PAYMENT OF INCOME TAX BY INSTALMENTS.

HC Deb 05 May 1931 vol 252 cc222-359

5."That Sub-section (2) of Section one hundred and fifty-seven of the Income Tax Act, 1918, as amended by Section twenty- one of the Finance Act, 1927, shall be further amended so as to provide that income tax, instead of being paid in two equal instalments, shall, in the cases to which the said Sub-section applies, be paid in two instalments of which the first shall be an amount equal to three-quarters of the tax and the second shall be an amount equal to one-quarter of the tax."

First Resolution read a Second time.

Lieut.-Commander KENWORTHY

I beg to move, in line 2, after the word "oils," to insert the words, "other than white spirit and turpentine."

This is the first Amendment on the Order Paper, but I will, with your permission, Mr. Speaker, argue the second Amendment, which is consequential. My Amendment would have the effect, if accepted, of continuing the tax on petrol and other motor oils, but exempting turpentine and white spirit from the impost. The reasons why I appeal to the Chancellor of the Exchequer to accept this Amendment are drawn from his own arguments, and I am going to use my right hon. Friend's opinion as a reason for persuading him to accept my Amendment, On Monday last week the Chancellor of the Exchequer in introducing his Budget used these words: We are asked by this proposal for a revenue tariff to go back to the pernicious taxation methods of a century ago, and then he proceeded to quote a very eloquent and violent passage by William Pitt. The duty on turpentine is par excellence a Revenue tax, and it is not a protective duty on turpentine, and last year the Chancellor of the Exchequer excused himself for continuing this duty because he said he wanted the money. Here are the words which the Chancellor of the Exchequer quoted on Monday last week from William Pitt: There is a way in which you can tax the last rag from the back, and the last bite from the mouth without causing a murmur against heavy taxation and that is by taxing a large number of articles in general use. The tax will pass into the price of the article. The people will grumble about high prices and hard times, but they will never know that the hard times are caused by heavy taxation. On the same occasion the Chancellor said: A revenue tariff, apart from its Protectionist object, is a means of relieving the well-to-do at the expense of the poor, and is an indirect method of reducing wages. I shall never be a party to any such imposition. The Chancellor of the Exchequer proceeded: I have explained on several previous occasions my desire to avoid, if possible, all forms of taxation, which, from the economic or the psychological point of view would have a depressing effect on industry, and which might retard recovery in trade and employment."—[OFFICIAL REPORT, 27th April, 1931; col. 1403, Vol. 251.] I want no better arguments than those arguments of my right hon. Friend last week in pleading with him to accept this Amendment, but I fortify myself still further by quoting what he said last year. I had no opportunity of raising this matter on the Budget Resolutions last year, because it was not a new tax, and the only reason why I have the opportunity now is because my right hon. Friend has gone one better this year, and has increased the tax on turpentine, white spirit, and, of course, petrol. Last year I moved an Amendment, and, although my right hon. Friend was not able to accept it, he held out a great deal of hope and gave a sympathetic reply. I will only quote a sentence or two from what he said last year on this very important point. He said: This is a tax that I myself would never have thought of proposing unless all the other available sources of revenue had been completely exhausted. Leaving out a few intervening words, he went on to say: It is a tax upon industry, and, there fore, theoretically, and to a large extent practically that is a condemnation of the tax."—[OFFICIAL REPORT, 7th July, 1930; col. 73, Vol. 241.] He then went on to say that it would cost about £100,000 a year to repeal the tax on turpentine, and, in the case of white spirit, about £250,000, and that he could not do it that year, and so on. The whole tone of his speech, as usual, was very courteous and sympathetic, and it was obvious that my right hon Friend had his heart with us. Those who tried to persuade him to remove this tax were in every part of the House. They included the hon. Member for East Birkenhead (Mr. White), and several hon. Members on the Conservative benches. Everyone who spoke in that Debate spoke most strongly against this tax, on the ground that it was picking out one or two raw materials which were as important to the manufacturers as cotton or wool were to the textile industries, or as iron ore was to the iron and steel industry. These one or two raw materials were picked out and a tax was clapped on them. No voice whatsoever was raised in defence of the tax, least of all by my right hon. Friend, who condemned it, and said, in the words I have just read to the House, that he would never put on such a tax. I am hoping that my right hon. Friend will implement his half-promise, his hint. He promised last year to take off the tax if he could this year, and I am hoping that, between now and the passing of the Finance Act, he will be able to tell us that he intends to leave the tax out of the Finance Act, so that either this Amendment will be accepted or he himself will propose the necessary words.

I want to draw attention to the burden of this tax. I myself have occasionally flirted with the idea of a revenue duty in these hard times, as an alternative to reducing wages and the standard of living. I have spoken of a 5 per cent., or even at times of a 10 per cent. duty. I would like to see a 2½ per cent. duty. We are dealing with enormous figures. Take the case of white spirit. The latest figures that I have this morning show that white spirit is being sold to the trade in bulk, thousands of gallons at a time, at 1s. 3½d. a gallon, or, less tax, 9½d. That means that without the tax the price of white spirit is 9½d. a gallon. A tax of 6d. on an article costing 9½d. is terrific—70 per cent. It is the sort of thing that they hope for in America under the high tariffs that they have there. They do not get in America any think like a tax of this kind on any raw material, but it is the sort of thing that interested parties in America dream of. A tax of 70 per cent. is terrific. Again, take the case of turpentine. Turpentine is sold by the hundredweight at 43s. 6d., or, less tax, 37s. 6d. The tax per hundredweight comes to 6s.; that is to say, on the price of 37s. 6d., 15 or 16 per cent. That is not so dramatic, but it is the sort of tax that is put on raw materials in high Protectionist countries. It is not the sort of thing that you expect in Free Trade England. [Interruption.]

What are the arguments in favour of this tax? My right hon. Friend is not going to say that he cannot get revenue somewhere else. I know he will not say that. There are many other less objectionable methods of raising revenue without hurting industry. I am not going into the alternatives; this is not the place to do so; but I wish my right hon. Friend would consider putting a tax on some of the luxuries which come into this country—furs, jewellery and things of that sort—rather than taxing a raw material of an industry which has to fight for its life in the markets of the world. It is said that white spirit can be used in engines as a substitute for petrol; but when there was no Petrol Duty white spirit was never used by the manufacturers, who bought large quantities of it, in their engines. It did not pay them to do it. It means special carburettors, and it is not suitable for the purpose. The trades concerned, which use very large quantities of this white spirit, have offered to treat it so that it cannot be used in engines, as I understand is done with paraffin now. As for turpentine, it cannot be used in engines at all, and it has always been a mystery to me how the right hon. Gentleman the Member for Epping (Mr. Churchill) was persuaded to put a tax on turpentine. The only explanation I have heard is that in the Treasury they wanted to keep the whole thing very secret, they did not make proper inquiries, and someone told them that turpentine could be used in engines. It cannot. It is a vegetable product and cannot be used in internal-combustion engines. It is also said that it is a competitor of white spirit, but I am told by those in the trade, who know the whole business thoroughly, that it is not a competitor, that it is used in different processes; and in any case the prices I have quoted to the House show that it cannot be a competitor.

The greatest objection, of course, is that this impost gives a direct advantage to our competitors on the Continent of Europe—to the French manufacturers who use turpentine for linoleum, and to the German manufacturers, Who are very keen competitors, who use turpentine and white spirit for oils and varnishes. They do not pay any tax; they get their product at spot prices, at world market prices, while our unfortunate manufacturers have to pay this very heavy tax. It is true that there is a rebate in the case of goods exported which contain these raw materials, but that means long delay, the piling up of capital, tremendous complications, filling up forms, applying to the Customs, applying to the Treasury Department, and so on, and all this hampers business very seriously. These raw materials are used in the manufacture of paint, colour and varnish, synthetic camphor, and all kinds of polishes, in which we do a considerable export trade and which are a very important industry. There is also linoleum, and I am sorry I did not mention Scotland just now, because the linoleum industry in Scotland is flourishing in spite of the hard times. Turpentine is an important raw material for the linoleum industry, and linoleum is the floor covering of the poor man. He cannot afford Axminster or Kidderminster carpets; he puts down what in Hull is called canvas, or what in the trade is called linoleum, and, if the price of linoleum is put up to him, it is a tax on the home. In the same way, paint and varnish are used for house decoration, and any increase in their prices puts up the price of houses. It is a direct tax on the poor. My right hon. Friend recognises all this. He said so last year, and no doubt he will agree with me again this year; and, therefore, I ask him to meet us by removing this impost.

4.0 p.m.

I want to quote the figures of only one firm in my constituency to show what this tax costs. Under the De-rating proposals, they got off rates to the amount of £2,500 last year, but, under the tax put on by my right hon. Friend's predecessor, they had to pay £4,000. They say it is impossible or very 4.0 p.m. difficult to pass the tax on to the consumer. I said just now that it is a tax on the poor. I can leave it to those who are well versed in the Free Trade—Protection argument to decide whether it is passed on to the consumer or not. The manufacturers say that it is very difficult to do it. They pay £4,000 in tax. This year it will be £6,000 in taxation of their raw material. They get off, with de-rating, £2,500, and this year they will pay £6,000 on their raw materials. I ask what defence there can be for a duty of this kind. What will the concession cost? I have here some figures for which I have to thank the Financial Secretary to the Treasury. The expected revenue this year from this white spirit and turpentine duty, this awful revenue tax, this improper and indecent tariff, is £500,000. Last year, on the old rate, on turpentine, the net revenue collected was £101,500, the draw back on exports £19,600, and the net receipts were £81,900. In a Budget of nearly £900,000,000 that is not very much for the Chancellor of the Exchequer. "Petrol spirit other than motor spirit," which I presume is the white spirit, produced a revenue of £256,200, the drawback was £27,900 and the net receipts £228,300.

This is the first Amendment that has been moved to the financial proposals of the Chancellor of the Exchequer. If he accepts it, it will cost him £340,000. As long as there are other means of raising the money I think it is unfair to pick out this small range of industries and to tax their raw material in this way. I repeat that it would be just as fair to tax timber or hides or any other raw materials used in manufactures in this country. Therefore, I appeal with some confidence to my right hon. Friend. I know that he would make exactly the same speech but with far greater elo- quence and force if he were in opposition now, with one of the right hon. Gentlemen opposite as Chancellor of the Exchequer. I know that he is with me in spirit. As one of his own supporters, one of those who do not oppose him for the sake of opposing, as one who wants to maintain him, I ask him to give this concession.

Mr. MUFF

I beg to second the Amendment.

The case has been presented in such an admirable way by my hon. and gallant Friend the Member for Central Hull (Lieut.-Commander Kenworthy) that very few words are needed from me. The House is unanimous at any rate in thinking that all taxes are anathema, but I say that Excise Duties have a double dose of original sin. Some of us who know this paint and varnish trade know that the duty acts in a great measure as a restraint on trade. In these days when trade is somewhat difficult we are appealing to the Chancellor to remove one of the barriers which hinder freedom not only in the home trade but in the foreign trade. The Chancellor no doubt will say that he gives a rebate for the foreign trade, but only yesterday I spent some time in a paint and varnish works and I noticed the fiddling forms and the details that had to be filled in, in order that the Chancellor's officers, most admirable in their way, might consent to pass for shipment a few hundred tins of paint packed in one-pound tins. The spectacle of Excise officers, no doubt better paid than others, spending their time in opening one-pound tins of paint in order to ascertain the specific gravity of white spirit, would be amusing if it were not for the loss of time and temper which is entailed not simply upon the manufacturer but upon the Excise officer. When the warmer weather comes the Excise officer is inclined to doubt the word of the manufacturer because more spirit is needed in summer than in winter in order to get what they call the right "stout ness" of the commodity.

My hon. and gallant Friend who preceded me told the House what would be the approximate loss to the Treasury if the Amendment were carried. I know-that time and again my right hon. Friend the Chancellor of the Exchequer has said that he was not lacking in resource, and though the hen-roosts are somewhat scarce in these days, I know that in his fertile brain there are other and more equitable methods by which he could obtain this money. My hon. and gallant Friend mentioned that even the Chancellor of the Exchequer, or rather he himself, sometimes indulged in flirtation with the idea of a revenue tariff. [Interruption.] I must not charge our Chancellor of the Exchequer with flirtation; he is beyond philandering either in love or in politics. Many of these manufacturers were tempted to enter upon a flirtation with the pernicious doctrines of some of the right hon. and hon Gentlemen on the Conservative benches. I notice, however, that as a consequence of the right hon. Member for Epping (Mr. Churchill) having put on the duty these people are now ardent Free Traders. So the right hon. Member for Epping has done some good in this world. I want the Chancellor of the Exchequer to give these manufacturers no opportunity of going back. I want him to bring them right up to the penitent form, to meet them in a decent way, to knock off these barriers and restraints, some of them fiddling and most of them ineffectual, and I ask him to accept the Amendment.

Lieut.-Colonel Sir A. LAMBERT WARD

As may be imagined it gives me very great pleasure to find myself completely in agreement with the hon. and gallant Member for Central Hull (Lieut.- Commander Kenworthy). As it is a pleasure which I do not often experience it is considerably keener than it would otherwise be. I am also in agreement with the past attitude which the Chancellor of the Exchequer has taken up on this question. I remember him decrying the tax on hydro-carbon oils in quite unmeasured terms not very long ago. Only last year he spoke somewhat scathingly of this duty, saying that it was a tax which he himself never dreamt of introducing, but in the circumstances, he went on to say, he hoped he would be able to do something in the matter this year. This year has come, and we are now-going to sec what the right hon. Gentleman will be able to do in the direction of relieving a none too flourishing industry from a distinct and severe burden. My objection to the tax is principally that it is a definite burden on industry. It is a tax on the raw material employed in that industry, and, as has been said, it is making it more difficult for manufacturers in this country to compete with manufacturers abroad. It is true that a rebate or drawback is granted on the amount of white spirit which is used in the articles exported, but imagine how difficult it is to decide exactly the amount of turpentine which is used and is being exported in a roll of linoleum or in a number of tins of boot polish or furniture polish.

These are among the smaller industries that have made headway in this country during the past few years. In the boot polish, furniture polish, and floor polish industry up to the present we have succeeded in establishing a very considerable export trade, but this duty is doing a definite amount of harm, in that it is putting up the cost of the manufactured article and making it more difficult for us to compete. We formerly exported considerable quantities of paint and varnish, but unfortunately we are not now exporting anything like what we exported 10 years ago. When these articles are sold in this country, the tendency is to put up the cost of every commodity in which they are used. The building trade and housing have been mentioned. Every building requires paint, and by putting a tax on what is one of the principal constituents of paint, we are making it more expensive to build the houses which are so badly needed in many parts of the country. In the city which I have the honour to represent strenuous efforts have been made in that direction. For these reasons, in view of the very small amount which this duty raises, and in view of the gigantic dimensions of the Budget it seems a very small thing to ask that the duty should be abolished so as to give these industries a better chance of competing in this country and in the markets of the world.

Mr. GRAHAM WHITE

I wish to support the Amendment. I can well appreciate the position of the Chancellor of the Exchequer. If he found himself last year, while fully sympathetic to the objects of the Amendment, unable to give the concession for which we then asked, and upon the basis of arguments with which he then agreed, still more must his position be difficult this year. There is only one argument which I can conceive him putting forward in opposition to the Amendment. That is the argument of force majeure. But if this House were engaged as a council of State in considering every possible means of helping employment and seeking by every conceivable method of attack to lessen unemployment, it would insist, no doubt, upon the removal of this tax upon production, and would replace the loss of revenue by imposing a tax, not upon production or on any raw material, but by singling out some such article of luxury as has been suggested. I do not know whether it is too late for some such step to be taken, but I am sure that it is a common-sense way of dealing with the matter. I am at a loss to know how turpentine, in particular, ever came to be included in this tax, I can only conclude that it was through some oversight or mistake. Turpentine is not a hydrocarbon oil, either chemically or technically, and it is inconceivable that it should have been included among hydrocarbon oils.

If the intention had been to tax all hydrocarbon oils, there are a large number of other substances which ought to have been included, such as paraffin wax and vaseline. No attempt has been made to include these substances in the tax, which will be detrimental to a large number of industries whose raw materials will be affected. This is more than a tax upon raw materials. White spirit is used not only as a raw material, but as a carrier or vehicle for a salt, and it is also used in certain processes of dry cleaning, and, where dyes are concerned as a carrying agent. It is not used once, but many times over, in carrying out the same operation, and it is thus a part of the machinery. This tax, therefore, may be described not only as a tax upon raw material, but as a tax upon machinery.

It was argued by the Chancellor of the Exchequer, in favour of this tax, that those who were called upon to pay it were those who benefited from the derating proposals. If it were a fact that those who use these materials, and who suffer in their business because of this tax, and in the volume of employment which they are able to give, were getting an equal countervailing remission of duty which would compensate them, that would be a valid argument which would have to be admitted. Manufacturers in the paint trade, at all events, do not get anything like a countervailing rebate on account of derating. I have been informed that the actual amount which they will pay in tax on the raw materials exceeds by four times the amount of benefit which they will derive under derating. The arguments in favour of remission of this tax are unanswerable. I hope the Chancellor will go some way to meet what is a very widespread desire. The tax will have a much bigger effect upon unemployment than is generally realised. If the Chancellor cannot go the whole way to repeal the duty on white spirit oil at once, he might set free the users of turpentine, at any rate, from what they feel is an injustice.

Mr. ARNOTT

The difficulty I find in this Debate is to deal with any arguments from the other side. No arguments have ever been put up in favour of this tax. Last year, when my hon. and gallant Friend the Member for Central Hull (Lieut.-Commander Ken-worthy) put up a case similar to the one which he has stated to-day, the Chancellor agreed with every word of it. He had only one excuse to offer, and that was that he required the money, but he said that on a more convenient occasion he would see what could be done. I do not know whether this is a more convenient occasion. Every argument that has been pointed out to-day could be adduced in favour of any revenue demand that the mind of man could conceive. I do not suppose that this could be called a revenue tariff, because it does not confer protection upon the users. Arguments used against a revenue tariff are, that it is protective, that it has the effect of raising the cost of the material to the consumer and that it places a handicap upon the industry which is producing those commodities. Those arguments apply to this duty quite as well.

One point that ought to be brought out with greater emphasis is, that one possible reason why this tax has been carried through so easily is that only a limited number of constituencies are affected by it. The manufacturer of paint does not employ anything like the number of persons that are employed in the mining industry. A tax that affected the production of coal to the same extent would be repealed this Session, without fail. That is an exaggeration, because such a tax would never have been imposed. It is quite impossible to impose a tax of this character on any industry that employs a large number of people, such as the cotton industry, the coal industry or even the iron and steel industry. When industries are located in only a few areas, the people who represent those areas can easily be out-voted, and therefore, this tax has been imposed by one Government as part of their fiscal policy, and presumably continued by another Government, despite the fact that Members of the latter Government protested against the principle upon which the tax was based. The House is now asked, not merely to maintain the tax, but to increase it.

I must ask the House to remember what the Chancellor said in making his Budget speech. He had, he said, to raise a large revenue, and he preferred to impose a tax upon petrol because, first, it was much better to increase an existing tax than to impose a new duty, and, secondly, and this was the more important reason, that the fall in the price of petrol had been so great, during the last few months, that the consumer of petrol would be paying no more. All that could be argued against the duty was, that the consumer of petrol would not get the benefit of the reduction in price. I am not sure that the same argument could be used in the case of turpentine. I do not think there has been a corresponding fall in price. A tax on petrol may be a tax on industry, but it could be argued with a certain amount of force that the users of petrol receive much greater advantages from taxation than do other consumers. This argument could not be used in connection with the two duties that we are now discussing. I hope that the Chancellor of the Exchequer or the Financial Secretary will give us a very sympathetic reply. The people who pay this tax would appreciate the reply much better if it took a more tangible form, by the Chancellor seeing his way to remove the tax entirely, or to reduce it to the same level as last year.

Mr. CULVERWELL

I sincerely hope that the eloquent and impassioned appeal made by the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) will not fall on deaf ears this year, especially in view of the general expression of approval that has been shown for this Amendment in all parts of the House. That hope is reinforced by the fact that the Chancellor, not very long ago, voted in favour of an Amendment in precisely similar terms. The duties on these spirits were origin ally imposed as part of the duties upon hydrocarbon oil, partly to levy a tax upon the users of motor transport in order that the horse-power tax could be reduced, and to endeavour to secure that the greater the use of a motor vehicle the more its contribution would be towards the upkeep of the roads. Another purpose was to secure a fairer competition between road transport and the railways. Neither of these arguments can apply to the duties under discussion this afternoon, because neither of these oils can be used for motor vehicles. The tax on hydrocarbon oils was further imposed for the encouragement of the home production of oil. That does not apply to these two duties, because some 90 per cent. of white spirit is already produced in this country. Turpentine, which is a vegetable oil, it is quite impossible to produce here.

The principal reason for the imposition of the so-called petrol duties was for Revenue purposes, and I have not the least doubt that the Chancellor of the Exchequer or the Financial Secretary will plead, as was pleaded last year, that while they view the proposal with sympathy, the state of the Revenue does not permit them to grant the repeal. That might have been urged by the right hon. Gentleman the Member for Epping (Mr. Churchill) when he first imposed these duties, and when he was looking round in every direction for sources of revenue on which to lay his hands. Today, the Chancellor of the Exchequer is in quite a different position. He has actually sacrificed revenues that practically balance the amount of revenue which we are now asking him to sacrifice. I am referring to the duty on wrapping paper, which has been abolished by the Budget which the Chancellor of the Exchequer introduced a few days ago. He cannot plead that he cannot afford to lose revenue, because he has sacrificed no less than £500,000 by dropping the Safe- guarding Duty on wrapping paper. If the House will compare the advantages of these duties, I do not think there can be any dispute. The duty upon wrapping paper gave confidence and encouragement to manufacturers to build new mills, lay down new machinery and extend their production. They reduced the price of goods that they produced, and contributed £500,000 to the Revenue.

The duties under discussion to-day fall as a heavy burden upon small industries, which, as the hon. Member for South-West Hull (Mr. Arnott) pointed out, are also electorally a small body of voters. It is an industry which the Chancellor of the Exchequer can afford to ignore in his electoral calculations. It is, nevertheless, a duty upon an essential raw material of industry, and it is damaging to trade both at home and abroad. Therefore, I appeal to the Chancellor of the Exchequer to act up to his Free Trade principles. If be is prepared to put his principles into practice to the detriment and damage of British industry, surely he might also put them into practice when, with the general approval of the House, the imposition of these duties would do harm. For these reasons I think the Financial Secretary will find it difficult to explain that the parlous condition of the national finances will render it impossible for him to repeal these duties. It would have been all right if he had not sacrificed that £5,000 with the Wrapping Paper Duty, but today he can no longer put forward that argument.

If the case for repeal was strong when the hon. and gallant Gentleman the Member for Central Hull moved his Amendment last year, it is still stronger to-day, when the Chancellor proposes to increase the duty from 4d. to 6d. With this increase, I suppose it represents an addition of between 60 and 70 per cent. to the cost of white spirit and of somewhere around 20 per cent., if not more, to the cost of turpentine. That imposition on an essentially raw material is bound to affect the cost of many household commodities—polishes, wall-papers, floor-cloths and so on, and not only that, but it will affect our export trade. The Financial Secretary cannot plead that it is impossible to repeal these duties for administrative reasons. There is a drawback given on the export trade, but it does not apply to engineering goods into which a considerable amount of paint and so on has gone. Therefore, by the amount to which engineering and manufactured goods use paint, to that extent are the costs of production increased, and to that extent is their power of competition in the world market hindered by these duties. For all these reasons, because this duty is unnecessary and could well have been dispensed with, because it is a burden upon industry which falls upon a small section of the electorate, I hope the right hon. Gentleman will see his way to abolishing it. May I read an extract from a letter I received last July from the National Federation of Associated Paint, Colour and Varnish Manu facturers of the United Kingdom, in which they say: Although not successful in extracting from the Chancellor of the Exchequer, any financial concession, yet I think it is most satisfactory to obtain an admission of sympathy from the Chancellor to our request, as well as an admission that he himself did not approve of the tax. Should the present Government be in power next year, I look forward with considerable hope that this burdensome tax on our industry will be removed. I trust that that hope will be fulfilled, and that the Chancellor of the Exchequer will consent to the repeal of this unnecessary and injurious tax.

Mr. J. JONES

In these Debates I do not expect to be looked upon as an expert. I only hear experts when their interests are affected. I represent a constituency in which we have one of these great combines. It is all very nice to talk about individual companies, but when industry happens to be affected by the Budget, they are all one. One hon. Member who spoke is interested in a firm in my constituency which has paid for 10 years an average of 25 per cent. dividend with bonus, and they are connected with all the firms in Great Britain. If it was ordinary spirits, I should agree. I should not mind a reduction of about 4d. on a glass of whiskey. It would save me some money. If you have to raise a certain amount of money to run the country, you have to go where the money is. We are tackling the landlords. Why should we not tackle the monopolists? They are Pinchin and Johnson. They are pinching all the time. We have had a strike in my division. Although there may be big profits, they want to reduce wages at the same time. It is heads they win and tails we lose every time, and they ask us to vote for them in this House when they want a reduction of taxation. What for? To increase their profits. We are not having any, much as I should like to see taxation abolished from the standpoint of commodities consumed by the people. We have a Budget that is going to tax the landlords, though not so much as I should like to see it. I cannot understand why we should have any. I was born and brought up in Ireland, where we love landlords.

Mr. SPEAKER

The Amendment is to reduce the duty on white spirits and turpentine.

Mr. JONES

This is one of the commodities in which we have almost a monopoly. There is very little competition from abroad. Since the end of the War, the British manufacturers have become masters of the situation. Now they are turning round and saying, "In spite of the fact that we are making these big profits, we must not pay anything more into the national Exchequer." I am surprised to hear Members who talk about patriotism telling me that we must be prepared to sacrifice our country on the altar of international Free Trade. That is the argument that is being advanced by hon. Members opposite. They say, "We are now masters of the situation, therefore, instead of putting taxation on to us, we are to have a free hand, and we can go to Germany, Belgium, Denmark and France and sell our goods cheaper than anyone else." I can go to Antwerp and I can buy English manufactured paint cheaper. They have to pay an extra 3d. on it. We can sell it for 6d. in London, but they have to pay 9d. in Antwerp. There are ships' painters in my constituency who go over and take contracts in Antwerp and Hamburg and they can take a staff from here and do the jobs cheaper than the people in Antwerp can do them. There is supposed to be a tax on British industry. It is not a tax. We are doing more because it is not a question of competition. It is now a question of co-operation. The manufacturers on both sides of the Channel have come into one combine, and they are playing the game. In Antwerp they are one company, in London they are another, but, when you come to analyse it, they are both the same company, and you have to pay their price, so they make their profits at both ends. I certainly think industry ought to be free of taxation. The only tax that there ought to be is a direct tax upon everyone's income. No other kind of tax can be defended.

Mr. RAMSBOTHAM

I do not propose to follow the hon. Member in his somewhat humorous observations. I associate myself very warmly with the line taken by the Mover and Seconder of the Amendment. The Seconder reminded me of the words of Burke: To tax and to please, no more than to love and be wise, is given to men. I entirely appreciate the Chancellor's difficulty in the matter. He cannot expect to please everyone. If one were a betting man in the last two or three years, one would have given fairly long odds against such a proposal as this being made by the Chancellor of the Exchequer. I have looked over one or two of his previous announcements on this kind of tax, and I saw to my astonishment that he once said that he had always been opposed to a tax on petrol, and that the Revenue did not approve of such a tax. I am wondering in this case whether, if he does not accept the Amendment, it is because of some difficulty in collection or some possibility of evasion. Surely, in these days of great industrial difficulty, it does not come well from him to say that, because of some evasion or difficulty of collection, he is going to impose upon the industry an additional tax to the amount of something like £300,000 when he is perfectly willing to incur expenditure of from £1,000,000 to £2,000,000 upon the very complicated and intricate scheme of Land Valuation which we are shortly going to discuss.

Unquestionably this is a tax on industry. I was glad to note that the hon. and gallant Gentleman the Member for Central Hull (Lieut.-Commander Kenworthy) referred to linoleum. The bulk of those who are engaged in industry in my constituency live by the linoleum industry. It is the most important industry in Lancaster and one of the largest concerns of its kind in the world. Naturally, it concerns the repre- sentative of such, a constituency, and all who represent British industry, when they are informed that this impost is going to be imposed upon the raw material of an important industry like that. For that reason, I thoroughly associate myself with the remarks that have fallen from the Mover and the Seconder, and I trust that the Chancellor will see his way not to impose this tax in these difficult times. I am hopeful, from what I have heard from hon. Members opposite, and after reading the previous Debate, that a considerable body of the Chancellor's normal supporters will rally together and prevent this impost. The hon. Member for Rochdale (Mr. Kelly) a year or two ago made a short, snappy speech on the matter. I hope he will be found in the Lobby against the tax, unless the Financial Secretary makes the concession for which he has been asked.

The sum involved, £300,000, is small. It may be that that money is already pledged to provide for the cost of the land valuation in this year's Budget. Let us hope that by the economies which the Chancellor of the Exchequer expects to make the money can be found elsewhere. In these very difficult times it is regrettable that the Government should think it worth while to obtain £300,000 from the paint and varnish industry which, despite the remarks of the hon. Member for Silvertown (Mr. J. Jones), is finding it not at all easy to compete with foreign goods. The importation of foreign linoleum has been increasing very considerably in the last few years, and we may expect that it will continue to increase if our costs of production are augmented by a charge of this kind. Therefore, I hope that in regard to this comparatively small case the Chancellor of the Exchequer will see his way to make the reasonable concession which has been asked for by the hon. and gallant Member for Central Hull and his friends.

The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)

My hon. and gallant Friend who moved the Amendment said that in the Debate last year no voice was raised against the principle of his Amendment. As I fully anticipated, the experience of last year has been repeated to-day, but there is a still, small voice that must be heard on the other side, and that is the voice of the Exchequer. However much the sympathies of the House, as they generally are—and rightly—invoked on the side of the taxpayer, I am afraid that the need of the national finances must be paramount. The exclusion of turpentine and white spirit from the tax on hydrocarbon oils would cost £500,000 a year. Even if they stood alone, they would destroy the equilibrium of the Budget. Does any Member of this House seriously suppose that if this concession were made it would stop there? Once a breach had been effected in the integrity of these duties on hydrocarbon oils, the opening would be widened until all sorts of exclusions and exemptions would have to be effected.

Mr. CULVERWELL rose—

Mr. PETHICK-LAWRENCE

I have heard the hon. Member and I have noted his remarks carefully. If he has any new point to put forward, I will give way.

Mr. CULVERWELL

Has not the integrity of the hydrocarbon duties been violated already by the exclusion of paraffin?

Mr. PETHICK-LAWRENCE

That is an unnecessary interruption, but I will answer it. I would, however, point out that I listened with great care to the speeches that have been made, without interrupting, and I should have thought that hon. Members would have accorded me the same courtesy. When the tax was originally proposed by the right hon. Member for Epping (Mr. Churchill) he proposed a tax on hydrocarbon oils which included a tax on paraffin. The tax on paraffin was very strongly resented in all parts of the House, and it was decided to draw a line between the heavier and the lighter oils. That line was drawn, but the integrity of the tax on the lighter hydrocarbon oils remains. My point is that if this exemption were made it would be impossible to stop the breach without its being further widened in many ways. I will quote what the right hon. Member for Epping said in this regard: If we were to begin giving exemptions I do not know where the process would end. I am sure that every single demand met or exemption given even where a hard case was shown would open the door to another case so closely akin that at once another exemption would have to take place by its side. So we should move on from point to point, from trade to trade and from exemption to exemption until the whole working of this duty would cease to be the simple proposition that it is now and would become a most intricate matter of exemption and allowance."—[OFFICIAL REPORT, 1st May, 1928; col. 1516, Vol. 216.] Anyone who has studied these duties and the previous experience when the duties existed some time ago, will support the statement of the late Chancellor of the Exchequer. There can be no doubt that step by step we should be forced forward until all non-road users would be excluded from the proposal. That would cost about £1,700,000. Even then I am not clear that we should get to a halting place. Road users of petrol would take advantage of these exemptions and a very large number of checks of all kind would have to be introduced. I am certain that evasion on a large scale would be practised, as it was practised when the duties existed before. Therefore, although I have, and I know the Chancellor of the Exchequer has, considerable sympathy with those who are supporting the Amendment, I very much regret that we are not able to accept it.

In refusing the exemption I have no wish to add to the sense of grievance that will be felt by those who think they are suffering from the tax, by using any unsympathetic words, but when the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) asked us to view with concern the added cost of housing which will arise from this tax, and when the hon. Member for West Bristol (Mr. Culverwell) asked me to sympathise with the exporters of machinery who were being injured in foreign competition by the tax, I must ask both of them and the House to have a sense of proportion. What are the facts? The cost of housing and the cost of engineering machinery is going to be increased, we are told, because of the small quantity of paint that is used for both those purposes. How will the cost of paint be affected? On a gallon of paint, which sells at never less than 7s. 6d., and sometimes considerably more, the effect of the tax is something between 2d. and 3d. I am afraid that if arguments of that kind are going to be used, we cannot feel very much appreciation of them.

In regard to linoleum and wallpaper, we must remember that the paint and varnish used in those products is a very small part. The tax on white spirit or turpentine is only a tiny part of the cost of the paint. Therefore we must realise that the additional cost involved in the manufacture of those goods is an infinitesimal proportion of the total cost. Perhaps the limit of absurdity was reached by hon. Members opposite like the hon. and gallant Member for North-West Hull (Sir A. Lambert Ward) and the hon. Member for West Bristol, who are fervent advocates of tariffs in this country. The argumente which they have been using with regard to what for the purpose of these particular manufactures is a very trifling sum, would be repeated many hundredfold if we were to impose taxation such as they wish to see upon all manufactured articles entering this country. All the difficulties about rebates, and comparing the amount of one article used in the process of manufacturing another article, would arise a hundred or a thousand times. When those hon. Members join with the hon. and gallant Member for Central Hull in arguing against this particular tax, on their particular ground, I do feel that, much as I sympathise with the Amendment on its merits, the arguments by which it has been supported seem to be unworthy of any credence.

Mr. CHAMBERLAIN

The speech to which we have just listened has entirely justified the anticipation of the hon. Member for Kingston-upon-Hull (Mr. Arnott), who suggested that we should probably have sympathy from the Financial Secretary but that no business would be done. The speech of the Financial Secretary has been received with great disappointment in all parts of the House. It is a very striking fact that an Amendment which has been moved from the benches behind him has been supported not only from these benches but also by an hon. Member below the Gangway. It appears, therefore, that the arguments which the Financial Secretary thinks are so trivial and so unworthy of attention have, nevertheless, produced in the minds of hon. Members a conviction that a serious case has been made out for the remission of the duty in regard to these two classes of articles. This question may seem small to the Financial Secretary, but it raises a considerable point of principle. The principle involved is whether we are going to use the finances of this country to help or to injure trade and employment. The Chancellor of the Exchequer, as we all know, is a fanatical Free Trader, but there is nothing to prevent him from imposing a protective duty, as he has done in the present case. This must be a protective duty as long as there is no corresponding excise on the article produced in this country.

Lieut.-Commander KENWORTHY

It is worse than that: It is not even a protective duty.

5.0 p.m.

Mr. CHAMBERLAIN

I was speaking of the duty on oil at the moment, but I do not want to prevent my hon. and gallant Friend from increasing the charge that I am making against the Chancellor of the Exchequer. If he thinks that the Chancellor of the Exchequer is being done more than justice to by anything that I have been saying, I shall be very glad to withdraw. I was saying that this is a case where duties could, without outraging the Chancellor's principles, be used not to hinder but to assist the manufacturers of this country. The Financial Secretary to the Treasury has based his opposition, not on the ground that it hindered industry, but on other grounds. First, he said that he could not afford to lose the money, and, secondly, he said that it would open the door to further reductions. I am not surprised that he did not find it possible to argue that industry would not be injured by the imposition of this duty. Not long ago the Chancellor of the Exchequer said that any further imposition upon industry would be the last straw, and when we are talking about these trivial results he might remember that last straw and that this comes on the top of all the other taxation which the Government are imposing upon industry generally.

I want to examine the two reasons which the Financial Secretary has put forward for not accepting the Amendment. The first is that it would cost £500,000. Apparently he calculates the loss at a rather higher figure than that given by the hon. and gallant Member for Central Hull, but we will assume that it is £500,000. The Chancellor of the Exchequer, who, as has been pointed out already, has deliberately and wantonly thrown away revenue in industry after industry by allowing the Safeguarding Duties to lapse, surely cannot come here to-day and plead that he cannot give this small assistance to industry because he is in want of revenue. He had not to lake active steps, but merely to allow things to remain as they were, and there would be no difficulty at all about the money, so that that is really an argument that will not hold water. Now I come to the other point, that this would open a breach in the duties and that it would be impossible to stop at this point. The Financial Secretary to the Treasury bases that argument not upon his own views, but upon an opinion expressed by the late Chancellor of the Exchequer when he was in office. I know that the present Government are carrying their slavish imitation of the late Chancellor very far, but they cannot expect to get off every time by simply quoting the late Chancellor when they themselves expressed exactly the opposite view at that time. Therefore, I cannot accept that as a valid argument.

But let me go into it further. The conditions under which the late Chancellor of the Exchequer was speaking were very different from what they are to-day. Industry was by no means in the depressed condition in which it is to-day, and unemployment had not reached the colossal figures to which it has risen under the Socialist Government. But the Financial Secretary to the Treasury has given us no reason to suppose that it would be impossible to stop at any particular point. After all, hon. Members are not asking for a general remission of the duty on spirits which are used by all non-road users. They have united from different parts of the House in support of a remission of a particular kind of spirit used for particular purposes, and it is because there are special reasons for that view that there has been this singular unanimity of opinion. If there had been any indication that there were other Amendments of this kind on the Paper, I could understand the hon. Gentleman saying he could not agree to one without agreeing to the other, but seeing that there has been no such indication, I say that the Financial Secretary to the Treasury must address himself to the merits of this particular case and not try to pray in aid hypothetical and imaginary cases which have not arisen and of which there are no signs at present. Therefore, I think that, in spite of the speech of the Financial Secretary, the President of the Board of Trade, whom I see sitting there with a sympathetic countenance, will reconsider the question and give us a little bit more favourable reply when he has heard further arguments from various parts of the House.

Sir GEORGE HAMILTON

Although I am not a chemist, I have always understood that turpentine is not a hydrocarbon oil, and I was very much reinforced in that view to-day when I heard the hon. Member for Birkenhead (Mr. White) make the same statement, but if that is so, surely the Chancellor of the Exchequer is running a grave risk by increasing the tax on turpentine because if any of these companies who have had to pay this tax in the past had taken the matter to the courts it would have been found that it is being levied illegally, because the tax is on hydrocarbon oil, and I ate informed turpentine is not, never was, and never will be a hydrocarbon oil. That being so, I want to plead with the Financial Secretary to the Treasury on two points—first, that he should try to discover whether this tax is legal or not and, having made quite sure, that he should inform the House in due course; and, secondly, that he should take into consideration the danger that he is running, if there is some doubt as to the legality of this tax, by increasing it now. The tax has not been very heavy up to date, but it is this last straw that breaks the camel's back to which the Chancellor of the Exchequer referred, and it is just this extra 2d. put on to this particular commodity which will make manufacturers who use it in any quantity at all examine the legal position and, if necessary, fight the Chancelier of the Exchequer and his tax collectors in the courts.

I was very interested in the speech of the hon. Member for West Edinburgh (Mr. Mathers) who talked about this tax as not being a protective tax. It is a protective tax. This tax on turpen- tine is Protection of the very worst form, in favour of our great competitors in Germany. There never was such Protection. It is a safe Protection to Germany of no less than 12s. 4d. per cwt. on one commodity alone. Some few years ago the celluloid business in this country was developing fairly rapidly, and certain chemists put their heads together to discover whether camphor could be produced synthetically; and after some work and the expenditure of no less than £25,000, they discovered that camphor could be produced synthetically in this country. Camphor before had usually come from Formosa, which is part of Japan, but by producing it synthetically in this country, a trade was set up, factories were started, and one factory alone which I know of in the county of Essex, not very far from London, cost no less than £40,000 and was only put up two or three years ago.

Now comes this tax on turpentine. The main process in the making of synthetic camphor is dependent on turpentine, and you cannot use anything else, and as a result of this tax the extra cost per cwt. of camphor will be raised by 12s. 4d. This business is a new business, a struggling business, one which is only just getting on its feet, and it is In keen competition with Germany. The Germans are also making synthetic camphor in the same way, and the users of camphor, the manufacturers of celluloid in this country, do not at present buy from Germany because our price here is just the same. May I point out to the hon. Member for Silvertown (Mr. J. Jones) that when I say "our price," I have no financial interest in this matter whatever, so that I need not be suspected in any way. I mean the British price. The British manufacturers' price is only just equal to the German price, and this extra 2d. will just spoil their market, it will lose their trade, and Germany will come in.

We hear much said about helping the unemployed, but this tax will undoubtedly create more unemployment in this small industry as it is. I personally happen to know two factories that are now producing this synthetic camphor. One is in my own Division, that of Messrs. Howard and Sons, who are very big chemical manufacturers, and the other is in the county of Essex, just a few miles further on. Both these businesses are just holding their own; it is just worth while to produce this synthetic camphor at home, and they are just able to sell it in competition with the German manufacturers. The total cost of a remission of the Turpentine Duty on this particular product, synthetic camphor, would only be a matter of a few thousand pounds. I have an estimate in my hand which suggests that at one factory it might amount to £1,300 a year. There are only some three or four factories that produce synthetic camphor at all, and I do not think the Chancellor of the Exchequer would be giving up more than some £4,000 or £5,000 if he agreed to allow a rebate on turpentine used for this purpose.

There would be no trouble about it, for all these chemical factories have representatives of the Chancellor of the Exchequer, who are constantly weighing up, calculating and measuring the duties on the various spirits and other things used in those factories. But if the Chancellor of the Exchequer presses on with this tax, there is no doubt that these processes will stop within the next few months, and all the people employed will lose their work and will add to the enormous crowd of those who are unemployed already. Therefore, I beg the Chancellor of the Exchequer to look into this matter. If he cannot really go as far as I would like to see him go and accept the whole of the Amendment, will he at any rate consider giving a rebate on turpentine used for the production of synthetic camphor in this country?

Mr. MANDER

Unlike the last speaker, I think I should begin by saying that I am personally interested as a manufacturer, and therefore, if a Division takes place on this Amendment, I do not, in accordance with precedent, intend toking part in it, but I understand that it would be quite in accordance with the traditions of this House that I might be permitted to say a few words as representing a very important body of manufacturers in this country. I believe that that can quite properly be done, otherwise I should not think of doing it.

The whole case against this tax on white spirit and turpentine is that one particular trade in the whole country is being quite unnecessarily subjected to the infliction of a tax which certainly bears hardly upon it and which will be borne by it, because it certainly will not be passed on, although we were told in previous Debates that the intention was that it should be passed on to the consumer. The de-rating benefits that have come to this trade are outweighed three or four times over by the additional taxation which is imposed on this trade in respect of the duties upon white spirit and turpentine; and there is no real difficulty, I am informed, in differentiating between white spirit used for manufacturing purposes and spirit used for petrol for motor cars. Therefore, there is no justification for putting on this duty. The argument originally used was that unless you taxed it, it would be used for driving motor cars, but a distinction can be made on scientific lines, and I should like to hear from the Government what their views are on that point and whether they dispute it.

With regard to turpentine, the position is still more indefensible. Turpentine cannot possibly be used for driving motor cars. I can quite understand that the Government might come down here and say they are very sorry, but that, in view of the state of the finances, they are unable to repeal the duty this year, but I really do not think they are justified in saying that they are actually going to increase unnecessarily a duty which they themselves dislike intensely and in which they disbelieve, when the whole of the arguments put forward in this House from every party, last year and this year, arguments which are agreed to by the Chancellor of the Exchequer and by the Government, are against the course which they are now proposing to follow. Turpentine and white spirit are articles which are very different in composition. One is very much more expensive than the other. They are not really competitive, so that there is no argument in that point of view. I hope very much that for these reasons and as an act of justice the Government will reconsider the matter. While I do not expect them to repeal the duty, I ask that they should most seriously consider the question as to whether they cannot abstain from putting on the totally unnecessary burden they are proposing to impose on this great trade this year.

Mr. SKELTON

I should not have risen to take part in this Debate at this stage but for the fact that I should not be doing justice to the constituents I represent if I did not put before the Treasury the circumstances of this duty as it affects the most important industry in the City of Perth. The Financial Secretary to the Treasury made rather lumbering fun of some of the arguments used on this side of the House in attempting to make the point that overemphasis was being laid upon this duty as a duty on raw material, since instances were cited in which the raw material affected was a very small proportion of the total raw materials used. That is not the case in the industry to which I wish to draw the attention of the right hon. Gentleman the President of the Board of Trade. I refer to the dry-cleaning industry, which everyone knows is concentrated almost, as far as this country is concerned, in the City of Perth. White spirit is in fact almost the only raw material used in that trade and by far the most important.

It is not, therefore, a question of some fractional proportion of extra cost being involved; it is a case of practically the whole raw material of the industry being affected. Further than that, it cannot be said that the situation has remained unchanged since this duty was originally imposed. For the first time since I became the representative of that part of the country the industry has been suffering very heavily from bad trade, and there has been an increasing number of men turned out of work in the industry, and an increasing amount of unemployment in the city, whose workers are now more seriously unemployed than at any time during my representation of the constituency. This is the moment which is selected to add a very large increase to the burden upon the industry's raw material.

The Government must realise the force of the arguments in favour of this Amendment. It is true that various trades use the article, which is taxed in various degrees. It can be shown, and it has been shown, that whole trades, as in the case I have recited, use white spirit exclusively almost as raw material. It is clear that this duty involves a tax upon raw material, and that it is a tax which cannot be disregarded. If I remember rightly, in Dante's great work, in the lowest circle of Hell, one finds one's enemies frozen in ice and one has an opportunity of stamping on their faces. I cannot imagine any more unpleasant situation than to be a person so frozen. I have always understood from a fiscal point of view that that is the circle of Hell to which taxes on raw materials should be relegated. In this matter it is not only a question of Free Trade, because as I understand the fiscal arguments, the one point upon which those in favour of Protection and those in favour of Free Trade are agreed is the fiscal impropriety and economic unsoundness of tariffs upon raw material. That is, perhaps, one of the reasons why, from all sides of the House, Members have been able to rise in their places and point out the disadvantages of this particular duty.

When you get a duty upon raw material increased at a time when unemployment is increasing, when you get it in industries where it is used, as I have shown it to be used, as the only raw material in an industry where unemployment is spreading, you are out of the reach of fiscal heresy or the smaller proprieties of taxation, and the Government, unless they listen to the arguments put before them from all sides of the House, will be a consenting party to real and serious damage to the interests not merely of British manufacturers, but to a whole group of British trades, some of which are already suffering as far as unemployment and production are concerned. I did not believe that the Government could be a party to such an action at such a moment as this. As far as I am concerned I shall lose no opportunity of trying to do my duty in this House. I have urged the claims of the most important industry in my constituency, and I have shown that its raw material, almost its only raw material, is going to suffer extra taxation, and I shall lose no opportunity of pointing out the economic fallacy of the Government's policy.

Captain CROOKSHANK

I think that we are reducing our Parliamentary procedure on these Resolutions to an absolute farce, because on all sides of the House speaker after speaker has got up and supported the Amendment of the hon. and gallant Gentleman. Not a single soul has spoken for the Government; not even a voice has been heard from the benches of the docile private Secretaries. The Financial Secretary, who has since disappeared, made a few casual observations of a very general kind, beginning by admitting that it was the still small voice of the Exchequer, and that its only interest in the matter was to safeguard the revenue. It is the business of the House to deal with the revenue. It is not purely a Treasury function. He told us that the needs of the Treasury must be paramount, but in our view it is the needs of the taxpayer which must be considered in these particular and specific instances, more especially those of hard-pressed industry. I should like to ask the President of the Board of Trade if he really is satisfied about the form of this Resolution covering this part of the industry?

As my hon. Friend the Member for Ilford (Sir G. Hamilton) has pointed out, hydrocarbon oil does not under any normal description cover turpentine. When the original Resolutions were introduced in 1928 the Resolution imposing this duty was of a very different kind. It was a very long and very complicated one, which gave all sorts of detail with regard to distillation, volume, centigrades and so on, under which, for all I know, they may have covered this particular case. The Resolution on the Paper to-day gives no account or description at all except the words "hydrocarbon oils," which the experts apparently agree do not cover these particular cases. Perhaps the President of the Board of Trade would be good enough to explain whether he really thinks he can, under this form of words, collect any money at all? The trouble is that we are dealing with a very large increase of an existing duty. Under the obiter dicta of the Chancellor of the Exchequer the duty is going to be as much as 2d. a gallon, and that alters the whole basis on which criticism is made.

It is interesting to observe the different treatment meted out to different industries. The object of this House, apart from the necessity of getting revenue, should be to assist industry and not make it more difficult for industry to carry on. You have a very curious double case here, both of them representing the same amount of revenue. The duties that we are discussing now raise £500,000, and the duties on wrapping paper also raise £500,000. As I understand the position, the Government are letting those latter duties lapse, that is to say, they are letting £500,000 slip out of their pockets which they might have quite well retained and for the disappearance of which there has been no demand whatever from the wrapping-paper industry. In fact, the demand is in the other direction, and in that case the industry takes the view that the tax on foreign products should be kept on as it has been of use to them. Here you do the reverse, and you have an industry which takes the view that a tax of something like £500,000 should not be put on. The Government have no hesitation in putting on the duty, and they say that the needs of the Treasury must be paramount. If the needs of the Treasury must be paramount in regard to getting £500,000 out of this hard-pressed industry, why are their needs not as paramount in regard to the £500,000, which could have been got from the other industry? That is simply a little mathematical proposition which I put to the Financial Secretary of the Treasury, and I should like to have an explanation regarding it.

He told us that it would upset the equilibrium of the Budget. Its equilibrium was upset before it was ever hatched, because we know that the theoretical balance of the Budget is only £166,000, and that that has already disappeared. So the little matter of half a million here or there as regards equilibrium has nothing at all to do with the decisison of the Government. The hon. Gentleman's final argument was that it would be a breach in the integrity of the whole. The present Chancellor of the Exchequer previously had this to say about the Oil Duty—that it was full of loopholes, that there were any amount of opportunities for evasion, and that it would not require much ingenuity to run a whole army corps through the duty which the right hon. Gentleman the Member for Epping (Mr. Churchill) had set up. What is the good of talking so solemnly about those duties when the hon. Gentleman's own leader says that a whole army corps—it is interesting to note that these metaphors, as the War recedes into the past, become more frequent—can, I suppose, for all I know, still be driven through the Oil Duty. If either the hon. Gentleman or the President of the Board of Trade put up a single argument, possibly some of us on these benches might reconsider our attitude on this matter, but until they do I have no doubt that the opinion of the House will be contested on this matter, and it will be very interesting to see whether hon. Gentlemen sitting behind there are going to run away on this occasion as they did on the last occasion.

Captain CAZALET

I must confess that neither I nor my constituency has the least financial interest in the question which the House is discussing at the moment. It appears to me that the Government desire to have the best of two worlds so far as this matter is concerned. Whenever we discuss a form of duty far more scientific than the present proposal and one solely calculated to benefit the industries of this country, hon. Members opposite pour scorn and derision upon our suggestion. In this case we are not proposing a duty; we are proposing to reduce a duty, and the same kind of scorn and derision is poured upon our suggestion. It may be human to desire to have the best of both worlds, but it is not a logical attitude for the Government to take. There is, I think, a much more subtle object behind the opposition of the Government to this Amendment. When the hon. Member who seconded the Amendment was referring to the difficulties which inspectors would have in administering this duty, in opening the tins and calculating the amount of the rebate duty, the Chancellor of the Exchequer chuckled and seemed to say, "Yes, this is the kind of difficulty the Conservative party want to impose on all industries in this country." That is, of course, quite in correct, but it seems to me that one object of the Government in resisting this Amendment is that they want to use it as an illustration of the kind of difficulties which they allege that we desire to inflict on all the industries of the country by any future tariff.

The Government are opposing this Amendment because they say that they cannot afford to throw away some £500,000, yet at the same time they are throwing away that sum by allowing the Wrapping Paper Duty to lapse. Other Safeguarding Duties are coming to an end in a few months' time, which do no harm to anybody; indeed they are a positive benefit to various industries in the country, but the Government are allowing them to lapse. They are throwing them aside, yet they are maintaining a duty which is a real inconvenience and a hindrance to various industries of the country. I shall certainly support the Amendment in the Lobby. I hope that the hon. and gallant Member will carry the Amendment to a Division.

Mr. REMER

In the speech of the Financial Secretary we got the keynote of the whole Cobdenite principle in a few sentences. Before they impose any import duties they must be satisfied that they are not going to do any good whatever to anybody in the country but must do some injury to some people. The policy of the party on these benches is that before we put on any duties it must be shown that they are going to do good to a great many people and no injury of any kind to anybody. Many instances have been given of the injury which has been done to many trades by the imposition of this duty. We have been told of paint and linoleum. I desire to refer to another industry—the industry connected with hides which are used in the interiors of motor cars. Before these hides can be finished and utilised for a motor car they have to be treated with this spirit. A leading manufacturer of these hides gave me some startling figures the other day. For the year 1929 his firm used for this purpose as much as 99,300 gallons, and last year they used 96,220 gallons. The imposition of this tax means in the case of that firm, as much as £264,000.

This is a duty imposed on the importation of the raw material of this firm; yet we allow hides to come into this country in competition without any interference whatever. This industry has been building up an export trade in the face of the keenest competition. Lately an order was taken for the first time by a British firm for the supply of hides to the Fiat Company. Previously the orders had gone to Germany, but a British firm secured this order in the face of the keenest competition; and now the Government are putting this duty upon them and making it more difficult for them to secure this business. It is about time that we looked after British interests instead of putting additional burdens upon our industries, as we are doing by this Budget. I am afraid that it is no use appealing to the Front Bench. I do not think they have any idea of doing anything for the advantage of our own people, and, therefore, I content myself with putting the case before the House and leaving the House to decide whether it will support the Amendment or not.

Commander SOUTHBY

I have no desire to traverse the same ground as has been covered by previous speakers this afternoon, but one fact certainly emerges from this Debate, and that is that the House is almost entirely unanimous in pressing the Government to make this concession. The Financial Secretary to the Treasury in his reply referred to the still small voice. Circumstances always alter cases, but I must ask the indulgence of the House to read what the still small voice said on another occasion when the hon. Member sat on this side of the House. The still small voice sitting on the Treasury Bench is now forced to take a different view. The Financial Secretary has just scoffed at hon. Members on this side, who pointed out that this was a small concession and might easily be granted, but in 1928, when he was sitting on this side of the House, he said this in regard to the same concession: On the merits of this question, it is pointed out by Government spokesman that you cannot pile concession upon concession. That is not an argument against this proposal. It is an argument simply to show that the tax, as it was originally conceived, was a bad tax and one that involved a very large number of injustices which, when they have been exposed, have brought about the concessions required. He now goes on to belittle the remarks made by hon. Members on this side of the House about the injury which this duty would do to various industries, but this is what the same still small voice said on the former occasion: Now we have another point, and a very grave point it is. It is that by this tax the Government are delivering a very serious blow at important industries. At that moment the then Chancellor of the Exchequer apparently was absent, and it did not please the hon. Member. When the Chancellor of the Exchequer came back the hon. Member said: I should like to inform him that on the question of the tax on turpentine there has been a large amount of opposition manifested in all parts of the House. as indeed similar opposition has been manifested to-day; but then the still small voice went on: It is no answer to the arguments that this part of the tax is interwoven with other taxes. To-day he has taken the line that we cannot take out this duty because it Is so interwoven with the rest of the Budget that to do so would destroy the integrity of the Budget. In 1928 he went on to say: The duties are unjust and injurious to trade and employment. If the Chancellor of the Exchequer taxes these light oils it is his business, and not ours, to see that they can be put on without detriment to the interests of trade and industry. If he cannot do it, it is not an argument for allowing injustice to continue. It is an argument for removing them and imposing other taxation which is not open to the same objection."—[OFFICIAL REPORT, 23rd July, 1928; col. 1022, Vol. 220.] That is what the still email voice, when it sat on this side of the House, said in regard to this duty, and I think it disposes of his argument to-day that the suggestion put forward by hon. Members on this side of the House has no substance and that no real injury is done to various trades. A serious injury is done, for example, if you increase the cost of paint, to the shipping industry. One of the most important raw materials of that industry is paint, and if you do anything to increase the cost of a raw material in paint then the cost of paint is increased and you strike a blow at an industry which is finding it hard to keep its head above water.

The Financial Secretary to the Treasury has certainly violated his Free Trade principles. I have always understood that the first and foremost principle of Free Trade is that you must not tax a raw material; yet the Financial Secretary has defended, and has almost gloried in the fact, that the Government are taxing a raw material. The Chancellor of the Exchequer last year said that he would not have proposed this duty; yet he comes down to the House this year and not only continues the duty but increases Its burden. If the duty on turpentine was a protective duty it would enable manufacturers to make it in this country and not have to rely solely upon foreign turpentine, and I should go into the Lobby in favour of such a duty, because it would be helping industry in this country. But this is not a protective duty to help the manufacturers here. It is a duty put on turpentine which we have to get from abroad, the raw material of several industries, and the duty should not be kept on for one moment. Now that I have reminded the Financial Secretary of the different views he had on a previous occasion, I hope he will instruct the President of the Board of Trade to make this concession which is demanded on all sides of the House. In conclusion I would remind him that many if not most Members of the Front Bench, when a similar Amendment was moved on a previous occasion, went into the Lobby in support of that Amendment, and I hope they will do so to-day.

The PRESIDENT of the BOARD of TRADE (Mr. W. Graham)

The Financial Secretary to the Treasury gave what I think was a complete reply to the Amendment, but the right hon. Gentleman for Edgbaston (Mr. Chamberlain) made such a moving appeal to me personally that I must briefly respond. I cannot conceal the fact that the right hon. Gentleman's logical arrangement of speech makes a profound impression upon the Scottish mind, and I should like for this and other reasons to supplement what my hon. Friend the Financial Secretary has said. A good deal of the argument has been with regard to the lapse of the Safeguarding Duties, but that is really irrelevant this afternoon. We are dealing here with a duty which was introduced under our predecessors and which, for the reasons given by the Chancellor of the Exchequer in his Budget Speech, we have to extend. I would remind the Committee that under existing conditions this is the only new taxation which is being imposed. This addition to the duty is designed to provide £7,500,000 in the present financial year, rising to £8,300,000 in a full financial year, and, having regard to the precarious circumstances of our national finances, it must be obvious to hon. Members in all parts of the House that any Amendment, however desirable on the merits, which makes any inroad at all upon the yield of the duty must be viewed very seriously indeed.

It is worth while also to recall the exact cost of this proposal to exempt white spirit and turpentine. There is no doubt that it would be much more than the figure represented by my hon. and gallant Friend the Member for Central Hull (Lieut.-Commander Kenworthy). It would be, at least, £500,000, and I think that the case for the extension of the concession to other oils would be so strong as to be almost irresistible and extensions might be made which would lead to a loss of revenue as high as £1,700,000. I know that that is a familiar argument used by everyone who has to defend Treasury proposals, but it is none the less a real argument in this connection, because the Committee will observe that a very large part of the argument advanced this afternoon has been directed to the special use of this commodity in different industries or trades. A case has been built upon that foundation particularly for the exemption of these two classes of oils.

That was also the point taken to some extent by the right hon. Gentleman the Member for Edgbaston, but I am bound to say that it is not an impressive point in this connection, because while the condition of the paint and varnish industry may not be all we would like to see it, it is relatively very much better than a great range of other industries in this country, and it has been shown beyond any dispute that in regard to paints selling at 7s. 6d. and 8s. per gallon, and even higher prices, all that is involved in the tax even as increased is between 2d. and 3d. With the greatest desire to recognise the wish of all of us to see duties of this kind removed, it cannot be seriously suggested that this is a grievous burden on an industry the circumstances of which are, as I have said, much better than those of other industries at the present time.

The hon. Member for Ilford (Sir G. Hamilton) raised another point about synthetic camphor. The Committee will recognise that, standing as we do at this Box, with miscellaneous briefs on every conceivable subject, neither the Financial Secretary nor I can profess to be experts in regard to every industry whose case is raised, and I, certainly, make no profession of that kind to-day. But I can say that it is true that this case of synthetic camphor is confined to one firm, with possibly a second, and I think it can also be shown that competition is not so much with an imported article of the same kind, as, perhaps, with the natural camphor from Japan. Inasmuch as no turpentine remains in the finished product here, I am inclined to agree that there is perhaps a case of a kind to be made, within limits, in this matter, but, against that, it must be remembered that going back to the time of the establishment of the factory, which I think the hon. Member has in mind, there has been, even allowing for the inclusion of the duty, a very substantial fall in the cost of turpentine, I think from about 60s. per cwt. to 43s. or 44s.

Sir G. HAMILTON

But is not that a drop in the world price and not in the English price only?

Mr. GRAHAM

Yes, but it must be taken into account in an argument of this kind, and it is my duty not to evade any of the facts in making the case on which this proposal rests. As I say, this firm or these firms cannot be described as in distress. It would be idle of me to hold out any hope on behalf of the Chancellor of the Exchequer that this matter can be reconsidered, because the moment we cross the line into any remissions applicable to the duty, we are opening the door to many other claims of a similar nature which undoubtedly would then be pressed upon us with even greater force than at present, and while I always regret disappointing hon. Members in a matter of this kind, I am obliged to stand by the proposal of the Government.

There is one other consideration which has been raised. Several hon. Members have suggested that it may be illegal to include turpentine in the list of hydrocarbon oils. The right hon. Gentleman the Member for Epping (Mr. Churchill) has done many appalling things in his public career and probably even when he

was Chancellor of the Exchequer, but, according to all the information at my disposal, he at least relied on technical advice in regard to many of his plans. He relied on technical advice when this duty was instituted, and I am advised that, although turpentine has a vegetable origin as distinct from the mineral origin of the other oils, it can be properly included and has been properly included under the head of hydrocarbon oils for the purposes of our Finance Bill legislation. Therefore there need be no anxiety on legal grounds in any part of the House.

All these considerations have been taken into account by the Chancellor of the Exchequer in framing this plan. Of course hon. Members opposite have gone back and dug up old speeches made upon this subject. That I have always regarded as the least desirable form of argument on these matters. These things have been done all along the line and no Chancellor of the Exchequer has evolved a perfect system. I am sure that my right hon. Friend dislikes this duty just as much now as formerly. He would give anything to be able to abolish what is undeniably a burden upon industry, but the financial facts, arising from the grave industrial crisis, are overwhelming, and that is the reason why we must reject this Amendment, if we are not to be drawn into an elaborate system of rebates and concessions which, administratively, it would be almost impossible to work. For those reasons I must with profound regret disappoint the hon. Members in different parts of the House who have supported the Amendment, and I suggest that the House should now come to a decision in favour of the retention of the Government's plan.

Question put, "That those words be there inserted in the Resolution."

The House divided: Ayes, 179; Noes, 245.

Division No. 228.]	AYES.	[5.55 p.m.
Acland-Troyte, Lieut.-Colonel	Boothby, R. J. G.	Bullock, Captain Malcolm
Albery, Irving James	Bourne, Captain Robert Croft.	Butler, R. A.
Astor, Maj. Hn. John J. (Kent, Dover)	Bowater, Col. Sir T. Vansittart	Butt, Sir Alfred
Astor, Viscountess	Bowyer, Captain Sir George E. W.	Cadogan, Major Hon. Edward
Atholl, Duchess of	Bracken, B.	Campbell, E. T.
Atkinson, C.	Brass, Captain Sir William	Castle Stewart, Earl of
Baldwin, Rt. Hon. Stanley (Bewdley)	Briscoe, Richard George	Cautley, Sir Henry S.
Beamish, Rear-Admiral T. P. H.	Broadbent, Colonel J.	Cazalet, Captain Victor A.
Beaumont, M. W.	Brown, Col. D. C. (N'th'l'd., Hexham)	Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)
Berry, Sir George	Brown, Brig.-Gen. H. C. (Berks, Newb'y)	Chamberlain, Rt. Hon. N. (Edgbaston)
Betterton, Sir Henry B.	Buchan, John	Christle, J. A.
Bevan, S. J. (Holborn)	Buchan-Hepburn, P. G. T.	Clydesdale, Marquess of
Birchall, Major Sir John Dearman	Buckingham, Sir H.	Colfex, Major William Philip
Colman, N. C. D.	Hope, Sir Harry (Forfar)	Roberts, Sir Samuel (Ecclesall)
Colville, Major D. J.	Howard-Bury, Colonel C. K.	Rodd, Rt. Hon. Sir James Rennell
Conway, Sir W. Martin	Hudson, Capt. A. U. M. (Hackney, N.)	Ruggles-Brise, Colonel E.
Courtauld, Major J. S.	Hunter, Dr. Joseph	Russell, Alexander West (Tynemouth)
Courthope, Colonel Sir G. L.	Hunter-Weston, Lt.-Gen. Sir Aylmer	Samuel, A. M. (Surrey, Farnham)
Cowan, D. M.	Hurd, Percy A.	Sandeman, Sir N. Stewart
Crichton-Stuart, Lord C.	Hurst, Sir Gerald B.	Shakespeare, Geoffrey H.
Crookshank, Cpt. H. (Lindsey, Gainsbro)	Inskip, Sir Thomas	Shepperson, Sir Ernest Whittome
Culverwell, C. T. (Bristol, West)	Iveagh, Countess of	Skelton, A. N.
Cunliffe-Lister, Rt. Hon. Sir Philip	Jones, Henry Haydn (Merioneth)	Smith, R. W. (Aberd'n & Kinc'dine, C.)
Dalkeith, Earl of	Knox, Sir Alfred	Smith-Carington, Neville W.
Dairymple-White, Lt.-Col. Sir Godfrey	Lamb, Sir J. Q.	Smithers, Waldron
Davidson, Rt. Hon. J. (Hertford)	Lambert, Rt. Hon. George (S. Molton)	Somerset, Thomas
Davies, Maj. Geo. F. (Somerset, Yeovil)	Law, Sir Alfred (Derby, High Peak)	Somerville, A. A. (Windsor)
Davison, Sir W. H. (Kensington, S.)	Leigh, Sir John (Clapbam)	Southby, Commander A. R. J.
Despencer-Robertson, Major J. A. F.	Leighton, Major B. E. P.	Spender-Clay, Colonel H.
Duckworth, G. A. V.	Lewis, Oswald (Colchester)	Stanley, Lord (Fylde)
Dudgeon, Major C. R.	Locker-Lampson, Rt. Hon. Godfrey	Stanley, Hon. O. (Westmorland)
Eden, Captain Anthony	Lymington, Viscount	Steel-Maitland, Rt. Hon. Sir Arthur
Edmondson, Major A. J.	McConnell, Sir Joseph	Stewart, W. J. (Belfast, South)
Elliot, Major Walter E.	Macdonald, Capt. P. D. (I. of W.)	Stuart, Hon. J. (Moray and Nairn)
Erskine, Lord (Somerset, Weston-s-M.)	Makins, Brigadier-General E.	Sueter, Rear-Admiral M. F.
Everard, W. Lindsay	Margesson, Captain H. D.	Taylor, Vice-Admiral E. A.
Falle, Sir Bertram G.	Marjoribanks, Edward	Thomson, Sir F.
Ferguson, Sir John	Meller, R. J.	Thomson, Mitchell-, Rt. Hon. Sir W.
Fermoy, Lord	Milne, Wardlaw-, J. S.	Tinne, J. A.
Fielden, E. B.	Monsell, Eyres, Com. Rt. Hon. Sir B.	Titchfield, Major the Marquess of
Forestler-Walker, Sir L.	Moore, Lieut.-Colonel T. C. R. (Ayr)	Todd, Capt. A. J.
Fremantle, Lieut.-Colonel Francis E.	Morrison, W. S. (Glos., Cirencester)	Train, J.
Galbraith, J. F. W.	Muirhead, A. J.	Tryon, Rt. Hon. George Clement
Ganzoni, Sir John	Newton, Sir D. G. C. (Cambridge)	Vaughan-Morgan, Sir Kenyon
Graham, Fergus (Cumberland, N.)	Nicholson, O. (Westminster)	Wallace, Capt. D. E. (Hornsey)
Gratton-Doyle, Sir N.	Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)	Warrender, Sir Victor
Grenfell, Edward C. (City of London)	O'Connor, T. J.	Wayland, Sir William A.
Gretton, Colonel Rt. Hon. John	Oliver, P. M. (Man., Blackley)	Wells, Sydney R.
Guinness, Rt. Hon. Walter E.	O'Neill, Sir H.	White, H. G.
Gunston, Captain D. W.	Ormsby-Gore, Rt. Hon. William	Williams, Charles (Devon, Torquay)
Hacking, Rt. Hon. Douglas H.	Peake, Captain Osbert	Wilson, G. H. A. (Cambridge U.)
Hall, Lieut. Col. Sir F. (Dulwich)	Penny, Sir George	Windsor-Clive, Lieut.-Colonel George
Hanbury, C.	Percy, Lord Eustace (Hastings)	Withers, Sir John James
Hannon, Patrick Joseph Henry	Peto, Sir Basil E. (Devon, Barnstaple)	Wolmer, Rt. Hon. Viscount
Hartington, Marquess of	Pownall, Sir Assheton	Womersley, W. J.
Harvey, Major S. E. (Devon, Totnes)	Ramsbotham, H.	Wood, Rt. Hon. Sir Kingsley
Heneage, Lieut.-Colonel Arthur P.	Rawson, Sir Cooper	Young, Rt. Hon. Sir Hilton
Hennessy, Major Sir G. R. J.	Raid, David D. (County Down)
Herbert, Sir Dennis (Hertford)	Remer, John R.	TELLERS FOR THE AYES—
Hills, Major Rt. Hon. John Waller	Rentoul, Sir Gervals S.	Sir A. Lambert Ward and Sir
Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.	Reynolds, Col. Sir James	George Hamilton.
NOES.
Adamson, Rt. Hon. W. (Fife, West)	Cocks, Frederick Seymour	Griffiths, T. (Monmouth, Pontypool)
Adamson, W. M. (Staff., Cannock)	Collins, Sir Godfrey (Greenock)	Groves, Thomas E.
Addison, Rt. Hon. Dr. Christopher	Compton, Joseph	Grundy, Thomas W.
Altchison, Rt. Hon. Craigle M.	Cove, William G.	Hall, G. H. (Merthyr Tydvil)
Alpass, J. H.	Cripps, Sir Stafford	Hall, J. H. (Whitechapel)
Angell, Sir Norman	Daggar, George	Hall, Capt. W. P. (Portsmouth, C.)
Arnott, John	Dallas, George	Hamilton, Mary Agnes (Blackburn)
Attlee, Clement Richard	Davies, D. L. (Pontypridd)	Hamilton, Sir R. (Orkney & Zetland)
Ayles, Walter	Davies, Rhys John (Westhoughton)	Harbord, A.
Baldwin, Oliver (Dudley)	Denman, Hon. R. D.	Hardle, George D.
Barr, James	Dukes, C.	Hastings, Dr. Somerville
Batey, Joseph	Duncan, Charles	Haycock, A. W.
Benn, Rt. Hon. Wedgwood	Ede, James Chuter	Hayes, John Henry
Bennett, Sir E. N. (Cardiff, Central)	Edwards, C. (Monmouth, Bedwellty)	Henderson, Right Hon. A. (Burnley)
Bennett, William (Battersea, South)	Edwards, E. (Morpeth)	Henderson, Arthur, Junr. (Cardiff, S.)
Benson, G.	Egan, W. H.	Henderson, W. W. (Middx., Enfield)
Bondfield, Rt. Hon. Margaret	Elmley, Viscount	Herriotts, J.
Bowerman, Rt. Hon. Charles W.	Foot, Isaac	Hicks, Ernest George
Broad, Francis Alfred	Freeman, Peter	Hirst, G. H. (York W. R. Wentworth)
Brockway, A. Fenner	Gardner, B. W. (West Ham, Upton)	Hirst, W. (Bradford, South)
Bromfield, William	George, Rt. Hon. D. Lloyd (Car'vn)	Hoffman, P. C.
Bromley, J.	George, Major G. Lloyd (Pembroke)	Horrabin, J. F.
Brooke, W.	George, Megan Lloyd (Anglesea)	Hudson, James H. (Huddersfield)
Brothers, M.	Gibbins, Joseph	Isaacs, George
Brown, Rt. Hon. J. (South Ayrshire)	Gibson, H. M. (Lancs, Mossley)	John, William (Rhondda, West)
Burgess, F. G.	Gill, T. H.	Johnston, Rt. Hon. Thomas
Buxton, C. R. (Yorks. W. R. Elland)	Gillett, George M.	Jones, Llewellyn-, F.
Calne, Hall-, Derwent	Glassey, A. E.	Jones, J. J. (West Ham, Silvertown)
Cameron, A. G.	Gossling, A. G.	Jones, Rt. Hon. Leif (Camborne)
Cape, Thomas	Gould, F.	Jones, Morgan (Caerphilly)
Carter, W. (St. Pancras, S. W.)	Graham, Rt. Hon. Wm. (Edin., Cent.)	Jowett, Rt. Hon. F. W.
Chater, Daniel	Gray, Milner	Jowitt, Sir W. A. (Preston)
Cluse, W. S.	Greenwood, Rt. Hon. A. (Colne)	Kennedy, Rt. Hon. Thomas
Clynes, Rt. Hon. John R.	Grenfell, O. R. (Glamorgan)	Kinley, J.

Knight, Holford	Naylor, T. E.	Sinkinson, George
Lang, Gordon	Newman, Sir R. H. S. D. L. (Exeter)	Smith, Ben (Bermondsey, Rotherhithe)
Lansbury, Rt. Hon. George	Noel Baker, P. J.	Smith, Frank (Nuneaton)
Law, Albert (Bolton)	Noel-Buxton, Baroness (Norfolk, N.)	Smith, Lees-, H. B.
Law, A. (Rossendale)	Oldfield, J. R.	Smith, Rennie (Penistone)
Lawrence, Susan	Oliver, George Harold (Ilkeston)	Smith, Tom (Pontefract)
Lawton, John James	Owen, Major G. (Carnarvon)	Smith, W. R. (Norwich)
Lawther, W. (Barnard Castle)	Palin, John Henry	Snowden, Rt. Hon. Philip
Leach, W.	Paling, Wilfrid	Sorensen, R.
Lee, Frank (Derby, N. E.)	Parkinson, John Allen (Wigan)	Stamford, Thomas W.
Lee, Jennie (Lanark, Northern)	Peters, Dr. Sidney John	Stephen, Campbell
Lees, J.	Pethick-Lawrence, F. W.	Strauss, G. R.
Lewis, T. (Southampton)	Phillips, Dr. Marion	Sullivan, J.
Lindley, Fred W.	Picton-Turbervill, Edith	Sutton, J. E.
Lloyd, C. Ellis	Pole, Major D. G.	Taylor, R. A. (Lincoln)
Logan, David Gilbert	Potts, John S.	Taylor, W. B. (Norfolk, S. W.)
Longbottom, A. W.	Price, M. P.	Thomas, Rt. Hon. J. H. (Derby)
Longden, F.	Pybus, Percy John	Thorne, W. (West Ham. Plaistow)
Lovat-Fraser, J. A.	Quibell, D. J. K.	Thurtle, Ernest
Lunn, William	Ramsay, T. B. Wilson	Tillett, Ben
Macdonald, Gordon (Ince)	Rathbone, Eleanor	Tinker, John Joseph
MacDonald, Rt. Hon. J. R. (Seaham)	Raynes, W. R.	Tout, W. J.
MacDonald, Malcolm (Bassetlaw)	Richards, R.	Townend, A. E.
McElwee, A.	Richardson, R. (Houghton-le-Spring)	Vaughan, David
McEntee, V. L.	Riley, Sen (Dewsbury)	Viant, S. P.
MacLaren, Andrew	Riley, F. F. (Stockton-on-Tees)	Walkden, A. G.
Maclean, Sir Donald (Cornwall, N.)	Ritson, J.	Walker, J.
Maclean, Nell (Glasgow, Govan)	Romeril, H. G.	Watkins, F. C.
MacNeill-Weir, L.	Rosbotham, D. S. T.	Watson, W. M. (Dunfermline)
McShane, John James	Rowson, Guy	Watts-Morgan. Lt.-Col. D. (Rhondds)
Malone, C. L'Estrange (N'thampton)	Salter, Dr. Alfred	Wedgwood, Rt. Hon. Josiah
Mansfield, W.	Samuel, Rt. Hon. Sir H. (Darwen)	Wellock, Wilfred
March, S.	Sanders, W. S.	Welsh, James C. (Coatbridge)
Marcus, M.	Sandham, E.	West, F. R.
Markham, S. F.	Sawyer, G. F.	Westwood, Joseph
Marley, J.	Scott, James	Whiteley, Wilfrid (Birm., Ladywood)
Marshall, Fred	Scrymgeour, E.	Whiteley, William (Blaydon)
Mathers, George	Scurr, John	Wilkinson, Ellen C.
Matters, L. W.	Sexton, Sir James	Williams, David (Swansea, East)
Montague, Frederick	Shaw, Rt. Hon. Thomas (Preston)	Williams, T. (York, Don Valley)
Morley, Ralph	Sherwood, G. H.	Wilson, J. (Oldham)
Morris, Rhys Hopkins	Shield, George William	Wilson, R. J. (Jarrow)
Morris-Jones, Dr. J. H. (Denbigh)	Shiels, Dr. Drummond	Winterton, G. E. (Leicester, Loughb'gh)
Morrison, Rt. Hon. H. (Hackney, S.)	Shillaker, J. F.	Wood, Major McKenzie (Banff)
Morrison, Robert C. (Tottenham, N.)	Shinwell, E.	Young, R. S. (Islington, North)
Mort, D. L.	Short, Alfred (Wednesbury)
Muggeridge, H. T.	Simmons, C. J.	TELLERS FOR THE NOES.—
Murnin, Hugh	Simon, E. D. (Manch'ter, Withington)	Mr. T. Henderson and Mr.
Nathan, Major H. L.	Sinclair, Sir A. (Caithness)	Charleton.

Sir JOSEPH LAMB

I beg to move, in line 4, after the second word "oils," to insert the words: but including light oils used for agricultural purposes. The object of this Amendment is quite clear; it is to obtain remission for agriculture of the extra twopence which has been placed upon petrol. It is unnecessary for me to say anything in regard to the position of the industry and its absolute inability to bear any further tax. I should be ruled out of order if I were to make any further remarks on that, and it is unnecessary for me to do so, because it is agreed by all parties that agriculture is in a very disastrous condition and that we should do all we can to help the industry. The Chancellor of the Exchequer has not fully taken into consideration or appreciated the effect that this duty will have upon the industry. I cannot conceive why a party which is passing a Bill to encourage the mechanical cultivation of the land and the greater use of machines, many of which are run by petrol, should advocate an increase in the cost of the fuel with which to work those machines.

It is not only in the cultivation of the land that the extra cost will be incurred, but in the processing later on. To-day many farmers utilise stationary engines run by petrol to assist them in other processes than the actual cultivation of the land. They are used for the preparation of food for cattle. Owing to the low price of the cereals which they grow, it is to their advantage to use a great deal more of the cereals grown at home rather than to sell them. Owing to the fact that most of our country mills are disused, and most of the milling is done at the ports, the grinding of the corn for use in farming operations has to be done at home by small mills which are run by stationary engines on petrol fuel. That is another instance where this duty will come as an extra charge on the industry. It will fall on the dairying side of agriculture also. In order to secure greater cleanliness in the production of milk, many farmers have put in milking machines, which are worked by small petrol consuming engines. That is not a passing charge, but a daily charge, because the operation has to be done twice a day. Then, in order to send the milk to market in a satisfactory condition, it is necessary in hot weather that the milk should be cooled; on many farms they have to pump the water for cooling purposes, and in this case also they use petrol driven engines.

These are instances where petrol counts very largely in the cost of production in agriculture. I do not think that the Chancellor of the Exchequer has given as much thought as he might have done to it, or he would have realised that this duty will throw an extra cost on an industry which should not have any further burden placed upon it. One of the arguments that will be made against this concession is the difficulty in discriminating between the petrol which is used for production and the petrol which might be used by the farmer for running his motor car. That could be got over by having some method of colouring the petrol, but it is not such a big item as might be imagined, because the bulk of the road transport work done by the farmer is not done for pleasure but in connection with the carrying on of his farming operations. A great deal of the farmer's produce is delivered by motor into the towns or to the station, and the roads are now in such a condition—I do not refer to the surface, but to the greater use of the roads by motor trans port—that it is almost impossible to deliver stock by road unless it is conveyed by motor. Large quantities of stock are delivered direct from the farms to the auctions or to the butchers in motor transport.

In this industry the use of petrol is not confined to the cultivation of the land; it is a recurring charge, because it enters not only into the cultivation of the crop, but into various other operations, such as processing or delivery connected with agriculture. We have been told that the duty on petrol was justified because of certain benefits which the taxpayer was receiving in the condition of the roads. As a matter of fact, the condition of the roads which has brought about all the extra traffic is the cause of one of the difficulties of agriculture in the moving of stock on roads. I am not trying to justify the Amendment on the assumption that those engaged in the industry are large or small in number, because a tax is either just or unjust, no matter what the size of the industry on which it is imposed. In this case, however, it should be remembered that the agricultural industry employs the second largest number of individuals in the country, so that this is a duty which falls upon a very large number of people indirectly.

I am not much encouraged by what occurred on the last Amendment, but I believe that if the Chancellor of the Exchequer will give this matter full consideration he will see that there is no justification at the present time, considering the hard-pressed condition of the industry, for imposing this extra tax. I hope that he will see his way to make this concession, which can be done very easily and without much loss, for I believe that there are other ways in which the Chancellor can raise the money with advantage to the community and to the industry for which I am speaking. In this case the Government are allowing to come free into this country produce which competes with the produce of the agricultural industry, and are imposing a further charge upon the industry.

Mr. GEORGE LAMBERT

I beg to second the Amendment.

I appeal to the Government to realise that this extra duty of 2d. a gallon will be a real burden, especially upon arable farmers. I was not a Member of the last Parliament, and therefore had no share in the responsibility for the imposition of the Petrol Duty, but I always regarded it as a bad duty, and now we are to impose this additional burden on a class of the community who are suffering very severely. No one can say that arable farmers are in a prosperous condition; their state, indeed, is pitiable, many of them being almost near to bankruptcy. Do the wheat growers of this country really deserve this treatment. They are fulfilling a very useful function, growing wheat for bread, which is the universal food of mankind; and it cannot be said that those wheat growers who use motor transport are the least efficient in the industry. In fact they are the most efficient, and grow the best crops. I have extracted from the public Press one or two instances to illustrate the burden which was placed upon the industry by the Petrol Duty at its old figure. In a letter to the "Times" newspaper of 4th April, Mr. Dudley, of Andover, said: It might interest your agricultural readers to know that two tractors recently cross-ploughed 34 acres of undulating land here five inches to six inches deep in eight hours at a cost of 1s. 5d. an acre….The general public would probably be astonished to learn that this figure of 1s. 5d. includes a tax on arable land of no less than 18 per cent. levied on the fuel used in the operation. That was before the extra duty was imposed. That was a charge of 3d. an acre; now it will be 4½d. an acre. Why do the Government impose this extra duty upon this very deserving class, the arable farmers? Another letter, from Mr. J. G. Maynard, of Ticehurst, Sussex, published in the "Times" yesterday, states: My tractor is in use at least 200 days a year, using an average of 15 gallons of petrol per day. I shall now, therefore, have to pay 7s. 6d. a working day, or £75 a year, in taxation on one item of petrol for this one machine.

Mr. J. JONES

But how much does he save on men?

Mr. LAMBERT

That is rather an irrelevant interruption, because unless farmers use up-to-date machinery they will be left in the lurch. The Government have issued tables of the price of wheat. Six years ago it was making 52s. a quarter, now the price is about 25s.; yet the Government are imposing this burden upon farmers who are endeavouring to produce wheat at the lowest possible cost. The President of the Board of Trade, who is an economist, would be aghast if anyone proposed a duty on foreign wheat coming into this country. He would hold up his hands in holy horror. But he does not mind taxing the motive power of the machines that help to produce wheat in this country. Is that right? The farmers have to accept lower prices for their commodities, but the Government are preventing them, by this taxation, from utilising the lower prices of other commodities in the production of their own. The whole thing is quite wrong.

Speaking from my experience in Devonshire, I say that to-day horses are practically denied the use of the roads. The surface is often very slippery, and I have seen horses sweating from fright at having to step out on such roads. To-day, therefore, all the manures the farmer uses are delivered by motor power, and the produce is taken from the farm to market by motor power. Further, nearly every farmer to-day has a stationary engine. Why should we tax the petrol used to drive that stationary engine? We do not tax the coal which is put into the threshing engine, but we tax the petrol used in the stationary engine. Farmers have a grievance in this matter. Many small farmers work from 12 to 14 hours a day: they have to pay this duty to meet the burden of unemployment insurance. Farmers are working 12 to 14 hours a day to pay taxes in order to maintain people who are doing nothing at all. That is not fair play to the agriculturist.

Then the Government say, "Let us have large-scale farming." Large-scale farming means mechanical farming, which must be carried out by tractors and other machines driven by petrol. The Minister of Agriculture is between the devil and the deep sea. The members of another place are slashing at his Land (Utilisation) Bill, and here is the Chancellor of the Exchequer taxing the motive power of the agricultural industry. I rather pity the Minister of Agriculture. I do not want to resurrect old speeches, though I have them here, and could show that the President of the Board of Trade voted for a reduction of the Petrol Duty in 1928. The Chancellor of the Exchequer himself moved a reduction of the duty from 4d. to a 1d., and my right hon. Friend voted in favour of it and so did the Financial Secretary to the Treasury. I looked up the Division List just now. [Interruption.] It was on 25th June, 1928. The Chancellor of the Exchequer, the President of the Board of Trade and the Financial Secretary to the Treasury each voted against a duty of 4d. on petrol and proposed to reduce it to 1d. In this matter I prefer to appeal to "Philip sober." "Philip sober" was a very sensible person, but now that he has imbibed a little of the wine of the right hon. Member for Epping (Mr. Churchill) he has become somewhat financially inebriated. I hope the right hon. Gentleman will give consideration to this genuine plea made on behalf of a set of men who are trying under very adverse circumstances to carry on the cultivation of the land.

Sir HARRY HOPE

I desire to support this Amendment. Agriculture is passing through most abnormal times, and the sufferings of the industry are more severe than ever before in its history. However, I do not base my arguments upon the condition of the industry, but upon the fact that petrol is one of the main raw materials of agriculture at the present time. Things have progressed very much in the last few years. Petrol is being increasingly used in the cultivation of the land, and will continue to be increasingly used. Further, we know that almost the entire produce of arable farms is now marketed by means of motor haulage, and the advance which has taken place in recent years in that respect will continue in the future. Why, then, should the Government propose this extra duty of 2d. a gallon on this essential raw material of agriculture? I know that the President of the Board of Trade, who is in charge of this Debate, is dead against the taxation of raw materials, and it must be against his settled principles to find us taxing a raw material of an industry which is doing so much good work in providing food for the people.

Therefore, I appeal to the right hon. Gentleman to take this matter into favourable consideration, and, in consultation with experts, try to find out means whereby the farmers' petrol can be separated and given the concession of a rebate of 2d. I am told that it is quite possible to make a differentiation by the use of a little colouring matter, and I am convinced that in consultation with experts that point could easily be cleared up. I hope that the right hon. Gentleman, in spite of his fixed determination not to tax raw material, will recognise the necessity for relieving the burdens upon agriculture at the present time, when the industry is struggling, and when it is necessary to adopt every possible means of encouraging experiments. In these circumstances, agriculture should not be discouraged in the good work it is undertaking, and I hope that some concession will be made.

Mr. BUTLER

Unfortunately, we are faced, as we have so often attempted to show, with an emergency which has never before been equalled in the history of corn growing. At this time the Government propose to add an extra burden of 2d. a gallon on the petrol which is used as a raw material by the agricultural industry. In the Budget which the Conservative party introduced in 1928 a tax on petrol was proposed, but the Government felt that the agriculturists made out a very strong case for the remission of that tax. At that time it was argued that as agriculturists knew that they would have their land de-rated, they knew that they were going to get something out of the tax, although they were having a great deal taken from them. At that time many agriculturists felt that the tax on petrol took more from them than they would have returned to them.

What do they find this year? Looking at the Budget as a whole, and comparing it with the Budget of 1928, it will be seen that the case of agriculture has been disregarded. I will give a specific in stance—that of the Land Tax. We are told that the farmer is not to be taxed on the value of his land as agricultural land, and that one specific case in which he will have relief is that of the Petrol Duty. But supposing there is at the corner of two roads a perfect site on his land for a petrol pump. He would have to pay a tax on the extra value of that land, and he would have to pay the difference between the value of that land for agricultural purposes, and its value when used as a petrol pump station. Not only would the farmer in this instance have to pay an extra twopence on a raw material of his industry, namely, petrol, but he would also have to pay a tax on the extra value of the site used as a petrol station. That is an extremely unfortunate situation for any man, and if he has not any sense of humour, I am convinced that he would not put up with such treatment.

Not only is the farmer to be taxed on possible sites for petrol pumps and other purposes to which land may be put, but if he has any income, which is very doubtful in present circumstances, he will have to advance the payment of his Income Tax at a very critical time of the year. If the farmer has any money to pay the Income Tax, which is very doubtful, he will be faced with an additional burden by the proposals of the present Government. The advantages which the farmer was to get under the 1928 Budget through de-rating as compensation for the extra Petrol Duty does not occur in this case. This is very much like the case of the Scotsman who gave his girl a lipstick in order that he might get some of it back again. The farmer is made to pay now, and he has no hope of getting anything back. The fact is that we are now facing one of the most serious emergencies in the history of English corn growing in East Anglia, and there has only been one time when the price of corn was lower.

At a time like this we are asked to place additional burdens on the agricultural industry, and we are told that we ought not to grumble. We are not at all satisfied with the way in which the money which it is proposed to raise by the Budget is to be spent. We are not satisfied with the way in which it is proposed to face the national insurance deficiencies, and as we did not get insurance for the workers on the country side, it is totally wrong that we should be called upon to meet deficiencies in which we have no interest. For these reasons, I intend to support the Amendment.

Colonel RUGGLES-BRISE

The Chancellor of the Exchequer has already told us that he has avoided increasing the Income Tax because the industries of the country generally were in such a bad way that they are not able at this juncture to bear any additional burdens. The right hon. Gentleman has selected one industry out of all the industries for special taxation in this Budget. If we closely examine the Budget proposals, we find that the one industry which he has selected for special treatment is agriculture. I think I shall be well within the mark when I say that of all our industries agriculture is by far in the worst condition, and yet we find that farmers are called upon to make an advanced payment of the Income Tax under Schedule D. An instalment of one-half has to be paid in advance. As the hon. Member for Saffron Walden (Mr. Butler) has already told us, agricultural land has been singled out for special treatment in regard to the taxation of land values. It is no good hon. Members opposite saying that agricultural land is not taxed by the proposals of the Chancellor of the Exchequer, because that is not true. It may be true that land is not taxed in so far as its agricultural value is concerned, but land which is used for agricultural purposes is to be taxed on the difference between its agricultural value and its value when used for other purposes. That is the second imposition which the Chancellor of the Exchequer places upon agriculture.

I come to the immediate question which is the subject of this Amendment. This Amendment deals with a definite increase of taxation on the means of production. Hon. Members opposite are always claiming that everything should be done to keep the cost of production as low as possible in the interests of the great mass of the people. One would have thought that in order to give effect to the policy of keeping prices low, hon. Members opposite would have realised that it was necessary that the industry should not be burdened by a tax of this kind. Here we find that the Government are doing exactly the reverse. They are putting new taxation on what has become an article of necessary consumption upon almost every farm throughout the land. If that is so, are we not reasonable in moving this Amendment asking that agriculture, which already suffers greatly under this Budget, should be allowed the exemption which is proposed in this Amendment?

Reference has been made to the Land (Utilisation) Bill under which the Minister of Agriculture is trying to arrogate to himself power to operate farming on a large scale by mechanisation, and now the Chancellor of the Exchequer tells the right hon. Gentleman that if he does that he intends to increase the cost of the means of production. I trust that the President of the Board of Trade will see the force of the arguments used in support of this Amendment, and accept it with good grace.

Sir DENNIS HERBERT

The President of the Board of Trade has given no indication that he is likely to yield to the appeals which have been made to him in regard to this Amendment. I have been wondering how the right hon. Gentleman can justify his refusal to accept this Amendment. I feel certain that, in his heart of hearts, he will have agreed with the case which has been made out by the right hon. Gentleman the Member for South Molton (Mr. Lambert) speaking for the agricultural interests. I cannot help thinking that the President of the Board of Trade is going to find refuge in the difficulty there would be in granting an exception in the case of petrol specially used for agricultural purposes. As I feel sure that that difficulty could be overcome, I hope the right hon. Gentleman will ask the Chancellor of the Exchequer to accept this Amendment. The amount of money involved cannot be very large, and it is really about the most inconsistent thing any Government could do to add this extra burden not merely upon the agricultural industry as a whole, but upon that particular kind of agriculture which the Government are so anxious to encourage, that is, the agriculture carried on with the help of mechanisation. A Government which considers that there is no serious difficulty involved in ascertaining the site value of 10,000,000 or 11,000,000 units of land ought to be able to distinguish between the petrol which is used for agricultural purposes, and that which is used for other purposes. I would remind the President of the Board of Trade of the source of petrol. It is the gift of the Creator to all His children, and it is not reserved by Him for Dukes nor for Chancellors of the Exchequer.

Lieut.-Colonel ACLAND-TROYTE

We have beard a good deal from hon. Members opposite about the necessity of making farming pay, but the Chancellor of the Exchequer has now decided to make the farmers pay. I think in times like the present, the Government ought to let the farmer off, and not impose burdens upon him. The President of the Board of Trade has endeavoured to establish a Tariff Truce, and he is opposed to all kinds of Protection. Surely the Petrol Duty is Protection, because it is put upon imported petrol and not upon petrol made in this country. It is Protection of the very worst sort, because it is a tax upon the raw material of farming. There is no doubt that the petrol used by farmers is a raw material. It is almost essential for the farmer in these days to have a petrol engine of some sort, either a stationary engine or a tractor, and the stationary engine is used, not only by the large, but by the small farmer. It is not only a question of relieving the large landowner; it is a question of relieving the small working farmer, who, as my right hon. Friend pointed out, works 14 hours a day, and his wife likewise. It would seem that in this Budget the Government want to put as much tax and trouble on the land as they possibly can. They may say that there would be difficulties in making this concession, and one recognises that there are, but those difficulties can be overcome if the President of the Board of Trade really puts his mind to doing so, as I hope he will.

Lieut.-Colonel HENEAGE

I come from a part of England where corn is grown and tractors are used to a considerable extent, because the fields are larger than in many other parts, and where, therefore, this tax will be very heavy. The right hon. Gentleman seems to imagine that paraffin is used in tractors, and, of course, that is so to a certain extent, but I hope he realises that, even where paraffin is used, petrol is certainly used for starting, and there is a tremendous number of cases where it is much more advantageous to use petrol entirely. Not only will the large-scale farmer be hit by this tax, but also the smallholder. This is a tax on new inventions. There are coming into the market for the benefit of smallholders a certain number of small machines which are useful for hoeing, and so on, and require only a very small horse-power, and I believe they are entirely petrol-driven. It seems to be rather hard that the Minister should put a damper on any of these new inventions. It cannot be said that we in this country are very ready to adapt ourselves to new inventions, but certainly it is a pity that this moment is chosen to put a stopper on the use of these things.

It has always been recognised that agriculture needs special help as regards vehicles. When the original horse-power tax was put on, it was recognised as unfair to put it on agricultural vehicles. Is the Minister seeking to take away with one hand what has been given with the other? The difference between 5s. and, perhaps, £l8, AS between agriculture and other industries, is an indication of the recognition by Parliament of the necessity for helping agriculture. Cannot that necessity be recognised now in a smaller way by making this tax very much cheaper to agriculture than to the private rich man? The private owner who uses his CAT for joy rides will get his petrol at the same price as the farmer or smallholder who requires it for the working of his farm.

An agitation has been going on in the party opposite for "Hands off Taxes on Food." We know the opinion of the Chancellor of the Exchequer on the question of direct and indirect taxation, and we know how he is always inveighing against indirect taxation, but this is indirect taxation of food. While the leading organ of the party opposite brings out very nice headlines about the taxation of food, it is the party opposite who are leading the way in that direction. This extra 2d. on petrol goes on to the bread of their people. The Minister cannot get away from that, and I hope it will be thoroughly well rubbed in at the next election. I join with those on these benches who are pressing for this concession. I do not believe it will be a very costly one, but certainly it will give encouragement to agriculture. I should like to hear how much it is estimated to cost. No doubt it would be progressive, because, as petrol became cheaper as compared with petroleum or paraffin, it would, on account of its being easier to use, be more often used in machines in which it is not used at present; but I would ask the Minister to be bold. He is spending large sums of money, and this is a very useful way of helping agriculture, so that I hope he will adopt our suggestion.

Mr. SMITHERS

I should like to emphasise the arguments which have been brought forward in support of this Amendment. Speakers in the Debate so far have rather addressed themselves to farming in general, but I want to direct the attention of the House to the claims of market gardeners and quasi market gardeners, whose farms are not conducted on a four-year rotation, but are used more for the production of fruit and vegetables for the large cities. This kind of farming is a great industry in my con- stituency, and, indeed, in all constituencies around London and most big towns. Any night you may see on the new roads which have recently been built literally a chain of lorries going out from these surrounding districts to Covent Garden market, and the petrol bill of that type of farmer is a very serious item in his annual expenditure.

I should like also to reinforce the point that has been made as to the growing difficulty of employing horses to take this stuff to market. I remember as a boy seeing the chains of vans going up every night to London drawn by horses, and carrying the same kind of produce that is carried by motor lorries to-day, but, under the existing conditions on the roads, the employment of horses is no longer possible, and farmers are compelled to use motor traction to take their goods to market. Again, quite a small industry has grown up in country districts, of which I can speak from experience, where one farmer will buy a lorry, I do not say on any written understanding, but on the general understanding that the farmers or smallholders around will use that lorry to take calves and cows to the nearest market. In this and many other ways the lorry is becoming more and more essential to the farmer.

Only a few months ago I was at a special meeting of representatives of the National Farmers' Union and the Small Growers' Association, who complained most bitterly of the dumping of seasonal produce and of fruit pulp from Russia. If the Government, with their avowed policy of Free Trade to the uttermost, are going to allow all this stuff to come in, and refuse any protection against it or any licensing of it, the least they can do is to look for other means to enable our farmers and their workpeople better to compete with this flood of imported fruit and vegetables, grown under conditions which would never be tolerated in this country. The farming industry as a whole is in a condition which reminds me of a simile used by the Leader of our party the other day. He said that a camel, when it is too heavily loaded, refuses to get up, and I believe that this extra 2d. on the farmer's petrol may easily be the last straw which will break the camel's back. The farmers' outlook is so hopeless at the moment that they will quite easily exaggerate this extra 2d. on petrol. It will make them feel more hopeless than ever, and they will ask, what is the good of trying? I beg the President of the Board of Trade, even if he is going to refuse this concession, not to refuse it to-day, but to take time to talk the matter over with the Chancellor of the Exchequer, and see, in consultation' with his advisers, how much it will cost, and if he cannot give us some consideration in the later stages of the Finance Bill.

Mr. W. GRAHAM

I should be the last to complain of the Spirit in which the hon. Member for Stone (Sir J. Lamb) and the right hon. Gentleman the Member for South Molton (Mr. Lambert) have proposed this Amendment, or of the manner in which it has been supported by hon. Members on the other side; but our first duty, of course, in all these Debates, is to ascertain what exactly is involved in the proposal. As this Amendment is drawn, it is wide enough to cover tractors, stationary engines, lorries, and other vehicles used for the conveyance of farm produce, and even motor cars which are used by farmers. There is nothing in the Amendment to suggest any restriction to any particular class in the operations which are covered by the list that I have just summarised. Passing to the question of the cost of any concession of this kind, I understand that, if it were confined to tractors and stationary engines, the loss of revenue would be not less than £70,000, while if it were extended to the other classes of Vehicles, the loss would probably run from £150,000 to £200,000. It is, how-every plainly impossible to give a precise estimate, because the Amendment is drawn in very wide and general terms, and I am proceeding on the assumption that hon. Members opposite, as their speeches seem to indicate, do not wish to restrict it in any way.

7.0 p.m.

I have already said that it is not an agreeable duty to stand here and refuse Amendment after Amendment moved on grounds which are urgent and even convincing in existing conditions. I am the last to dispute, and the Government do not wish to dispute, the serious condition which has overtaken British agriculture. It would be out of order to stray into a wide Debate on that subject, but, as hon. Members have made much of cereal cultivation, I may say that we have seen with some degree of disappointment the recent international discussions on wheat prices, and we are familiar, of course, with the general position of British agriculture since the heavy fall in commodity prices which began in the autumn of 1929. All that is perfectly true, and I would only say in passing that it is, of course, applicable to the great range of agricultural countries. We are not peculiar in that respect, although our position is undeniably serious. But when it comes to a question of taxation, and hon. Members seek a special concession for agriculture, it is fair for any Government to point out what has been done for agriculture in the past. Agricultural land is now completely de-rated and, with the exception of dwelling houses, the scope of the agricultural rates grant has been carried to its conclusion. Reference has been made to the tax which farmers have to pay on the income they enjoy, but in that matter they have for a long period had the benefit of a kind of conventional assessment based on the annual valuation, with the right to revert to a profit basis if they prefer. The State has paid very large sums of money in direct and indirect subsidy to important articles of agriculture at the present time. It is fair to remember these considerations when hon. Members propose an Amendment which is closely related to our taxation.

Turning briefly to the more immediate application of this tax, I must remind the Committee again of the cost which it will involve. It is true that, as regard's the structure of these oil duties, two small concessions have been made, and I am a little surprised they have not been pleaded this afternoon, although on both there was a complete reply. The right hon. Member for Epping (Mr. Churchill) made one concession as regards fishing vessels, and last year the Chancellor of the Exchequer made a concession as regards the lifeboats of the Royal National Lifeboat Institution, but, on both occasions and in particular by the right hon. Member for Epping, very strong emphasis was laid on the plea that that concession to fishing boats was not to be made the basis for a further inroad on the general arrangements of this duty.

When we come to the manner in which it would operate in practice, I am bound to say that the administrative and other difficulties are a very great obstacle, even if we can afford the sacrifice of revenue involved. Take, for example, the case of the stationary engines which hon. Members opposite have brought forward in support of this Amendment. Large numbers of these stationary engines are used in other industries which are also depressed, although the depression may not have reached the point which is true of agriculture. It would be quite impossible to resist a plea for similar exemption for those stationary engines. Although it is a well-known argument familiar to every Member in Budget Debates, I am obliged to fall back upon the importance of keeping this tax on a uniform basis as long as the tax is to be preserved at all. I do not differ from what hon. Members have said, and in particular from the plea of my right hon. Friend the Member for South Molton as to the undesirability of a tax of this kind. I can only say what has been said in reply to the previous Amendment, that the Chancellor of the Exchequer, the Financial Secretary and the other Members of the Government would be very glad indeed if this tax could disappear, but that is not practical politics in existing conditions. As long as the tax remains, we must try to keep it on an administrative and other basis which is capable of defence. For those reasons, very largely of administrative difficulty, and not differing from hon. Members in the main plea they have advanced, I am afraid I must, with very great regret, ask the House to resist this Amendment.

Major ELLIOT

We have listened with our usual pleasure and our usual disappointment to the remarks of the right hon. Gentleman the President of the Board of Trade. He is "the mildest-mannered man who ever scuttled ship or cut a throat," and, as he says himself, there are no extremes to which he would not go in the cause of moderation. He says that the Government agree with many of the things we have brought forward, that they believe this duty is heavy on agriculture and wish it to be got rid of, and that the cost is very small indeed. Every Member of the House would be surprised to learn that the estimated cost given by the President of the Board of Trade of giving this exemption in respect of tractors is £75,000, while, if it were extended to the other forms of engines used in agriculture, it would not come to more than £150,000 or £200,000.

Mr. W. GRAHAM

In order that there can be no difference of opinion between us as to the cost, may I say that we estimated it generally, if applied to tractors and stationary engines at £75,000, but, if the whole list were included, double that amount, reaching, perhaps, £200,000.

Major ELLIOT

Those are the figures I have just given. The smallness of the amount necessary to deal with tractors and stationary engines must have come to the Committee as a relief. It is not an unreasonable concession from the financial point of view which we are pressing upon the Treasury Bench. The Treasury are so rich, so generous and so wealthy that it is remitting a duty of peculiar interest to the agricultural community, the duty on gloves amounting to £150,000, and also other large sums in respect of duties on lace and embroidery. The right hon. Gentleman regards the duty paid by the farmer's wife when buying a new pair of gloves as so heavy that it must come off, although he adds to the cost to the farmer of the tractor that ploughs the fields. The lace curtains she puts in the window must be relieved of all duties, even at the cost of 2d a gallon for the petrol for the pump that brings the water to wash those curtains. The handling of the British tariff by the present Government is one of the most involved and muddle-headed things the House of Commons has ever seen.

The right hon. Gentleman mentioned the administrative difficulty of allowing any hole in the fence through which the lambs might get out, and there would be nothing left in the field for the butcher to kill. That argument is exploded by the fact that the late Chancellor of the Exchequer, when proposing these duties, actually proposed to exempt all tractors. He said: The tax on light oils used in agricultural tractors, of which there are 23,000, for the purpose of tillage, and only for the purpose of tillage, in all its stages, will be remitted, The advisers of one Chancellor are the advisers of another. The administrative difficulties necessary to deal with this proposal had been envisaged, examined, grappled with and overcome by the permanent officials on whom any Chancellor of the Exchequer relies in dealing with these matters. Even the number of tractors had been enumerated. In fact, the late Chancellor of the Exchequer was able confidently to grapple with the administrative difficulties involved.

It might be said, before the present Budget, that the ingenuity of the late Chancellor of the Exchequer was so great and his financial recklessness so great that he might be able to make proposals upon which no Labour Chancellor of the Exchequer would ever embark. That argument has been exploded by the agility with which the present Chancellor of the Exchequer has embarked on the proposals he has brought before the House. I well remember his reply to the right hon. Member for Bewdley (Mr. S. Baldwin) when he said: He jumps about and turns about, and does just so, And every time he jumps about, jump Jim Crow, which seemed to bring delight to the Chancellor of the Exchequer. We on this side cannot imagine the right hon. Member for Bewdley jumping in any fashion or being Jim Crow at any time, whereas the present Chancellor of the Exchequer has shown great agility.

This tax is a tax which will bear hardly on agriculture, particularly the increase in the tax, not merely on the tractors used for arable farming, but on the light engines used for a thousand and one purposes in agriculture. The Chancellor of the Exchequer in the last Government was able to make a special remission to deal with this particular case of tractors for tillage, that being the branch of agriculture which is most heavily hit just now. In 1928 the tractors had been enumerated; let us have the benefit of those considerations now. In view of the repeated pledges of the Government to make farming pay, let them give agriculture the benefit of this small concession. The cost is only £75,000 and the administrative difficulties can be overcome so that there is nothing more for the right hon. Gentleman to do than to jump up and make a name for himself by making this concession. It is a concession which will be covered two or three times over by the remissions of revenue which the Chancellor is asking the House to make in other directions at the present time.

Sir BASIL PETO

I wish to draw the attention of the House to some of the implications of the reasons which the right hon. Gentleman gave us for refusing this concession to agriculture. He said it would cost £75,000 for tractors, but, if extended to the motor lorries and motor cars very often used for the transport of agricultural produce, it might run up to £200,000. So far as that portion of this tax is concerned, it is a direct tax on the most depressed industry in the country. He gave us another reason. He said that, if he gave a concession to these small fixed engines used in agriculture, there were similar engines used in far greater numbers in other industries equally or similarly depressed. It is urged in justification of this tax and of the refusal to give any remission to meet our demand, that the tax is expected to yield £7,500,000 this year and £8,000,000 in a full year. A very large proportion of this is a direct tax upon industry. The only reason that the President of the Board of Trade could give was not that we had not made out a full case, for he could not answer one of the arguments of my right hon. Friend the Member for South Molton (Mr. Lambert) who recapitulated one after another instances from his own experience of agriculture of how this tax would press heavily upon the farmer; that was not his reason at all. His reason was that this was a tax upon all the industries of the country, and he could not exempt one industry from the burden of that tax. That is a very serious admission.

I do not think the farming community will be in the least consoled by the tears shed by the President of the Board of Trade. I do not say they were crocodile tears. I believe that his heart is genuinely wrung by the condition of agriculture, and that his sympathy is sincere. His sympathy is not practical, because he is not willing to face the small administrative difficulties which, as my hon. and gallant Friend the Member for Kelvingrove (Major Elliot) pointed out, have already been faced in respect of the petrol used in tractors. He is not prepared to admit that the concession with respect to the fishing industry, which is under the protection of the Minister of Agriculture, in this matter of the petrol used by fishing boats, ought now to be extended to agriculture.

I will press only one reason why the matter is very much more urgent than it was in 1928, when this duty was imposed. The condition of agriculture is much worse, and the condition of the roads is much more impossible for farmers. A greatly increased number of farmers have been forced to give up horse transport and, at great cost to themselves, to go in for lorries, not only to take their produce to the market, but in many cases to get their manures to the fields. The whole process of agriculture is being forced by the condition of the roads into a mechanical channel. Therefore, the quantity of petrol that is necessarily used is far greater than it was in 1928, and the cost to the farmer is much greater. At the same time, the resources with which he has to meet this tax are less. The principle upon which the Government are going in order to "make farming pay," as one hon. Member opposite put it, is this, that the worse the condition of the industry, the

more our national policy with regard to the roads makes the roads useless as a means of access to the different parts of the farm, and the more depressed the industry becomes the greater the burden the Government propose to place upon it. I do not see how there can be any justification for that line of policy.

The President of the Board of Trade did not answer the case which was raised. He gave only two reasons: That while this is a tax upon industry as a whole, he could not make an exception in favour of one industry, and, secondly, the administrative difficulties, which have already been overcome, and which. I am convinced, could be entirely overcome, even if it involved a little loss. We shall support the Amendment, with full confidence that it will give satisfaction not only in the agricultural constituencies but, what is much more important, throughout the whole country, as being an act only of bare justice to an industry which is very hard hit.

Question put, "That those words be there inserted in the Resolution."

The House divided: Ayes, 158: Noes, 246.

Division No. 229.]	AYES.	[7.20 p.m.
Acland-Troyt, Lieut.-Colonel	Crichton-Stuart, Lord C.	Hudson, Capt. A. U. M. (Hackney, N.)
Albery, Irving James	Croom-Johnson, R. P.	Hurd, Percy A.
Allen, Sir J. Sandeman (Liverp'l., W.)	Culverwell, C. T. (Bristol, West)	Hurst, Sir Gerald B.
Atholl, Duchess of	Cunliffe-Lister, Rt. Hon. Sir Philip	Inskip, Sir Thomas
Atkinson, C.	Dalkeith, Earl of	Iveagh, Countess of
Baldwin, Rt. Hon. Stanley (Bewdley)	Dairymple-White, Lt.-Col. Sir Godfrey	Jones, Sir G. W. H. (Stoke New'gton)
Balfour, George (Hampstead)	Davidson, Rt. Hon. J. (Hertford)	Jones, Henry Haydn (Merioneth)
Balfour, Captain H. H. (I. of Thanet)	Davies, Maj. Geo. F. (Somerset, Yeovil)	Kindersley, Major G. M.
Beamish, Rear-Admiral T. P. H.	Davison, Sir W. H. (Kensington, S.)	Knox, Sir Alfred
Beaumont, M. W.	Duckworth, G. A. V.	Lambert, Rt. Hon. George (S. Molton)
Betterton, Sir Henry B.	Edmondson, Major A. J.	Law, Sir Alfred (Derby, High Peak)
Bevan, S. J. (Holborn)	Elliot, Major Walter E.	Leighton, Major B. E. P.
Birchall, Major Sir John Dearman	Erskine, Lord (Somerset, Weston-s-M.)	Lewis, Oswald (Colchester)
Bird, Ernest Roy	Evans, Capt. Ernest (Welsh Univer.)	Llewellin, Major J. J.
Blindell, James	Everard, W. Lindsay	Locker-Lampson, Com. O. (Handsw'th)
Boothby, R. J. G.	Falle, Sir Bertram G.	McConnell, Sir Joseph
Bourne, Captain Robert Croft	Ferguson, Sir John	Maitland, A. (Kent, Faversham)
Bowater, Col. Sir T. Vansittart	Fielden, E. B.	Makins, Brigadier-General E.
Bowyer, Captain Sir George E. W.	Foot, Isaac	Mason, Colonel Glyn K.
Boyce, Leslie	Forestler-Walker, Sir L.	Meller, R. J.
Braeken, B.	Fremantle, Lieut.-Colonel Francis E.	Merriman, Sir F. Boyd
Brass, Captain Sir William	Ganzoni, Sir John	Milne, Wardlaw-, J. S.
Briscoe, Richard George	Graham, Fergus (Cumberland, N.)	Morris, Rhys Hopkins
Broadbent, Colonel J.	Gratton-Doyle, Sir N.	Morrison, W. S. (Glos., Cirencester)
Brown, Col. D. C. (N'th'l'd., Hexham)	Grenfell, Edward C. (City of London)	Muirhead, A. J.
Brown, Brig.-Gen. H. C. (Berks, Newb'y)	Gretton, Colonel Rt. Hon. John	Newton, Sir D. G. C. (Cambridge)
Buchan-Hepburn, P. G. T.	Guinness, Rt. Hon. Walter E.	Nicholson, O. (Westminster)
Burton, Colonel H. W.	Hacking, Rt. Hon. Douglas H.	Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)
Cadogan, Major Hon. Edward	Hanbury, C.	O'Neill, Sir H.
Campbell, E. T.	Hannon, Patrick Joseph Henry	Peake, Capt Osbert
Castle Stewart, Earl of	Hartington, Marquess of	Penny, Sir George
Chamberlain, Rt. Hn. Sir J. A. (Birm, W.)	Harvey, Major S. E. (Devon, Totnes)	Percy, Lord Eustace (Hastings)
Chamberlain, Rt. Hon. N. (Edgbattan)	Heneage, Lieut.-Colonel Arthur P.	Peters, Dr. Sidney John
Christle, J. A.	Hennessy, Major Sir G. R. J.	Peto, Sir Basil E. (Devon, Barnstaple)
Cobb, Sir Cyril	Herbert, Sir Dennis (Hertford)	Pybus, Percy John
Colfox, Major William Philip	Hills, Major Rt. Hon. John Waller	Ramsbotham, H.
Colman, N. C. D.	Hope, Sir Harry (Forfar)	Remer, John R.
Courtauld, Major J. S.	Hore-Belisha, Leslie	Reynolds, Col. Sir James
Cowan, D. M.	Howard-Bury, Colonel C. K.	Roberts, Sir Samuel (Ecclesall)
Rodd, Rt. Hon. Sir James Rennell	Stanley, Lord (Fylde)	Warrender, Sir Victor
Ross, Ronald D.	Stanley, Hon. O. (Westmerland)	Waterhouee, Captain Charles
Ruggles-Brise, Colonel E.	Steel-Maitland, Rt. Hon. Sir Arthur	Wayland, Sir William A.
Russell, Alexander West (Tynemouth)	Stuart, Hon. J. (Moray and Nairn)	Wells, Sydney R.
Samuel, A. M. (Surrey, Farnham)	Sueter, Rear-Admiral M. F.	Williams, Charles (Devon, Torquay)
Sandeman, Sir N. Stewart	Taylor, Vice-Admiral E. A.	Wilson, G. H. A. (Cambridge U.)
Shepperson, Sir Ernest Whitt[...]e	Thomas, Major L. B. (King's Norton)	Windsor-Clive, Lieut.-Colonel George
Skelton, A. N.	Thomson, Mitchell-, Rt. Hon. Sir W.	Wolmer, Rt. Hon. Viscount
Smith, Louis W. (Sheffield, Hallam)	Thomson, Sir F	Womersley, W. J.
Smith, R. W.(Aberd'n & Kinc'dine, C.)	Titchfield, Major the Marquess of	Wood, Rt. Hon. Sir Kingsley
Smith-Carington, Neville W.	Todd, Capt. A. J.	Young, Rt. Hon. Sir Hilton
Smithers, Waldron	Train, J.
Somerville, A. A. (Windsor)	Tryon, Rt. Hon. George Clement	TELLERS FOR THE AYES.—
Somerville, D. G. (Willesden, East)	Wallace, Capt. D. E. (Hornsay)	Mr. Butler and Sir Joseph Lamb.
Southby, Commander A. R. J.	Ward, Lieut.-Col. Sir A. Lambert
NOES.
Adamson, Rt. Hon. W. (Fife, West.)	Gould, F.	McEntee, V. L.
Adamson, W. M. (Staff., Cannock)	Graham, D. M. (Lanark, Hamilton)	McKinlay, A.
Addison, Rt. Hon. Dr. Christopher	Graham, Rt. Hon. Wm. (Edin., Cent.)	Maclean, Nell (Glasgow, Govan)
Altchison, Rt. Hon. Craigle M.	Gray, Milner	McShane, John James
Alpass, J. H.	Greenwood, Rt. Hon. A. (Colne)	Malone, C. L'Estrange (N'thampton)
Angell, Sir Norman	Grenfell, D. R. (Glamorgan)	Mander, Geoffrey le M.
Arnott, John	Griffiths, T. (Monmouth, Pontypool)	Mansfield, W.
Aske, Sir Robert	Groves, Thomas E.	March, S.
Attlee, Clement Richard	Grundy, Thomas W.	Marcus, M.
Ayles, Walter	Hall, G. H. (Merthyr Tydvil)	Markham, S. F.
Baker, John (Wolverhampton, Bilston)	Hall, J. H. (Whitechapel)	Marley, J.
Baldwin, Oliver (Dudley)	Hamilton, Mary Agnes (Blackburn)	Marshall, Fred
Barr, James	Hamilton, Sir R. (Orkney & Zetland)	Mathers, George
Benn, Rt. Hon. Wedgwood	Harbord, A.	Matters, L. W.
Bennett, William (Battersea, South)	Hardie, George D.	Maxton, James
Benson, G.	Hastings, Dr. Somerville	Messer, Fred
Bevan, Aneurin (Ebbw Vale)	Haycock, A. W.	Middleton, G.
Birkett, W. Norman	Hayday, Arthur	Milner, Major J.
Bondfield, Rt. Hon. Margaret	Henderson, Right Hon. A. (Rurnley)	Montague, Frederick
Bowerman, Rt. Hon. Charles W.	Henderson, Arthur, Junr. (Cardiff, S.)	Morley, Ralph
Broad, Francis Alfred	Henderson, Thomas (Glasgow)	Morrison, Rt. Hon. H. (Hackney, S.)
Brockway, A. Fenner	Henderson, W. W. (Middx., Enfield)	Morrison, Robert C. (Tottenham, N.)
Bromfield, William	Herriotts, J.	Mort, D. L.
Brooke, W.	Hicks, Ernest George	Muff, G.
Brothers, M.	Hirst, G. H. (York W. R. Wentworth)	Muggeridge, H. T.
Brown, Rt. Hon. J. (South Ayrshire)	Hirst, W. (Bradford, South)	Murnin, Hugh
Buchanan, G.	Hoffman, P. C.	Nathan, Major H L.
Burgess, F. G.	Hopkin, Daniel	Noel Baker, P. J.
Buxton, C. R. (Yorks, W. R. Elland)	Horrabin, J. F.	Noel-Buxton, Baronets (Norfolk, N.)
Calne, Hall-, Derwent	Hudson, James H. (Huddersfield)	Oldfield, J. R.
Cameron, A. G.	Hunter, Dr. Joseph	Oliver, George Harold (Ilkeston)
Cape, Thomas	John, William (Rhondda, West)	Oliver, P. M. (Man., Blackley)
Carter, W. (St. Pancras, S. W.)	Johnston, Rt. Han. Thomas	Owen, Major G. (Carnarvon)
Charleton, H. C.	Jones, Llewellyn-, F.	Palin, John Henry
Chater, Daniel	Jones, J. J. (West Ham, Silvertown)	Paling, Wilfrid
Church, Major A. G.	Jones, Rt. Hon. Leif (Camborne)	Palmer, E. T.
Clarke, J. S.	Jones, Morgan (Caerphilly)	Parkinson, John Allen (Wigan)
Cluse, W. S.	Jowett, Rt. Hon. F. W.	Pethick-Lawrence, F. W.
Clynes, Rt. Hon. John R.	Jowitt, Sir W. A. (Preston)	Phillips, Dr. Marion
Cocks, Frederick Seymour	Kedward, R. M. (Kent, Ashford)	Picton-Turbervill, Edith
Compton, Joseph	Kelly, W. T.	Pole, Major D. G.
Cove, William G.	Kennedy, Rt. Hon. Thomas	Potts, John S.
Cripps, Sir Stafford	Kenworthy, Lt.-Com. Hon. Joseph M.	Price, M. P.
Daggar, George	Kinley, J.	Quibell, D. J. K.
Dallas, George	Lang, Gordon	Ramsay, T. B. Wilson
Dalton, Hugh	Lansbury, Rt. Hon George	Rathbone, Eleanor
Davies, E. C. (Montgomery)	Lathan, G.	Raynes, W. R.
Davies, D. L. (Pontypridd)	Law, Albert (Bolton)	Richards, R.
Davies, Rhys John (Westhoughton)	Law, A. (Rossendale)	Richardson, R. (Houghton-le-Spring)
Day, Harry	Lawrence, Susan	Riley, Ben (Dewsbury)
Denman, Hon. R. D.	Lawson, John James	Riley, F. F. (Stockton-on-Tees)
Dukes, C.	Lawther, W. (Barnard Castle)	Ritson, J.
Duncan, Charles	Leach, W.	Romeril, H. G.
Ede, James Chuter	Lee, Frank (Derby, N. E.)	Rotbotham, D. S. T.
Edwards, C. (Monmouth, Badwellty)	Lee, Jennie (Lanark, Northern)	Rowson, Guy
Edwards, E. (Morpeth)	Lees, J.	Samuel, Rt. Hen. Sir H. (Darwan)
Egan, W. H.	Lewis, T. (Southampton)	Sanders, W. S.
Elmley, Viscount	Lindley, Fred W.	Sandham, E.
Freeman, Peter	Lloyd, C. Ellis	Sawyer, G. F.
Gardner, B. W. (West Ham. Upton)	Logan, David Gilbert	Scott, James
Gardner, J. P. (Hammersmith, N.)	Longbottom, A. W.	Scrymgeour, E.
Gibbins, Joseph	Longden, F.	Sexton, Sir James
Gibson, H. M. (Lancs, Mossley)	Lovat-Fraser, J. A.	Shakespeare, Geoffrey H.
Gillett, George M.	Lunn, William	Shepherd, Arthur Lewis
Glassey, A. E.	Macdonald, Gordon (Ince)	Sherwood, G. H.
Gossling, A. G.	McElwee, A.	Shield, George William

Shillaker, J. F.	Strauss, G. R.	Welsh, James C. (Coatbridge)
Shinwell, E.	Sullivan, J.	West, F. R.
Short, Alfred (Wednesbury)	Sutton, J. E.	Westwood, Joseph
Simmons, C. J.	Taylor, R. A. (Lincoln)	White, H. G.
Simon, E. D. (Manch'ter, Withington)	Taylor, W. B. (Norfolk, S. W.)	Whiteley, Wilfrid (Birm., Ladywood)
Sinclair, Sir A. (Caithness)	Thomas, Rt. Hon. J. H. (Derby)	Whiteley, William (Blaydon)
Sinkinson, George	Thorne, W. (West Ham. Plaistow)	Wilkinson, Ellen C.
Sitch, Charles H.	Thurtle, Ernest	Williams, David (Swansea, East)
Smith, Frank (Nuneaton)	Tinker, John Joseph	Williams, T. (York, Don Valley)
Smith, Lees-, H. B.	Townend, A. E.	Wilson, C. H. (Sheffield, Attercliffe)
Smith, Rennie (Penistone)	Vaughan, David	Wilson, J. (Oldham)
Smith, Tom (Pontefract)	Viant, S. P.	Wilson, R. J. (Jarrow)
Smith, W. R. (Norwich)	Walker, J.	Wise, E. F.
Snowden, Rt. Hon. Philip	Watkins, F. C.	Young, R. S. (Islington, North)
Sorensen, R.	Watson, W. M. (Dunfermline)
Stamford, Thomas W.	Watts-Morgan, Lt.-Col. D. (Rhondda)	TELLERS FOR THE NOES.—
Stephen, Campbell	Wellock, Wilfred	Mr. Hayes and Mr. B. Smith.

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

The House divided: Ayes, 252; Noes, 146.

Division No. 230.]	AYES.	[7.29 p.m.
Adamson, W. M. (Staff., Cannock)	Evans, Capt. Ernest (Welsh Univer.)	Lawson, John James
Addison, Rt. Hon. Dr. Christopher	Foot, Isaac	Lawther, W. (Barnard Castle)
Altchison, Rt. Hon. Craigle M.	Freeman, Peter	Leach, W.
Alpass, J. H.	Gardner, B. W. (West Ham, Upton)	Lee, Frank (Derby, N. E.)
Angell, Sir Norman	Gardner, J. P. (Hammersmith, N.)	Lee, Jennie (Lanark, Northern)
Arnott, John	Gibbins, Joseph	Lees, J.
Aske, Sir Robert	Gibson, H. M. (Lancs, Mossley)	Lewis, T. (Southampton)
Attlee, Clement Richard	Gillett, George M.	Lindley, Fred W.
Ayles, Walter	Glassey, A. E.	Lloyd, C. Ellis
Baker, John (Wolverhampton, Bilston)	Gossling, A. G.	Logan, David Gilbert
Baldwin, Oliver (Dudley)	Gould, F.	Longbottom, A. W.
Barr, James	Graham, D. M. (Lanark, Hamilton)	Longden, F.
Benn, Rt. Hon. Wedgwood	Graham, Rt. Hon. Wm. (Edin., Cent.)	Lovat-Fraser, J. A.
Bennett, William (Battersea, South)	Gray, Milner	Lunn, William
Benson, G.	Greenwood, Rt. Hon. A. (Colne)	Macdonald, Gordon (Ince)
Bevan, Aneurin (Ebbw Vale)	Grenfell, D. R. (Glamorgan)	McElwee, A.
Blikett, W. Norman	Griffiths, T. (Monmouth, Pontypool)	McEntee, V. L.
Blindell, James	Groves, Thomas E.	McKinlay, A.
Bondfield, Rt. Hon. Margaret	Grundy, Thomas W.	MacLaren, Andrew
Bowerman, Rt. Hon. Charles W.	Hall, G. H. (Merthyr Tydvil)	Maclean, Nell (Glasgow, Govan)
Broad, Francis Alfred	Hall, J. H. (Whitechapel)	McShane, John James
Brockway, A. Fenner	Hamilton, Mary Agnes (Blackburn)	Malone, C. L'Estrange (N'thampton)
Bromfield, William	Hamilton, Sir R. (Orkney & Zetland)	Mander, Geoffrey le M.
Brooke, W.	Harbord, A.	Mansfield, W.
Brothers, M.	Hardie, George D.	March, S.
Brown, Rt. Hon. J. (South Ayrshire)	Hastings, Dr. Somerville	Marcus, M.
Buchanan, G.	Haycock, A. W.	Markham, S. F.
Burgess, F. G.	Hayday, Arthur	Marley, J.
Buxton, C. R. (Yorks, W. R. Elland)	Henderson, Rt. Hon. A. (Burnley)	Marshall, Fred
Calne, Hall-, Derwent	Henderson, Arthur, Junr. (Cardiff, S.)	Mathers, George
Cameron, A. G.	Henderson, Thomas (Glasgow)	Matters, L. W.
Cape, Thomas	Henderson, W. W. (Middx., Enfield)	Maxton, James
Carter, W. (St. Pancras, S. W.)	Herriotts, J.	Messer, Fred
Charleton, H. C.	Hirst, G. H. (York W. R. Wentworth)	Middleton, G.
Chater, Daniel	Hirst, W. (Bradford, South)	Milner, Major J.
Church, Major A. G.	Hoffman, P. C.	Montague, Frederick
Clarke, J. S.	Hopkin, Daniel	Morley, Ralph
Cluse, W. S.	Horrabin, J. F.	Morris, Rhys Hopkins
Clynes, Rt. Hon. John R.	Hudson, James H. (Huddersfield)	Morrison, Rt. Hon. H. (Hackney, S.)
Cocks, Frederick Seymour.	Hunter, Dr. Joseph	Morrison, Robert C. (Tottenham, N.)
Compton, Joseph	John, William (Rhondda, West)	Mort, D. L.
Cove, William G.	Johnston, Rt. Hon. Thomas	Muff, G.
Cowan, D. M.	Jones, Llewellyn-, F.	Muggeridge, H. T.
Cripps, Sir Stafford	Jones, J. J. (West Ham, Silvertown)	Murnin, Hugh
Daggar, George	Jones, Rt. Hon. Leif (Camborne)	Nathan, Major H. L.
Dallas, George	Jones, Morgan (Caerphilly)	Newman, Sir R. H. S. D. L. (Exeter)
Dalton, Hugh	Jowett, Rt. Hon. F. W.	Noel Baker, P. J.
Davies, E. C. (Montgomery)	Jowitt, Sir W. A. (Preston)	Noel-Buxton, Baroness (Norfolk, N.)
Davies, D. L. (Pontypridd)	Kedward, R. M. (Kent, Ashford)	Oldfield, J. R.
Davies, Rhys John (Westhoughton)	Kelly, W. T.	Oliver, George Harold (Ilkeston)
Day, Harry	Kennedy, Rt. Hon. Thomas	Oliver, P. M. (Man., Blackley)
Denman, Hon. R. D.	Kenworthy, Lt.-Com. Hon. Joseph M.	Owen, Major G. (Carnarvon)
Dukes, C.	Kinley, J.	Palin, John Henry
Duncan, Charles	Lang, Gordon	Paling, Wilfrid
Ede, James Chuter	Lansbury, Rt. Hon. George	Palmer, E. T.
Edwards, C. (Monmouth, Bedwellty)	Lathan, G.	Parkinson, John Allen (Wigan)
Edwards, E. (Morpeth)	Law, Albert (Bolton)	Peters, Dr. Sidney John
Egan, W. H.	Law, A. (Rossendale)	Pethick-Lawrance, F. W.
Elmley, Viscount	Lawrence, Susan	Phillips, Dr. Marion
Picton-Turbervill, Edith	Sherwood, G. H.	Thurtle, Ernest
Pole, Major D. G.	Shield, George William	Tinker, John Joseph
Potts, John S.	Shillaker, J. F.	Tout, W. J.
Price, M. P.	Shinwell, E.	Townend, A. E.
Pybus, Percy John	Short, Alfred (Wednesbury)	Vaughan, David
Quibell, D. J. K.	Simmons, C. J.	Viant, S. P.
Ramsay, T. B. Wilson	Simon, E. D. (Manch'ter, Withington)	Walker, J.
Rathbone, Eleanor	Sinclair, Sir A. (Caithness)	Watkins, F. C.
Raynes, W. R.	Sinkinson, George	Watson, W. M. (Dunfermline).
Richards, R.	Sitch, Charles H.	Watts-Morgan, Lt.-Col. D. (Rhondda)
Richardson, R. (Houghton-le-Spring)	Smith, Frank (Nuneaton)	Wellock, Wilfred
Riley, Ben (Dewsbury)	Smith, Lees-, H. B.	Welsh, James C. (Coatbridge)
Riley, F. F. (Stockton-on-Tees)	Smith, Rennie (Penistone)	West, F. R.
Ritson, J.	Smith, Tom (Pontefract)	Westwood, Joseph
Romeril, H. G.	Smith, W. R. (Norwich)	White, H. G.
Rosbotham, D. S. T.	Snowden, Rt. Hon. Philip	Whiteley, Wilfrid (Birm., Ladywood)
Rowson, Guy	Sorensen, R.	Whiteley, William (Blaydon)
Samuel, Rt. Hon. Sir H. (Darwen)	Stamford, Thomas W.	Williams, David (Swansea, East)
Sanders, W. S.	Stephen, Campbell	Williams, T. (York, Don Valley)
Sandham, E.	Strauss, G. R.	Wilson, C. H. (Sheffield, Attercliffe)
Sawyer, G. F.	Sullivan, J.	Wilson, R. J. (Jarrow)
Scott, James	Sutton, J. E.	Wise, E. F.
Scrymgeour, E.	Taylor, R. A. (Lincoln)	Young, R. S. (Islington, North)
Sexton, Sir James	Taylor, W. S. (Norfolk, S. W.)
Shakespeare, Geoffrey H.	Thomas, Rt. Hon. J. H. (Derby)	TELLERS FOR THE AYES.—
Shepherd, Arthur Lewis	Thorne, W. (West Ham, Plaistow)	Mr. Hayes and Mr. B. Smith.
NOES.
Acland-Troyte, Lieut.-Colonel	Everard, W. Lindsay	Nicholson, O. (Westminster)
Albery, Irving James	Falle, Sir Bertram G.	Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)
Allen, Sir J. Sandeman (Liverp'l., W.)	Ferguson, Sir John	Oman, Sir Charles William C.
Atholl, Duchess of	Fielden, E. B.	O'Neill, Sir H.
Atkinson, C.	Forestler-Walker, Sir L.	Peake, Captain Osbert
Baldwin, Rt. Hon. Stanley (Bewdley)	Fremantle, Lieut.-Colonel Francis E.	Percy, Lord Eustace (Hastings)
Balfour, George (Hampstead)	Ganzoni, Sir John	Peto, Sir Basil E. (Devon, Barnstaple)
Balfour, Captain H. H. (I. of Thanet)	Grace, John	Ramsbotham, H.
Beamish, Rear-Admiral T. P. H.	Graham, Fergus (Cumberland, N.)	Remer, John R.
Betterton, Sir Henry B.	Grattan-Doyle, Sir N.	Reynolds, Col. Sir James
Bevan, S. J. (Holborn)	Grenfell, Edward C. (City of London)	Roberts, Sir Samuel (Ecclesall)
Birchall, Major Sir John Dearman	Gretton, Colonel Rt. Hon. John	Rodd, Rt. Hon. Sir James Rennell
Bird, Ernest Roy	Hacking, Rt. Hon. Douglas H.	Ross, Ronald D.
Boothby, R. J. G.	Hanbury, C.	Ruggles-Brise, Colonel E.
Bourne, Captain Robert Croft	Hannon, Patrick Joseph Henry	Samuel, A. M. (Surrey, Farnham)
Bowater, Col. Sir T. Vansittart	Hartington, Marquess of	Sandeman, Sir N. Stewart
Bowyer, Captain Sir George E. W.	Harvey, Major S. E. (Devon, Totnes)	Shepperson, Sir Ernest Whittome
Boyce, Leslie	Heneage, Lieut.-Colonel Arthur P.	Skelton, A. N.
Bracken, B.	Hennessy, Major Sir G. R. J.	Smith, Louis W. (Sheffield, Hallam)
Brass, Captain Sir William	Herbert, Sir Dennis (Hertford)	Smith-Carington, Neville W.
Briscoe, Richard George	Hills, Major Rt. Hon. John Waller	Smithers, Waldron
Broadbent, Colonel J.	Hope, Sir Harry (Forfar)	Somerville, A. A. (Windsor)
Brown, Col. D. C. (N'th'l'd., Hexham)	Hore-Belisha, Leslie.	Southby, Commander A. R. J.
Brown, Brig.-Gen. H. C. (Berks, Newb'y)	Howard-Bury, Colonel C. K.	Stanley, Lord (Fylde)
Buchan-Hepburn, P. G. T.	Hudson, Capt. A. U. M. (Hackney, N.)	Stanley, Hon. O. (Westmorland)
Burton, Colonel H. W.	Hurd, Percy A.	Stuart, Hon. J. (Moray and Nairn)
Butler, R. A.	Hurst, Sir Gerald B.	Sueter, Rear-Admiral M. F.
Cadogan, Major Hon. Edward	Inskip, Sir Thomas	Taylor, Vice-Admiral E. A.
Campbell, E. T.	Iveagh, Countess of	Thomas, Major L. B. (King's Norton)
Castle Stewart, Earl of	Jones, Sir G. W. H. (Stoke New'gton)	Thomson, Sir F.
Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)	Jones, Henry Haydn (Merioneth)	Thomson, Mitchell-, Rt. Hon. Sir W.
Chamberlain, Rt. Hon. N. (Edgbaston)	Kindersley, Major G. M.	Todd, Capt. A. J.
Christle, J. A.	Knox, Sir Alfred	Train, J.
Cobb, Sir Cyril	Lamb, Sir J. Q.	Tryon, Rt. Hon. George Clement.
Colfox, Major William Philip	Lambert, Rt. Hon. George (S. Molton)	Wallace, Capt. D. E. (Hornsey)
Colman, N. C. D.	Law, Sir Alfred (Derby, High Peak)	Ward, Lieut.-Col. Sir A. Lambert
Courtauld, Major J. S.	Leighton, Major B. E. P.	Warrender, Sir Victor
Crichton-Stuart, Lord C.	Lewis, Oswald (Colchester)	Waterhouse, Captain Charles
Crookshank, Cpt. H. (Lindsey, Gainsbro)	Llewellin, Major J. J.	Wayland, Sir William A.
Croom-Johnson, R. P.	Locker-Lampson, Com. O.(Handsw'th)	Wells, Sydney R.
Cunliffe-Lister, Rt. Hon. Sir Philip	McConnell, Sir Joseph	Williams, Charles (Devon, Torquay)
Dalkeith, Earl of	Maitland, A. (Kent, Faversham)	Windsor-Clive, Lieut.-Colonel George
Dairymple-White, Lt.-Col. Sir Godfrey	Makins, Brigadier-General E.	Wolmer, Rt. Hon. Viscount
Davidson, Rt. Hon. J. (Hertford)	Mason, Colonel Glyn K.	Womersley, W. J.
Davies, Maj. Geo. F. (Somerset, Yeovil)	Meller, R. J.	Wood, Rt. Hon. Sir Kingsley
Davison, Sir W. H. (Kensington, S.)	Merriman, Sir F. Boyd	Young, Rt. Hon. Sir Hilton
Duckworth, G. A. V.	Milne, Wardlaw-, J. S.
Edmondson, Major A. J.	Morrison, W. S. (Glos., Cirencester)	TELLERS FOR THE NOES.—
Elliot, Major Walter E.	Muirhead, A. J.	Sir George Penny and Major the
Erskine, Lord (Somerset, Weston-s.-M.)	Newton, Sir D. G. C. (Cambridge)	Marquess of Titchfield.

Second Resolution read a Second time.

Sir HUGH O'NEILL

I beg to move, in line 3, to leave out the words "and sixpence."

The object of this Amendment is to reduce the standard rate of Income Tax from 4s. 6d. to 4s. in the £. It is an Amendment which has been moved on many previous occasions, but I make no apology for moving it once again, particularly in a year like this, when we are faced with such a period of depression. Of all the points of the Budget of last year, the one which I think gave most general surprises was the increase of the standard rate of Income Tax to 4s. 6d. We who then protested against it made many prophecies. We said the result of it would be that confidence would be lost, that initiative would be sterilised, that trade and commerce would be depressed and that unemployment would increase. All those things have happened to a very marked degree, and I do not think anyone who studies our position to-day could deny that in very considerable measure the distress from which we are suffering is due to the very high rate of direct taxation. Last year the Chancellor of the Exchequer in his Budget speech said that all who knew his fiscal views would not be surprised to hear that, to meet the deficit, he should look to direct taxation. He did look to direct taxation and increased the Income Tax, Super-tax and Death Duties.

This year there is a very marked change. He no longer looks to direct taxation. I cannot imagine that, if the Chancellor of the Exchequer had thought it possible to raise revenue by a further increase of Income Tax and Super-tax, he would not have done it. Of course he would. He would have put a further 6d. or 1s. upon the Income Tax and in that way, as he airily said last year, he would have produced revenue to meet the deficit of this year. He did not do it, because he could not do it. He knew that taxes of that kind would not produce the revenue. By implication, therefore, he admits that the limit of direct taxation is already reached. Last year he told us that Income Tax constituted no tax on industry. We all disagreed with that statement. This year he had a good deal to say about the psychological effect of direct taxation, and it was obvious to those who heard him that he has greatly modified his views about direct taxation as the result of what happened during last year.

I have looked out a few figures in regard to direct and indirect taxation. I find that, for the year 1908–9, direct taxation produced £63,800,000, and indirect taxation £64,600,000. In 1913–14 direct taxation produced £85,274,000 and indirect taxation £76,040,000. That is to say, the change had begun and the scales were being already weighted rather in the direction of direct taxation. When we come to the last financial year, we find that direct taxation has been £430,967,000 and indirect taxation £245,401,000. Since 1908–9 direct taxation has increased seven times, whereas indirect taxation has increased only four times. This constitutes a colossal burden on the country and it is extracted from that source of the country's wealth which should be available to trade and industry. There is no greater barrier to commercial expansion than a very high rate of Income Tax and other direct taxation. When we look at the figures of the total income assessable to Income Tax they give some remarkable results. The total income assessed to Income Tax has risen from £950,000,000 in 1913–14 to £2,500,000,000 in 1928–29, the last year when the complete returns were available in the Statistical Abstract. Income has risen just over two-and-a-half times, while the tax has increased by a fraction under four times since 1913–14, from Is. 2d. to 4s. 6d.

The income assessed under Schedule D has risen from £584,000,000 in 1913–14 to £1,064,000,000 in 1928–29. The income is less than double under Schedule D, but the tax has increased four times. Schedule D is the Schedule under which all the great businesses are assessed. From these figures it is obvious that the relative burden of Income Tax has enormously increased during the last 12 or 15 years. That is bound to have a very serious effect on the savings of the country, from which alone can come the new capital necessary for industry. A high Income Tax diminishes the capital amount which is available to individuals for investment, and it tends to encourage the spending of a person's income rather than the saving of it. I assert with some confidence that there is a spirit abroad which says: "I might as well spend my money rather than let the Government take a big whack of what is left."

There is an even worse effect of a very high Income Tax and high direct taxation as regards savings, and that is the way in which high taxation affects the savings not of individuals but of business concerns and commercial enterprises. In other words, it takes the money which might otherwise be devoted by companies to the building up of their reserves. We have heard a great deal about Income Tax and company reserves in recent years during the discussions on the Finance Bills. That is a point on which even this Government, strong though they be in favour of direct taxation, have shown signs that they are beginning to realise that real harm is being done to industry by taxation which prevents great business enterprises and associations from putting to reserve as much as in the interests of the business they ought to reserve. It would be superfluous for me to enlarge upon the vital necessity of the maintenance of proper reserves by businesses. Not only are renewals and provision for depreciations constantly necessary, but everyone knows that the legal allowance for depreciation is grossly inadequate.

We have only to look at such commercial catastrophes as, for instance, what has happened to the Royal Mail Steam Packet Company, to see the terrible danger which a great concern may be brought up against if it neglects to strengthen its reserve position, or to write down its assets as they should be written down. Particularly in these days when rationalisation is all the rage it becomes more and more important that our business enterprises should be given the greatest help possible towards strengthening their reserve positions, as they ought to be strengthened. Reserves are necessary for the creation of new capital, quite apart from the question of writing off diminishing assets or depreciation. The advantage of financing capital expenditure out of revenue, if it can be done, is beyond question. It is infinitely better for a business to finance capital expenditure out of revenue, if it can do so. Some of the soundest and strongest and best businesses in the country have during the last 50, 40, 30 or 20 years been built up to their present condition because they have largely financed their capital expenditure out of revenue. Therefore, for that purpose it is vitally necessary to industry that the moneys which might go to the purpose of financing capital expenditure out of revenue should not be penalised by excessive Income Tax and therefore be unavailable.

It seems to me, and I cannot see any argument against it, that the amounts which are placed by companies to their reserve account are not really income to any individual, and they should not be subject to tax as income. Yet in view of all the very strong argument which can be raised, we find not only that the company reserves are taxed but that they are taxed at twice the rate of the average taxpayer throughout the country. The President of the Board of Trade knows quite well that the effective rate of Income Tax is roughly half the standard rate. If we take the average of the people who pay Income Tax we find that it works out not at 4s. 6d. but at probably slightly under or slightly over 2s. 3d. That is the effective rate of tax, but the company reserves are taxed at the full rate of 4s. 6d., and there can never be any question of them being liable to repayments or any of the claims for allowances which the ordinary individual taxpayer can claim. Therefore, these reserves are penalised more than taxpayers generally by having to pay the full rate of tax. I should like to know whether the President of the Board of Trade can say anything about the forthcoming report of the Macmillan Committee. The Government have been questioned on this subject more than once during recent months. I have no doubt that this is one of the points to which the Committee has devoted its inquiries. I hope the right hon. Gentleman will be able to give the House some definite indication how soon the report of that very far-Teaching and important inquiry is likely to be available for public information.

8.0 p.m.

There is one further point in regard to the high rate of Income Tax, and it is this: Everybody is agreed that there is nothing more important for the financial stability and future of the country than that economy in public expenditure should be practised. Nothing will bring about economy in public expenditure until we get some kind of public demand for economy, but I am afraid that at the present time the public demand for economy in public expenditure is not as widespread, as universal or as clamant as it ought to be in the interests of the country. That is largely because such a comparatively small proportion of the people pay Income Tax or any direct taxes. In so far as they do pay taxes they pay them through indirect taxation. That is paying taxes, in a sense, without knowing it. I, therefore, strongly feel that the more people in this country who are themselves and know themselves to be directly affected by the taxation of the country, the more people will there be who will be interested in bringing about satisfactory Government finance. In the year ended 31st March, 1930, the number of Income Tax payers in this country was 2,250,000. That is only one in about 22 of the population. We are living at a time when with the increased electorate and the greatly increased social services of the country there are more people than ever before benefiting by the expenditure of the Government and very few people paying direct taxation to support that expenditure. It is not for me to suggest how a larger number of people should be brought into the purview of direct taxation, but I do feel that in these days when economy is so necessary and when we see before us so many dangers and difficulties in the financial future of the country, that the more people who are directly interested in the finance of the nation the healthier will our financial policy be. To illustrate still further what the position is in that regard, I would quote one or two figures. I have seen it stated, and so far as I know it is correct, that the national income of the country is £4,400,000,000. In the year 1928–29 the assessments to Income Tax amounted to £2,494,000,000, so that just over a half of the national income was assessed to Income Tax. Supposing such a thing could happen as that the whole of the national income had been liable to Income Tax, the Income Tax would have produced over £600,000,000. I hope I have said enough on this point to indicate that there are very grave reasons why more people should be directly interested, through the taxes which they pay, in the proper conduct of the finances of the country. I was looking the other day at John Stuart Mill's works, and on this point of equality of taxation I should like to quote a paragraph in which he writes: If anyone bears less than his fair share of the burden, some other person must suffer more than his share; and the alleviation to the one is not on an average so great a good to him as the increased pressure on the other is an evil. I think that sums up very appositely and well the doctrine of equality of taxation and how necessary it is in any well-governed and well-managed country. The reduction of Income Tax and direct taxation generally is, as is well known, one of the principal features of the financial policy of the party to which I belong. The deficiency which a reduction in Income Tax might cause in the national revenue would have to be met, in our view, first, by decreased expenditure and secondly, as is well known—I merely mention the fact, as it would be out of order to go into details—by duties on foreign manufactured goods. Events are rapidly marching in the direction of those changes. [An HON. MEMBER: "NO Signs of it."] I think there are many signs in recent by-elections that events are marching very rapidly in that direction, and the time will come sooner, perhaps, than the hon. Member opposite now thinks when we shall be able to put that policy into force. In the meantime, we must struggle on, I suppose, as best we can under our present Government, but I feel very strongly that it will not be until we have faced these problems in the way in which I have indicated they will be faced from this side of the House that this country can regain the pre eminent position in the commerce and industry of the world which it used to occupy.

Major COLVILLE

I beg to second the Amendment.

The Amendment is one to reduce the standard rate of Income Tax to 4s., the rate at which it stood when the present Government took office. Members of the Socialist party, when challenged on the subject of unemployment, as they frequently and very properly are challenged, continually point to world causes as being the reason for the depression of trade in this country, and they disclaim all responsibility on the part of the Government for the lamentable conditions which exist. But I hold that no single action taken by the Socialist Government has had such a bad effect on trade in this country or has cost so many British working men their jobs as the addition of 6d. to the standard rate of Income Tax by the Chancellor of the Exchequer last year.

When the right hon. Gentleman opened his Budget last year, the principal feature of which, I think we must all agree, was the increase of the standard rate of Income Tax, I recollect that he said that he had to impose a new burden, but that he would place it on the shoulders best able to bear it. [HON. MEMBERS: "Hear, hear!"] The shoulders that have borne it are the shoulders of the 1,000,000 working men who have lost their jobs since then, and hon. Members opposite are the best judges whether or not those are the Shoulders best able to bear it. Since that date representative organisations in this country—chambers of commerce, business men, and trade unions—have all been examining the question of taxation and its effect on the trade of the country, and a very strong plea has been put forward to the Government by many organisations that the rate of taxation in this country is having a very bad effect on our industries as compared with those of other countries, and that the most urgent efforts should be made by the Government to bring down taxation. The Chancellor of the Exchequer has given evidence in recent speeches that he is aware of the very grave position which faces the country at the present time.

My right hon. Friend has dealt with the effect of this tax on company reserves, and I would like to add a word or two to what he said. In the present difficult times through which we are passing those companies which have been able to build up strong reserves are managing to weather the storm, but all the time that the Chancellor of the Exchequer is tapping those reserves, there are companies which are only able to keep their men working and to pay their wages bills by the fact that they have these reserves. Many of those companies which in better days built up good reserves are nearing the end of their resources, and I urge the Government very earnestly to take into consideration the effect of that imposition of 6d. last year on those companies which are having to rely on their reserves to get through this economic blizzard at the present time.

Then there is, of course, the psychological effect of this increase in the Income Tax. If we allow for the change in the value of money, we find that 12 years after the War we are back to as high a rate of taxation as we ever had during the War. That has a grievous effect on this country, and the lack of confidence which was engendered by the increase of the flat rate of Income Tax, instead of stimulating trade, had the reverse effect upon it through the length and breadth of the country. I have no doubt that the President of the Board of Trade, in reply, will urge the same plea that has been consistently urged earlier to-day, that the Government must have the money. The real answer to any Amendments put forward on Budget questions is, "We cannot afford it, because we must have the money," and the right hon. Gentleman will urge that again. I should be out of order if I outlined where I would like him to look for the money, but I think I might at any rate be allowed to say that he can look for it in the same quarter as that in which the Chancellor of the Exchequer is at present giving away a very valuable source of revenue, namely, the duty on wrapping paper. He might get it by taxing all those articles from abroad which we can usefully make in this country, and I think that when the Government have passed away—and we know that the actions of Governments do not pass into oblivion, but into history—it will be remembered of this Government that they removed those taxes which were benefiting British industry and applied those which were not.

Mr. DEPUTY-SPEAKER (Sir Robert Young)

The hon. and gallant Member is trying to widen the discussion.

Mr. TINKER

The question under discussion, which is that of direct as against indirect taxation, raises one of the keenest points of difference between the party on this side and the party opposite. We hold very strongly that all taxation should be direct, because we wish the people to know what they are paying, and we do not like it to be indirect. At the moment, I believe that direct taxation is about 66 per cent., as against 34 per cent. indirect. In recent years it has gradually grown more direct. It has fluctuated between 60 per cent. and 70 per cent., but the direct taxation has grown in recent years, and we on this side shall never rest satisfied until it gets to about 90 per cent. direct taxation. Therefore, our hon. Friends opposite are raising a very strong point which will go on as far, while we are in power, as ever we can make it go. The very argument that was used by the last speaker, that out of the enormous wealth that we are making there are 2,250,000 paying Income Tax, shows where the vast bulk of the money is going, and if we can find it in so few hands, comparatively speaking, we say that the wealth is not evenly distributed; and, because of that, we must go on pressing our point of view until we get more equality in wealth.

The right hon. Member for Bewdley (Mr. S. Baldwin), in addressing a meeting at the Albert Hall on Friday, spoke of the great works of Disraeli and said that one of Disraeb's strong points was that you could never have a contented country while there was so much unequal distribution of wealth, and I took it from the theme of his speech that the ideal of the Conservative party was that there would have to be a levelling up or down of the wealth of the country before we could get contentment. That is where, in our opinion, direct taxation will bring, us. On the last occasion when the Chancellor of the Exchequer brought in this 6d. increase on the Income Tax, he did not satisfy us, because we thought it ought to have been more, and even this time there is discontent on these benches because the Chancellor of the Exchequer has not gone further in the direction of direct taxation. He has just balanced his Budget, and farther Estimates will be required. We are asking ourselves, "Where is the money to come from?" We are dead against what is called revenue taxes or indirect taxation, so that it can only come from the method of direct taxation. The time must come when more will have to be put on to direct taxation, either Income Tax, Supertax or Death Duties.

If we were to accept the Amendment which has been moved from the other side of the House, that 6d. be knocked off the Income Tax, making a further deficit of round' about £30,000,000, what would happen to the Budget? A proposition has been put forward with regard to other ways of getting the money directly opposite to what we want. The £30,000,000 can better be paid in the way it is being paid than in any other way. I say quite clearly and straightforwardly that if aw increase of the Income Tax were proposed, I would gladly go into the Lobby in favour of it, rather than in favour' of a reduction. I shall never be satisfied until we have gone further into the accumulated wealth of the country and can balance our Budget by that means rather than by indirect taxation.

It used to be trotted out in the early days when I first became a Member here, in 1924, that wealth would be taken away from the country if we went on with direct taxation. That argument has not been used to-night, but it may be later on. The fear is that company reserves cannot be built up, but whenever there is a loan floated on decent terms, I notice that there is no lack of money in the market. Whenever 5 per cent., or anything like it, can be got for the loan of money, millions of pounds become available. Quite recently a loan was floated, and within 24 hours several millions were forthcoming, because the terms were very good. All the talk about money being driven away and that reserves cannot be built up always goes by the board when there is a decent investment in sight. I hope that hon. Members opposite will not continue to taunt us about money being scarce or being driven' away, or about companies not being able to carry on. The time for that has gone by. There is wealth in the country, but it is in the hands of the few. The Government must press on in that direction and give more satisfaction to their Members than they have done in the past.

Mr. ARTHUR MICHAEL SAMUEL

The hon. Gentleman the Member for Leigh (Mr. Tinker) made two points. The first thing he said was that the Chancellor had balanced his Budget. He did not balance his Budget.

Mr. TINKER

He has found £803,000,000 of income as against £803,000,000 of expenditure on paper, and that is what I call balancing the Budget.

Mr. SAMUEL

My right hon. Friend who opened this Debate made use of a very apposite observation by referring to the Budget as "Royal Mail finance." The Budget is balanced in the first place by taking £20,000,000 from the Dollar Reserve Fund, and in anticipating £10,000,000 of the Income Tax and by borrowing.

Mr. DEPUTY-SPEAKER

We had all that on a previous discussion.

Mr. SAMUEL

I will take the point that the Budget has not been balanced for the reason which I have just given. The Chancellor was prevented—for he had seen the error of his ways, and thought that the last straw of taxation had been raised—from putting any more on to the Income Tax. We said, and we say it now—and that is the tenour of this Amendment—that too much has been put on to the Income Tax payer. Notwithstanding the fact that the hon. Gentleman the Member for Leigh has said that the Chancellor of the Exchequer has balanced his Budget—and I cannot proceed any further in this connection to show that he has not—the right hon. Gentleman has shown that we have got to a point when not another single atom of weight upon the Income Tax payer is possible without breaking his back.

Mr. TINKER

I do not agree with the hon. Member.

Mr. SAMUEL

I will proceed to explain. Not only is it necessary to reduce this heavy Income Tax, but the Chancellor of the Exchequer made some play, and very properly, upon the psychological effect of a heavy Income Tax. I will in a moment call attention to some figures in the Seventy-third Report of the Commissioners of His Majesty's Inland Revenue, Command Paper 3802, which will bear out the view I take. The psychological effect of this very heavy Income Tax, plus the very heavy Surtax and plus the Death Duties, prevent businesses being started and employment being obtained for our people. Who is going to start a new business to-day? After a man has placed his money and his health at the chance of a venture, if he loses his money the State will not give back a penny, and if he succeeds, the State takes 4s. 6d. in the £, which we say is too heavy, and a heavy Supertax if the venture is big by employing a large number of men and he becomes very prosperous. The State then takes an enormous slice for Death Duties again out of any savings after income and Surtax, and on top of that, at the street-corner where his factory is situated, the policy of the party opposite is to put a man upon a box to shout, "Down with this capitalistic fellow, who has made a good business and employs men."

Too heavy taxation is calculated to do harm to the creation of wealth and so to employment. To use a term employed by engineers, the pump of taxation has refused to draw. The total income assessed as Surtax in 1924–25 has fallen to the 1928–28 figure, notwithstanding the increase of population meantime, and the fact that we ought, in consequence, to have an increase of business. The amount of income assessable for Surtax has fallen by £7,000,000. The actual income assessed will be found in page 88 of the Command Paper to which I have just referred. The actual Income Tax for 1920–21, as compared with the Income Tax for 1929–30, also to be found in this little book, in page 66, has fallen by a very large number of millions. The population has increased and the income has decreased. What happens? With more people in the country there is less to go round. What is the cause of it? It has been said over and over again by Socialist speakers that the limit of taxation has not been reached. The hon. Gentleman the Member for Leigh made that point. Hon. Members opposite have it firmly fixed in their minds that more taxation can be placed upon the people, yet under Schedule D, which is the amount of actual income from profits and trade, they will find that for the year 1928–29, as compared with 1929–30, the income has fallen notwithstanding the increase of population. It is less also than in 1920–21. They have another fallacy in their minds. They think that the burden of direct taxation can be increased without damage. The hon. Gentleman the Member for Leigh quoted the percentage of direct taxation, as compared with that of indirect taxation and said that he would like to see direct taxation, not 66 per cent. as it is now, but 90 per cent.

I was interested to see in this morning's "Times" that the General Council of the Trades Union Congress, in putting their unemployment proposals before the Commission on Unemployment, said that they desired the removal of charges on industry and recognised—and this is one of the most important statements that has been made recently— That the cost of the social services of health and unemployment does represent a handicap particularly serious when the pro ducts of his (the employers') firm have to meet the competition of commodities which do not contain a similar item of cost. There you have the Trades Union Congress telling us that the high cost of social services, for which this taxation is raised, actually falls upon goods which have to compete with other goods from abroad which do not have to bear the same cost. It is a landmark in our economic industrial history.

Mr. PALMER

That is not all that they said.

Mr. SAMUEL

The hon. Member's remark impugns the veracity of the quotation I have given, and it also implies that I have left out something that is material. In order that there may be no mistake on this point, I will read the passage again: does represent a handicap, particularly serious when the products of his (the employer's) firm have to meet the competition of commodities which do not contain a similar item of cost. I have not misquoted the passage. Over and over again I have heard hon. Members opposite, in the course of Debates in this House, assure us that the Colwyn Committee was of the opinion that the cost of heavy direct taxation does not fall upon enterprise. Within the last few months a highly competent and public spirited commission went out to the East to inquire into the condition of our cotton export trade, and one of the outstanding statements in their report is that the costs of our goods are too high, and that, consequently, we cannot sell them. As against that we are always confronted with the Colwyn Report. I know this report very well because I gave evidence before that committee and fought against the idea that heavy taxation does not affect the cost of goods. Hon. Members opposite take a few isolated paragraphs from that report and particularly paragraph 451 in which the Colwyn Committee say: We conclude, with regard to enterprise, that the effects of high income taxation have been almost negligible in the field of employments and professions, over a great part of the industrial field; but it is clear that they must often have put a check on the more speculative class of business. If there is one thing that this country wants more than anything else it is new trades new ventures, new industries, not merely an increase in the over-production which already exists in established trades. The Colwyn Committee itself says that the effects of high taxation must be a check on the more speculative classes of business, that is businesses where money may be lost as well as made. It goes on to say: This holds good particularly of private business, in a sphere where the individual with large resources has usually been considered best able to initiate pioneer work. This heavy taxation, according to the report, has stopped the venturesome man risking his time, money and strength in trying to start fresh business in new trades with untried materials. In paragraph 447 they say: The reaction on the enterprise of public companies due to the restricted supply of capital, especially from the wealthier and more heavily taxed members of the community, is more important, although the situation may have been partly met by companies increasing their efforts to save out of profits. We think that in this indirect way the Income Tax has exercised an apcompanies increasing their efforts to save out preciable effect in damping down industrial activity, particularly of the more speculative kind; a cause which goes deeper, however, is the deficiency of national wealth due to war expenditure. This was not a political committee! it is one of the most famous committees of our days. Later on it says: The enterprise of private concerns also is prejudiced by the diminution of their supply of capital, i.e., of the net amounts after payment of tax which the proprietors are able to put back into the business. In some individual cases, especially where there is heavy liability to Super-tax the result will have been very injurious but, on the other hand, it appears that in the great majority of cases the proprietors of large concerns have outside means from which they can supplement their business capital. What a pitiful thing it is for a man who is running a private business not to be able to do so without having to turn to the savings of his father, or his brothers, or his sisters or any of his relatives for help.

Mr. TINKER

At any rate, there is money circulating in the family.

Mr. SAMUEL

If I am in a business and trying to do all I can to make ends meet but am not able to do so, it is very pitiable for me to have to go to my brothers or any other relative for help to be able to carry on; and yet that is what the Colwyn Committee says is occurring. This high taxation has prevented us from doing something which we are coming to see we ought to do. Many of the old businesses are producing- more than the world can consume, and what we want are new businesses, new enterprises; just as we had the artificial silk business and the soya bean, which introduced the oil-crushing business and gave new industries here. We need new ventures, fresh business, which will plough fresh fields of enterprise which have never before been touched by our people. But we have not the money; it has been taken away by this very high taxation.

I want to put this question to the President of the Board of Trade: Has he asked the Macmillan Committee whether they are in agreement with the idea that heavy taxation does not injure enterprise? They should be asked a question on the continual argument of the Colwyn Report used by hon. Members opposite, that there is nothing to be retracted about heavy direct taxation not being a burden upon industry. That point must be cleared up; and I hope that the Macmillan Committee, when its report comes out, will give us some information and some support to the statement of the Trades Union Congress in their evidence before the Unemployment Commission which affirms that the cost of the social services is a handicap on the products of our working people. Reference has already been made to the amount which is being raised by this Budget, and it is a horrible reflection that to-day we have to raise, roughly, £800,000,000 in the Budget while we are also finding in rates throughout the country a sum of about £200,000,000. That is about £1,000,000,000 a year out of an income which, according to the estimate quoted by an hon. Member, amounts to £4,000,000,000 a year. In other words, we are working three months in each year for the tax-gatherer. Hon. Gentlemen opposite would not like to be put into a field or a factory and told that, out of every 12 months' work, the proceeds of three months' work would go to the Treasury's tax-gatherer.

Mr. GORDON MACDONALD

The miners do that.

Mr. SAMUEL

I am not saying that they do not. We all have to do it. Hon. Gentlemen opposite must not run away with the idea that because high direct taxation is paid by the well-to-do its effects do not fall on the poor. They must realise that if direct taxation is piled on to the shoulders of the well-to-do it must inevitably react on production, and in this matter we are not merely appealing that the well-to-do should be protected against taxation. We seek to defend the community as a whole, and if hon. Members want to see an example of the results of too heavy taxation let them look at the case of Australia. There could not be a better object lesson of the results of the type of Government policy which is going on here than can be seen in what has occurred in Australia during the last 20 years or so. We see the result now. A smash.

Mr. BROAD

The result of Protection.

Mr. SAMUEL

No, it has been the result of carrying things in Australia to extremes of indirect taxation, just as will happen here from excessive direct taxation. There is an old Latin tag: Ne quid nimis which teaches that we must be careful not to go to extremes. It is because they have gone to extremes in Australia with indirect taxation that Australia has been driven to borrowing to pay for normal expenditure just as the same extreme taxation policy is driving the Chancellor of the Exchequer to-day to adopt these methods of balancing Budgets by loans. If the present policy of this Government in the matter of taxation is followed much longer here we shall find ourselves face to face with the same economic crisis as Australia has been faced with, though I hope not as terrible, and that Australian position is a warning which should make us sit up and take stock of what we are doing. The fact of the matter is that the party opposite have got it into their heads that they need not pay the slightest attention to trying to increase wealth. Having got the power of the ballot box, which was conferred by the Reform Act of 1832, they are now using that power for economic purposes and they are using it solely to distribute wealth. Their idea is to divide up existing wealth rather than to try to increase existing wealth.

Mr. DEPUTY-SPEAKER

If I allowed the hon. Member to travel along that road I am afraid he will provoke some arguments from the other side on a subject which is not relevant to this discussion.

Mr. SAMUEL

I am afraid that I would not have the strength to develop this argument as it ought to be developed and therefore I am glad that you have reminded me that I am straying from the path of the Debate. The fact remains that heavy taxation such as is proposed and the whole policy of the party opposite aims at the division of wealth solely, and if we are to go on dividing wealth but not increasing wealth, what will be the result? It has been suggested that every year the population increases to the extent of perhaps from 200,000 to 400,000 people. As those people grow up year by year and reach the age period when they have to earn their living there must be an increase of wealth to meet that additional demand for capital with which to equip their lives, and if we destroy wealth and prevent its increase by heavy taxation there will not be sufficient to go round the increased population. If there are 10 people and £10, that is £l each, but if they increase to 20 people and only £11 there is only eleven-twentieths of a pound for each. Heavy taxation is destructive of wealth, and, if I may say so without impertinence and without appearing to patronise hon. Members opposite, I would advise them to give up the idea of taxing merely for the purpose of dividing up and so preventing the creation of wealth. If they prevent or discourage the creation of wealth they are doing a very bad service to the poorest of the people whom they profess—and I am perfectly willing to give them credit for being sincere in that profession—to be desirous of helping. For that reason I would urge on the Government with all the power I possess that even if they will not so act in this Budget they should take into consideration the need to stop the mischief which they are doing and have a revision of their direct taxation policy arising from excessive expenditure so that at least those connected with the industry may have some opportunity of increasing the wealth of the nation.

Mr. W. GRAHAM

The Amendment moved by the right hon. Gentleman the Member for Antrim (Sir H. O'Neill) seeks to reduce the standard rate of Income Tax from 4s. 6d. to 4s. in the £, but the House, including hon. Members opposite, will, I am sure, agree that that Amendment has been placed on the Paper, not with any hope that under existing conditions it would be carried, but as the basis for our annual discussion on direct and indirect taxation. As regards the Amendment itself may I say that the effect of reducing the rate by 6d. in the £ would be to rob the revenue in the current year of something like £20,000,000. I feel sure that no further argument in reply to the Amendment is needed on that head, especially as we have rejected other Amendments on the ground that they would have involved losses not exceeding £75,000.

The right hon. Gentleman having made this proposal proceeded to deal with the question of the relative weight of direct and indirect taxation. In the past, Chancellors of the Exchequer have usually taken this opportunity of saying something on that subject. In the old days in our financial Debates there used to be a strong feeling that the proper proportion for this country was 50 per cent. from direct taxation and 50 per cent. from indirect taxation, but I am not aware that there was, at any time, any particular value in that allocation. After all, the underlying problem is to achieve what ought to be the object of all taxation—to get as near as possible to strict ability to pay. Whatever may be said for indirect taxes, there is not the least doubt that they wander away from that principle, and wander away from it in a very dangerous manner, when applied, not so much to the comforts or luxuries of life as to the necessary articles, or those conventional necessaries on which millions of people depend. It is common ground that people pay not only the indirect taxation imposed upon those commodities but something more, which is intercepted by middlemen or other interests at various points along the line. In other words, there is not taken out of the pockets of the taxpayer merely what the Chancellor of the Exchequer takes, but in a very large number of cases something more, and that has always been a part of the attack upon indirect taxation.

I propose to give the House some figures. Comparing the year 1924 with 1931 as at present estimated, we find, in regard to this question of indirect and direct taxation, that in 1924 the old balance had altered to such an extent that we were raising about 67 per cent. of our revenue from direct taxation and about 33 per cent. from indirect taxation. During the intervening seven years, notwithstanding the changes introduced in successive Budgets, there has been very little change in that respect. For this year 1931, as estimated, direct taxation will give us about 66.66 per cent., and about 33.34 per cent. will be derived from indirect taxation, so that during that time no great change has taken place.

There is one other point that was made by the right hon. Member for Antrim, which I thought at the time corresponded very closely to a great deal of the argument that has been quite properly made in the movement to which we on this side of the House belong. We have always conceded that it is desirable that people should know exactly the amount of taxation which they pay, and there is no doubt that direct taxation in many respects comes nearer to the achievement of that form of economic or fiscal education that indirect taxation can ever do. Sometimes, in those moments of financial idealism which overtake us all when we are not burdened by responsibility, one has thought of a time when all taxes would be direct, and when there would be no indirect taxation save on manifest luxuries which few people would be prepared to defend. That direct taxation would, after exempting a certain level to secure a standard of life, begin at a few pence and reach up to higher sums per £. Then we should know much more directly than we know to-day what we pay annually to the State. Of course, that consideration is not before us to-night. My hard and unpleasant duty is to stick to the painful facts as they concern us in our post-War financial experience.

The right hon. Gentleman also referred to the importance of economy, but I feel that very little need be added on that subject to what was said by the Chancellor during the Budget speech. An influential committee is dealing with this subject. If I may offer one personal observation, I would say, looking back on 12 years' experience of financial Debates in this House, that to an appreciable extent the remedy lies in our own hands; and if true, as against bogus, economy is to be practised, hon. Members in all parts should take a far keener interest in the work of the Estimates Committee, the Public Accounts Committee, and even in our own Debates at the moment, which, although of first class importance, do not seem to invoke any excitement, judging from the appearance of the House now.

The right hon. Gentleman and other hon. Members also referred to the question of the taxation of company reserves, and it is part of their case in pleading for a reduction of this standard rate that we should have that consideration in mind. My hon. Friend who has just spoken has not been particularly enthusiastic about the work of the Colwyn Committee, but I must say this for the Colwyn Committee, that it reviewed this problem of exempting company reserves in some form at very great length, and it rejected the proposition. To-night I should like to say a word or two in addition to the very cautious statement—I am afraid, exceedingly cautious statement—which I made last week in our preliminary Debates. Every hon. Member will agree that it is very difficult indeed in a matter of this kind to draw the line or to say exactly what form the exemption is to take.

The Debate to-night has suggested that exemption of company reserves should cover all ordinary forms. There is not the least doubt that these reserves are put in many cases to substantial use, or are devoted to development for the purpose of more business or more economical returns. In the case of firms, the owners of these reserves not only pay the full Income Tax on their profits, but also Sur-tax in existing conditions; and accordingly, if these firms were excluded from the scope of any exemption of this character, they would be at a manifest disadvantage—indeed, under a serious injustice—as compared with the companies which are commonly in mind. For my part, I will not believe that- an artificial distinction of that kind, setting aside altogether for the moment the advantages which companies enjoy in other directions—could be drawn without opening the door to such an impressive appeal as would make the Chancellor's position under that exemption well nigh impossible. Let the House realise what is involved in a small concession of 6d. applicable to ordinary company reserves. I am advised that it would cost not less than £6,000,000 on a moderate computation, and of course that is a sum which cannot be entertained under existing conditions.

I do not want to proceed altogether on a negative note, and there are one or two things which could be said which are a partial reply to the case that has been put. Hon. Members are making much of the difficulty of finding the necessary resources for industrial development. To the extent to which reserves are taxed, there is something to be, said for that complaint, but if I pass for a moment to the ordinary tasks of industrial reconstruction and reorganisation, to which my hon. Friend who has just spoken and others have alluded, we are advised on the very highest authority that for all sound schemes at the present time the necessary finance will be forthcoming. That is the declaration of the Securities Management Trust and the Bankers' Industrial Development Company. They say quite plainly that, if these schemes are sound, the necessary money will be provided, but hon. Members must observe that there is a great deal of misunderstanding regarding many of these propositions. Of course, there are private undertakings not associated with the Bank of England which are engaged in a similar provision.

There is a great deal of misunderstanding as to the form that these requests take, and as to what it is proposed to do with the money. Much of that misunderstanding arises, not on the rate of the taxation at all, but because there is a desire to get financial provision merely to compensate existing interests, which these authorities are not prepared to do under existing conditions. Over and over again in our discussions on the application of finance to industrial reconstruction and reorganisation, we have been confronted with that difficulty, and I beg the House to believe that it is not a difficulty which is created by the Government. It is not due to our Socialist principles or anything of that kind. It is the view taken by high financial authorities in this country, and they say that you will actually penalise reorganisation if you put money in merely to be taken out. That is closely related to a good deal of the discussion which we have had to-night.

One other point, again associated with this proposition for exempting these company reserves, is the question of depreciation, renewals and other allowances. We reviewed that at great length in the Royal Commission on Income Tax in 1919, and in the past we have frankly conceded that we should like to see worked out as a business proposition—and this has an important bearing upon unemployment—a plan or a programme providing equitably and fairly for depreciation, renewals and the rest. A good deal of inquiry has been made into that question, and also, of course, into this matter of the exemption of company reserves, and I must say quite frankly to the House that we are not in a position to commit the Chancellor of the Exchequer to anything in this financial year, or to hold out any promise at all. All we are able to say is that he appreciates the importance of those points, that the inquiry is proceeding, and that, if circumstances are better in future, he may be able to take some steps; but I have withheld not one word of the difficulty of making the concession, and not a word of promise has been given that he can do anything in this financial year.

Two hon. Members referred to the forthcoming publication of the report of the Macmillan Committee. My hon. Friend the Financial Secretary has already informed the House that this committee has been very active. It has held more than 70 meetings, and it is now engaged in the drafting of its report, but both the Chancellor of the Exchequer and the Financial Secretary say that they cannot press the committee to issue that report at any given date, having regard to the great importance of the task upon which it is engaged, and what, as an outsider, I should think is the extreme delicacy of a great deal of its investigations. We cannot give any pledge as to the date of the publication of that report, but I think I have said enough when I say that they are now actively engaged on the draft, and presumably at some time in the near future the document will be available.

9.0 p.m.

There is only one other consideration which I should like to add, and it is of quite a general nature, relating to our national income and the burden of tax which it is bearing at the present time. We have nothing to gain by idle taik of national bankruptcy or disaster, or anything of that description, and we have to be extremely guarded in the references we make even to the so-called exhaustion of the power of direct taxation. All references of that kind have a bearing upon our national and industrial position, and we make no apology for trying always to put the best face on the situation, although we recognise the difficulties, because we shall not help by writing down by one copper our national or our industrial position. At the same time, there are certain changes in our national income to which reference might be made in reply to the right hon. Gentleman who opened this Debate. In recent years the aggregate income of this country has been computed at round about £4,000,000,000. In passing, I would say a word about its distribution. Of that vast sum not more than about £1,600,000,000, much less than one-half, went to the great majority of the people classed as wage-earners. That is a very important consideration. They have borne their part, believe me, in the taxation of recent years. They have made very heavy sacrifices over a wide area. It is necessary to say that to-night, by way of reference, when we hear about taxation being concentrated on a certain limited class in the community. After all, that direct taxation on income does not fall on any person unless there is an income on which it has to be paid. The income has been received and the taxation is applied properly and effectively, which is the thing that really matters. Of the 2,250,000 Income Tax payers, probably less than one-half pay at the standard rate now in force.

But this is what I really want to mention, that the provisional figures for the year 1930, which was, of course, a year of profound depression, show the national income to have fallen by between £300,000,000 and £400,000,000. Part of that fall will rest, I regret to say, on the great wage-earning masses of this country, who have already made a serious contribution, in their reduced wage level; the rest will fall on the professional and business people. When we take a fact of that kind into account, and remember the great burden of our national debt, about £7,500,000,000, and the fact that probably, unless there is a change, we shall be fighting a long battle with that debt for the whole of the remainder of this century, the circumstances of our country will impress many people as being grave. Therefore, we say that taking everything into account this is the best proposition which can be made in a year of undeniable difficulty. This is a Budget which has involved the minimum of change, and no concession can be made in Income Tax or indirect taxation without a very serious loss of revenue, and the inevitable result that we could only make that good by passing the burden on to the shoulders of members of the community much less able to bear it. I think, in all these conditions, that is a fair defence of this proposition, and I trust the hon. Member will not press this Amendment to a Division, or, at any rate, if it is pressed, that it will be rejected by a large majority

Mr. CHARLES WILLIAMS

Anyone who listened to the right hon. Gentleman's speech will realise that the reason why we cannot have this reduction is not that the finances of the country are in capable of allowing a reduction, but because the Chancellor is unwilling to give us the economics which could easily be made and would enable the reduction to take place. I was interested to note that the right hon. Gentleman gave a figure to the House of the proportion of direct to indirect taxation during the last few years. Taxation has again been weighed in the balance against the direct taxpayer, and in favour of the indirect taxpayer. The whole of the Budget is an attempt at balancing, but it does not balance. By the Income Tax you are anticipating a sum of £10,000,000, but if you had a courageous and a determined Chancellor of the Exchequer he would make his weight felt on the Department concerned. Instead of that, the Chancellor of the Exchequer seems to be a mere sponge which the Departments squeeze as they like; otherwise the Chancellor would have come to the House of Commons and insisted upon substantial reductions in the interests of industry as a whole.

It is no good the Chancellor of the Exchequer talking about economy. Only this morning, upon a Committee upstairs, we had a Minister advocating increased expenditure. Already there are prospects of two or three Supplementary Estimates, and all these within a week of the introduction of the Budget. Now the President of the Board of Trade tells us that he cannot do anything to help us in the direction of this Amendment. The Chancellor of the Exchequer told us not long ago that there is plenty of money in the country for establishing new industries, provided that they are sound. There has always been money available for a sound and safe industry in which you are certain to make a profit. But that is not the way in which our great industries have been built up. That is not the way in which the coal industry and our foreign trade were built up. In the past, our success in trade has been achieved by sending our representatives abroad filled with the desire to enter into new lands to build up new enterprises on a chance and not upon a certainty. That is what brought about success, and not the person who just wanted his 5 per cent.

Every business man will tell you to-day that unless you have an absolutely safe proposition very little spare money will be invested. If we do not have a real revival of trade and a real demand for cash, we shall soon use up our reserves and there will be a shortage of capital. The reason for this state of things is that we have been eating up our reserves at a rate out of all proportion to the development of the population and the development of the needs of the people. This question is very closely connected with the Income Tax, and you cannot hope to improve the standard of life unless you have capital reserves on which to draw to enable wages to be paid. It is only by encouraging the big and small companies and trading enterprises of every sort and kind to put the maximum amount of their profits into their reserves that you can hope to absorb the people who are unemployed.

I am not going at any length into the question of the ability of the direct taxpayer to pay, because that is one of the subjects which you can argue from one side or the other, but as far as I understand it we have in this country a, burden on the direct taxpayers far higher than any other country in the world. For practical purposes direct taxation is a burden directly placed upon the back of the trading community, and I think the arguments which have been put forward from this side of the House clearly show that we cannot hope to see any real development in the country unless those burdens are adjusted. Whether the Opposition decide to divide on this Amendment or not, I feel certain that if the Chancellor of the Exchequer made up his mind to accept the Amendment, he would see in the course of a comparatively short time that it would give such an encouragement to trade and industry that the yield of taxation would be higher.

I have never accused the Chancellor of the Exchequer, the President of the Board of Trade or the Financial Secretary to the Treasury of not having great courage, but on this occasion I ask them to take their courage into both hands and accept the Amendment. The Amendment is a perfectly reasonable and safe proposal, and it is no good saying that, if it is not accepted, the Budget will not balance. The Budget never has balanced. I say that the Government could do what we are asking them to do by forcing the various Government Departments to cut down their expenditure. If they would do that, it would be very easy to make this very small reduction at the present time.

Sir GERALD HURST

It is difficult to see how anyone representing an industrial constituency can oppose this Amendment. I do not think that there are more than a few hundred people who pay Income Tax in my constituency, but the effect of the heavy and intolerable burden of direct taxation extends far beyond the orbit of those who pay Income Tax, and the £20,000,000 represented by sixpence in the £ on the Income Tax is a burden not only on the immediate taxpayers, but upon the whole community. Several points have been made by hon. Members on this side with a view to showing how industry is handicapped by high direct taxation. It has been pointed out beyond challenge that a high Income Tax prevents industry from extending, from buying new plant, from starting new trades and opening up new branches of commerce.

Undoubtedly the greatest handicap which high direct taxation places upon industry is the inability of industry in those circumstances to build up reserves. I agree with the President of the Board of Trade as to the difficulty of discriminating between limited liability companies and private firms, but this Amendment does not deal with the exemption of any particular body of taxpayers. All this Amendment is aimed at is a reduction of the general burden of the Income Tax, and there is no doubt that the high rate of Income Tax has had a deplorable effect on the ability of private firms and companies in regard to the building up of reserves. In no part of the country has this handicap been more severe than in Lancashire. At the present time, in the wilderness of desolation represented by East Lancashire, where two-thirds or three-fourths of the mills are closed, the few spinning companies that are able to keep afloat are those which are lucky enough to have built up reserves. In Manchester to-day, when one business house after another is failing and dismissing employés, those firms which are lucky enough to have capital resources are alone able to weather the bad times. Experience shows that ft is vital for the future of industry in England that firms should be able to build up reserves, and that the Income Tax should not be so high as to prevent people from putting money by against a rainy day. At the present time it is impossible, owing to the high taxation, for the ordinary business concern to place any money to reserve.

Hon. Members opposite labour under a fallacy when they think that the disability which high direct taxation places on industry is placed on one class alone. It is placed on all classes, and it is a commonplace of business experience that the higher direct taxation is, the harder it is for our industry to hold its own. If that is true, and I think most reasonable men will agree that it is, with regard to our country in competition with less taxed trades in other countries, it is equally true with regard to the ordinary Income Tax payer at home. The less money he has with which to buy, the worse it is for those from whom he would buy. If he pays money in taxes, it goes in unproductive expenditure[HON. MEMBERS: "Social services!"] You may call them social services, but it also goes in employing valuers at a cost of £1,500,000 to value the land of the country, and that is simply sinking money in unproductive expenditure. If you build roads in the Liberal way, it is the same. But if people buy goods which are the product of industry, they do good to their fellow citizens, and, instead of throwing money into a dead end, they are placing their resources at the service of other industries. [Inter ruption.] Many of the arguments of hon. Gentlemen opposite represent what I might describe as primary economic fallacies. The hon. Member for Leigh (Mr. Tinker) spoke about high taxation as being extraordinarily good because it led to equality in wealth. He is wrong; it leads to equality in poverty. You do not make the poor richer by taxing rich men engaged in industry. If you take money out of industry and divert it to unproductive expenditure, you diminish the wage fund and depress all classes in the country. No nation has ever been taxed into prosperity. You may tax the rich into poverty, but you do not thereby raise the standard at which the poor live.

Mr. TINKER

If I might interrupt the hon. and learned Gentleman, I spoke of direct taxation on the backs of the rich, not of high taxation.

Sir G. HURST

Unfortunately, all direct taxation at the present time is high. The Death Duties are high, and the Income Tax is high. We are now dealing with the Income Tax. It is true that some indirect taxes may be of the greatest value to the community by increasing the demand for British labour, but, unfortunately, we are not dealing with indirect taxation, but with the Income Tax, and high direct taxation cannot make any class wealthy, but tends to raise the cost of production and to diminish the standard of living among all classes in the community. The hon. Member does not believe in economy at all. He seems to think it does not do any good to the country if people have savings. I wish that the President of the Board of Trade, who is interested in and believes in sound economic theory, would try to impress upon his fellow Socialists the importance of economy, the value of savings and the error of over taxation. It is only by accepting these cardinal principles of political economy that the country can be made prosperous.

The President of the Board of Trade is however not always very orthodox, because he said that in our attacks on the ill-effects of high taxation we are disclosing such a bad state of affairs in our country as to depress the national credit. You do not depress the national credit by telling the truth, but you do when you try to camouflage the real state of the country. It is much the best to realise that at present we are living beyond our income, that in many cases we are living upon our capital, and that, if we go along the road to higher taxation, which the hon. Gentleman opposite wishes to take, that is the way which leads to depression of the national credit and the real destruction of our financial solvency.

It is an error to say that Parliament has committed itself to a high rate of expenditure, and that therefore the money must be raised, and this is the only way in which it can be raised. There are two objections to the view which the President of the Board of Trade has put forward. In the first place, we are not committed as a country to this high rate of expenditure, because the Conservative party, representing at least half the population of the country, is in favour of economy. [Interruption.] Whether you go North or South, whether you go to Sunderland or Ashton-under-Lyne, or whether you come to London, you will find that everyone who really understands the needs of trade and industry to-day is against this high rate of expenditure and of taxation. In the second place, we do not accept the view that it is only by an Income Tax of 4s. 6d. in the £ that we can meet the national expenditure. There is another way, which has been outlined before the House, and which, instead of reducing will increase employment; which, instead of destroying the national wealth, will add to it. On these grounds I hope that, the Amendment will be taken to a Division, and that the House will be able to give its views upon an Amendment which, if carried, would be regarded as a blessing by three-fourths of the people of this country.

Sir ARTHUR STEEL-MAITLAND

I only rise because of some of the remarks of the President of the Board of Trade, and some points of information which be did not give and which, perhaps, the Financial Secretary to the Treasury will supply. I would like to say what a perfectly invaluable representative the Chancellor of the Exchequer must have in the President of the Board of Trade. He talked of cautiousness the other day, and said he was going to give us some more information to-night about reserves. I have never known cautiousness carried to the extreme that the President of the Board of Trade has shown this afternoon. His reply, like the discourse of the Scottish minister, fell under three headings. In the first place, he could not give any undertaking at all as to whether any allowance would be given for the reserves of companies; but at the same time, when the statement could be made, he wanted us also to be assured that, so far as his own opinion was concerned, he was very doubtful whether there ought to be any allowance to limited companies as regards their reserves; and finally, as the question was being considered by a Committee at present, he would not like to suggest that the Committee should be hurried in its deliberations, or that we should expect results from it too soon. At last he gave us a ray of hope when he said that it was in process of writing its report, though it ought not, of course, to be hurried in that process. That was the degree of encouragement which we got as to the possibility that some allowance might be made on the profits which companies put to reserve.

There is another point about which the right hon. Gentleman gave us no information. It is really an important one, and I ask the Financial Secretary to the Treasury whether he can fill the gap. It. arose out of a remark made by the hon. Member for Leigh (Mr. Tinker). He argued for a redistribution of the wealth of the country in an eloquent speech upon models which we have heard not infrequently from Members of the other side, suggesting it should be achieved by means of high direct taxation. He said it was perfectly clear that there was a lot of money going about the country which could be redistributed, because when public loans were offered on advantageous terms, very large applications were made. If the hon. Member will look into past history, he will find the fact that peculiarly large applications are made for Governmental and other public loans on good terms is a characteristic of stages of acute industrial depression. That is the case at this moment, and it is so equally in all moments of great industrial depression. I almost hesitate to trouble the House with the reason, but I think it is obvious that when people have very little confidence in industry itself they, quite naturally, keep what savings they have to make application for Government loans, which they think are more certain and in which, in a period of lack of confidence, they can still put their savings. That is the only reason why at this moment, public loans are over-subscribed to a degree you never would get if industry were prosperous.

This Debate has taken the line of the effect of high direct taxation and, in particular, high Income Tax, on industry and production, and a good many arguments have been adduced on both sides of the House. I should like to ask the Financial Secretary a question which I put at Question Time, but to which I have really received no answer. Putting the situation quite briefly, the production of the country is broadly devoted to producing two different classes of commodities—those, which we consume and which are used up and done with, and those which are called producers' goods, and which go into capital and are used for reproductive purposes. It is perfectly obvious, for the well-being of the country as a whole and of all classes of the community, we have not got to sacrifice the future for the present. If you have too much of the productive effort of the country devoted to commodities which are consumed at once, the productivity of the future is sacrificed to the present. It is perfectly clear that there should be a balance between the two.

The whole point is whether there has been enough savings of the country put to reproductive purposes? In the Colwyn Committee report, which has been quoted so frequently this evening, a calculation was made of the national savings in any year which could be used for reproductive purposes. They came to the conclusion that these savings amounted to about £500,000,000 a year. It is essential, if we are to know the present industrial and financial state of the country, that we should have some knowledge of that very important factor at present. I put questions about that to the Financial Secretary, and he said he would go into it. Calculations were made on the Colwyn Committee by private individuals, and I have made inquiry of them as to whether they have themselves made similar calculations since. They have not done so, but it is the kind of information which should be at the disposal of any Department at the head of the finance of the nation. In all probability, it is the kind of point which has been inquired into by the Committee which is now sitting, and which is soon to report. It has probably got information upon it which it would be glad to place at the disposal of the Treasury, and I would ask the Financial Secretary if he has any information on this point which he can give to the House?

Mr. PETHICK-LAWRENCE

I rise to respond to the question of the right hon. Gentleman. With regard to the Mac millan Committee, its sittings are private and I should not consider it right to question them on evidence they receive' We must await their report. I cannot go beyond that.

Sir A. STEEL-MAITLAND

Was no evidence taken in public?

Mr. PETHICK-LAWRENCE

No, the evidence before the Committee is private, and, as far as I am aware, none of it has been published.

Major ELLIOT

Is it not the fact that in one case at least the evidence has been published?

Mr. PETHICK-LAWRENCE

The hon. Gentleman suggests that the evidence of one witness, at any rate, has been published. My answer is that I am not aware of that fact, though it is perfectly open to any individual who gives evidence before the committee to publish his own evidence. Apart from that, the evidence given before the committee is not published. Therefore, I have no means of ascertaining any such figure from that source. On the more general question, the position is this: Some of the data on which the figure of £500,000,000 was based can be brought up-to-date, but one of the essential factors is a conjecture as to certain proportions which was made by a private individual and which enabled him to conjecture this result of £500,000,000. I am afraid, speaking for a Government Department, I should not feel justified in making what must be a pure conjecture in this matter. What I will do is to see whether data which are real data can be given and then hon. Gentlemen can make such conjectures as they may think fit on the data. That deals with the question which I was specifically asked. I can only say that I think probably the House will reject this Amendment, which would mean a lose of revenue of £20,000,000 in the current year and a still larger sum assuming the reductions were effected in a full year.

Captain CROOKSHANK

I should like to ask one question. I understood the President of the Board of Trade was not able to tell us anything about the taxation of company reserves, partly because the Chancellor of the Exchequer had not entirely made up his mind and partly because the Macmillan Committee had not yet reported. Is not the real reason to be found in the fact that the hon. Gentleman the Member for South-West Bethnal Green (Mr. Harris) and other Members of the Liberal party have not yet drafted their Amendment on the subject?

Question put, "That the words 'and sixpence' stand part of the Resolution."

The House divided: Ayes, 260; Noes, 145.

Division No. 231.]	AYES.	[9.35 p.m.
Adamson, Rt. Hon. W. (Fife, West)	Davies, Rhys John (Westhoughton)	John, William (Rhondda, West)
Adamson, W. M. (Staff., Cannock)	Denman, Hon. R. D.	Johnston, Rt. Hon. Thomas
Addison, Rt. Hon. Dr. Christopher	Dukes, C.	Jones, Llewellyn-, F.
Altchison, Rt. Hon. Craigle M.	Duncan, Charles	Jones, Henry Haydn (Merioneth)
Alpass, J. H.	Ede, James Chuter	Jones, J. J. (West Ham, Silvertown)
Angell, Sir Norman	Edge, Sir William	Jones, Rt. Hon. Leif (Camborne)
Arnott, John	Edwards, C. (Monmouth, Bedwellty)	Jones, Morgan (Caerphilly)
Aske, Sir Robert	Edwards, E. (Morpeth)	Jowett, Rt. Hon. F. W.
Attlee, Clement Richard	Egan, W. H.	Jowitt, Sir W. A. (Preston)
Ayles, Walter	Elmley, Viscount	Kedward, R. M. (Kent, Ashford)
Baker, John (Wolverhampton, Bilston)	Evans, Capt. Ernest (Welsh Univer.)	Kelly, W. T.
Baldwin, Oliver (Dudley)	Foot, Isaac	Kennedy, Rt. Hon. Thomas
Barnes, Alfred John	Freeman, Peter	Kinley, J.
Barr, James	Gardner, B. W. (West Ham, Upton)	Knight, Holford
Batey, Joseph	Gibbins, Joseph	Lang, Gordon
Benn, Rt. Hon. Wedgwood	Gibson, H. M. (Lancs, Mossley)	Lansbury, Rt. Hon. George
Bennett, William (Battersea, South)	Gill, T. H.	Lathan, G.
Benson, G.	Gillett, George M.	Law, Albert (Bolton)
Bevan, Aneurin (Ebbw Vale)	Glassey, A. E.	Law, A. (Rossendale)
Birkett, W. Norman	Gossling, A. G.	Lawrence, Susan
Blindell, James	Graham, D. M. (Lanark, Hamilton)	Lawson, John James
Bondfield, Rt. Hon. Margaret	Graham, Rt. Hon. Wm. (Edin., Cent.)	Lawther, W. (Barnard Castle)
Bowerman, Rt. Hon. Charles W.	Gray, Milner	Leach, W.
Broad, Francis Alfred	Greenwood, Rt. Hon. A. (Colne)	Lee, Frank (Derby, N. E.)
Brockway, A. Fanner	Grenfell, D. R. (Glamorgan)	Lee, Jennie (Lanark, Northern)
Bromfield, William	Griffiths, T. (Monmouth, Pontypool)	Lees, J.
Brooke, W.	Groves, Thomas E.	Lewis, T. (Southampton)
Brothers, M.	Grundy, Thomas W.	Lindley, Fred W.
Brown, C. W. E. (Notts, Mansfield)	Hall, G. H. (Merthyr Tydvil)	Lloyd, C. Ellis
Brown, Rt. Hon. J. (South Ayrshire)	Hall, J. H. (Whitechapel)	Logan, David Gilbert
Buchanan, G.	Hamilton, Mary Agnes (Blackburn)	Longbottom, A. W.
Burgess, F. G.	Hamilton, Sir R. (Orkney & Zetland)	Longden, F.
Burgin, Dr. E. L.	Harbord, A.	Lovat-Fraser, J. A.
Buxton, C R. (Yorks. W. R. Eltand)	Hardie, George D.	Lunn, William
Caine, Hall-, Derwent	Harris, Percy A.	Macdonald, Gordon (Ince)
Cameron, A. G.	Hastings, Dr. Somerville	Macdonald, Sir M. (Inverness)
Cape, Thomas	Haycock, A. W.	McElwee, A.
Carter, W. (St. Pancras, S. W.)	Hayday, Arthur	McEntee, V. L.
Chater, Daniel	Hayes, John Henry	McKinlay, A.
Clarke, J. S.	Henderson, Right Hon. A. (Burnley)	MacLaren, Andrew
Cluse, W. S.	Henderson, Arthur, Junr. (Cardiff, S.)	Maclean, Sir Donald (Cornwall, N.)
Clynes, Rt. Hon. John R.	Henderson, Thomas (Glasgow)	Maclean, Nell (Glasgow, Govan)
Cocks, Frederick Seymour	Henderson, W. W. (Middx., Enfield)	McShane, John James
Compton, Joseph	Herriotts, J.	Malone, C. L'Estrange (N'thampton)
Cove, William G.	Hirst, G. H. (York W. R. Wentworth)	Mansfield, W.
Cripps, Sir Stafford	Hirst, W. (Bradford, South)	Marcus, M.
Daggar, George	Hoffman, P. C.	Markham, S. F.
Dallas, George	Hopkin, Daniel	Marley, J.
Dalton, Hugh	Horrabin, J. F.	Marshall, Fred
Davies, D. L. (Pontypridd)	Hudson, James H. (Huddersfield)	Mathers, George
Davies, E. C. (Montgomery)	Hunter, Dr. Joseph	Matters, L. W.
Maxton, James	Rathbone, Eleanor	Stamford, Thomas W.
Messer, Fred	Raynes, W. R.	Stephen, Campbell
Middleton, G.	Richards, R.	Strauss, G. R.
Milner, Major J.	Richardson, R. (Houghton-le-Spring)	Sullivan, J.
Montague, Frederick	Riley, Ben (Dewsbury)	Sutton, J. E.
Morley, Ralph	Riley, F. F. (Stockton-on-Tees)	Taylor, R. A. (Lincoln)
Morris, Rhys Hopkins	Ritson, J.	Taylor, W. B. (Norfolk, S. W.)
Morris-Jones, Dr. J. H. (Denbigh)	Romeril, H. G.	Thomas, Rt. Hon. J. H. (Derby)
Morrison, Rt. Hon. H. (Hackney, S.)	Rosbotham, D. S. T.	Thorne, W. (West Ham. Plaistow)
Morrison, Robert C. (Tottenham, N.)	Rowson, Guy	Tinker, John Joseph
Mort, D. L.	Salter, Dr. Alfred	Toole, Joseph
Muff, G.	Samuel, Rt. Hon. Sir H. (Darwen)	Tout, W. J.
Muggeridge, H. T.	Sanders, W. S.	Townend, A. E.
Murnin, Hugh	Sandham, E.	Vaughan, David
Nathan, Major H. L.	Sawyer, G. F.	Viant, S. P.
Naylor, T. E.	Scott, James	Walkden, A. G.
Newman, Sir R. H. S. D. L. (Exeter)	Scrymgeour, E.	Walker, J.
Noel Baker, P. J.	Sexton, Sir James	Watkins, F. C.
Noel, Buxton, Baroness (Norfolk, N.)	Shakespeare, Geoffrey H.	Watson, W. M. (Dunfermline).
Oliver, George Harold (Ilkeston)	Shaw, Rt. Hon. Thomas (Preston)	Watts-Morgan, Lt.-Col. D. (Rhondda)
Oliver, P. M. (Man., Blackley)	Shepherd, Arthur Lewis	Wellock, Wilfred
Owen, Major G. (Carnarvon)	Sherwood, G. H.	Welsh, James C. (Coatbridge)
Palin, John Henry.	Shield, George William	West, F. R.
Paling, Wilfrid	Shillaker, J. F.	Westwood, Joseph
Palmer, E. T.	Short, Alfred (Wednesbury)	White, H. G.
Parkinson, John Allen (Wigan)	Simmons, C. J.	Whiteley, Wilfrid (Birm., Ladywood)
Peters, Dr. Sidney John	Simon, E. D. (Manch'ter, Withington)	Whiteley, William (Blaydon)
Pethick-Lawrence, F. W.	Sinclair, Sir A. (Caithness)	Wilkinson, Ellen C.
Phillips, Dr. Marion	Sinkinson, George	Williams, David (Swansea, East)
Picton-Turbervill, Edith	Sitch, Charles H.	Williams, T. (York, Don Valley)
Pole, Major D. G.	Smith, Frank (Nuneaton)	Wilson, C. H. (Sheffield, Attercliffe)
Potts, John S.	Smith, Lees-, H. B.	Wilson, R. J. (Jarrow)
Price, M. P.	Smith, Rennie (Penistone)	Winterton, G. E.(Leicester, Loughb'gh)
Pybus, Percy John	Smith, Tom (Pontefract)	Wise, E. F.
Quibell, D. J. K.	Smith, W. R. (Norwich)
Ramsay, T. S. Wilson	Sorensen, R.	TELLERS FOR THE AYES.—
		Mr. B. Smith and Mr. Charleton.
NOES
Acland-Troyte, Lieut.-Colonel.	Davies, Maj. Geo. F. (Somerset, Yeovil)	Meller, R. J.
Albery, Irving James	Despencer-Robertson, Major J. A. F.	Merriman, Sir F. Boyd
Allen, Sir J. Sandeman (Liverp'l., W.)	Duckworth, G. A. V.	Milne, Wardlaw-, J. S.
Atholl, Duchess of	Edmondson, Major A. J.	Morrison, W. S. (Glos., Cirencester)
Atkinson, C.	Elliot, Major Waiter E.	Muirhead, A. J.
Baldwin, Rt. Hon. Stanley (Bewdley)	Erskine, Lord (Somerset, Weston-s-M.)	Nicholson, O. (Westminster)
Balfour, Captain H. H. (I. of Thanet)	Falle, Sir Bertram G.	Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)
Beamish, Rear-Admiral T. P. H.	Ferguson, Sir John	Oman, Sir Charles William C.
Betterton, Sir Henry B.	Fremantle, Lieut. Colonel Francis E.	O'Neill, Sir H.
Bevan, S. J. (Holborn)	Ganzoni, Sir John	Percy, Lord Eustace (Hastings)
Bird, Ernest Roy	Gault, Lieut.-Col. A. Hamilton	Peto, Sir Basil E. (Devon, Barnstaple)
Boothby, R. J. G.	Gibson, C. G. (Pudsey & Otley)	Power, Sir John Cecil
Bourne, Captain Robert Croft	Grace, John	Ramsbotham, H.
Bowater, Col. Sir T. Vansittart	Graham, Fergus (Cumberland, N.)	Remer, John R.
Bowyer, Captain Sir George E. W.	Gunston, Captain D. W.	Reynolds, Col. Sir James
Boyce, Leslie	Hacking, Rt. Hon. Douglas H.	Richardson, Sir P. W. (Sur'y, Ch'te'y)
Bracken, S.	Hall, Lieut.-Col. Sir F. (Dulwich)	Roberts, Sir Samuel (Ecclesall)
Brass, Captain Sir William	Hamilton, Sir George (Ilford)	Ross, Ronald D.
Broadbent, Colonel J.	Hanbury, C.	Ruggles-Brise, Colonel E.
Brown, Col. D. C. (N'th'l'd., Hexham)	Hannon, Patrick Joseph Henry	Russell, Alexander West (Tynemouth)
Brown, Brig.-Gen. H. C. (Berks, Newb'y)	Harvey, Major S. E. (Devon, Totnes)	Salmon, Major I.
Buchan-Hepburn, P. G. T.	Heneage, Lieut.-Colonel Arthur P.	Samuel, A. M. (Surrey, Farnham)
Burton, Colonel H. W.	Hennessy, Major Sir G. R. J.	Sandeman, Sir N. Stewart
Butler, R. A.	Herbert, Sir Dennis (Hertford)	Shepperson, Sir Ernest Whittome
Campbell, E. T.	Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.	Smith, Louis W. (Sheffield, Hallam)
Carver, Major W. H.	Howard-Bury, Colonel C. K.	Smith, R. W.(Aberd'n & Kinc'dine, C.)
Castle Stewart, Earl of	Hudson, Capt. A. U. M. (Hackney, N.)	Smith-Carington, Neville W.
Cautley, Sir Henry S.	Hunter-Weston. Lt.-Gen. Sir Aylmer	Smithers, Waldron
Cazalet, Captain Victor A.	Hurst, Sir Gerald B.	Somerville, A. A. (Windsor)
Chamberlain, Rt. Hon. N.(Edgbaston)	Inskip, Sir Thomas	Southby, Commander A. R. J.
Christle, J. A.	Iveagh, Countess of	Stanley, Lord (Fylde)
Clydesdale, Marquess of	Jones, Sir G. W. H. (Stoke New'gton)	Stanley, Hon. O. (Westmorland)
Cobb, Sir Cyril	Kindersley, Major G. M.	Steel-Maitland, Rt. Hon. Sir Arthur
Colfox, Major William Philip	Knox, Sir Alfred	Stuart, Hon. J. (Moray and Nairn)
Colman, N. C. D.	Lamb, Sir J. Q.	Sueter, Rear-Admiral M. F.
Colville, Major D. J.	Law, Sir Alfred (Derby, High Peak)	Taylor, Vice-Admiral E. A.
Courtauld, Major J. S.	Leighton, Major B. E. P.	Thomas, Major L. B. (King's Norton)
Courthope, Colonel Sir G. L.	Lewis, Oswald (Colchester)	Thomson, Sir F.
Crookshank, Capt. H. C.	Llewellin, Major J. J.	Thomson, Mitchell-, Rt. Hon. Sir W.
Croom-Johnson, R. P.	Locker-Lampson, Rt. Hon. Godfrey	Tinne, J. A.
Culverwell, C. T. (Bristol, West)	Long, Major Hon. Eric	Titchfield, Major the Marquess of
Cunliffe-Lister, Rt. Hon. Sir Philip	McConnell, Sir Joseph	Todd, Capt. A. J.
Dalkeith, Earl of	Maitland, A, (Kent, Faversham)	Train, J.
Dairymple-White, Lt.-Col. Sir Godfrey	Makins, Brigadier-General E.	Vaughan-Morgan, Sir Kenyon
Davidson, Rt. Hon. J. (Hertford)	Marjoribanks, Edward	Ward, Lieut.-Col. Sir A. Lambert

Warrender, Sir Victor	Wilson, G. H. A. (Cambridge U.)
Waterhouse, Captain Charles	Windsor-Clive, Lieut.-Colonel George	TELLERS FOR THE NOES.—
Wayland, Sir William A.	Winterton, Rt. Hon. Earl	Sir George Penny and Captain
Wells, Sydney R.	Womersley, W. J.	Wallace.
Williams, Charles (Devon, Torquay)	Young, Rt. Hon. Sir Hilton

Sir HILTON YOUNG

I beg to move, in line 4, after the word "thousand," to insert the words "five hundred."

The effect of this Amendment would be to raise the lower limit at which Super-tax becomes chargeable and to exempt from Super-tax, now called Surtax, all incomes between £2,000 and £2,500 a year. The general purpose, of course, is to lighten the burden of direct taxation, in this case not upon the whole body of Income Tax payers but upon a particular class which I shall hope to satisfy the House, both in the interest of the community and in the name of equity, particularly deserves such a re lief. I am quite aware that it has become almost common form, particularly amongst hon. Members opposite, to treat Super-tax payers as if they alone amongst the taxpayers of the country were deserving of no consideration, and as if any tax upon them was almost a matter of jest. I do not think one need be in the least afraid of facing up to what one might call the unpopularity of any Motion in favour of the Surtax payer, in the first place because no class of our fellow citizens, however fortunate and industrious they may be, are deserving of no consideration at all, and they are as much entitled to equitable treatment as any other class. As a matter of fact, on bare grounds of equity the Surtax payer has some special cause of complaint on historical grounds All through this century, whenever the country has been in difficulties, Chancellors of the Exchequer, by following the path of least resistance, have turned to the Surtax payer for relief. Whenever taxation has gone up they have suffered, and when it has come down they have not benefited.

But I would base the case for the Amendment on the wider grounds of advantage to the community as a whole. The class which it is proposed to relieve is not the class which provokes the special hostility of hon. Members opposite, the class of the big, the astronomical income. It is not the £20,000, £30,000 or £50,000 a year class at all. The effect would be slightly to flatten the curves of the incidence of direct taxation, com- posed of Income Tax and Surtax, for the lower range of incomes, particularly those between £2,000 and £2,500 a year and, conversely, to make the curve of the incidence of the tax slightly steeper on incomes above that limit. Very little benefit from this relief would be derived by very large incomes. The benefit that would be derived would be by those incomes between £2,000 and £2,500 a year in all.

What is the typical class of the Surtax payer between those incomes? I believe it comprises a very large number of those upon whose industry, enterprise and brains the community most signally depends. It comprises, for instance, as to a large percentage of the class the skilled technical advisers of the nation, the more able and successful technicians engaged in professions. It comprises again, as to a very large percentage of it, the more successful and able executive officers in charge of the businesses of the country upon whose enterprise and energy the country so largely depends. It comprises those who are, as it were, the flower of the professional classes. In addition to that it comprises, as to a very large percentage of it, those who are engaged in business on their own account, in the busineses of shopkeeping, the larger and more successful shops and other small merchant businesses. That, again, is a class which is, as it were, the seeding ground whence the growth of big businesses springs. The real substance of the Amendment is, I think, contained in this consideration. I believe it will commend itself to all those who have come to see that under present conditions we have made a dangerous divorce between effort and the reward of effort, [Interruption.]

I should like to think that the applause which that expression receives from the benches opposite comes from a precise similarity of opinion between myself and them but, of course, it does not. What is in their mind is not the same thing as is in my mind, though the two opinions are by no means mutually exclusive. My argument does not in the least run counter to what is in their minds about the redistribution of the general fruits of industry. On the contrary, I point their attention to a particular class which is of exceptional importance for its equipment in education and its selection in the battle of the survival of the fittest for brains and energy, and, as regards that class, the burden of taxation imposed upon it has now gone so far in reducing the reward of toil and enterprise that it is acting as a dangerous poison in the veins of the nation. I do not think it is possible to exaggerate the evil effect which that is having upon the general industrial life of the country. If it were possible to point to one single case which more than any other is at the root of our difficulties in competition with our foreign rivals, it is this case of the grinding burden of such taxation as this, which takes the life out of the enterprise and initiative of those to whom we naturally look for those qualities. That is the basis for this argument.

I should like to point to a particular instance which affects the Surtax only and which makes it above all others a tax from which relief should be given when there is an opportunity of doing so. It is a circumstance which I know from the speech of the Chancellor of the Exchequer when opening his Budget. He said he could rely upon the undiminished income from Surtax in the coming year because Surtax is based upon a statutory income and is, therefore, unaffected by the depressed conditions of the present year. That means that, good times or bad times, the Surtax payer has to stump up, in fact that the burden of his taxation is unrelated to the means which he has to bear it. The Chancellor referred to that circumstance with pride. He ought to have referred to it, as a scientific taxer, with shame. It is a bad feature in a tax that there should be no relief to this unfortunate class of taxpayers because of the bad times through which they are passing and the smaller incomes which they are making. It would be appropriate that that circumstance should be met by some such relief as that proposed in the Amendment.

There is another reason which ought to make a very strong appeal to the right hon. Gentleman if he has any realisation of what his Budget does. The Surtax payer to whom this Amendment would bring relief is precisely that class which will suffer most from the anticipation of Income Tax proposed this year. That anticipation of Income Tax the Committee, when it has got used to the idea, when it has stripped away the trimmings, clearly perceives to be the imposition of a fresh heavy burden of direct taxation upon Income Tax payers of the professional class and the small business class in the current year. It is equivalent to the addition of a rate of Income Tax of 1s. l½d. in the pound. [HON. MEMBERS: "No!"] Some hon. Members have not yet seen through the smoke cloud which the Chancellor of the Exchequer raised, but the general mind of the House seems to have become more clear on the subject. The burden will fall upon this class at a time of the year when we know that it will be exceptionally hard for them to bear it. I cherish the hope that the Chancellor of the Exchequer and the Financial Secretary will also have begun to understand what an exceptional burden they are imposing on these Income Tax payers. "Hope springs eternal," and I hope that they may be prepared at the last moment to rectify the inequity of that burden by making some compensating concession. No concession could be more appropriate than the one which I now propose. It would not be quite co-extensive with the class upon whom the first burden falls, but it would cover a great many cases that will suffer from that burden.

The Amendment is only a special case of the wider Amendment which we have just discussed. The arguments which were used on the Amendment for a general reduction of the Income Tax apply equally well in this case, and particularly the argument that the country needs funds for the re-equipment, the reorganisation and the extension of its industries, and that those funds are being drawn away down the unprofitable sink of direct taxation and extravagant expenditure. In this particular case the argument is strengthened because this class of Surtax payer is one that provides more richly than any other the funds or savings that are essential for the purposes of the country, and that if any concession is to be given in order to increase the investment fund it cannot be given to a class from which more benefit would be derived in that particular respect.

10.0 p.m.

Mr. PETHICK-LAWRENCE

It will be well if I intervene at once to explain what the effect of this Amendment would be. The right hon. Gentleman was, I think, under the impression that if my right hon. Friend and I were able to concede his point and the Amendment was carried that the effect would be that the Surtax for this year would be along the lines that he indicated. That is far from being the case. The Resolution which decides the Surtax payable in the current financial year is not the second Resolution but the third Resolution, to which we shall come in a little while. I fully appreciate the fact that this Surtax proposal, which was introduced by the right hon. Member for Epping (Mr. Churchill), is one of extreme complexity, and it is not to be wondered at if the right hon. Gentleman in moving the Amendment was under a misapprehension as to its effect. Let me deal with that point. The third Resolution imposes the rates of Surtax for the existing year, which are paid in the existing year and are due on the 1st January next. The Resolution which we are now discussing merely postpones until a future occasion the payments of persons whose income is in excess of a certain amount, and directs Parliament in future to impose a Surtax upon them.

The effect of the Amendment, if carried, would be nugatory. If Parliament next year were to decide to revert to the £2,000 figure, the fact that the Amendment had been carried could not prevent Parliament taking that course. On the other hand, if the right hon. Gentleman's Amendment were rejected it would still be open to Parliament next year to impose rates of Surtax which would make the allowance which the right hon. Gentleman proposes. I will, however, put aside the technical point, which is very vital, and come to the substance of the right hon. Gentleman's proposal. Let us see what the effect of the proposal would be in any year in which it operated. He proposes that the figure £2,500 should be substituted for £2,000. The actual tax imposed will be a matter for the decision of Parliament at the time, but I will assume, in order to meet the right hon. Gentleman, that the wording of the tax when it comes will be in precisely the same form as it was on the last occasion. The effect of the Amendment would then be that, in the first place, the person whose income is between £2,000 and £2,500 would be exempt altogether. In the second place, with regard to the persons whose incomes are over £2,500, they would have a double advantage. They would pay no Sur-tax in reference to the £500 between £2,000 and £2,500, and the whole table of taxation would be shifted £500 on, so that at each stage they would pay a smaller proportion of tax. The consequence of that would be this—and it is something rather different from what the right hon. Gentleman led us to suppose—that so far as the 24,000 people whose incomes are between £2,000 and £2,500, are concerned, the State would lose £300,000. But with regard to the other individuals, whose income is over £2,500, they would be relieved of approximately £5,500,000. Therefore, the relief to those over £2,500 per man would be several times greater than the relief to those between £2,000 and £2,500. I am sorry to say that it is quite impossible for us to accept the Amendment, for two reasons—first of all, because if the Amendment is to achieve its purpose, it is in the wrong place, and ought to be moved on the Third Resolution, not on the Second, but, putting that technical point aside, on its merits it is quite impossible for the Chancellor either this year or in any subsequent year to forgo something like £6,000,000 of revenue.

Mr. SMITHERS

The right hon. Member for Sevenoaks (Sir H. Young) referred to the idea of the Socialist Chancellor of the Exchequer and Members of the Socialist party that by taxing the very rich people through the Surtax they were merely extracting wealth from a kind of source which would go on for ever, and distributing that wealth for social services. I only rise to give a concrete instance to show that that is not the case, and that the imposition of Surtax really hits the poorest of our people and puts men out of work. This is a case which I know to be true, of a certain individual employing 50 people in a certain business. He found that the pressure of Surtax was such that, with other industries which he had and other interests which he could not draw in, he was compelled to reduce his staff of 50 men by 20, which, at £2 a week each, comes to about £2,000, roughly, the amount by which his Surtax was increased last year. The direct effect of the Chancellor's proposal to lower the level at which Surtax should be chargeable was to put out of employment 20 men in that case.

Mr. EDE

What were they working at for £2 a week?

Mr. SMITHERS

Agricultural work, and that was 8s. above the minimum wage. I have another instance, of a much bigger concern, which employs several hundreds if not thousands of men, a big industrial works. The man who started those works built them up and all his money is in them. He does not receive any dividends except what he receives for the work, and that man is very anxious that when he dies there shall be no part of that works sold and no men shall be thrown out of employment owing to the payment of Death Duties. For that reason, he has initiated a sinking fund, or, in other words, he has insured his life to meet the Death Duties when they come. The effect of this heavy taxation is that that man's Income Tax, Surtax, and the pressure of the expense of the insurance come to 22s. in the £ on his income, and although he is a rich man and can afford to go on for a time, the point that I want to put to the Socialist Government is that the Supertax payer has been very valuable to them in helping to pay the country's bills, but there will come a time when the pressure is so great that they will be in fact killing the goose that lays the golden eggs. These rich people cannot go on bearing this unfair burden for ever, and the time will soon come when other forms of taxation will have to be found and when the Surtax payers, upon whom the livelihood and happiness of thousands of workers depend, will have to be considered more.

Mr. CHAMBERLAIN

The explanation which the Financial Secretary to the Treasury has given us of the effect of this Amendment shows that we must add to the already incomprehensible things, such as the theory of relativity and the Government's scheme of Electoral Reform, the whole subject of Super-tax or Surtax and the way in which it is imposed. I confess that I was unable quite to follow his argument that if the Amendment were carried it would affect incomes over £2,500 and would be carried right away up to the very top of the list, because, after all, as he has pointed out to us, the actual rates which are being levied upon incomes are to be such as Parliament may hereinafter determine. Therefore, it seems to me that it would be within the competence of Parliament to restore the rates so far as incomes over £2,500 were concerned, if Parliament so desired.

Mr. PETHICK-LAWRENCE

I quite agree. I think the effect of this Amendment would be nugatory, but what I said was that if the Amendment meant anything, and if we were to retain the rates otherwise as they are in last year's Finance Act, then the effect would be what I stated.

Mr. CHAMBERLAIN

I can assure the hon. Gentleman that the Amendment does mean something, and it would be quite possible for effect to be given to the meaning of the Amendment by Parliament, if it so determined, hereafter; but in view of the explanation of the Financial Secretary I would suggest to my right hon. Friend the Member for Seven-oaks (Sir H. Young) that it is not necessary to press his Amendment to a Division. I think we ought certainly to have a further discussion and a Division upon the next Amendment in the Paper dealing with line 5 in the second Resolution.

Sir B. PETO

The Financial Secretary to the Treasury did not and could not answer a single one of the cogent arguments which my right hon. Friend the Member for Sevenoaks (Sir H. Young) put to him, to the effect that the Surtax-payers with incomes ranging from £2,000 to £2,500 should not be required to pay Surtax in the coming year, particularly in view of the fact that a very large number of those same Surtax payers will be required to pay an extra quarter of their Income Tax in the same year. I feel confident that, when we come to the Finance Bill, it will not be beyond the ability of the right hon. Member for Sevenoaks to devise an Amendment which will exactly carry out his intention in moving this Amendment. The argument of my right hon. Friend the Member for Sevenoaks absolutely convinces me that there is a very strong and unanswerable case for giving some special consideration to those smaller Sur-tax payers, particularly in the present year.

I suggest two special reasons beyond the one which my right hon. Friend gave, that a very large number of these smaller Sur-tax payers are specially charged with Income Tax in the present year. The Sur-tax is based upon the Income Tax of the year before. There is always the lag of a year. As we are going from bad to worse from year to year while the present Government remain in office, the Sur-tax is a special burden, and it is one of the reasons why the Chancellor of the Exchequer told us that he could depend upon revenue from a Sur-tax much better than from the Income Tax. It really means that he can depend upon the revenue from the remains of a past prosperity more than upon anything which he can possibly devise for himself.

I also think that there is another very special reason why the particular class which the right hon. Member for Sevenoaks told us he had in mind in moving the Amendment, have a special claim to consideration. I envisage the position that by this Sur-tax, now reduced to such a low level as £2,000 a year of annual income, you are, so to speak, devising a special means of hitting upon the head the very man who is emerging from the rut and showing by his brains and ability that he is capable of doing something a little more for himself and for the nation than the great mass of his fellow citizens. If there is one class which deserves encouragement and not discouragement on the part of the Revenue Department it is precisely those men with a very moderate income, mainly men who have earned and are earning it by their brains and ability, whether it is in industry or in commerce or in the professions.

You should give them special encouragement at a time when the country needs the brains, energy and determination of the people of this country who possess those qualities. For those reasons I sincerely hope that before my right hon. Friend withdraws his Amendment he will indicate to the House that he intends to pursue this matter at a time when we can get on the Paper an Amendment which definitely will carry out the purpose that he has in mind. The purpose which he has in mind is one which ought to command the respect and the votes of all Members who wish to see us emerge from the present industrial slough of despond.

Sir H. YOUNG

By the leave of the House, I should like to say that we are obliged to the right hon. Gentleman for his assistance in making this Amendment effective. In view of what he has said, I ask leave to withdraw the Amendment in order to be able to move it at a more appropriate time.

Amendment, by leave, withdrawn.

The following Amendment stood upon the Order Paper in the name of Sir HILTON YOUNG: In line 5, after the word "thousand," to insert the words "five hundred."

Sir H. YOUNG

This is a consequential Amendment.

Mr. SPEAKER

I thought that the right hon. Gentleman particularly laid stress upon this Amendment.

Mr. CHAMBERLAIN

No, I was referring to the next Amendment.

Captain BOURNE

I beg to move, in line 6, at the end, to insert the words: but not exceeding the rates specified in the second column of the Table contained in Section nine of the Finance Act, 1930. When the Financial Secretary replied to my right hon. Friend on the last Amendment, he pointed out that in this Resolution we are determining the amount of Surtax which will fall to be assessed on the income to be derived during the financial year ending on 31st March next year, but which will actually become payable a year later. It is only fair, if we are putting a tax upon a body of taxpayers in respect of income to be derived in the current year, that their full liability for tax should be announced at the time when the taxation is imposed. The practice has grown up under the arrangements for Surtax, which are very complicated, that this House passes a Resolution defining the field but not the weight of the tax in one year, and implements that Resolution by passing a second Resolution defining the weight of the tax in the second year. I was rather surprised to hear the Financial Secretary say on the Amendment of the right hon. Member for Sevenoaks (Sir H. Young) that he thought, even if the Amendment were carried, that it would be nugatory, because Parliament can alter the field of taxation as well as the weight.

I do not want to enter into a discussion of that technical point, but it seems to me that the Financial Secretary is stretching the rights of Parliament too far. By this Resolution we are definitely fixing the class of Income Tax payers who are liable to Surtax on the 1st of January, 1933, and, even if we have a legal right, I do not think that we have an equitable right to inform these people a year after their Income Tax has been paid, that they are taxable for a sum which they never realise. The point I wish to put is this: The Chancellor of the Exchequer has already stated that the limits of direct taxation have been reached. The Amendment does not limit the present amount of direct taxation; it merely states that Parliament shall not increase that amount in respect of incomes earned by the taxpayer in the current financial year, on which the liability to pay does not come on until the 1st of January, 1933. After all, it is admitted that Surtax is a pretty heavy burden. Provision has to be made between now and the date when the Surtax becomes payable, and no doubt the taxpayer will set aside part of his income to meet what he expects will be his liability, and a liability which will continue even if he dies between the end of the next financial year and the date when the Act comes into operation. He will put aside something out of his income to meet this liability; that is the only prudent thing to do.

We cannot be certain that the income which we enjoy this year will continue next year. We may easily find ourselves thinking that we shall be able to pay the Surtax out of the income of the subsequent year, when in point of fact, either because professional earnings are less or because the dividends which we are accustomed to receive are no longer paid, we are no longer able to meet that liability. I submit that the total liability of the taxpayer should be defined in the Finance Act which proposes the taxation, that the taxpayer should know the worst that is going to befall him. In theory we are levying in this Bill the taxation of this year which should end next April, and we should indicate to the taxpayer the greatest amount of burden he may have to bear, but we should not raise that taxation in respect of that year. It will be open to Parliament to raise the Surtax or Income Tax in respect of a subsequent year. No one can possibly deny the right of Parliament to do that. I think that on this occasion Parliament is under a moral obligation to define the maximum amount to be taken off any man's income for the present year, and it is for that reason that I move the Amendment.

Sir SAMUEL ROBERTS

I beg to second the Amendment.

This is a most important Amendment, because at the present time it is impossible for an individual to balance his own budget and make his income meet his outgoings when he does not know how much taxation he will have to pay. I do not know whether hon. Members opposite realise that people are at present receiving incomes and spending them who have not the slightest idea of what taxation they will have to pay upon those incomes at a later date. The whole thing is a gamble. The advantage of taxation by deduction at the source is that the individual never receives the amount of the tax and has not the temptation to spend it, but in the case of Surtax he receives the whole income and after a long period has to pay taxation upon it. The hon. and gallant Member for Oxford (Captain Bourne) spoke of the prudent taxpayer who set aside the amount of Surtax during the year in which he received the income, and had it waiting ready in the bank to pay when the Special Commissioners chose to collect it. Is there one Surtax payer in 10 who has the money ready in that way? I think most of us have to pay our Surtax out of the charity of our bankers.

It is a most unfortunate and unsatisfactory position to be taxed upon an income which has been received and spent. Everyone should know at the time of receiving income how much tax is to be paid upon it and the prudent man should at any rate be given a fair opportunity of setting aside the correct amount. At present the prudent man cannot know what he has to set aside and, in these days of increasing taxation and rapidly diminishing incomes, it is almost impos- sible for the individual to know how to balance his budget. Just as it is advisable for the State to balance its budget, so it is advisable for the ordinary individual to prepare a budget of his income and expenditure and see how he can fairly and honestly balance it. This Amendment ought to receive the consideration of the House because the present system Involves a great injustice with regard to the payment of Surtax. I am not going to put the responsibility upon any person for introducing the evil but it is an evil and one which ought to be remedied.

Mr. PETHICK-LAWRENCE

I am sorry to disappoint the hon. and gallant Member for Oxford (Captain Bourne) and the hon. Member for Hereford (Sir S. Roberts), but they cannot get round a constitutional principle by an Amendment of this kind and it is a constitutional principle that a Parliament cannot tie the hands of a future Parliament. [HON. MEMBERS: "What about the Land Values Tax?"] What I say is perfectly correct, and hon. Members can make any application of it that they like. Parliament can make any decision for the future, but Parliament cannot tie the hands of a future Parliament or of a future Session of the same Parliament. When I replied to the right hon. Gentleman the Member for Sevenoaks (Sir H. Young) that Parliament, could not in this Session tie the hands of a future Parliament with

regard to the field of persons coming within the ambit of the tax, I was correct, in spite of what the hon. and gallant Member for Oxford has said, but such a case has not hitherto arisen.

With regard to this Amendment, however, a case has already arisen and has been decided in the contrary sense to his proposal. The hon. and gallant Member, I think, forgets that in the last Finance Bill my right hon. Friend did the very thing which he is seeking to prevent by a previous decision. In the Finance Act of 1929–30, the Surtax rates for the succeeding year were laid down, but my right hon. Friend the Chancellor of the Exchequer, in spite of that perfectly definite provision, altered them in his Budget for last year. It is therefore quite useless for the hon. and gallant Gentleman the Member for Oxford to lay down for next year certain rates, because it would be equally quite possible for whoever may be Chancellor next year to lay down entirely different rates, just as my right hon. Friend did last year. Therefore, I am sorry to have to tell the hon. and gallant Gentleman that his Amendment also would not have any binding effect, and Parliament next year would be able to do exactly what it liked in spite of any such proviso.

Question put, "That those words be there inserted in the Resolution."

The House divided: Ayes, 148; Noes, 262.

Division No. 232.]	AYES.	[10.31 p.m
Acland-Troyte, Lieut.-Colonel	Christle, J. A.	Gault, Lieut.-Col. A. Hamilton
Albery, Irving James	Clydesdale, Marquess of	Gibson, C. G. (Pudsey & Otley)
Allen, Sir J. Sandeman (Liverp'l., W.)	Colfox, Major William Philip	Grace, John
Atholl, Duchess of	Colman, N. C. D.	Graham, Fergus (Cumberland, N.)
Atkinson, C.	Colville, Major D. J.	Gunston, Captain, D W.
Baldwin, Rt. Hon. Stanley (Bewdley)	Conway, Sir W. Martin	Hacking, Rt. Hon. Douglas H.
Balfour, Captain H. H. (I. of Thanet)	Courtauld, Major J. S.	Hall, Lieut.-Col. Sir F. (Dulwich)
Beamish, Rear-Admiral T. P. H.	Courthope, Colonel Sir G. L.	Hamilton, Sir George (Ilford)
Beaumont, M. W.	Crookshank, Capt. H. C.	Hanbury, C.
Betterton, Sir Henry B.	Croom-Johnson, R. P.	Hannon, Patrick Joseph Henry
Bevan, S. J. (Holborn)	Culverwell, C. T. (Bristol, West)	Harvey, Major S. E. (Devon, Totnes)
Bird, Ernest Roy	Cunliffe-Lister, Rt. Hon. Sir Philip	Heneage, Lieut. Colonel Arthur P.
Bourne, Captain Robert Croft	Dalkeith, Earl of	Herbert, Sir Dennis (Hertford)
Bowyer, Captain Sir George E. W.	Dairymple-White, Lt.-Col. Sir Godfrey	Howard-Bury, Colonel C. K.
Boyce, Leslie	Davidson, Rt. Hon. J. (Hertford)	Hudson, Capt. A. U. M. (Hackney, N.)
Bracken, B.	Davies, Maj. Geo. F. (Somerset, Yeovil)	Hunter-Weston, Lt.-Gen. Sir Aylmer
Brass, Captain Sir William	Duckworth, G. A. V.	Inskip, Sir Thomas
Broadbent, Colonel J.	Eden, Captain Anthony	Iveagh, Countess of
Brown, Col. D. C. (Nth'l'd., Hexham)	Edmondson, Major A. J.	Jones, Sir G. W. H. (Stoke New'gton)
Brown, Brig.-Gen. H. C. (Berks, Newb'y)	Elliot, Major Walter E.	Kindersley, Major G. M.
Buchan-Hepburn, P. G. T.	Erskine, Lord (Somerset, Weston-s-M.)	Knox, Sir Alfred
Butler, R. A.	Everard, W. Lindsay	Lamb, Sir J. Q.
Cadogan, Major Hon. Edward	Falle, Sir Bertram G.	Lane Fox, Col. Rt. Hon. George R.
Campbell, E. T.	Ferguson, Sir John	Law, Sir Alfred (Derby, High Peak)
Carver, Major W. H.	Fermoy, Lord	Leigh, Sir John (Clapham)
Castle Stewart, Earl of	Fielden, E. B.	Leighton, Major B. E. P.
Cautley, Sir Henry S.	Forestler-Walker, Sir L.	Lewis, Oswald (Colchester)
Cazalet, Captain Victor A.	Fremantle, Lieut.-Colonel Francis C.	Llewellin, Major J. J.
Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)	Ganzoni, Sir John	Locker-Lampson, Rt. Hon. Godfrey
Long, Major Hon. Eric	Roberts, Sir Samuel (Ecclesall)	Thomson, Mitchell-, Rt. Hon. Sir W.
McConnell, Sir Joseph	Ross, Ronald D.	Tinne, J. A.
Makins, Brigadier-General E.	Ruggles-Brise, Colonel E.	Titchfield, Major the Marquess of
Marjoribanks, Edward	Russell, Alexander West (Tynemouth)	Todd, Capt. A. J.
Mason, Colonel Glyn K.	Salmon, Major I.	Train, J.
Merriman, Sir F. Boyd	Samuel, A. M. (Surrey, Farnham)	Vaughan-Morgan, Sir Kenyon
Milne, Wardlaw-, J. S.	Sandeman, Sir N. Stewart	Wallace, Capt. D. E. (Hornsay)
Morrison, W. S. (Glos., Cirencester)	Shepperson, Sir Ernest Whittome	Ward, Lieut.-Col. Sir A. Lambert
Muirhead, A. J.	Smith, Louis W. (Sheffield, Hallam)	Warrender, Sir Victor
Nicholson, O. (Westminster)	Smith, R. W. (Aberd'n A Kinc'dine, C)	Waterhouse, Captain Charles
Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)	Smith-Carlngton, Neville W.	Wells, Sydney R.
Oman, Sir Charles William C.	Smithers, Waldron	Williams, Charles (Devon, Torquay)
O'Neill, Sir H.	Somerset, Thomas	Wilson, G. H. A. (Cambridge U.)
Penny, Sir George	Somorville, A. A. (Windsor)	Windsor-Clive, Lieut.-Colonel George
Percy, Lord Eustace (Hastings)	Southby, Commander A. B. J.	Winterton, Rt. Hon. Earl
Peto, Sir Basil E. (Devon, Barnstaple)	Stanley, Lord (Fylde)	Womersley, W. J.
Power, Sir John Cecil	Stanley, Hon. O. (Westmorland)	Young, Rt. Hon. Sir Hilton
Ramsbotham, H.	Steel-Maitland, Rt. Hon. Sir Arthur
Reid, David D. (County Down)	Stuart, Hon. J. (Moray and Nairn)	TELLERS FOR THE AYES.—
Remer, John R.	Sueter, Rear-Admiral M. F.	Major Sir George Hennessy and Sir
Reynolds, Col. Sir James	Taylor, Vice-Admiral E. A.	Frederick Thomson.
Richardson, Sir P. W. (Sur'y, Ch'tey)	Thomas, Major L. B. (King's Norton)
NOES
Adamsen, Rt. Hon. W. (Fife, West)	Egan, W. H.	Knight, Holford
Adamson, W. M. (Staff., Cannock)	Elmley, Viscount	Lang, Gordon
Addison, Rt. Hon. Dr. Christopher	Evans, Capt. Ernest (Welsh Univer.)	Lansbury, Rt. Hon. George
Altchison, Rt. Hon. Craigle M.	Foot, Isaac	Lathan, G.
Alpass, J. H.	Freeman, Peter	Law, Albert (Bolton)
Angell, Sir Norman	Gardner, B. W. (West Ham, Upton)	Law, A. (Rossendale)
Arnott, John	George, Major G. Lloyd (Pembroke)	Lawrence, Susan
Aske, Sir Robert	George, Megan Lloyd (Anglesea)	Lawson, John James
Attlee, Clement Richard	Gibbins, Joseph	Lawther, W. (Barnard Castle)
Aylee, Walter	Gibson H. M. (Lance, Motsley)	Leach, W.
Baker, John (Wolverhampton, Bilston)	Gill, T. H.	Lee, Frank (Derby, N. E.)
Baldwin, Oliver (Dudley)	Gillett, George M.	Lee, Jennie (Lanark, Northern
Barnes, Alfred John	Glassey, A. E.	Lees, J.
Barr, James	Gossling, A. G.	Lewis, T. (Southampton)
Batey, Joseph	Graham, D. M. (Lanark, Hamilton)	Lindley, Fred W.
Benn, Rt. Hon. Wedgwood	Graham, Rt. Hon. Wm. (Edin., Cent.)	Lloyd, C. Ellis
Bennett, Sir E. N. (Cardiff, Central)	Gray, Milner	Logan, David Gilbert
Bennett, William (Battersea, South)	Greenwood, Rt. Hon. A. (Colne)	Longbottom, A. W.
Benson, G.	Grenfell, D. R. (Glamorgan)	Longden, F.
Bevan, Aneurin (Ebbw Vale)	Griffiths, T. (Monmouth, Pontypool)	Lovat-Fraser, J. A.
Birkett, W. Norman	Grundy, Thomas W.	Lunn, William
Blindell, James	Hall, G. H. (Merthyr Tydvil)	Macdonald, Gordon (Ince)
Bondfield, Rt. Hon. Margaret	Hall, J. H. (Whitechapel)	MacDonald, Malcolm (Bassetlaw)
Bowerman, Rt. Hon. Charles W.	Hamilton, Mary Agnes (Blackburn)	Mc Etwee, A.
Broad, Francis Alfred	Hamilton, Sir R. (Orkney & Zetland)	McEntee, V. L.
Brockway, A. Fenner	Harbord, A.	McKinlay, A.
Bromfield, William	Hardie, George D.	MacLaren, Andrew
Brooke, W.	Harris, Percy A.	Maclean, Sir Donald (Cornwall, N.)
Brothers, M.	Hastings, Dr. Somerville	Maclean, Nell (Glasgow, Govan)
Brown, C. W. E. (Notts, Mansfield)	Haycock, A. W.	Macpherson, Rt. Hon. James I.
Brown, Rt. Hon. J. (South Ayrshire)	Hayday, Arthur	McShane, John James
Buchanan, G.	Hayes, John Henry	Malone, C. L'Estrange (N'thampton)
Burgers, F. G.	Henderson, Right Hon. A. (Burnley)	Mansfield, W.
Burgin, Dr. E. L.	Henderson, Arthur, Junr. (Cardiff, S.)	Marcus, M.
Buxton, C. R. (Yorks, W. R. Elland)	Henderson, Thomas (Glasgow)	Markham, S. F.
Caine, Hall-, Derwent	Henderson, W. W. (Middx., Enfield)	Marley, J.
Cape, Thomas	Herriotts, J.	Marshall, Fred
Carter, W. (St. Pancras, S. W.)	Hirst, G. H. (York W. R. Wentworth)	Mathers, George
Charleton, H. C.	Hirst, W. (Bradford, South)	Matters, L. W.
Chater, Daniel	Hoffman, P. C.	Maxton, James
Church, Major A. G.	Hopkin, Daniel	Messer, Fred
Clarke, J. S.	Horrabin, J. F.	Middleton, G.
Cluse, W. S.	Hudson, James H. (Huddersfield)	Milner, Major J.
Clynes, Rt. Hon. John R.	Hunter, Dr. Joseph	Montague, Frederick
Cocks, Frederick Seymour	Isaacs, George	Morley, Ralph
Compton, Joseph	John, William (Rhondda, What)	Morris, Rhys Hopkins
Cove, William G.	Johnston, Rt. Hon. Thomas	Morris-Jones, Dr. J. H. (Denbigh)
Cripps, Sir Stafford	Jones, Llewellyn-, F.	Morrison, Rt. Hon. H. (Hackney, B.)
Daggar, George	Jones, Henry Haydn (Merioneth)	Morrison, Robert C. (Tottenham, N.)
Dallas, George	Jones, J. J. (West Ham, Silvertown)	Mort, D. L.
Dalton, Hugh	Jones, Rt. Hon. Leif (Camborne)	Muff, G.
Davies, D. L. (Pontypridd)	Jones, Morgan (Caerphilly)	Muggeridge, H. T.
Davies, E. C. (Montgomery)	Jowett, Rt. Han. F. W.	Murnin, Hugh
Denman, Hon. R. D.	Jowitt, Sir W. A. (Preston)	Naylor, T. E.
Dukes, C.	Kedward, R. M. (Kent, Ashford)	Newman, Sir H. H. S. D. L. (Exeter)
Duncan, Charles	Kelly, W. T.	Noel Baker, P. J.
Ede, James Chuter	Kennedy, Rt. Hon. Thomas	Noel-Buxton, Baroness (Norfolk, N.)
Edge, Sir William	Kinley, J.	Oldfield, J. R.
Edwards, E. (Marpeth)	Kirkwood, D.	Oliver, George Harold (Ilkeston)

Oliver, P. M. (Man., Blackley)	Scrymgeour, E.	Townend, A. E.
Owen, Major G. (Carnarvon)	Sexton, Sir James	Vaughan, David
Palin, John Henry	Shakespeare, Geoffrey H.	Viant, S. P.
Palmer, E. T.	Shaw, Rt. Hon. Thomas (Preston)	Walkden, A. G.
Parkinson, John Allen (Wigan)	Shepherd, Arthur Lewis	Walker, J.
Paters, Dr. Sidney John	Sherwood, G. H.	Watkins, F. C.
Pethick-Lawrence, F. W.	Shield, George William	Watson, W. M. (Dunfermline)
Phillips, Dr. Marion	Shillaker, J. F.	Watts-Morgan, Lt.-Col. D. (Rhonda.)
Pole, Major D. G.	Short, Alfred (Wednesbury)	Wellock, Wilfred
Potts, John S.	Simmons, C. J.	Welsh, James C. (Coatbridge)
Price, M. P.	Sinclair, Sir A. (Caithness)	West, F. R.
Pybus, Percy John	Sinkinson, George	Westwood, Joseph
Quibell, D. J. K.	Sitch, Charles H.	White, H. G.
Ramsay, T. B. Wilson	Smith, Ben (Bermondsey, Rotherhithe)	Whiteley, Wilfrid (Birm., Ladywood)
Rathbone, Eleanor	Smith, Frank (Nuneaton)	Whiteley, William (Blaydon)
Raynes, W. R.	Smith, Rennie (Penistone)	Wilkinson, Elten C.
Richards, R.	Smith, Tom (Pontefract)	Williams, David (Swansea, East)
Richardson, R. (Houghton-le-Spring)	Smith, W. R. (Norwich)	Williams, Dr. J. H. (Llanelly)
Riley, Ben (Dewebury)	Sorensen, R.	Williams, T. (York, Don Valley)
Riley, F. F. (Stockton-on-Tees)	Stamford, Thomas W.	Wilson, C. H. (Sheffield, Attercliffe)
Ritson, J.	Stephen, Campbell	Wilson, J. (Oldham)
Romerll, H. G.	Strauss, G. R.	Wilson, R. J. (Jarrow)
Rosbotham, D. S. T.	Sullivan, J.	Winterton, G. E. (Leicester, Loughb'gh)
Rowson, Guy	Sutton, J. E.	Wise, E. F.
Salter, Dr. Alfred	Taylor, R. A. (Lincoln)	Young, R. S. (Islington, North)
Samuel, Rt. Hon. Sir H. (Darwen)	Taylor, W. B. (Norfolk, S. W.)
Sanders, W. S.	Thomas, Rt. Hon. J. H. (Darby)	TELLERS FOR THE NOES.—
Sandham, E.	Tinker, John Joseph	Mr. Charles Edwards and Mr.
Sawyer, G. F.	Toole, Joseph	Paling.
Scott, James	Tout, W. J.

Question, "That further Consideration of the Resolution be now adjourned," put, and agreed to.

Captain BOURNE

I beg to move, in line 8, to leave out from the word "shall" to the word "have" in line 10.

This Amendment is to leave out of the Resolution the words: (subject to such of the provisions contained in the Finance Act, 1930, with respect to Income Tax as did not take effect with respect to the Income Tax charged for the year 1930–31).

I move this Amendment in order to ask the Financial Secretary or the Attorney-General precisely what is the effect in 1930–31. Am I right in thinking that this Surtax is put on in this year's Finance Bill? If it is not, then it is not at all clear what the position is, and I am moving the deletion of those words to get information and an explanation from the Government.

Major LLEWELLIN

I beg to second the Amendment.

Mr. PETHICK-LAWRENCE

I am very glad to be able to supply the information which has been asked for. Under the Finance Act, 1930, for the purpose of assessment to Income Tax Schedules A and B for the year 1931–32, the assessment of properties in the Metropolitan area is no longer governed by the valuation under the Valuation Metropolis Act, 1869, and it would be based upon an (independent valuation which is now being made under the general provisions of the Income Tax Act for the year 1931–32, on the same principles as apply to the valuation for Income Tax purposes of properties situated elsewhere in England. The words proposed to be omitted are inserted in order to ensure that the provision shall apply to the year 1931–32. In the circumstances, I think the hon. and gallant Member for Oxford (Captain Bourne) will appreciate that the insertion of those words is necessary to give effect to the proposals that were carried in last year's Finance Ball, and for no other purpose.

Captain BOURNE

In view of that explanation, I ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Captain BOURNE

I beg to move, in line 3, after the word "by," to insert the words "amounts not exceeding."

The reason for this Amendment is to make quite clear the right of the Opposition to move Amendments during the Committee stage of the Finance Bill if we so desire. This Resolution fixes the amount of the Surtax to be paid in respect of the past year, and payable on the 1st January, 1932, at the same amount as was payable on the 1st January, 1931. This Amendment would not alter the right of the Government to keep the Surtax at that amount, but I am not certain how far it would tie our hands at a later stage in moving Amendments to reduce the amount of the Surtax if we wished to do so. I move the Amendment solely in order to safeguard our position.

Major GEORGE DAVIES

I beg to second the Amendment.

Mr. PETHICK-LAWRENCE

I can give the hon. and gallant Member the assurance for which he asks. I think it is the common procedure of this House that these Resolutions, carried in Committee of Ways and Means and reported to the House, are such that, in the Bill which is subsequently founded upon them, any proposals for less taxation than those contained in the Resolution can be carried. All that is essential is that no Resolution imposing a greater charge upon the taxpayer than those which have been already passed by the House in Resolutions can be moved. Therefore, the position of the Opposition is quite safeguarded if they wish, during the Committee stage of the Finance Bill, to reduce the maximum taxation which can be enforced.

Captain BOURNE

I do not wish to press the Amendment, but I must say that I cannot see why the Government cannot accept it. It would not hurt either them or anyone else.

Mr. PETHICK-LAWRENCE

It would he quite improper, in any of these taxation proposals, to, have an expression of that kind. It may be true that in the case of the Surtax no actual collection takes place before the Finance Bill is carried, but in the case of the Income Tax it would prevent any collection at all, and, even although the Surtax is not collected until after the Finance Bill has been passed, it would be a very unusual and improper method of passing a Resolution in this House.

Amendment, by leave, withdrawn.

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

Mr. SMITHERS

I should like to raise a point of Order. In his Budget speech the Chancellor of the Exchequer is shown in column 1401 of the OFFICIAL REPORT for 27th April to have used the following words: Although in a recent case—Hamilton and the Commissioners of Inland Revenue."—[OFFICIAL RBPORT, 27th April, 1931; col. 1401, Vol. 261.] Since his speech was made I have been informed that that particular case is the subject of appeal in the High Court. I want to submit that it is not in order for a case before the courts, which has not yet been settled, to be the subject not only of discussion but of legislation. Without offence to the Attorney-General, I would ask, is it fair, when a decision has been given in his favour—because the Crown won that case—that before an appeal can take place which might reverse the decision of the lower court, legislation should be brought in to make the decision in Hamilton case the law of the land?

Mr. SPEAKER

It does not seem to me that a point of Order really arises on this matter. Obviously, in spite of the case being appealed against, Parliament can do anything it likes in the way of altering the law. It is a question entirely for Parliament, and it is not a matter for me to decide.

Mr. SMITHERS

The House has just heard the Resolution read from the Table, and I would like to ask hon. Members in all parts of the House what they think it means and whether they understand anything about it at all? It is the duty of Members of Parliament, and, I presume, especially of the Opposition, to see that no legislation is passed unless it is properly scrutinised and that we make quite sure from the Government of the day that every provision is carefully examined, and that the interests of the taxpayers are properly safeguarded. The Chancellor of the Exchequer in his speech on the Budget said: Under a long-established practice companies have deducted Income Tax from the full amount of any dividends paid by them out of profits of a revenue nature irrespective of the amount on which the company has been charged to tax for the particular period to which the dividend relates, and the full amount of such dividends has been regarded as income of the shareholders for all purposes, that is to say, not only for the purpose of assessment to Super-tax, but also for the purpose of repayment of Income Tax to people who are not liable." He goes on to say: One or two attempts have recently been made in various quarters to upset this practice."—[OFFICIAL REPORT, 27th April, 1931; col. 1401, Vol. 251.] I would direct attention to the words "one or two attempts," because I wish to examine one or two of those cases. The Chancellor then went on to mention by name the case of Hamilton and the Commissioners of Inland Revenue. I do not know whether it is the fault of the Government or of the Chancellor of the Exchequer, or of the procedure of this House, but it does seem to me very unsatisfactory that a Resolution which to most of us might be written in Greek should be put down on the Order Paper with only the amount of explanation—or few lines more—that I have read. There is nothing the Chancellor said in his opening statement which would give the House any idea what this Resolution really means. As I see it, the two cases referred to are the Hamilton case, and the Gimson case. The appellant, Hamilton, lost his case, and the appellant, Gimson, won his case. The taxpayer lost in one case and the taxpayer won in the other case. I will make an appeal to the learned Attorney-General. This is a very complicated case. I understand that he appeared as counsel in both these cases; if I make a mistake of fact, I hope he will correct me at once.

The Fourth Resolution, as I see it, seeks to confirm the Hamilton ease and to reverse the Gimson case. If we are to understand what this Resolution means, it is necessary for the House to understand the difference between the assessable income of a company and the total income of a company. The amount of income upon which a company can declare dividends for any particular year, very rarely coincides with the amount of income on which the company is assessed for Income Tax for that year. In many cases, the amount legally distributable by a company by way of dividend rarely coincides with the amount of income on which it is assessed from Income Tax. That curious position arises because of the application of the rules of Income Tax under which the profits of a company are assessed. Those rules are to be found in the first Schedule of the Income Tax Act, 1918. A further point arises. A company returns its gross income, which for Income Tax purposes, may well be ascertainable by reference to a previous year.

That is a point which must be borne in mind in this discussion. Against that figure of gross income, the company, under the rules of collection of Income Tax, may be, and is often, entitled to make deductions in respect of wear and tear of plant and machinery, and the annual value of the office, buildings, etc. The result is that a net figure is arrived at, on which the company is assessable for Income Tax purposes, which may be substantially smaller than the amount of earned income which is in the till and which is available for distribution by way of dividend. While the company is allowed to make deductions for wear and tear of plant and machinery, there is nothing in law, as I understand it, which will compel the company to allocate that amount, allowable, under the Income Tax rules, to be applied to that purpose. The directors may, if they so decide, distribute that amount by way of dividend to the shareholders, and of course prudent directors, in the usual course of things, retain that amount allowed for wear and tear and for reserve purposes. In bad times, when directors may see better times coming ahead, they may, and are, entitled to use those reserves for distribution to the shareholders. A case may often arise when the directors of a company may wish to distribute, say, a 5 per cent. dividend, and the amount earned in that year falls short by, let us say, £10,000 or £20,000, of fulfilling the amount required to pay that 5 per cent. dividend. They then have recourse either to a capital fund, or to some other fund which is not subject under the rules of assessment for Income Tax, to make up the amount required to pay the 5 per cent. dividend.

11.0 p.m.

May I give one example? Take the case of an amalgamation of four or five companies. After the amalgamation has taken place, the directors find that one of the companies is of no use for the purpose of amalgamation. They sell it for, we will say, £25,000, and the money is put into the till of the amalgamated company and is available for dividend distribution. The proportion of the dividend received by each shareholder, in so far as it is drawn from either a capital amount such as I have described, or from amounts which were not assessable to Income Tax, is not cheargeable to Surtax if the recipient happens to be a Surtax payer. Income Tax in the hands of a company which is not assessable should be treated in the same way as capital appreciation and income distributed from those sources should not make the recipient liable to Surtax. Surtax is only another name for Income Tax, and it is only payable in cases over a certain amount. The Government have no right to claim Surtax unless Income Tax has already been paid on the amount laid down by the Statute.

In the Hamilton case the company had an assessable income of £10,000, and yet had available for distribution £12,000. When a company distributes in excess of the amount assessed, it has generally been the practice to deduct tax at the standard rate from the whole sum distributed, and recipients who have been assessed to Surtax can recover Income Tax, if they are entitled, on the basis that the whole dividend is the income of the recipient. In the Hamilton case Mr. Hamilton objected to being assessed to Super-tax on the whole dividend and claimed only to be assessed on so much—in this example ten-twelfths—of the dividend as represented any assessment for Income Tax, and argued that the company was not entitled to deduct on the whole amount distributed, but only on so much as had been assessed in the hands of the company.

May I refer to the Gimson case? That case was slightly different, but I understand that the principle was the same. There was not an assessable profit for a particular year, but there were two funds available for distribution. One fund was a fund of capital profits and the other fund was made up of accumulated items of income which under the provisions of the law had not been brought into any computation of liability to Income Tax. Mr. Gimson received £75, of which £40 admittedly came from the capital fund. The Crown claimed to assess him for Super-tax on the balance of £35, plus £9. The Attorney-General, to arrive at some means of extracting tax from this wretched man, had to make up an amount at which he could be assessed. I would ask the Attorney-General if he would be good enough to explain, as briefly as he can, the words of the Amendment. I am sure that the House is already getting tired of this technical explanation, and if I am allowed I can save time by quoting from the judgment of Mr. Justice Rowlatt, which sums up the matter more briefly than I can do. After relating the points leading up to the decision, he says: Now that brings us to the point which is this, that the dividend received from a company is itself a tax-bearing subject-matter and that it is not a subject-matter which represents merely the division to the individual of a fund which has suffered tax, so that the tax attaches in the hands of the company and that the dividend-receiver has nothing whatever to say to the Income Tax as regards that Of course, the matter became of extreme importance in the first instance in cases where a subject having a small income was entitled to get back tax. It is exactly the same rule which governs the Super-tax, and if the Commissioners are right in this case in assessing it at £44, we should get this extraordinary result, that if this gentleman's income was small he could get back tax which the Revenue never had, representing sums which did not exist, so that is perfectly wrong. Will the Attorney-General tell the House why he asks for powers to upset that judgment? The judgment proceeds: Now I am bound to say I have always regarded it as fundamental that, just as in the case of an individual whose income comes to him straight and who gets back the tax which he has suffered, and no other, and pays Super-tax in respect of a fund which has suffered tax, and no other, so if this gentleman had received this money direct from the company by holding this source of income himself and had been liable to Income Tax in nil, because of the regulations affecting measurement, his income would not be subject-matter on which he could get back tax which was small or pay Super-tax in case it was big. Finally, the judgment says: I think this Appellant is entitled to succeed in this case, and the appeal must be allowed with costs. It will doubtless be said that the Resolution does nothing more than give validity to an established practice, but I think there are two answers to that claim. A practice which is wrong in law and unjust in its operation should not be made valid at any time, and the second answer is that all taxpayers should be treated alike and that those whose income is derived from joint stock companies should not be penalised. The Chancellor in his speech made a specious argument, with regard to the small shareholder who is entitled to the repayment of Income Tax, and who under the existing practice gets a little more than he might, or ought, to get. There is no more reason why a small shareholder should get back tax which he has never paid to the State than any other person with small means who does not derive his income from dividends.

I want to ask if this difficulty could not be overcome by the Government insisting that Section 33 of the Finance Act, 1924, should be put into operation. I would like to know why that cannot be done. There may be some good reason. That Section lays it down that a company, when it sends one of its shareholders a dividend warrant, must state (a) the gross amount which after deduction of Income Tax appropriate thereto corresponds to the net amount actually paid; (b) the rate and the amount of Income Tax appropriate to such gross amount; and (c) the net amount actually paid. I should like to ask the Attorney-General why all this Fourth Resolution is necessary and why it should not be sufficient to enforce Section 33 of the Act of 1924. I submit that the Government ought not to have it both ways; they ought not to uphold the Hamilton case and reverse the Gimson case. Supposing a shareholder of a company receives a dividend from that company and happens to be below the Income Tax line, the dividend is paid to him net, free of tax, and he is entitled to claim back that amount which has been deducted at the source. In so far as that amount which has been deducted at the source is a proportion of the amount in the hands of the company which has not been assessable to Income Tax, he is in fact taking back from the Government a rebate of Income Tax which the Government have never received.

In conclusion, I would like to ask the Attorney-General if there is more behind this Resolution than meets the eye. After all, we are opponents across the Floor of the House, and I noticed the other day some very pertinent questions about the remuneration of the Attorney-General and the other Law Officers of the Crown. I am wondering whether it is not possible that he is very anxious and that the Government are very anxious —I make no charge whatever—that in regard to these cases, the one case should be maintained and the other should be reversed.

Sir D. HERBERT

Before the Attorney-General replies, I want to call attention to one point arising on this Resolution of a very much simpler nature than that of my hon. Friend, but one which I think is of considerable importance. It has been a recognised principle in the past in this House, observed, I think, by all parties—at any rate the exceptions to it have been very few—that we do not indulge in retrospective legislation to reverse the decision given by the courts of the land on the meaning of an Act of Parliament. Apparently the Government are now proposing to do what, I think, is even worse than that, namely to endeavour to indulge in retrospective legislation on a matter which is actually pending on appeal before the courts. The wording of this Resolution is That Rule 20 of the General Rules shall, in relation to a dividend paid by any body of persons, whether before or after the passing of this Resolution, be construed in a certain way. I do not think that any Government have ever been guilty of proposing to Parliament such a proposition as that in the past. I can only suppose that this form of resolution has slipped through, so to speak, if I may use that expression in regard to the consideration of the Resolution by the Government, without their attention being drawn to this particular point. I do not know whether at this stage, Mr. Speaker, you would allow an Amendment to be moved, but I should like to hand in a manuscript Amendment.

Mr. SPEAKER

I cannot allow an Amendment to be moved now, as I have already put the Question, "That this House doth agree with the Committee in the said Resolution."

Sir D. HERBERT

I apologise for having omitted to notice that you had actually put the Resolution, but this is a matter with which we can deal when the Bill comes before the House. I think that, now attention has been called to it on this Resolution, we are entitled to ask for a definite answer from the Government upon it, and to have some assurance from them that they will not oppose such Amendments as may be moved, if they are necessary, in the Bill—I hope the Bill will he drawn in such a way as not to need them—to ensure that this House shall not pass legislation of a retrospective nature to interfere not merely with a decision of the courts but with a question actually pending before the High Courts of the Realm. I hope that the Attorney-General will consider this matter, and give a reasonable answer which will satisfy us at any rate that the Government realise the importance of the question which I have raised.

The ATTORNEY - GENERAL (Sir William Jowitt)

No one who has listened to the speech of the hon. Member for Chislehurst (Mr. Smithers) can fail to realise that this is an exceedingly com plicated question. If I had to argue the cases myself, I should say that they were two of the most intricate and complex Income Tax cases I had ever had to answer. It is quite impossible for me in any reasonable measure of time really to expound the doctrine here. I hope that hon. Members, therefore, will not mind if I briefly accept the hon. Member's speech and explain to the House as simply and shortly as I can what we pro pose to do by this Resolution. May I correct one point of which the hon. Member made use in his interesting speech. He referred to the case of an amalgamation company, the sale of the assets of one company and the distribution in the form of dividends of what really was capital. I agree that it would be wrong to treat that dividend as if it were income. It was really an addition to capital. We do not seek to do that and the Resolution is so drafted to make it quite clear that we are not doing that, and when we come to the Clause the hon. Member will see that we have made it abundantly plain. A case like that would not be subject to taxation at all—

Mr. CHAMBERLAIN

Not Surtax?

The ATTORNEY-GENERAL

The argument is that the Surtax is an additional duty, but if you are not liable to Income Tax you are not liable to Super-tax. It is a question of not being liable for Surtax in respect of what is a distribution of assets. The complication which arose in the Hamilton case was this. Suppose that a company earns a profit of £1,000 in one year, year A, and in the succeeding year, year B, a profit of £10,000. The House is aware that the company pays Income Tax in respect of year B measured by its earnings in year A. Suppose in year B, the year in which the company is only liable to pay a tax on £1,000, it proceeds to pay the whole of the £10,000 in dividends; what is the company to deduct? In the Hamilton case the argument was that you are only entitled to deduct at all in respect of Income Tax, and as you have only paid in respect of year B and only paid Income Tax on £1,000, therefore you can only deduct from the amount you are distributing in dividends such a sum as will bring back to you that sum. You must not deduct 4s. 6d. in the £ on £10,000; you must confine yourself to deducting 4s. 6d. in the £ on £1,000, because that is all you have to pay.

The House will see how important this is. The learned judge who tried the case, and decided in my favour, decided it partly for the reason that any other decision he gave would make the whole system of deduction at the source unworkable. You would at once destroy the uniformity of deduction. The amount which a company is entitled to deduct from the dividend it passes is dependent upon what that company earned in the previous year. The shareholders will have no possibility at all of telling what the company did earn in the previous year. Very likely what the company earned would not be fixed at the time, and, consequently, the shareholders would not know what to deduct, and you would have complete chaos.

I can give my view to the House. The learned judge decided that case in my favour. Rule 20, coupled with the provisions of Section 39 of the Finance Act, 1927, which was designed for this purpose, really makes the position plain. Rule 20 says that a company may deduct at the appropriate rate, and in the Finance Act of 1927 it is laid down that the appropriate rate is the standard rate. Unless you maintain the principle of uniformity of deduction, I can assure the House that it is not putting it too high, as the learned judge said, that the whole system of deduction at the source would break down. That being so we have felt it necessary to take a step, which is by no means exceptional, and which should only be resorted to in special circumstances, of giving the judge's decision the force of law and the object of this Resolution is to declare that the decision of the learned judge, Mr. Justice Rowlatt is right, because we really could not run the risk of the decision being reversed. It is a practice which has existed since 1842 and if by any chance this decision is wrong—I do not think it is—it would introduce chaos into our system.

Mr. SMITHERS

That is the Hamilton case only.

The ATTORNEY-GENERAL

Yes, the Hamilton case only. Therefore, the first object of our Resolution is to make it plain that whenever a company pays dividend, that company may deduct from the dividend so paid, Income Tax at the standard rate. The hon. Member will realise that I am not seeking to get Income Tax on a division of capital assets. The next part of the Resolution deals with the position between the taxpayer and the Inland Revenue. Mr. Hamilton indicated in his case that he was going to claim against the liquidator of the company on the ground that the liquidator had wrongly deducted sums of money. That is the aspect of the case with which I have already dealt and I have said that the company is entitled to deduct the standard rate from the full amount distributed in dividend. Now we have to consider the position between the taxpayer and the Inland Revenue. What sum has the taxpayer to bring into account for the purposes of Income Tax? The House knows that exemption, abatement and Super-tax are governed on exactly the same lines. Supposing that a man receives a dividend of £77 10s. That is the amount which the shareholder actually gets. If hon. Members work it out, they will find that the £77 10s. is arrived at in this way. You take £100 and deduct 4s. 6d. in the £ and the result will be £77 10s. Now although the shareholder actually gets £77 10s., the object of this Resolution is to make it plain that he is to be treated as having received £100.

Mr. SMITHERS

For Super-tax purposes?

The ATTORNEY-GENERAL

Certainly. That is the object of the Resolution. It is just the same for abatement and just the same for exemption. Otherwise ridiculous results would arise. Gimson's case was a peculiar case. It related to the period of 1921–22. That is the time when the dividends arose and for various reasons into which I forbear to enter, because they are too long and complicated, Gimson's case would not be the same to-day. Because of an alteration in the law, it would be decided differently now. Therefore, I do not think we need feel so much difficulty in dealing with Gimson's as in dealing with the other case. It is right to say that if a shareholder receives a dividend he ought to pay Income Tax on that dividend, and that he ought to pay Super-tax on that dividend, and that for the purposes of collection the dividend should be treated as the gross amount. It has been so treated for years. In the case which I have put for instance, if the shareholder has no other asset at all, he would be entitled on getting his £77 10s. to go to the revenue authorities and claim back from them £22 10s., the difference between the £77 10s. and the £100. I really think that that works out in the only equitable and fair way, and that any other system is bound to cause great inequalities between various classes of persons. The House, of course, will have ample opportunity, when we come to the Clauses of the Bill, to consider the details of this matter, which I will then expound more fully, but I forbear from doing so at the present stage. I have stated the broad principles which we have in mind, and I hope that, with that statement, the House will agree to the Resolution.

Sir THOMAS INSKIP

I shall not attempt to delay the consideration and final disposal of the Resolution. I am sure the House is indebted to the Attorney-General for an explanation as lucid as all who know him have learned to expect from him, and as simple as the nature of this complicated case will allow. There are only two questions of general importance which I think it right to mention. The first is this, that although the Attorney-General has claimed that the retrospective nature of this Resolution is necessary, in view of the fact that any reversal of Mr. Justice Rowlatt's decision would involve chaos in the Income Tax laws, anything in the nature of retrospective legislation which would deprive the citizen of rights which he had under the law as it existed, ought to be watched and scrutinised with the most jealous care by this House. I venture to think that hon. Members opposite will be as alert as we ought to be on this side of the House in taking care that it is only in most exceptional cases that anything in the nature of retrospective legislation ought to be adopted by this House. At this hour I say no more on that because the Attorney-General has recognised that this is a matter about which more may have to be said. I only wish to keep the matter open, and not let it be supposed that the Opposition are content to accept the statement of the Revenue authorities that his Resolution is necessary. It must not be supposed that this House is to accept pontificial statements of this character which are made unless it jealously examines the situation for itself.

The other observation that I want to make is this. The Attorney-General, I hope, will forgive me for saying that he has probably forgotten that, in the early days of this Parliament, he contemplated putting all this legislation in such a form that it would be intelligible to the most simple member of the public. This Resolution, I think, will be a classic example of Income Tax legislation, which is not only unintelligible to the layman, but is unintelligible to anybody of lower intellect than the Attorney-General himself. In all seriousness, there have been some Sections, as the Attorney-General knows, in the Income Tax Acts, which the courts have declared are unintelligible and can be given no meaning whatever in relation to Income Tax administration. Whether or not this Resolution, which is to be put into the Finance Bill, is ever likely to meet that fate, I do not know, but I think the House ought to consider, in relation to the Income Tax Acts, whether it is in the interests of a great democratic community that so important a part of the law should be more and more involved in language which is literally incapable of being understood even by those who are experts in this branch of the law. I only make these observations in order that I may remind the House and the Attorney-General that there is supposed to be a committee which has been sifting for years considering the simplification of the Income Tax Acts, and I invite the Financial Secretary to hasten the report of this committee in order that the provisions of the Income Tax Acts may be made at long last a little more intelligible to the ordinary member of the public.

Mr. SMITHERS

I would like to thank the Attorney-General for his speech. May I remind him that he avoided the case of the small taxpayer who claims back tax; I shall have to refer to that at some later stage of the Debates.

Mr. W. GRAHAM

I beg to move, "That further Consideration of the Resolution be now adjourned."

I think it will be agreeable to hon. and right hon. Members opposite that we should conclude on Thursday the discussion of the Resolutions dealing with the collection of tax by instalments and the other matters in this part of the Budget, which will leave to-morrow for the Debate on the collection of the land Values Tax.

Mr. CHAMBERLAIN

I presume the right hon. Gentleman means that the Report stage is to be taken on Thursday, after we have finished with the consideration of this Resolution.

Mr. GRAHAM

Yes, that is exactly the position.

Sir D. HERBERT

I am sorry to intervene, but I have not the slightest idea of what has been going on across the Table. We could not hear a word. I do not know whether I was correct in gathering that the consideration of this Resolution was to be taken to-morrow night, after the completion of the Debate on the Land Values Resolution. We would like to know what the arrangement is.

Mr. GRAHAM

The short point is that to-morrow we conclude the Committee stage of the discussion of the Land Values Taxation Resolution and that on Thursday we complete the consideration of the Report stage of the Resolutions on which we have been engaged to-day. That is the arrangement.

Resolutions to be further considered on Thursday.