as the Chancellor says, by the economic blizzard. Suddenly, the Chancellor turns round when the tribes are getting a little troublesome and fractious among themselves, and says, "Boys, we are lost. I do not know if there is a Promised Land; but, if there is, I am sorry that I have taken the wrong turning. As for myself, I am going to 'stay put' for 12 months. I do not know what to do. I dare not turn back, because I may have to face a tariff wall. I dare not go on, because I may be engulfed by the drifts of the economic blizzard. I am going to do the ostrich trick and put my head in the sand and forget my troubles. I shall put twopence more on petrol, a little squeeze on the blighters who gave me the wherewithal to start but who will not produce the wherewithal to finish the journey and I shall utter a cannibalistic threat to the capitalistic landowners. That ought to keep them quiet. I will 'stay put,' and perhaps in 12 months' time, when I take my head out of the sand, the economic blizzard may be off, or the trek may be off, or even I may be off, but for the present time, boys, the deal is off."

That seems to be the present situation. The country looks with some gratitude to the Chancellor on the one hand for not proposing charges which his comrades would have him impose on industry for the sake of political theories. We have at the same time grave fears as to what will happen when the Chancellor takes his head out of the sand. When he does that, however, we need not worry, because he will not be on that side of the House, but on this, and we shall be forming a Government and marching towards the sane, solid progress which is based on the Conservative policy of trying to help to foster industry with the realisation of the ultimate utter dependence of every man, woman and child of this country upon industry, and of the fact that industry cannot be the plaything of politics which for these past two years it has been until this moment, and as hon. Members would have it at the present time. Only when industrial life can be carried on free from political objects sacrificing its every need, only when industry can be carried on, not in a spirit of political rancour, but each participant giving of his best for the whole, can it succeed and this country progress again to prosperity.

Mr. R. A. TAYLOR

The hon. and gallant Member for the Isle of Thanet (Captain Balfour) has assured the House that history always repeats itself. That sweeping statement is just us unreliable as the other portions of his speech, for history is simply the interpretation of a number of facts and tendencies by individuals, and is not in any sense a complete record of the facts; and history, like everything else, does not always repeat itself correctly. The hon. and gallant Member proceeded to say, as so many other Conservative Members say, that it is necessary for the Government to practise economy at the expense of the poorer sections of our population. We have in the country, unfortunately, some 2,500,000 men who are not able to obtain the normal amount of work that they desire, and the hon. and gallant Member has actually suggested that the workman who is drawing transitional benefit shall be put in a separate category and segregated from the rest of the unemployed—and treated, I presume, in the spirit of the Poor Law, and as people who are not entitled to maintenance as a matter of right, but who are to be given it as a matter of charity. Now, at least, we know exactly what the Conservative party stands for.

Captain BALFOUR

I am sure that the hon. Member does not wish to misinterpret me. What I said was that we should have a separate Exchequer scheme for those who are uninsurable. I said nothing about the spirit of the Poor Law, and I am sure the hon. Member will withdraw the imputation that I wish to get the Poor Law spirit into it.

Mr. TAYLOR

What is the object of segregating unemployed people from their fellows unless you want to treat them on disadvantageous terms?

Captain BALFOUR

A man in any actuarially sound scheme draws his benefit because he is entitled to it in the light of his contributions. Under an Exchequer scheme, a man would have to give a quid pro quo, probably in the form of labour in some State-aided employment, or possibly there might be a subsidy to his firm in order to enable him to be employed. That is the difference.

Mr. TAYLOR

The only inference I can draw from the hon. and gallant Gentleman's explanation is that the kind of quid pro quo he has in mind is the kind that has been practised by the London County Council, controlled by the Conservative party, which has been paying relief of 3s. a week to men and imposing 40 hours labour for it. If that is the spirit in which that particular class of unemployed are to be treated, we cannot look forward to any era of social peace in this country, because there are not many Members on this side who would tolerate the treatment of the unemployed in that way.

We are all glad that the Chancellor of the Exchequer has been restored to health, and that he has stood so well the ordeal of presenting a very difficult Budget. Most Members of the House will rejoice that, by comparison with countries like the United States of America, with a deficit of something like £160,000,000, or protectionist Germany, with a deficit of something like £60,000,000, this country is standing up to the difficulties caused by the world crisis far better than some other nations which already enjoy the benefits of Protection or Safeguarding, which are so often urged from the opposite benches as a means of remedying our difficulties. The deficit in last year's accounts was largely accounted for by a declining revenue and increased expenditure, both of which were due to causes in the main outside the control of the Chancellor of the Exchequer. The £7,000,000 decline in the receipts from Stamp Duties is an indication of the general depression of trade and the decline in Stock Exchange activities. A sum of £3,750,000 represents the decline in the standard rate of Income Tax, but, curiously enough, the revenue from the higher grades of Income Tax payers as represented by the Super Tax payers, has actually shown an increase. A sum of £7,250,000 has been lost in the receipts from Customs and Excise; and the receipts from motor ears are down by £1,250,000. The Government have had to bring forward Supplementary Estimates for £10,500,000 to provide transitional benefit for the un employed.

If we analyse the causes of these deficits, we shall see that in the main they have been due to forces quite outside the control of the Chancellor of the Exchequer. We know the tremendous fall in the price of almost every commodity produced for the world market, and that over a large part of the earth, notably in Spain and in Central and South America, revolutions have taken place. These two factors—the fall in commodity prices and political disturbances—are at the root of most of the difficulties with which the Chancellor was faced and which led to the deficit of £23,000,000. The estimates in this year's Budget provide for a revenue of £776,000,000 and an expenditure of £803,000,000. The Chancellor proposes to meet the deficit by appropriating £20,000,000 from the Exchange Account, £10,000,000 from the alteration of the instalments of Income Tax, and £8,000,000 by an increased Petrol Duty. In the circumstances, the Chancellor is to be congratulated upon the astuteness and agility which he has displayed in finding the temporary expedients which have enabled him to provide for the £37,500,000 that he has to find without substantially increasing the tax burdens of the country.

There are one or two statements made during the Chancellor's speech which filled me with a certain measure of apprehension. The right hon. Gentleman told us: I am confidently expecting that, as the outcome of the recommendations of the Economy Committee set up by the vote of all parties in the House, considerable reductions of expenditure will be made during the year, which will automatically go to Debt reduction. It is also possible that during the year conditions may be favourable for considerable Debt conversion operation."—[OFFICIAL REPORT, 27th April, 1931; col. 1397, Vol. 251.] I do not see how it is possible for any economy committee to bring down the total national expenditure by any considerable amount. If it can be demonstrated beyond doubt that there are abuses in connection with unemployment insurance administration, they should be dealt with at the earliest possible moment, but nobody who knows anything about unemployment insurance administration and the system by which the claims to benefit are determined, can for a moment assume that any economies as the result of the removal of abuses can amount to any considerable reduction in the sum expended. It would be the falsest possible economy to attempt to cut down the unemployment benefits received by the mass of the recipients because the more that is done the less purchasing power there will be to circulate in the very areas where trade is most depressed. Such a policy would damage not only the unfortunate people who are out of work, but the tradesmen who are dependent upon their spending power. Out of a total expenditure of £677,000,000 on the Civil and Consolidated Funds, about £620,000,000 is represented by obligations that the Chancellor of the Exchequer must discharge in any circumstances; they are obligations which are fixed by Acts of Parliament or by Royal Warrants.

I am all for economy, if it is the kind of economy which is wise in the interests of the nation, but there is a false economy which, I am certain, is doing very great damage to the national interests and is the cause of a considerable amount of unemployment. Instead of economy, the Chancellor of the Exchequer might adopt as a slogan, "Spend wisely, and save your country." At present, the nation is saving far too much. There is no shortage of capital equipment with which to carry on production or to pay for any imports that may be necessary, and whilst everybody recognises that savings create the fund from which the supply of new capital is obtained it is obvious that serious economic damage can be done if people save too much, even during a period of depression. If everybody were suddenly to begin to save the whole of their income, except such part of it as it was necessary to spend to keep body and soul together, it would produce an even worse paralysis of trade than we now have, would, indeed, lead to a complete disaster. It is equally clear that if everyone spent all they received, and nothing was saved with which to provide the capital which a modern economic system needs, disaster would overtake us, and social progress would come to an end. But somewhere between those two extremes there is an ideal point, and if at the present time people could be induced to spend more and to save less it would help to remove a considerable volume of unemployment. The Chancellor of the Exchequer made a significant reference to our social services. He said: It is in times of prosperity and abounding revenue and of Budget surpluses that we can afford to lessen the intolerable burden of debt and to liberate resources for schemes of economic and social reform."—[OFFICIAL REPORT, 27th April, 1931; col. 1397, Vol. 251.] I understand from the Chancellor's statement that this year a sum of £355,000,000 is provided for the interest and sinking fund on the War Debt, and that even in this period of unparalleled depression the Chancellor thinks it is wise to retain the Sinking Fund laid down by the Act of 1928. I entirely dissent from that view. The Chancellor, of course, has the advantage of a great mass of detailed information such as is not at the disposal of a back bencher, but it seems to me that instead of restricting social services during a time of depression we ought to concentrate upon extending them and increasing the supply of money available for spending by the masses of the people, who must spend money for necessary goods, many of them produced inside this country.

It would have been a greater national advantage if the Chancellor had seen his way clear to extract more from that altogether useless and parasitic element in our national life, the rentier class, who, through the ownership of fixed-interest bearing securities, are now taking something between one-quarter and one-third of our total national income. The real burden of the sums taken in the form of interest on mortgages, debentures, War debt and all other forms of fixed-interest bearing securities is at least 60 per cent. higher than it was in 1920, when taxation was supposed to be at its zenith, and in a time of unparalleled depression it would have been good policy to put a special tax upon fixed-interest bearing securities and to have applied the money to the alleviation of some of the undeserved poverty and destitution of sections of our population. The rentier class to which I have referred lives by investment, much of it in foreign countries. Some of their investments, by establishing competitive concerns in low wage countries elsewhere, damage British trade, and a tax ought to have been put upon incomes from that source, and the money thus obtained transferred, through unemployment benefit or old age pensions, to those who are trying to face up to life in difficult circumstances. There are men with a lifelong record of industrial service who, at 65 years of age, find themselves ineligible for unemployment benefit; and if, as is commonly the case, their wives are three, four or five years younger than themselves they have to face up to life on 10s. a week old age pension in place of the unemployment benefit. I do not for a moment subscribe to the theory that this country has reached the stage when it is not in a position to meet their claims

The Chancellor of the Exchequer admitted in his speech that unless trade improves next year there will be no alternative to a reduction of expenditure or an increase of taxation. The Chancellor is budgeting for a balance of only £134,000, and so it is perfectly clear that his hopes of balancing his Budget next year are dependent on a trade revival. It is fair to assume that under the normal working of economic laws some of the causes which have produced the present terrific world depression will work themselves out, and that there will be a more favourable atmosphere at the end of next year; but, unfortunately, many accepted economic theories have been completely upset by experience in the post-War world; and unless the Chancellor stands up to the banking interests of this country and compels them to take steps to restore the conditions necessary to prosperity, I am of opinion that when we meet in 12 months' time we shall not see any very substantial improvement. In view of the variety of the factors which control world depression or world prosperity, it is quite possible, indeed, that things may be infinitely worse.

May I draw attention to what I believe to be the greatest single cause of our present position? During the War all the nations engaged in it departed from the principles of sound currency as represented by convertibility into gold, and proceeded, by the method of inflation practised in varying degrees in different countries, to move away from the conditions of pre-War monetary stability. In some countries the process went further than in others. In some countries, through this process, the currency completely collapsed. In France and Belgium it was kept within measurable bounds, and eventually there was a conversion of the paper to a new ratio of value with gold. In this country we adopted a policy which has thrown tremendous burdens upon the creative forces in our nation. We attempted to bring back a paper pound worth about 7s. to parity with gold. What have been the consequences? We have, since 1920, gone through a period of prolonged deflation, with the result that enterprise has been killed, that our export industries have been half ruined, and our great basic industries, which depend upon export trade for the sale of their products, have been robbed of the money with which to re-equip themselves and rationalise their methods of production.

It is true that there have been certain compensating advantages, but nobody can deny that, through the fall in prices, the tremendous burden of national and local taxation is pressing upon the people with increasing severity, and that in the inter- national aspect of this problem the fall in prices, due in the main to the mishandling of the return to the gold standard, has produced a situation which, if it is not dealt with, will create revolution in Europe within five years and revolution, probably, in the United States of America as well. It is clear to anyone who devotes five minutes' thought to the problem that, in a world complicated with great international debts and great internal debts, the great debtor countries which, with the single exception of Germany, are mainly food producing and raw material producing countries, will, with the present level of prices, be unable to meet their obligations, and will continue to be unable to buy the products of manufacturing countries.

From time to time many learned economists have given us the benefit of their great knowledge on this problem. Some say the position is due to the mal-distribution of gold, and that all that is needed to set the system working again is the redistribution of the world's gold supply; that then prices would begin to recover and all would go well. I fail to see how any transfer of gold from Paris or New York to other countries can set the machinery going again. The fact of the matter is that we have now reached the stage in which the command of gold over commodities has been almost doubled, and in some cases rather more than doubled, since 1920. During last year we have seen the United States of America acquiring another £90,000,000 of gold over and above that which she had already accumulated, and France acquiring another £60,000,000 of gold, and from the treatises written by the economic experts we are all able to trace and explain the economic causes of those movements of gold. What we are not able to solve is the problem of restoring prosperity and trade to the world as a whole.

As I see this problem of world trade stripped of all the trimmings, it is fundamentally an exchange of foodstuffs and raw materials for the manufactured goods of industrial countries. The food producing and raw material producing countries want to sell their products, and the manufacturing nations want to sell their products, and yet we are unable to adjust these matters through a breakdown in the financial mechanism. The low prices received for foodstuffs and raw materials prevent the areas where they are produced from buying the manufactured goods of the industrial nations at the prevent level of prices and the same cause prevents the food producing and raw material producing countries from buying the manufactured goods necessary to meet their requirements. So far as I understand the problem, there can be no restoration of normal world trade until the prices received by the great food producing and raw material producing areas are raised either to the level of the prices now required for the manufactured goods of the industrial areas; or, alternately, until the cost of the manufactured goods has been reduced to the price level received now for primary products. That is the problem. Either we must face a reduction of our prices in order to get the price of our goods down to the level which the food producing and raw material countries are now receiving, or we must devise some method of raising the price of foodstuffs and raw materials to enable the exchange to take place.

I am absolutely opposed to any attempt to reduce wages in this country in order to reduce the price of our goods for sale abroad. I am opposed to that, because it will not provide a remedy for the situation with which we are now faced. The more reductions of wages take place the less demand there will be for goods produced in this country or for the imports from our Dominions and Colonies. The more wages are reduced the greater becomes the burden of the national Debt, local taxation and fixed interest-bearing charges. Such a proposal would not reduce the difficulties created by trade depression and may provoke industrial disorder. This policy will not provide a remedy for the existing state of affairs. I believe that there is a step within the competence of this country which could be taken by the Chancellor of the Exchequer in order to meet, to some extent, the situation which now exists. We all know that the Government are doing their best to promote international agreement and co-operation, but, if we are to wait until the American bankers and the French bankers find themselves in complete sympathy with British interests, we may have to wait some considerable time.

Therefore, the question arises as to whether the British Chancellor of the Exchequer could not take some steps in order to begin this recovery of prices so far as world commodities are concerned. On this point, I commend to the Chancellor of the Exchequer a statement made by a distinguished political economist, Professor Edwin Canaan, who has the reputation of being more frequently right than wrong, a statement which does not apply to all economists. Professor Canaan says: What is wanted is to throw more gold on the market outside that furnished by the demand of the gold standard countries for central banking hoards. Gold, like other things, is cheapened when less is bought, not, as some banks and politicians seem to imagine, when more is bought. Great Britain is not at present in a good position for preaching this doctrine. It is true that the hoard is not so great in proportion to all possible requirements as the boards of some other countries, but her principle that all additions to her currency must be met by equal additions to her gold hoard would, if generally adopted, cause the demand for gold to be far greater than the more widely accepted—though also indefensible—rule of 30 per cent. or 40 per cent. cover would require. She could, however, easily escape from this awkward position if the Bank and the Treasury would at once agree upon a moderate increase of the fiduciary issue, and give out that Parliament would be asked to ratify not only this but also further increases as they were required. Such a move would not only enable her to take her proper place in a general movement for checking the inconvenient falling tendency of prices which has been present for some years, but might also he seine considerable help toward putting an end to the violent slump of the last 15 months. I hope that that step, or some other, will be taken in order to get out of the present debacle and to restart the wheels of trade. I believe that at least 10,000,000 of the unemployed owe the position in which they are placed to the mistakes of the bankers in mishandling the return to the gold standard.

Whereupon, the GENTLEMAN USHER OF THE BLACK ROD, being come with a Message, the CHAIRMAN left the Chair.

Mr. SPEAKER resumed the Chair.