§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
I think it is a good rule that when we are working under the Guillotine, those questions in which the Opposition take most interest, should be most discussed. That is a, view which I have always held when in Opposition, and which I do not propose to alter now when I am supporting the Government. I do not wish, therefore, to detain the Committee long with the observations which I wish to make on this Clause, nor do I ask my hon. and gallant Friend the Financial Secretary even to make a reply to those observations. At the same time, I think it is desirable that attention should be called to certain aspects of the subject matter of this Clause.
In the first place, I draw attention to what I believe to be the effect on foreign opinion of the very high direct taxation, the very high Income Tax, which we have in this country and which is being increased by the present Budget. I do not suppose it will be disputed that it is important in the case of a great manufacturing, trading, and exporting country like ours, that what might be termed our economic prestige abroad should stand at a high level. I am convinced that foreign observers who are well disposed towards this country regard our high Income Tax as having two very evil effects on our trade 424 and industry—first in affecting our competitive power, and second in reducing our chances of recuperation. Nor is that view confined to foreign observers or to those who sit on this side of the Committee. The Chancellor of the Exchequer, when he was a member of the party opposite, made a statement which attracted a great deal of attention at the time when speaking at Liverpool during January, 1928. The right hon. Gentleman then said that a high Income Tax affected savings and reduced them, especially when placed on company reserves.
There is another point in connection with the effect of our high direct taxation on foreign opinion. My experience of travelling in foreign countries and of talking with well-informed observers of events in this country and other countries, has gone to show that they think that we tend to be rather proud of our self-imposed burden and that we are inclined to say that we are crippled and proud of it. I think it very necessary that we ought not to give the impression that we regard our high Income Tax or its increase in this Clause as anything but a serious bar to trade revival. We must be careful as a country, and we must be careful in this Committee and in the House of Commons not to suggest that what is really an evil is a merit. I agree with what the Financial Secretary to the Treasury said in his speech on the Second Reading of this Bill when he pointed our how enormously the burdens on the direct tax- 425 payer and on the Income Tax payer in particular had increased during recent years, but even he may have given the impression to foreign observers—though I am sure such was not his intention—that we regarded this accretion of direct taxation in this country as a benefit. Common sense and common experience in every country, including our own, shows that it is not a benefit but an evil and it would be a great mistake if, in order to please the populace, we tried to make a merit of what is obviously a great bar to prosperity.
I will not detain the Committee by going into all the arguments which are usually put forward in support of Income Tax. The most common of those arguments, the one which has almost become a cliche in our Debates, is the argument that the heaviest weight of taxation should be placed on the broadest back. From an ethical and theoretical point of view that is, no doubt, what is desirable, but it is unfortunate that, sometimes, the effect of placing taxation on the broadest back is that the shoulders of the broad-backed taxpayer become so crippled that he is compelled to divest himself of other burdens, in respect of the labour which he employs and the wages which he is able to pay. That is a fact to which too much attention cannot be paid. My right hon. Friend the Member for Epping (Mr. Churchill) in a speech in this House some three years ago pointed out the significant fact that taking together all the years since the boom year of 1920, the highest proportion of unemployment was in this country, which is also the most highly directly taxed country in the world. The significance of this circumstance is remarkable and there is more than a mere coincidence in this relation of unemployment to direct taxation.
There is another argument used by hon. Gentlemen opposite when there is any proposal to increase direct taxation. It is not an argument which they use quite so frequently to-day, since the incidence of the Income Tax has been extended, but I have heard it used in the course of these Debates. It is that an increase of Income Tax seldom or never means that any Income Tax payer has to go without a meal by reason of it, or is affected, to any large degree, by it in his personal comfort and safety. That may be true, but the fact remains that in con- 426 stituencies like mine, where a very large amount of the available employment is given by direct taxpayers, every rise in the tax means that other people may have to go without a meal because it is no longer possible to afford the same amount of employment. It would be out of order to discuss it on this Clause, but it seems to me that if you are going to use what I may call the meal argument, then logically you ought to provide those people who are displaced from work as a result of increased taxation with some alternative means of employment. At the present time, in connection with this Budget, on neither side of the House are any proposals being put forward for finding employment for those displaced from work by reason of the increased taxation.
Lastly I would say that no arguments have ever been brought forward at any time in our Debates on the subject of Income Tax to meet this point, which was put by the Chancellor of the Exchequer in so many words when he was a Member of the late Government—that the Income Tax is a tax on the material which is required for refuelling industry. If the Government take the fuel and burn it, often for no economic end, there is so much less fuel for industry. [Interruption.] I gather that the hon. and gallant Member for East Rhondda (Lieut.-Colonel Watts-Morgan) who, I understand, is regarded in his own part of the world as a great financier does not agree with my views. But he will find that they are true. He will find that one of the reasons why there is so much unemployment in the neighbourhood from which he comes is the heavy incidence of direct taxation on industry.
Lieut. - Colonel WATTS - MORGAN
When the Income Tax was 6s. in the pound employment was greater, and wages were higher. Will the Noble Lord deal with that point?
Certainly, because that particular year was a year in which there were boom conditions throughout the world. In 1920, both highly taxed and low-taxed countries were in the same position. But leaving aside the world boom from 1920 onwards, it will be found that in this country, with the highest direct taxation of any country, the proportion of unemployment per head of the population has been higher than in, any other 427 country, and I say that nobody has ever met that argument, that by your taxation of the direct taxpayer you are diminishing the fuel of industry. While everyone on this side will support this proposal in. the Budget as a necessity, which can only be described as a very painful operation to save the patient's life, after the operation he will not be stronger but weaker, though he would be worse off if he had not had the operation. I am sure that all of us, not only on this side, are looking forward to the other medical remedy which we are told is to be applied by the Prime Minister shortly, but the remedy for industry contained in this Clause is not a remedy at all, but very much the reverse, or only a remedy in the sense that without it the patient would be worse off than he is to-day, but with it alone he will not be enabled to recover.
§ Mr. MILLS
The speech of the Noble Lord more than ever makes exact the old and classic phrase that a Bourbon learns nothing and forgets nothing, but in this instance the right hon. Gentleman has forgotten something. There is in Westminster Hall a tablet which marks the spot where Warren Hastings stood his trial. Some day the memory of the right hon. Gentleman opposite will stand its trial in public opinion with regard to the destruction of Indian commerce, because he was Under-Secretary of State for India—
§ Mr. MILLS
The Noble Lord took advantage of this Clause to indict the party on these benches for their policy with regard to the raising of money for the Government, and its effect on world employment. When he was Under-Secretary of State for India, in opposition to the opinion of every recognised authority on Indian finance, when they dragged India off the Silver Standard—
§ The DEPUTY-CHAIRMAN
No doubt Indian finance is a very fascinating subject, but I do not see how it can be related to the standard rate of Income Tax in this country.
§ Mr. MILLS
I will submit to your Ruling, and before we get away from this I will get the right hon. Gentleman where I want him. With regard to his general contention, when the Noble Lord used to sit in the seat that has been made famous by the hon. Member for Bridgeton (Mr. Maxton), in the days of 1920 and 1921, when the Income Tax stood at 1s. in the pound higher than is proposed to-day, as my hon. and gallant Friend has stated, and when, on top of that, there was Excess Profits Duty, at that period we had the lowest unemployment in British history since the War, but nobody knows better than does the Noble Lord that if there was one contributory factor to world-wide unemployment, it was the policy to which he was a ready subscriber in attempting to secure from defeated countries the policy by which they won the Election of 1918, and my colleague and every miner in the country knows—
§ The DEPUTY-CHAIRMAN
The hon. Member is again getting very far from the standard rate of Income Tax, and I must ask him to apply himself to that.
§ Mr. MILLS
Very well, Captain Bourne. On every Finance Bill since 1921, at every period that has followed there has been this pegging back of British industry to a theoretical exactitude called the Gold Standard, and ever since the Reparations Commission decided that Germany should pay in coal instead of paper, the mining industry has been destroyed, and taxation such as has had to be levied to meet unemployment has been a direct result of the gross mismanagement of the policy of this country towards the world. If there was any imagination, any constructive idea, for restarting the wheels of industry in any given corner of the world, nobody could do it better than the right hon. Member sitting by the Noble Lord, the right hon. Member for Tamworth (Sir A. Steel-Maitland). He could speak with immediate and certain knowledge as to 429 what extent the unemployment problem has been made bigger. I know he would not get up and say I am wrong. Anyone who speaks with any idea of the trade and commerce of this country, which has a direct bearing on taxation, knows that it has been almost irrevocably destroyed by the lopsided, shortsighted and vicious policy of the finances of this country in relation to the Silver Standard and the purchasing power—
§ Sir ASSHETON POWNALL
The hon. Member for Dartford (Mr. Mills) has found it as difficult to keep off the Silver Standard as this country has found it difficult to keep on the Gold Standard. In a good many years in this House I have never heard a more unsound analogy given than to compare the state of unemployment in 1919–1920, when, it is true, we had a 6s. Income Tax, with that of to-day, when we have a 5s. Income Tax. We have to remember that in 1919 there were hundreds of thousands of men who were not demobilised. We have also to remember that there was a world-wide shortage of necessaries and commodities, that the whole world had been in uniform, and that in 1921, when we were still with a 6s. Income Tax—which continued, I may remind hon. Members, till the Spring of 1922—we then had, in 1921 and 1922, an immense amount of unemployment; and one reason why the Income Tax was reduced in the Spring of 1922 was that trade was so thoroughly bad that industry could no longer bear so high a tax.
I may, perhaps, pay some tribute to the sufferings of the Income Tax payers up and down the country, which have been so patiently borne ever since the War. We are all liable to forget that before the War Income Tax was 1s. or 1s. 2d. in the pound and that Super-tax went up to about 1s. in the pound. Surtax is now about 8s. 3d. in the pound, on 430 top of a 5s. Income Tax, and there is no country in the world in which the burden of taxation has been borne so patiently as it has by the Income Tax payers of this country. I might perhaps couple that with the fact that there is no country in the world which has stood up to the problem of unemployment as manfully as we have and which has done so much for the unemployed, and it is not unfair to couple the two things together.
§ Sir A. POWNALL
I should think that is very likely the case, but that is only one of many industries which were thriving, but which slumped in the summer of 1920. My point in regard to Income Tax is that I think that while we have strong grievances, reflected in the Lobbies, from those who have suffered cuts, we should bear in mind the fact that the Income Tax payers have no way of putting their grievances before us.
§ Sir A. POWNALL
I am pointing out that Income Tax is now five times what it was before the War, and I shall vote for the increase in the tax to-day, as I imagine my hon. Friends will do, but I do say that the Income Tax payer deserves a certain measure of sympathy, which I do not think he gets from hon. Members opposite, many of whom are themselves Income Tax payers to a considerable extent. Let us give the Income Tax payer his weed of justice, and let us remember that we are putting a burden on the Income Tax payer that no other country in the world is doing, and that it is thanks very largely to him that we have been able to carry on without reducing our currency hitherto by four-fifths, as France, for instance, has done.