HC Deb 20 April 1932 vol 264 cc1481-609

Question again proposed, That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise, but not including the Law contained in the Import Duties Act. 1932, save as may be provided by any other Resolution passed in the present Session), and to make further provision in connection witch Finance."—[Mr. Chamberlain.]

Mr. ATTLEE rose


On a point of Order, Captain Bourne, may I point out that the proposal which we are proposing to discuss is one of the most important motions which comes before the House, and it is one of those rare occasions on which the Commons have an opportunity of controlling the expenditure of His Majesty's Government. I wish to ask, in these circumstances, if it is in order for the Chair to be occupied by a Member of His Majesty's Government?

The DEPUTY-CHAIRMAN (Captain Bourne)

In reply to the hon. Member's question, it is customary for the Chair in Committee to be occupied either by the Chairman or by myself, but there is no Rule of the House against the occupation of the Chair in Committee by any hon. Member of the House.

3.30 p.m.


In intervening at this stage of the Debate I feel somewhat of an intruder. The House is accustomed on the second day in Committee of Ways and Means to hear the big guns firing, and ex-Chancellors of the Exchequer and ex-Financial Secretaries joining in a long-range bombardment like a battle on the Western Front. On this occasion, our big guns are out of action. Our late Financial Secretary fell in the electoral battle, and our late Chancellor of the Exchequer has been captured by the enemy and has been enrolled in a labour battalion put to work behind the lines. Whether the Noble Lord is doing work of national importance or not we do not know. Consequently, we have to go forward in face of the possibility of firing from emplacements on the benches above and below the Gangway, and the heavy artillery of ex-Chancellors of the Exchequer and ex-Financial Secretaries. We are like the poor infantry under fire and we are anxious, because the right hon. Gentleman the Member for Epping (Mr. Churchill) may go cruising about, like a tank, in No-man's Land ready to fire on either side and at any convenient target. Therefore, our only possible support is likely to come from the ranks of certain doubtful elements among the allied and associated forces on the other side. I do not see any of the leaders of those doubtful elements on the bench opposite, but we have had a bulletin about them in the "News Chronicle" this morning which suggests considerable disaffection. We are sorry to see that the right hon. Gentleman is not in his place, and we are sorry for the reason; I understand that he is suffering from a, painful temporary indisposition, from which I hope he will soon recover. His Budget has had a very varied reception. I have looked through the various organs of the Press, and it is interesting to see what the various papers say about the Budget. The "Times" calls it "hard;" the "Morning Post" says that it is "austere and cautious;" the "Yorkshire Post" says it is "stern;" the "Express" says it is "stand pat;" the "Manchester Guardian" says it is "bleak;" and the hardest hit of all is that of the "Birmingham Gazette" which says it is an "all round disappointment Budget." [HON. MEMBERS: "What does the 'Daily Herald' say?"] The "Daily Herald" and the "News Chronicle" agree in calling it "nothing for anybody." That is not a very enthusiastic chorus, and the Chancellor of the Exchequer did not seem to be very enthusiastic in his introduction, nor were his supporters very enthusiastic in their reception, of his Budget. Of course, as we all expected, he made an extremely lucid and businesslike speech. It did not seem to me to be remarkable for sympathy; there were no high lights in it; we missed the acid pleasantry of Lord Snowden, or the exuberance of the right hon. Gentleman the Member for Epping. In fact, the right hon. Gentleman had to get through what was obviously a rather tedious and unpleasant function.

My first criticism of his speech must be its lack of background. It was curiously insular, curiously unrelated to world conditions. One would hardly gather from it the state of affairs in the world—the general economic ruin spreading throughout the civilised world. There was, in fact, generally a note of subdued optimism in the right hon. Gentleman's speech. It was very like its predecessors. On every Budget to which I have listened in the House, the Chancellor of the Exchequer of the day has always assured us that he was just carrying on until prosperity came. Prosperity is always waiting round the corner; the unfortunate taxpayer is always told that there was jam yesterday, and will be jam to-morrow, but there is never jam to-day. I think that most Members will agree that there was singularly little jam in this particular Budget. It was curious that the right hon. Gentleman should have ignored the fact of world conditions, because even the "Morning Post," that apostle of insular nationalism, has called attention in a leading article to the fact that our prosperity depends on the prosperity of other countries. It stated that: It is evident that there can be no hope of a single-handed recovery on the part of this country in isolation from the outside world. So long as the trade and, therefore, the purchasing power of this country continues to decline, our exporting industries are bound to remain depressed. The right hon. Gentleman may have been optimistic, but he gave us singularly little ground for optimism, and when he came to deal with the big question that faces everyone in dealing with the finances of the countries of the world, he told us practically nothing, but merely referred us to Lausanne. He left out altogether the question of Inter-Allied Debts. Apparently he hoped that we should not have to pay the interest on the American Debt, but I see that there is already a reminder from the other side of the Atlantic by one of the Senators there, who has informed us that there is not the slightest hope of our getting any relief in that quarter. Therefore, in so far as the right hon. Gentleman has ignored the whole question of external debt, he has not really met the Budget situation at all.

The next point is that this is the first Protectionist Budget for many years.

The Chancellor of the Exchequer was quite right when, last year, he informed Lord Snowden that that was the last Free Trade Budget for a period of years. This Budget contains a great variety of intricate and more or less Protectionist taxes, and it is interesting to see how this structure of Protection has been built up. I am quite aware that the building is not as high as hon. Members opposite hope. They hope to put a number of storeys on the top of this structure of economic nationalism. The curious thing is that its foundations and all the lower storeys have been dedicated to those who, in the past, were followers of Liberal Free Trade.

If we look at the oldest part of them, we find that it consists of the McKenna Duties, a memory of a great Liberal Free Trader; and in every instance some particular excuse has been made for these duties as not being really Protectionist. They are, of course, a relic of war-time exigencies. Next we have the Safeguarding Duties, which we may, surely, call the Churchill Duties. Then we come to the Abnormal Importations Duties, and I think we may call these the Runciman Duties. The fourth part does not really appear in this Budget, although it is to be a burden in the form of a tax on the people's food. That is the tax on bread, and we may, perhaps, call it the Sinclair Duty. Then we come to the 10 per cent. Revenue Duty. It is not to be Protectionist. Although there is no excise, it is called a Revenue Duty, and perhaps we may name it after that great Liberal who, although he says he disapproves of it, continues to be a prominent Member of the Government which is responsible for it. I think we may call this the Samuel Duty. Finally, we have the additional duties, which I do not quite know how to christen—this mysterious sum of £5,000,000 which appears in the Budget. I hope that the Financial Secretary to the Treasury will tell us what was the overmastering reason that prevented our knowing about this £5,000,000 on Budget Day. Why have we to wait? Is it because there must be a certain amount of unanimity in a Government when it introduces a Budget Is it to be included in the Budget and then objected to subsequently by the Liberal Free Trade Members of the Government? I think it is just another device to save the faces of these Chinese Generals.

There is one more prominent Member of the Government to whom I must refer in this respect, and that is the Noble Lord, Lord Snowden. I must recall to the Committee what he said about a revenue tariff, because he said he would not accept a revenue tariff as being merely a revenue tariff, and not Protection. He 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 he a party to such an imposition. When is a party not a party? [Interruption.] The answer is, when it is National. [HON. MEMBERS: "Socialist."] There seem to be two conditions in which a party does not feel any necessity for voting and acting together, namely, when it is a Liberal party and when it is a National party. In each case you can divide as you please.

The Chancellor of the Exchequer has balanced his Budget, and the main balancing factor has been a shifting of the incidence of taxation, shifting from direct to indirect taxation. The right hon. Gentleman paid a very handsome tribute to the Income Tax payer—no doubt a very well deserved tribute—but he did not seem to have the slightest interest in other people who were helping him to balance his Budget. He did not refer at all to the cuts in unemployment benefit, which brought him in £21,000,000 and more. He did not really bring out the point that, although the burden on the Income Tax payer had increased, the burdens on the indirect taxpayer have increased far more. As a matter of fact, in comparison with 1930, indirect taxation has gone up by £55,000,000 and the increase in the burden on the Income Tax payers is only £32,000,000. I have heard no argument put, forward to suggest that the wage earners are better off relatively than the Income Tax payers or what is the justification for shifting the burden of taxation on to the backs that are least able to bear it. Let us look at the change in incidence. It is rather remarkable. Out of a tax revenue of £727,000,000, indirect taxation is now contributing 41 per cent., and only a year ago it was 36 per cent. I do not claim for a moment that all in- direct taxes fall solely on the workers. They are borne by all, but they are borne in far greater proportion by the workers, and, instead of being proportionate to the income, they are proportionate to consumption, every person paying according to what he consumes.

I should like to see what is the condition of these people whom the right hon. Gentleman entirely ignored in his sorrow for the Income Tax payers—these people who have already suffered cuts and are now to be taxed. I have here a recent report on the condition of the unemployed issued, not by a Labour man, but by a committee of clergymen led by the Archdeacon of Northumberland. It says: It is our considered opinion that even as a bare maintenance level, standard benefit in this area is failing to maintain families adequately. This is specially obvious in cases where the wage earner has been out of work for a long period. Everyone has been brought dawn to a level too low for bare maintenance. Debt and fear of increasing debt, inability to replace clothing, boots and cooking utensils, are adding to the danger of under-nourishment by creating an irritable mentality. The right hon. Gentleman talked about the hardship of the Income Tax payers. They have had to pay out of capital. They have had to have overdrafts from the banks. If that is true—and we all know it is true—the poor have been having an overdraft on their health and strength and that of their wives and families. Those are the people whom the right hon. Gentleman still thinks he may tax. He thinks that they are the fittest people to bear the national burden. He justified it on very peculiar grounds. He said: Where on earth, I wonder, should we have found this great sum"— that is the sum necessary to balance the Budget— if we had been debarred from die consideration of Import Duties?"—[OFFICIAL. REPORT, 19th April, 1932; col. 1423, Vol. 264.] It is curious that some hon. Members seem to think that the sums that are collected by Wheat Quotas and Import Duties are a kind of manna that comes down from Heaven. Direct and indirect taxes must all come from only one source, and that is the pocket of the citizens. It is merely taking more out of one pocket and less out of another. The right hon. Gentleman 'seemed to think that it comes from somewhere in the atmosphere.


Will the hon. Gentleman say who is at present paying the 10 per cent. duty on steel coming into this country?


It is being paid by the consumer of steel, obviously.


I will give the hon. Gentleman this information. The price of foreign steel is cheaper than it has ever been in the history of the country, and the foreigner is paying the whole of the duty.


If that is so it seems extraordinary that the steel trade has been clamouring that the duty should be put on. It is obviously doing no good to them at all. If the hon. and gallant Gentleman really wants to get at the truth of the matter, I suggest that he should go through the Amendments that were put down to the Import Duties Bill and ask Members in every part of the House who have been asking for their raw materials to be put on the free list why they should do so if the foreigner is going to pay the tax.

The Chancellor of the Exchequer made another curious remark, that the declining yield from Income Tax was a convincing demonstration that we have reached the practical limits of direct taxation, while at the same time he talked of the wonderful response to the Income Tax demand. Of course, that is an entire fallacy. It shows nothing of the sort. I should have thought that the report of the Archdeacon of Northumberland that I have read would show that the taxable capacity of the unemployed had been fully reached, but that does not prevent the right hon. Gentleman from taxing their tea. It is true that many of the small Income Tax payers have suffered severely, but what about the very heavy income of the £50,000 a year man? He is very heavily taxed, but he has still £20,000 left although you may have taxed him £30,000, and in matters of taxation it is what remains that counts and not what is taken away. The £10,000 man still receives over £6,000 a year. It is obvious that the taxable capacity of the rich has not nearly been exhausted as compared with the poor. If the right hon. Gentleman proceeded to say the taxable capacity of the Income Tax paying class has been reached because there is wholesale evasion and we cannot get the money, it would have been a good argument, but his whole argument was that they had paid up splendidly. He did not even suggest that the decline in the return of Income Tax was due to evasion. It was only because the wealth of the whole nation had gone down, and that applies quite as much, in fact rather more so, to the poorer sections of the community.


Does the hon. Gentleman make the suggestion that there is wholesale evasion? If he does, he must prove it, because it is a suggestion of dishonesty against the whole of the population.


The hon. Baronet should try to follow my argument. I said that if the right hon. Gentleman had suggested that, it would have been a good reason for saying the taxable capacity had been exhausted. He did not suggest it, and neither did I. If I may turn to Budget expenditure, I want to draw attention to the really big question that has faced every Chancellor of the Exchequer, and that is the enormous sum of our War Debt payments. It is no good asking for an enormous cutting down of the Budget unless you are prepared to deal in some way or other with the enormous Debt charges, which still stand round about £300,000,000. Those are the features of every post-War Budget, and yet the attention of the House has always been directed to the Supply Services and not to the service of the Debt. The "Economist" Budget Supplement contained an interesting consideration of the ratio of the amount raised in taxes to the national income. It was there stated that the tax revenue bore to national income a ratio of 17 per cent. in 1930 as compared with 7 per cent. in 1913, suggesting that our national income had fallen and that the Government were now actually taking in taxes something like 25 per cent. of the national income. I think that the figures were exaggerated, but I suggest that we might work out the ratio between Debt interest and the national income if we want to realise the burden. In 1913 the payment of Debt only took 83 per cent. of the national income, and to-day it takes something like 8.2 per cent. The moral of the writer in the "Economist" is that if the taxpayer is to obtain any substantial alleviation of a burden whose indefinite continuance cannot be contemplated, a vigorous pruning of expenditure upon all hands must be effected. I suggest that the Committee should consider as to how far it should continue to carry this enormous burden of Debt—this huge fixed charge.

Almost everybody who is discussing the world situation or the situation of industry draws attention to the way in which the whole machinery of world economics is upset at the instance of these huge fixed sums. In a period of rapidly changing price levels we have to face up to it. As a matter of fact, the Debt of 1924 takes something like £100,000,000 more at present-day prices than it did then. The burden is constantly increasing. The Labour party were absolutely right when they recommended this country to have a capital levy immediately after the War. We have had to face this burden ever since, and one has to sympathise with every Chancellor of the Exchequer who has to meet it. Most intelligent people to-day are hoping for a scaling down of Inter-Allied Debts. The right hon. Gentleman is going to Lausanne. He hopes to get some relief from Inter-Allied Debts. France and Germany scrapped their debt, and not only their debt, but also their commercial and business debts by wholesale inflation. Big firms in this country have had to follow suit. Vickers have reduced their nominal capital by £8,500,000, Baldwins by £3,750,000 and Armstrong Whitworth's by £10,500,000, and yet all the time we sit down and see Budget after Budget introduced with this great burden untouched. It is time that this country, in relation to the rest of the world, considered the whole question of long-term debts, whether national or in industry, because I do not see how we are to get back to any reasonable position until they have been dealt with.

The Chancellor of the Exchequer said nothing about Debt conversion. I should have liked to have heard something from him of its prospects. After all, a Debt conversion might save up to 10,000,000, £20,000,000, or even £30,000,000. We all know that Lord Snowden contemplated a Debt conversion, and most people agree that he missed the omnibus. He might have done it in December or he might have done it in April, but he failed, and we are suffering from it to-day. I suggest that after all this business of cuts and all the talk about Supply Services, and when you have whittled them down as far as you can, you will find that you cannot get back to satisfactory budgeting until you have dealt with the Debt.

I turn to certain specific proposals of the right hon. Gentleman, and, in particular, to the borrowing of £150,000,000. It is an extremely interesting proposal. It is a belated recognition of the fact that the Labour party were right when we urged the mobilisation of foreign securities in the crisis. What it amounts to is that it is recognised that the Bank of England cannot control the exchange. It has to call in the State to assist it. It supports our contention that the Bank of England should no longer be a private institution. It is interesting to see how those proposals, when they were put forward, first of all, shocked everybody. I was interested, in reading the speech of the right hon. Gentleman the Member for Hillhead (Sir R. Horne), in a Debate in 1924. He was very shocked at the recklessness of the present Prime Minister and Lord Snowden in their unorthodox days suggesting that the Bank of England might have to be taken over by the nation. Now we find ourselves in the highly respectable company of that guide, philosopher and friend of the Conservative party, Lord Beaverbrook.

The right hon. Gentleman gave us very little explanation about the business of borrowing £150,000,000. I should like to know something more about it. It looks to me rather as if we are going to get the worst of both worlds, and that the Bank of England is going to get the best of both worlds. We are going to relieve the Bank of England of part of its very troublesome duty, and it is going to be free to call in our aid whenever it needs it. I did not gather from the right hon. Gentleman exactly what form the loan was to take. I gathered that part of it was to be in gold. Does that mean that we are to add to the great mass of gold which is now held absolutely uselessly in the world? The right hon. Gentleman admitted that it was likely to be a somewhat speculative business. It looks as if we might get the loss and the Bank of England the benefit. The right hon. Gentleman drew a distinction between the two sides of the Bank of England, in which he almost represented that the Issue Department was a State Department entirely separate from the private business of the Bank of England. If that line is taken it is about time that we took entire charge through the State of the Issue Department.

4.0 p.m.

The right hon. Gentleman has cleverly concealed the fact that there is one bit of his Budget which is not balanced, and that is the £8,000,000 lost in the borrowing transactions in the autumn. Instead of providing for paying it off in his Budget, he is simply adding it to the Debt. It is a very clever piece of work. The right hon. Gentleman said that the purpose is to help the exchange. We should like to know at what level he intends to help the exchange? Many people think that the exchange is too high now and that the Government acted much too precipitately when they first forced it up, and they have now to try and force it down. Does it mean that we are now going to be practically chained to America and France again? The House is entitled to know the policy of the Government. They are taking this exceptional power and intend to help the exchange. I turn to other specific points. I come to a very old friend of ours, the Tea Duty. The Tea Duty was abolished by the right hon. Member for Epping (Mr. Churchill). He has a faculty for abolishing things, and then they come back again. I remember he abolished the Ministry of Transport in one of his Budgets, and, I think, the Department of Overseas Trade, but they are back again. He stated that he was going to abolish the Tea Duty altogether —total, immediate, final abolition. He said there is no other comfort which enters so largely into the budget of the cottage home, or the still humbler budget of the old, the weak and the poor. The Tea Duty is to come on again, and the old, the weak and the poor are to help the Chancellor of the Exchequer in his Budget. He went further. He pointed out that tea from Java enters to a great extent into the cheaper blends used by the poorest people. Therefore, they are going to be taxed 4d. instead of 2d. imposed on the more expensive Indian teas. I should like to hear what repercussion that action is going to have besides putting up the cost to these unfortunate people. We have a very large business with Java, whose principal export is tea. Our exports were £10,000,000 three years ago, and even this year they are only down to £7,000,000. In the case of Ceylon, on the other hand, they are only £4,000,000. It is likely, therefore, that we shall go still further in the policy of the Government in killing off our export trade as far as possible.

There is one point I would like to put before the Financial Secretary, and that is the extraordinary chaos created in the tea trade by the Chancellor's Excise proposals. He proposes to put Excise on all stocks of tea except those under 1,000 lbs. That is being interpreted as being applied to the stocks in individual ownership. Therefore, the small grocer will not pay, but all the multiple shops will pay, because it is being interpreted as meaning that concerns like Liptons, the Home and Colonial Stores and cooperators are in the hands of one, and therefore they are to pay. That will create an extraordinary anomaly between traders. Of course, if the right hon. Gentleman says that it is his policy to support the individual trader against the multiple firm, we can understand it, but, from the point of view of pure equity, if there are two shops doing business in the same town, one a branch shop and the other an individual business, and one is to pay and the other is not, you are going to cause intense feeling throughout the country. [An HON. MEMBER: "Co-operators. "] Co-operators are entitled to equity.

I am thankful to the hon. Member for bringing me to the next point, that is, the question of the tax on co-operative societies. We had a very remarkable statement by the Chancellor of the Exchequer. He dealt in rather facetious fashion with two particular items of his Budget. He led hon. Members opposite up the garden. They hoped for beer at one end, and then they hoped for the taxation of co-operators at the other end. They came to a blank wall at the first, and, I understand, they had to scrap all the posters about cheap beer. At the other end they came to a committee of inquiry, as was to be expected from this Government. It was to be a committee of inquiry quite impartial, and I suppose there never was a more mendacious statement than that of the right hon. Gentle- man as he led up to it. I do not believe in impartial committees appointed on ex parte statements. He said: Under the existing law the co-operative societies enjoy a privileged position, in that they pay Income Tax only under schedules A and B, and not under Schedules C and D."—[OFFICIAL REPORT, 19th April, 1932; col. 1432, Vol. 264.] Of course that statement is wrong. The right hon. Member for Epping, another Conservative Chancellor of the Exchequer, said on 1st March, 1927: It must be borne in mind "— and, in time, "Here comes the noble lord," as Shakespeare might have said— that the societies pay out a large amount of interest on share capital, on which the Exchequer receives at present the tax to which it is entitled. "—[OFFICIAL REPORT, 1st March, 1927; col. 210, Vol. 203.] But I leave the politicians, and come to what the Treasury officials say. We have the Treasury Memorandum: Industrial and Provident Societies enjoy no real exemption from Income Tax.… The exemption is not an exemption from Income Tax on profits. It is merely an exemption from the liability which the Income Tax Acts impose on companies, etc., to account for the Income Tax on behalf of their shareholders. It is, in fact, merely a variation in the machinery of collection, not in the principle of the facts. It is expressly stated in the law that the exemption does not relieve a single member of such a society from any assessment to which he would otherwise be liable. The right hon. Gentleman must have mislaid that Memorandum when he made his speech yesterday. As a matter of fact, Finance Minister after Finance Minister, Financial Secretary after Financial Secretary has explained to the House, first of all, that there is no money in this, and, secondly, that there is no equity in it; and if the second does not appeal, I hope the first may. It is a sheer waste of time to appoint a committee, and I think the right hon. Gentleman must have felt trepidation at the last minute, due to the fact that there are a very large number of co-operative voters in the country.

Next, I would draw attention to the remarkable position with regard to sugar in this Budget. There was certain legislation passed by which home-grown sugar received certain subsidies. We might call that the covenanted benefit. Last year there was a special appeal made to the Government, and an additional sum was given over and above the letter of the law, which we might call uncovenanted benefit. But last time a test was applied. It was only to be received by those sugar factories which gave a certain price to the growers. [An HON. MEMBER: "Means test!"] Now the means test has been knocked off by the Government. The subsidy is to be given not only to those firms which pay a fair price to the farmer, but to the firms which obstinately stood out against paying a fair price to the farmer. I should like to know the justification for that.

At the conclusion of his Budget statement, the right hon. Gentleman talked about a wonderful revival of public confidence. I think it takes a, great deal of looking to see any great revival of public confidence. I do not believe that the people of this country have any confidence to-day in the financial machinery by which trade and industry are carried on. The events of the last few months have shown to everybody the dangerous position in which this country is. [Interruption,] I should have thought that the danger was sufficiently obvious. It has been expressed in language much better than I can express it, and by a Member of the present Government. In the Budget Debate of 1926 Lord Snowden said: The Government undoubtedly are in the grip of the banks and the financial houses.… This grip upon the Government by national and international finance cannot be allowed to continue without bringing about financial disaster to the country." —[OFFICIAL REPORT, 27th April 1926; col. 1882, Vol. 194.] When the disaster came, Lord Snowden was about as useful as a rabbit in the grip of a boa. The Budget of the right hon. Gentleman reminded us very much of the lady medium in court and the voice of "Power." The right hon. Gentleman spoke throughout with the voice of the City of London running all the way through. One word more about confidence. If there is any confidence in our banks, there is very little confidence in the way business is being run to-day. It is all very well to say, "Encourage investors to come into business," but what about Hatry, what about Lorang, what about Mr. Kreuger? A few weeks ago Mr. Kreuger might have stood against the world. He was held up as a great financier, one of those great men who make capitalism what it is. There has been a succession of shocks to the confidence of the investor, and the world is in a state of lack of confidence: in the ability of the present system to deliver the goods. The right hon. Gentleman's Budget may carry us on, or it may not. It depends almost entirely upon what happens to world affairs in general.

We shall oppose this Budget. I do not say that the right hon. Gentleman, acting as a capitalist, taking care of the capitalist system, could have been expected to do much else. The National Government never professed to be doing anything for the workers. [Interruption.] The Prime Minister only put into his speech as an afterthought that they were not to be forgotten. I agree they are remembered as tea drinkers, as consumers of bread, as payers of taxes. It is clear that the nation, as interpreted by hon. and right hon. Gentlemen opposite, means the privileged classes, and not the workers. This Budget is going to put a heavier burden on the shoulders of those who can least afford to bear it.


I should like to pay a tribute to the speech we have just had from the hon Member for Lime-house (Mr. Attlee). I appreciate the difficulties which he suggested as to his position. At the same time, I think he somewhat exaggerated them, judging by the skill with which he discharged a very difficult task. He indulged in military similes, in which he likened ex-Chancellors of the Exchequer to heavy artillery. If I can ordinarily come within that category, I think that the speech of the hon. Gentleman was so disarming in its character that I have, according to the latest formula at Geneva, lost all qualities of offence. All his similes were not quite so apt. I think his comparison of Lord Snowden and the rabbit was somewhat difficult to follow. I have some difficulty in understanding his criticism of the speech of the Chancellor of the Exchequer in those passages in which he referred to the revival of confidence. The hon. Gentleman seemed to dispute that there had been any such revival. The fact is, as all the world knows, that this country to-day is in a position incomparably superior to that at any time during the last few years. We have done with bankrupt Budgets, and that fact alone has restored not merely our confidence in ourselves, but it has restored the confidence of the world in the sound financial methods of Great Britain. I think it may be truthfully said that today there is no country which is steadier, and none to which the world so ardently looks for leadership and guidance in the difficulties in which the nations now find themselves. The Chancellor of the Exchequer said that we had adopted the hard and stony road. I share with him the belief that the British people, in spite of all the sacrifices that they have made, would rather endure a little longer than imperil by a single act the solid advantage which they have achieved within the last few months.

The hon. Member criticised the Budget in a somewhat sporadic manner, but I am glad that he suggested none of the full-blooded doctrines of recent Socialist Budgets. His main complaints were of a very narrow and meticulous order. The chief of them, so far as I could gather, was that a new tax has been imposed on tea. That kind of criticism leaves me entirely cold. It is possible, of course, to refer to the language in which the right hon. Gentleman spoke of the benefits which would be derived from the cancellation of that Duty, but there is not a single creature who ever really felt that he had obtained any 'benefit from its remission. I never heard a word of gratitude from any section of people about it, and I do not think there is going to be any outcry from the masses, to whom the hon. Member referred, on the ground that this tax has now been reimposed. What is to be said on behalf of Java? In order to put its tea into its own parent country of Holland, Java has to pay something like twice the duty that it will have to pay in this country.' Are we going to incur the hostility of Java because we charge half the duty that Holland charges?

I confess that I have some comments to make on the Budget which are not entirely laudatory. I think my right hon. Friend has made a mistake in not remitting the Beer Duty. I make this criticism on the sole ground of revenue. I remember a situation in which the yield from certain liquors was going down so rapidly that it seemed apparent that the amount of Duty was the cause of the diminution in the yield and the Duty was decreased and brought an increased yield. I believe that in the case of beer at the present time the Chancellor of the Exchequer would have obtained just as much revenue by remitting the extra tax which was imposed in September. In that way he would have gained as much yield from the increased consumption. Probably the same thing is true with regard to Scotch whisky. To me the treatment of Scotch whisky by the Exchequer has always been a, very great puzzle. If it is highly taxed upon moral grounds, why does the Exchequer not take into account the morals of the rich who alone are able to buy whisky with this high tax upon it? The late W. S. Gilbert said: Hearts just as pure and fair May beat in Belgrave Square As in the lowlier air of Seven Dials. I should have imagined that if care for moral influences was his desire, the Chancellor would take into account the morals of the rich as well as those of the masses. If it is to be considered on grounds of revenue, it is an undoubted fact that the blighting character of the Duty at the present time has the result of decreasing the revenue which, the Chancellor of the Exchequer might hope to obtain. In any case, how either upon grounds of morals, or upon grounds of revenue, or upon a combination of both, do you justify putting on the alcohol which is used to fortify cheap foreign wines a less amount of Duty than you put on the alcohol which goes into honest Scotch whisky These duties need revision; they do us no credit, and the Chancellor of the Exdhequer might devote himself on some other occasion to a revision of them.

I am somewhat disappointed that the Chancellor of the Exchequer has not dealt with the case of raw real silk. I hold this view, because I am perfectly convinced that there was here ready to his hand a method of increasing employment in this country. Raw real silk is at the present time taxed to the extent of 28 per cent. ad valorem, as it is taxed in no other country in the world. The result is to put our silk manufacturers, who used to be the greatest silk manufacturers in the world, under a very heavy handicap. I have had very good evidence vouchsafed to me to justify a remission of the duty. In the West of Scotland there are many derelict and disused factories. I doubt if there is any district in these islands more hit by unemployment than the West of Scotland. Recently there came to me an Austrian silk manufacturer, who guaranteed to take a factory in the county of Dumbarton, close to Glasgow, and to employ some hundreds of people within a very short time if only the duty on raw real silk were taken off and the revenue compensated for by duties that might be imposed upon the manufactured article. I beg the Chancellor of the Exchequer, having in view the interests of employment in this country, between now and the time when these matters come up in detail on the Finance Bill to consider whether something could not be done in that direction.

For the rest, one of the chief characteristics of the Budget seem to me to be the unfortunate factor of high expenditure which still persists. We cannot for Tong go on spending upon rates and taxes one-third of the whole income of the country. We cannot for long continue to use the revenue derived from Estate Duties to meet current expenditure. In the present year while we are making an attempt to devote £32,500,000 to the Sinking Fund, we are taking £76,000,000 from Estate Duty, that is, to say from the capital of the country. I am sure that that way leads to the inexorable impoverishment of the people. There are, happily, some grounds for believing that there are regions in which expenditure may be reduced. I could not quite follow from the Chancellor of the Exchequer's speech whether he has allowed anything for the probable decrease in the amount he will have to pay upon his borrowings in the course of the year. If he has not taken that into account, he might save a considerable sum in that category of expenditure. Undoubtedly, everything is moving towards cheap money. Not only do I think that in the course of the year the Chancellor of the Exchequer will be able to save a large sum of money in the rates of interest which he will pay upon borrowed money, but I think that matters are developing hopefully and quickly enough to allow him before very long to indulge the hope of achieving the conversion of the £2,000,000,000 of War Loan, which would effect a considerable saving in the expenditure of the country during the year.

One of the things upon which we may congratulate ourselves is the success of the tariff policy which has been adopted. The speech made by the President of the Board of Trade a few days ago seemed to me to justify all the claims that we on this side of the House have made for years in regard to the benefits to be derived from such a policy. What was the state of affairs with which we were met'? We are a manufacturing country and we must export, yet in 1931 we imported £12,000,000 less of raw materials than we imported in 1924, and we imported £70,000,000 more of manufactures: while our manufactured exports went down between 1924 and 1931 by £187,000,000 in the year. The result was necessarily increased unemployment in this country. That position, I take it from the figures given by the President of the Board of Trade, has been reversed. We are now importing less and therefore saving the country's money, and doing more within our own borders. Our export trade, while it has not gone up to any appreciable degree, has nevertheless maintained a higher ratio than that of any other country during recent months. More than all, we are able to say that 250,000 more of our people are in employment than six months ago. That is a great achievement.

Although as I believe the tariff is of first-class importance, it is in present circumstances entirely over-shadowed by the question of currency. The truth of that assertion will become obvious if we think for a moment that the rise in the value of the pound sterling, such as occurred three weeks ago, from about 3 dollars 50 cents to 3 dollars 80 cents entirely wipes out, so far as checking imports is concerned, the 10 per cent. duty. It is, therefore, clear that it is no good having a tariff policy unless we also have a currency policy. How can the Advisory Committee on Import Duties deal with any question of tariffs unless they have some sort of idea about the kind of level on which we intend to maintain the pound.? That fact has been implicitly recognised by the Government. Whether we like it or not we are now in the situation of having a managed currency, and that the management is going to assume a determined character has been made plain by the announcement of the Chancellor of the Exchequer that he intends to ask from the House, authority to borrow £150,000,000 for the purpose of equalising the exchange.

4.30 p.m.

These questions of currency always seem very remote from the ordinary life of the people, who have not had to consider them for more than 100 years, and yet the question of currency sits down at every table that is spread with a meal in every cottage or castle throughout the country. It very intimately concerns us in the House of Commons. Aristotle said long ago that money exists not by nature but by law. It is the law that gives it efficacy. It is the law that says what is legal tender. It is in this House that we make the law. We were the people who decided about our return to the Gold Standard. We were the people who gave authority for the amount of fiduciary issue that should be put out by the Bank of England. We are the people who only a few weeks ago gave authority for £15,000,000 to be added to the fiduciary note issue. In fact we are, God help us, the people who have to manage this currency, under the advice and through the means of the Chancellor of the Exchequer using as his instrument the Bank of England. I hope therefore I need make no apology for my intrusion on this subject. For our duty's sake, we cannot regard these as matters which are to be looked upon as an impenetrable mystery into which no sacrilegious nose may be poked. We have in our responsibility to our constituents to consider how this currency ought to be managed, and upon what principles. I say that I do not feel that I need apologise for my intrusion into these matters, but I do apologise for the ignorance which will be found in every sentence of my remarks. Nevertheless I will venture to say how I think this question should be dealt with.

If you are going to manage currency it is clear that you must have some objective in view. A knowledge of your objective is of paramount importance to people who are doing business in this country. Business with foreign countries is difficult enough in normal times, but it is paralysingly difficult at a time when the trader does not know how he stands in the matter of his own currency. You may say you can buy forward exchange but there are many countries for which you cannot get forward exchange.

The number of times that a person like myself is asked "Where do you think the pound is going" is poignantly great. I am constantly being told by persons that they cannot live if the pound goes above this figure or that, and every figure that has ever been mentioned in that way is less than the figure at which the pound stands to-day.

I hope that I am not unduly pressing this matter, but I do want to put to the Chancellor of the Exchequer the suggestion that he should go to the utmost limits of discretion in the disclosure he makes to the business people of this country of his monetary policy. Nobody wants to know what transactions are being effected in the exchange department of the Bank of England. There are many deals and negotiations which will take place which can only be effected successfully if other people do not know what you are doing. But it is an entirely different matter to let the people of this country who are trading upon your pound know what they have to expect so that they can make their contracts with some confidence. What then should be the guiding principle? I will venture to read to the Committee a statement in the report of the Macmillan Committee which I do not think has received the attention it deserves. It is one of the most emphatic and striking statements that has, ever come from a committee set up by a Government. On the subject of prices they say this: To allow prices to be stabilised at approximately their present level would be a serious disaster for all countries of the world alike; and the avoidance of such an event should be the prime object of international statesmanship. Our objective should be, so far as it lies within the power of this country, to influence the inter- national price level, first of all to raise prices a long way above the present level and then to maintain them at the level thus reached with such stability as can be managed. We recommend that this objective be accepted as the guiding aim of the monetary policy of this country. I do not propose to argue that point of view. I accept it as sound, and given by one of the most important committees that has ever discussed monetary problems in this country. Some people take a different view, but they are very few in number. Let me illustrate what the Macmillan Committee stated in that paragraph, keeping in mind that prices have fallen a considerable distance since that report was issued, so that our condition is worse now than it was then.

If hon. Members will think for a moment, they will see that prices are the source out of which costs of production are paid. These costs of production embrace various things. For example, they embrace rates and taxes, interest on debenture debt, and wages. The level of prices would be quite immaterial if you could always automatically bring down the level of your costs to the level of prices, but you cannot do it.

There is a whole lot of these costs which are rigid. Your rates and taxes, instead of tending to come down, always tend to go up, and the interest on your debt is a fixed charge of which you cannot get rid. In regard to wages, while they are more elastic than these other costs, they are still relatively inelastic, and it would be impossible, from a social and political point of view, to reduce wages to-day to the extent to which wholesale prices have fallen. If you take the year 1928, you will find that since then wholesale prices have fallen by 25 per cent. Wages have fallen only by 3i per cent. It is quite plain that you could not have brought down wages to the extent to which prices have fallen. In normal times these things tend to adjust themselves over a period. In good times you can make up for what you have lost in bad times, but the fall in prices in recent years has been so devastating that you are now at a point when it is quite impossible to compensate for the fall that has taken place. The vast fall in 1921, and the fall that has now taken place, has meant that prices to-day are not only below the 1913 level, although costs are a great deal higher, hut that in a great mass of cases they are well below the cost of production. This is the blight from which the world is suffering. You can see how it affects this country. If you compare 1924 with the present year, you will find that the Budget expenditure of that year is approximately the same as the expenditure for the current year, but we have to meet it this year out of prices which are 40 per cent. lower than the prices in 1924.

Take another illustration. Take the question of Debt. The Debt which we have to carry to-day, if you consider it in relation to wholesale prices, is 1.94 times as big, nearly twice as heavy as the figure at which the money was borrowed, and what looks like a Debt of 7,000,000,000 or £8,000,000,000 is in fact, by the fall in prices, a burden which is increased to £14,000,000,000 or £15,000,000,000. It is not to be wondered at that the Macmillan Committee put forward the question of prices as being one of the vital factors in our economy; and they said that there was no other way to retrieve the world's lost prosperity except by getting prices up to a level much higher than at present and sustain them upon that level.

The worst, the most pitiable, victims of this terrible economic disaster are, of course, the primary producing countries. They are in the main the borrowing countries, the newer countries of the world. What has happened to them? They have now to find in commodities twice and in some cases three times as 'much to meet the interest on their debt as was necessary at the time the money was borrowed, and with the cost level at which they have to work it is impossible for them to do it. The result is that you have had defaults in many countries, and if this condition persists you will have many more. In that way, it also affects creditor countries. If we are unable to collect the interest on some of our loans to that extent our investment income is depleted. It also affects us in our trade. The purchasing power of these primary producing countries is cut in two. Take the case of Australia. In 1930 Australia bought in metals and machinery £23,000,000 worth of goods. In 1931 she only bought £6,000,000 worth. In 1930 she bought in textiles and apparel.233,000,000 worth of goods, but last year only £12,000,000 worth. Thus, again, countries are hit which draw revenue from trade. This is one of the sources of loss from which our trade balance is suffering.

Take another item in this bill. We have been fixing our attention rather upon the serious adverse balance of our trade in respect of the exchange of goods, but the loss in investment income has been a very serious one. Our investment income between 1929 and 1931 from overseas has dropped by £80,000,000. This decline has been caused because the earnings of the countries in which British people have investments in railways and docks and mines and other adventures have all come down owing to the fall in prices. You can see this evil spreading not only through all the countries which are in difficulties, but immediately attacking the strength and power of creditor countries. That is one of the reasons why we were forced off the Gold Standard last September.

Is there anything that we can do to alter this situation within our own circle? I think there is. The Treasury and the Bank of England are., I take it, going to be the chief means by which the condition of things here will be reversed, through prices being raised. You cannot help matters—you can only worsen them —by having a rise in the pound. What is the result of the pound going up from 3.50 to 3.80 dollars'? The effect is immediately to put a check on our exports because it makes it dearer for other people to buy.Further, all our debtors are less able to meet their debts. Australia could never have met her obligations to this country in the last few months if sterling had stood at gold parity. Her situation has been greatly eased by our being off the Gold Standard. But every time your pound rises you increase their difficulties. Moreover, a rising pound brings a great deal of bad money here. By bad money I mean that which can be abstracted at short notice and do you great harm. Again, a rising pound makes it more difficult for you to keep on a par with those other countries which have gone off the Gold Standard. Sweden and Denmark have already found it too difficult to maintain their position relative to a mounting sterling.

Everything ought to be done, it seems to me, to make it possible that we shall keep as large a sterling area in the world as possible. As I understand the project of the Treasury and the Bank of England, it is a great source of hope in dealing with this matter. I say frankly that to me it was the factor in the Budget which seemed far and away the most important. As I understand the matter, with this fund of £150,000,000 and such other sums as they have at their disposal, they will be able to maintain the exchange value of the pound practically at any level they like. The Chancellor of the Exchequer was very careful and cautious in what he said upon the matter, and suggested that there would be circumstances in which it might be impossible to take such effective action. So far as I can see, it will not be necessary to prevent the pound declining. The revived confidence of the world in this country will prevent any ill-happening of that kind. The only difficulty will be in preventing the pound from going too high. At least that is how I envisage the situation.

There is only one consideration which may make it too difficult for the Treasury and the Bank of England to stop the pound from rising against them, and that is one which I hope we are not going to contemplate. There are rumours in the world that America may go off the Gold Standard. Frankly, I do not believe that anything of the kind can or will happen. The gold resources of the United States are quite sufficient to meet any situation that might arise. At any rate, we of all people should be the last to give any credence to such opinion. The mere fact that we refuse to believe it possible will be a great help in stiffening their position. A persistent flight from the dollar is the only circumstance which would make it difficult for the pound to be kept at such a level as the Treasury may desire.

Of course, this assumed action on the part of our monetary authorities would naturally raise prices in this country. I want to say a word upon that matter lest anyone should be frightened about the situation caused by a rise in prices here. I do not understand the speeches of,those who congratulate us on the fact that prices have not risen. The real fact is that unless prices rise in this country we shall not get the full compensation which we ought to get by going off the Gold Standard. It will not make the industrialist any better able to bear the burden of the taxation that he has to pay, the debt he has to carry or the charges he has to meet on his borrowings for his business. Accordingly, a rise in prices seems to me the first necessity in this country. I hope that no one feels timid about such a contingency.

Lest anyone should believe that the country would suffer any detriment, let me recall a state of matters which is well within the recollection of all of us. I ask hon. Members to carry their minds back to 1928. I am sure that none of us thinks that in the year 1928 we were in an intolerable position because of the prices we had to pay, or that life was too difficult for us to bear. Yet wholesale prices are 25 per cent. less now than then. The cost-of-living retail prices are now 11½ per cent, lower than they were then. They have never followed the full drop in wholesale prices. Wages are only 3½ per cent. lower. It is obvious from these figures that wholesale prices can rise a considerable distance before they begin to affect retail prices at all, and that retail prices and wholesale prices can rise together to another very considerable extent before anyone is worse off than in 1928. That, accordingly, is a situation which we can face with equanimity.

The illustration leads me, greatly daring, to carry my argument a little further. 1928 shows a level of prices 25 per cent. higher than now. Suppose that you depreciate your pound in something like that degree. You will get down to a figure which is in the region of $3.80 cents. If in order to make your position fairly certain you were to put it down a small margin further, it seems to me that you would arrive at some sort of figure—


Did the right hon. Gentleman say $3.50?


I said $3.60, but I am not really unduly concerned about the absolute figure. What I am rather concerned about is that the policy of the Government should give sufficient indication to the traders of the country that the pound is not going to rise above a figure in that region. If this assurance were given either by an announcement which the Bank of England might not like to make or by the obvious action which could be taken in the market, and which everyone would understand, I believe you would take a great burden off the traders of this country and enable them to conduct business with far more enterprise and courage and hope than they do now. What would be the effect of a rise in prices in this country 1 In my view it would extend to the whole area which is now trading upon sterling. You can see what the immediate effect will be. As soon as people who have to buy goods know that there is to be a, rise in prices they will come into the market and lay in the stocks which they have long ago depleted. You would have purchases from all parts of the world within the sterling area, and accordingly you would exercise at once a wide influence over more than half the world.

I believe that that would be a great thing to do. But I recognise that it is not all. The hon. Gentleman who preceded me to-day referred to the absence of any suggestion about world conditions in connection with this Budget. I agree with him that we not only cannot shut our eyes to world conditions but that we cannot properly envisage our own policy unless we have regard to what is happening elsewhere. While to create this sterling area, which I have vaguely indicated, would be a great achievement for this country and would be a steadying element in the world's trade, it is not the same as if you had all the world trading together as they did before the War. Now, as the Macmillan Committee pointed out, one of the clogs upon progress, one of the causes of distress and depression, if not the main cause, has been payment of Reparations and War debts. They have indicated that to get rid of this incubus or alleviate it is the first step which ought to be taken in order to relieve the despair from which the world is suffering. I am sure that, although it is possible to exaggerate the effect of the payment of Reparations and War debts, nevertheless it has had a paralysing effect, especially in recent time, upon the imagination of the people of the world, and I am confident that there is nothing which would so change the psychology of all the nations and give them an idea that you were at last taking a new movement in a forward direction, as a settlement of this great problem.

Those who go to Lausanne have upon them a greater responsibility than has ever been laid upon the shoulders of any council of Ministers in the history of the world; for they have nothing less than the fate of the modern world in their hands. I am glad to think that Britain will be speaking at that Conference with a revived authority. I hope that our Ministers will be able to keep out of the discussion the ordinary ambitions, the balancing of powers, the consideration of circles and spheres of influence, and all the old-world hostilities. I hope they will be able to make it clear that altruistic compromise is now the real road to enlightened self-interest. In the present condition of the world no nation can possibly profit by the distress of its neighbour. It is only by combination, by the combined efforts of all the statesmen of Europe that anything can now be done which will give the world a turn towards prosperity.

It appears fantastic to think that questions of currency can have such an enormous effect upon the life of peoples, and that such a device as the medium of exchange can exercise so great an influence upon the fortunes of mankind. It almost seems as if man had created a Frankenstein which would now destroy him because he has lost the key to the mechanism. But let the historian speak upon this matter. Sir Archibald Alison points out in his "History of Europe" that what ultimately brought about the fall of the Roman Empire was the lack of that specie which they had been accustomed to get from the mines of Spain and Greece. If I may read to the Committee a passage in which he refers to the matter it may clarify the view which I am endeavouring to present. He said: Rome, saved in its utmost need by an expansion, sank in the end under a still greater contraction of national currency. The supply of currency for the old world became inadequate to the increasing wants of its population. The mines of Spain and Greece, from which the chief supplies were obtained at that period, were worked out, and so great was the dearth of the precious metals that the treasure in circulation in the Empire, which in the time of Augustus amounted to £380,000,000, had sunk in that of Justinian to £80,000.000 sterling. As a consequence of so prodigious a contraction of currency, debts and taxes, which were measured under the old standard, became so overwhelming that the national industry was ruined; agriculture disappeared and was succeeded by pasturage in the fields; the great cities were all fed from Egypt and Libya and the revenue became irrecoverable. 5.0 p.m.

In that picture I think we may see some of the features of our present situation, and perhaps it is well that we should take warning by the historic sequel. Rome, as everyone remembers, plunged into the abyss, taking much of civilisation with her, and for many generations thereafter the world existed in the dismal twilight of the Dark Ages. There are people so complacent as to think that nowadays we are past all that kind of trouble and that the world always will "muddle through," and they are content to stand idly by and do nothing to prevent such catastrophes. But, believe me, there is nothing in human nature or in history to justify any such complacency. The world can only be saved by the efforts, intense, immediate, persistent, broadminded, and far-seeing of the statesmen who are charged with the destinies of the nations.


The burden of the important speech with its moving peroration which we live heard from the right hon. Gentleman the Member for Hill-head (Sir R. Horne) was, in its earlier stages, the success of tariffs and, towards the end, the necessity for a currency policy. As regards the former, I find myself in complete disagreement with him. As regards the latter I am largely in agreement with him. He will forgive me, however, if I do not follow him in his argument, because he, as a former holder of the office of Chancellor of the Exchequer, will understand that I desire this afternoon to address myself rather to yesterday's statement and to the financial proposals of the right hon. Gentleman who at present holds that high office. Anyone who has studied the Chancellor's statement and the details of this pretty grim Budget will agree that the Chancellor of the Exchequer is entitled to claim that he has wooed no fugitive winds of popular applause, that he has curried favour with no sectional interest, and that he has managed to balance his accounts, without recourse to windfalls, without uncovered borrowings, and without crediting capital assets to revenue.

All that must be freely and frankly placed to the credit of the right hon. Gentleman. For the nation to have in the last financial year succeeded, by a stupendous national effort, in balancing its Budget to the admiration of the world was not merely a fiscal triumph; was not, indeed, so much a fiscal triumph as a psychological triumph. It was idle to expect, in the circumstances of the day, any flow of glittering promises from the custodian of a straitened Exchequer, but the Chancellor's and statement has dealt a severe blow to the whole psychology of the country. It is not merely that the hopes of immediate tax relief have been dispelled, and that the taxpayer now realises that he is condemned once again to the crippling burden of the effort, to which the National Government last autumn called him, in order to support the national recovery. That alone would make this a Budget of disillusionment. But a greater factor in depressing confidence and engendering feelings of despair and defeatism is the revelation in the Chancellor's statement that the Government have shown no appreciation of two pre-conditions, the fulfilment of which is essential to any real betterment of the national financial situation. I agree with the right hon. Gentleman the Member for Hillhead that the first and the paramount consideration is a sound monetary policy, but a second condition is international recovery from the financial crisis.


The same thing.


Not entirely. A monetary policy is one of the conditions, but not, I think, the sole condition. But as regards both monetary policy and recovery from the financial difficulties which encompass us, the Chancellor's speech gives no indication of any but a makeshift policy. Hon. Members may search, as I have searched, the right hon. Gentleman's speech in vain for any sure ground on which to base the hope that there may be in the future an alleviation of the overwhelming burden of taxation which becomes more intolerable the longer the crisis lasts. I propose to say very little of the detailed items in the Budget. The total of the tax revenue is formidable. If we include as taxes the Post Office surplus and the Road Tax receipts, we shall find, on a comparison between the relatively prosperous year 1924–25, and the certainly depressed year 1932–33, a figure of £695,000,000 in the former year and a figure of £767,000,000 this year—an increase of £72,000,000 in terms of sterling, without taking into account the lower level of prices to which the right hon. Gentleman the Member for Hillhead referred and which has so important a bearing on this matter. It is an increase which is quite disproportionate to our national situation.

This measure of the need for economy has been reinforced by doubts which I feel and which any hon. Member who has studied the details of the Budget statement must also feel, as to whether the right hon. Gentleman has not over-estimated receipts. It will be observed that he expects an increased yield of no less than £10,500,000 from what he describes as the old Customs and Excise Duties, but any such increase must obviously depend upon a general expansion of trade and improved purchasing power, and there are no signs of either. Then there is the questionable assumption upon which he bases his forecast of £6,000,000 more for stamps. That presupposes a revival of Stock Exchange business and conveyancing business, of which at present there are no signs at all. But the supposition that £11,000,000 more will be derived from Estate Duty, seems to be in defiance of all the probabilities as to the course of values in the immediate future.

It is true that since the worst point of 1931–1932, gilt-edged securities have appreciated in value. As against that there has been a heavy and disastrous fall, which is continuing and shows every sign of being likely to continue further, in a vast range of industrial securities and in the return from our investments oversea. I think the figure given by the right hon. Gentleman the Member for Hillhead for the reduction since 1929 was £80,000,000. I do not dispute that figure, hut, even so, the tale of default—Greece, Hungary, Bulgaria and the rest—is as yet only half told. To suppose that on the average, barring exceptional luck from the Treasury point of view in the way of deaths, the estates of deceased persons during this coming year will be more fruitful than last year seems to me to be sheer speculation on a "bull tack."

My own feeling is that on the tax revenue of 1932–33 we may likely find ourselves faced with a short fall of round about £10,000,000, and that is independent of what, I believe, will turn out to be the disappointing returns from tariffs. I think the right hon. Gentleman will be disappointed as to the results which he expects from his tariffs. I submit to the Financial Secretary that a Budget in which the tax revenue is dependent, in the proportion of £300,000,000 to £732,000,000 on Customs and Excise, is much more vulnerable to changes in external trade than is either comfortable or safe for our national finances. To my mind, the criticism of this Budget is its acquiescence, camouflaged by pious references to hard work and personal economies on the part of the taxpayer, in a policy of expensive drift. It is not so much by what the Chancellor has said, as by what he has left unsaid, that he has filled the cup of the nation's disappointment.

Viscountess ASTOR



He offers no hope; he offers no hope of reduction of the national indebtedness. I should like to know whether that means that the Treasury have abandoned all hope of a 5 per cent. War Loan conversion. If so, it would be a policy of despair. Everything points to the likelihood, certainly to the desirability of ultra-cheap money, which ought to make possible conversion on a 4 per cent. or even a 3½ per cent. basis in the near future. I should like to know whether the Chancellor's complete and inexplicable silence on these points in the course of his statement yesterday is to be taken as an indication that he proposes to do nothing in this direction, though action has been and is now awaited by the City, eagerly and patriotically, in a desire to help.

Then my right hon. Friend the Member for Hillhead has emphasised that the Chancellor gave no sign at all that the Government have any considered and well-thought-out monetary policy. The Chancellor is taking powers to borrow £150,000,000 for exchange stabilisation. Why that particular mechanism has been adopted requires a little more explanation, and I have no doubt we shall have it. I am not complaining that we have not had it already, because I appreciate that it would be impracticable, in the course of a general survey, for the right hon. Gentleman to give to the House the details, but the obvious course for the Government to have adopted would have been to have authorised the Bank to replace British Government securities in the Issue Department by gold and foreign securities and foreign exchange.

Why have not the Government adopted that obvious course? I can only imagine that the idea is to conceal—and I do not use that term in any critical sense—the extent of the holdings of foreign exchange by the Bank itself and by the Treasury, in a way that would not be possible if the weekly Bank return disclosed a fall in British Government Securities and a rise in Other Securities. If it is the idea to fox the speculator, I have no complaint, and I find myself in agreement with the proposals, which are indeed in consonance with the conclusion of the Macmillan Report last June, that the resources of the Bank of England in this direction required to be enlarged; but we should be foolish to disguise from ourselves that it is a proposal that involves the Exchequer in a substantial risk of great loss, and that it is an experiment that should be watched with scrupulous and unremitting care. I say that, not by way of criticism, but by way of entering a caveat.

But I must confess that I am a little dismayed that, in thus proposing to use the taxpayers' money to support the business of securing a modicum of stability in foreign exchange, the Chancellor of the Exchequer has given no indication of the Government's long-term policy. I do not know what conclusions my right hon. Friend behind me drew, but from the Chancellor's suggestion that the £30,000,000 loss by exchange of the Bank and the Treasury in respect of the foreign credits last year may be offset by re-valorising gold, one would imagine that he has the notion of stabilising sterling at something between 3.60, the point given by my right hon. Friend, and 3.80, the point at which approximately it stands to-day. If that is the Government's intention, why not say so? Why all this mystification? I agree with my right hon. Friend that it is the experience of all those who come into close contact with business and business men, not only in this country but abroad, that it is the uncertainty from day to day of the situation as regards currency which is so much impeding the channels of business. Also it is borne in mind that so long as that uncertainty lasts, there will continue to be speculation in sterling by foreigners, and such speculation is apt to be costly to authorities who aim at some sort of exchange stability but have not quite made up their minds as to what their intentions really are.

The right hon. Member for Hillhead, in the concluding passage of his speech, referred to the Conference at Lausanne. The whole stability of the Budget hangs upon our international policy, but there was not a word of it in the speech of the Chancellor. What has he done? He has budgetted in effect for the cancellation of reparations and war debts, inter-allied debts, and the repudiation —in view of the attitude of Congress, it is foolish to mince words—of our debt to the United States. Is this the Government's considered forecast of the probabilities? If it is, since reparations for 1932–3 will certainly produce nothing, what is to be our policy at Lausanne? The Government, if they hope to induce France to be reasonable vis-à-vis Germany, must have a policy of their own for Europe vis-à-vis the United States, and I ask the Financial Secretary to the Treasury if he can say what is the Government's policy in that regard. The Chancellor of the Exchequer had no concrete programme to put before the country. All that he told us was that our policy was unchanged.

I found no evidence, though it might reasonably be looked for, in the Chancellor's speech that in the general crisis of the debtor countries, on whose payments to us commercially the stability of the Budget depends, he had any clear idea what our policy was to be in the matter to which my right hon. Friend referred so clearly—the question of the level of prices. Is it the policy of His Majesty's Government to work for a higher level of prices, thus alleviating the burden of taxation, or is the Chancellor's insistence upon hard work and economies to be taken as an indication that the Government have accepted the whole idea of deflation carried to its logical conclusion? It would be interesting to know.

There was not a word in the speech of the Chancellor of the Exchequer on the subject of national retrenchment, and I would just say a word about it, again in the terms of the international problem. So far as our detailed domestic, administrative savings are concerned, I doubt whether there will be an hon. Member of this House who will not deplore the failure of the Government to live up to its September propramme of economies, but the disquieting factor in the right hon. Gentleman's speech was that, just as he relied on an insular improvement in commerce and markets to give him his increased Customs, Stamp, and Death Duties revenues, so, in his survey yesterday, he made no reference at all to the prospects of the Disarmament Conference, nor did he hold out any hope of budgetary relief from that source. Offending America, as the statement published today from Senator Borah shows that he has done, by making no provision for debt repayment to her this year, the Chancellor has also given the world the impression that Great Britain looks for no reduction in armaments.

The example is bad. Indeed, sitting here yesterday, listening to the right hon. Gentleman making his statement, I was constrained to the reflection that he seemed to think that the British Chancellor of the Exchequer, opening his Budget in the face of the world at this juncture in history, when we are witnessing a race for time between collapse and recovery, has no other function save to be an unimaginative and unconstructive ready-reckoner of receipts and outgoings; but when all is said the British Budget may properly be regarded as facet in a problem whose crucial factor is the survival or the ruin of the whole system of capitalist civilisation. To the solution of that grave issue, I looked in the Chancellor's statement and in his financial proposals in vain for any evidence of the National Government's constructive contribution.


I suppose that five or 10 years ago the Budget that we became acquainted with yesterday would have been considered a good, sound, courageous Budget. My complaint is that the Chancellor of the Exchequer seems still to live five or 10 years ago—almost Victorian—and I believe that the Chancellor of the Exchequer himself was most surprised at the cordial dislike of the Budget and of the speech which accompanied it. Certainly, I do not remember, in my long experience of this House, a cooler reception and a more vigorous criticism than we heard in the Lobby and saw in the Press this morning. The Chancellor of the Exchequer ended up with a perfect peroration, describing himself as climbing up over one shoulder after another of a mountain and never getting to the top. Yes, gallant fellow.

The shades of night were falling fast, As through an Alpine village passed, A youth, who bore, 'mid snow and ice, A banner with the strange device— "More taxation" on one side and "More deflation" on the other. Really, it is not the Chancellor of the Exchequer who is climbing that mountain. It is the unfortunate business man and taxpayer of this country, and the right hon. Gentleman seeks to make the climb easier and more cheerful by putting more taxation on him and telling him, quite frankly, that he knows that by putting more taxation on him he is making it more difficult for him to reach the top. He followed that by another trope, another analogy, and another beautiful picture of the situation. He described himself as fishing in over-fished waters, pulling out, you know, one national asset after another and squandering it; and then, when we had all come to the conclusion that here at last he was going to reduce taxation, he said, "I am going to go on doing it." There, too, that may be honest, but it sounds rather stupid for a Chancellor of the Exchequer.

5.30 p.m.

Indeed, as he is so fond of analogies, I will give him one more, drawn from the Bible. The Gadarene swine thought they were going uphill, but they were not, and I cannot help thinking that those Gadarene swine, inspired by an old gentleman living among the tombs, if I remember rightly, were rather like the Chancellor of the Exchequer, inspired, not by Snowden—I believe that Snowden has been cured, just as the right hon. Member for Epping (Mr. Churchill) has been cured, of his old ideas about the Gold Standard. The Chancellor of the Exchequer still takes his inspiration from Lord Bradbury and the Treasury mind; Lord Bradbury was the only gentleman who declined to sign the Macmillan Report. I knew instinctively, as that speech was being delivered yesterday, that it would have two supporters in this House—the hon. Member for Edinlburgh and the hon. Member for Farnham (Sir A. M. Samuel). That gallant following shall not be denied him. For the rest, the House did not sympathise really heartily either with Farnham or with Edinburgh on this question. Indeed, the whole Debate to-day has been completely changed from that dull and foolish speech yesterday on a dull and foolish Budget.

In the speech of the right hon. Gentleman the Member for Hillhead (Sir R. Horne) we had a policy, and the Committee is entitled to ask the Financial Secretary, who has no doubt prepared a beautiful speech for seven o'clock to-night, to scrap that speech and to deal with the issue with which the country is interested to-day, namely, what is the Government's policy on currency? I do not believe anyone, either in business or in this Committee, is really interested half so much in the details of these wretched taxes with which we have to put up in the next year, as he is in the one question as to what the Government, now that they are up against it and have introduced a Budget and this Exchange Equalisation Account, are going to do. Have they a policy? Is there any, hope that the Chancellor of the Exchequer, having discovered, apparently for the first time, that the sort of stuff we heard yesterday is not good enough, will come forward with a policy on this question? He has been Chancellor of the Exchequer for six months. He must have had this question before him every day during that period and during his daily discussions with the Bank of England. Has he arrived at any conclusion, or are we to have another commission of impartial experts with empty heads to try to make up the Government's mind for them?

This Equalisation Fund is to be endowed with 2150,000,000, and I hear the Chancellor of the Exchequer saying that here is his machinery for stabilising the pound. At what figure is it to be stabilised, and what policy has the Chancellor of the Exchequer? That is really the only question that interests the country to-day. Can we have an answer? Is it the policy of the Government to use this new machine to deflate the pound, to send the value of the pound down and inflate the currency sufficiently to bring about a level of wholesale prices parallel to the ruling prices in 1929 or 1928? The right hon. Gentleman the Member for Hillhead said that he thought that 3.60 dollars to the pound would about put it right. I am not so optimistic. I think that we should probably want a lower dollar value of sterling. Whether it be 3.60, or some other figure, is it the intention of the Government to use their currency machinery to try to achieve that level? 'We really have the right to know that. Concealment of that will lead, not only to speculation, but to corruption. The country cannot have too much light thrown upon this question. You have your machine. Do you want to reflate to the level of 1929? You must say whether you want to do it or not. It is no use being for ever silent.

If you want to reflate to the level of 1929, is there any other way to do it except by putting sterling down to such a level as to create those prices? The hon. Member for Edinburgh said that it was dishonest to do so. It is dishonest not to pay your debts, and none are paying their debts, or will pay their debts, unless we put the pound on a level which will enable our debtors to pay us. If the Government have that policy, let them say so. If they have not that policy, let them say so, too. I gathered—I hope incorrectly—from the speech of the right hon. Gentleman that he is thinking of stabilising the pound at the present level of, roughly, 3.8. That would have a disastrous effect upon the country's export trade. I think that it would make many new defaulting debtors much more quickly, and that it would be the last nail in the coffin of reviving trade. If that is the Government's policy, let them say so, and we on these benches can have a different policy, and we can argue the thing out. It is a matter on which people can argue, without passion and without religious fervour, on hard, sound economic facts.

If the policy is to reflate to the 1929 level, how are the Government going to use their new machinery? I have said that the inspiration came to the Chancellor of the Exchequer from Lord Bradbury. His Lordship wrote to the "Times" a short time ago a letter in which he advocated keeping the pound down, or at any rate preventing a rise in the pound, by selling sterling and buying gold. I was afraid when I listened to the right hon. Gentleman's speech yesterday that that was what he was going to do with his £150,000,000 credit; or, if not to sell sterling and buy gold, at any rate to sell sterling and buy foreign exchange. What a gamble I This is nationalisation of gambling, I suppose. The issue department of the Treasury is to be separated from the Bank, and we are to meet the losses. It is gambling in order to do something with the pound. If we sell sterling, obviously sterling will go down. That is what Lord Bradbury wanted. That is what, I think, the business people of this country want—certainly what the manufacturers want. In so far as the £150,000,000 credit is to be used for selling sterling, it is so much to the good, but what are you going to buy? If you sell sterling, you must buy something. You might, of course, buy gold, or silver, or monkey-nuts—


Or a pup.


You will buy a pup in any case. The inevitable result of buying the other thing is to send up the value of what you buy, just as you send down the value of sterling by selling. Suppose you buy gold. You send up the value of gold. Immediately Lord Bradbury or the Chancellor of the Exchequer goes into the market with this £150,000,000 and buys gold, up will go the price of gold against him, and the people who will benefit are the owners of gold mines and those countries that have their reserves in gold—France and America. Nothing could possibly be more popular in France than selling sterling and buying their gold. I do not see the wisdom of enhancing the value of gold, still less the wisdom of speculating in gold when there is the possibility, even if it be a bare possibility, of other countries coming off gold. We can be very sure that if America comes off gold, not many countries will be left on gold, and we may find that the £150,000,000 has been used to buy gold which, since it was bought, has lost its value almost completely, owing to the fact that it has ceased to be the basis of any currency whatever.

If this £150,000,000 is to be used to sell sterling, let us buy with it something that we have got, something that will help us, something that will increase the purchasing power of the people of this country. We have been told—not to-day, I am thankful to say—that if we bought silver it would enable the countries of the East, the holders and hoarders of silver, to buy more English goods, and that if you increase th prosperity of the Chinese and the Indians, the best customer of England will be able to buy English goods. I should have been very pleased to help any customers, even at the expense of the British taxpayer, but I should be far better pleased if we were helping our own people to be better purchasers of our goods. If £150,000,000 is to be spent on buying gold or silver, I should prefer it being spent on printing banknotes and distributing them. It is the same thing as selling sterling to bring the price of the pound down. If the Budget had not balanced by £150,000,000, if we had had a remission of taxation of £150,000,000 a year, exactly the same result would have been brought about. The pound would have dropped to such a level as the unbalanced part of the Budget represented. The £150,000,000 spent by this new fund on selling sterling and buying gold will have exactly the same result, in effect, as if it were used for remitting certain taxation which would otherwise be required for balancing the Budget.

I am certain that the greater part of the Committee will say that I must be wrong, but I urge the Committee to think it out. You can bring down the value of the pound in a dozen ways. You can bring it down by selling sterling and buying gold, by an unbalanced Budget, by striking off tariffs and by letting trade balance itself. There are many ways, but have the Government any policy? Are they going to adopt any of these ways or will they go on hoping that the silly old taxpayer will still go on climbing that indefinite hill and hoping to have a Chancellor with brains when he tops the next rise? While that speech was being delivered yesterday, I thought quite the most amusing feature was to watch the faces of the other Chancellors of the Exchequer. I wish Lord Snowden had been here. He would have enjoyed it! The other Chancellors of the Exchequer always had some beautiful way of apparently balancing the Budget, and yet producing assets out of a hat and doing away with the necessity for balancing the Budget! Sometimes they collected taxes under Schedule A in advance, sometimes they raided the Road Fund, sometimes they discovered a fund, of which nobody had ever heard, hidden away in America. Every year the great Chancellors of the Exchequer of the past balanced their Budgets with remarkable economic rectitude—and did not do it at the same time; and everybody knew it; and everybody was glad they did not do it. But this time we have a Chancellor of the Exchequer without any imagination. In his stern rectitude he thought he was going to help the country by telling the people that it was their duty to be economical, not his, that the more assets we take from taxpayers and waste, the harder the roads they have to travel, the steeper the mountain they have to climb, the better it will be for their morals, and in the long run all will be well for their pockets.

I have the greatest admiration for the Government. I like them. At times I positively love them. But I do wish they would, if they could, get together or this question and educate the Chancellor of the Exchequer, the only stumbling block. But now, when all is for the best in that happy family of Protectionists and Tariff Reformers, now when they have got their ideal leader in the right hon. Gentleman the Member for St. Ives (Mr. Runciman), now, when not only is the lion lying down with the lamb, but even the little lambkins are lying down with the little lions, for goodness sake let us have a policy on the one issue that matters. They may leave cinemas to themselves, they can even leave the fundamentalists in their last ditch, but for goodness sake let them have a policy on the question of whether they do or do not want to reflate prices, and how they intend to do it, and give that policy to the country at large, so that people who are hardly able to make both ends meet to-day may at least have a chance of seeing hope for the future.


In rising to speak in this House for the first time, I would aim at the three objectives which, I am told, should be those of a Member making a maiden speech, namely, humility, brevity and relevance. However the last two may fare at my hands, I hope to have no difficulty with the first of them, because my constituents sent me here in the place of one who for many years was an able and a distinguished Member of this House, and who, until some six weeks before the election, was a Cabinet Minister in the Socialist Government. If that were not a sufficient encouragement to humility, I have another in having to follow the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). This is not the first time I have had to follow him, because, just as I follow him to-day in my first experience of speaking in this House, so 17 years ago I had to follow him in my first experience of the enemy's guns. The right hon. Gentleman's language was no less truculent then. I am hopeful that between us we shall be able to surmount the financial Gallipoli which now confronts our beloved country.

Yesterday the Committee listened to a speech which must have been as unpleasant to deliver as it was to hear. The Chancellor of the Exchequer has been compared this afternoon by the hon. Member for Limehouse (Mr. Attlee) to a lady medium. That was not the comparison which entered my mind while I was listening to the right hon. Gentleman. His speech took me back some years to the time-honoured formula of the schoolmaster who, cane in air, exclaims: "My lad, this hurts me just as much as it hurts you!" That speech did underline and emphasise the gravity of the situation which brought together this House of Commons. If anything were needed to make clear to the country the difficult situation which existed then, and from which we have not yet emerged, it must be the exposition given by my right hon. Friend yesterday. What was the first and most notable feature of the review he gave? Surely that, in the face of almost incredible difficulty, this country has emerged from the late finan- cial year with a balanced Budget. Many of us were disappointed that no relief could be given to the various sections of the community who were clamouring for it, but when we remember that our Budget stand's balanced in the eyes of the world—partly owing to the fact that a portion of next year's revenue had to be taken in to achieve that balance—then, I think, those who are familiar with the procedure of company meetings must say that he would be an impatient shareholder who would expect the declaration of any dividend, however small, in those circumstances.

Another point emerges, namely, that a balanced Budget has been obtained very largely because the unsound methods of finance of late Governments, which have been condemned, and rightly condemned for their methods of raiding hen-roosts, borrowing for unemployment insurance, and the like, have been transferred from the Government of the country to the private individual. It is the private individual who, by borrowing, by raiding his capital, has been able to achieve this balanced Budget. That is something of which the Chancellor cannot fail to take notice, and, indeed, did take notice in his speech. The Chancellor complained of the disappointing mortality among the rich during last year. He told us the yield from Death Duties had been disappointing, and if one had to seek for an explanation of that one might submit this view, that not only has it become too expensive to live, but it is also too expensive to die, in the present financial state of the country, and that this source of capital, which has been tapped by Government after Government, and treated as income, is drying up with such rapidity that it will be the duty of Governments in the future to adopt a very different attitude towards that particular source of income.

There is one other point which emerges from yesterday's speech. During a Debate some few days ago, an hon. Member, I think it was the hon. Member for Chester-le-Street (Mr. Lawson), whom I see sitting on the Front Bench opposite, stated that the well-to-do in this country had adopted an attitude of utter callousness towards the unemployed in particular and those who are worse off in general. I hope the hon. Member is inclined to review his opinion now, when he sees what would have been the fate of the unemployed but for the efforts made by those taxpayers who, by a curious misnomer, he refers to as the "well-to-do," by those who made superhuman efforts in order to provide the necessary funds for the empty pockets of the unemployed during the past two months. Had they been callous they could very well have abandoned the unemployed to their fate, and made no effort to meet the claims which the country made upon them. I hope the hon. Gentleman has also noted that, so far from the revenue tariff being used, in the gloomy words of the Home Secretary, for the purpose of taking money out of the pockets of the poor in order to relieve the rich, it is the revenue tariff which has put money into the pockets of the unemployed during the month in which it has been in operation, and has assisted to maintain that very necessary provision for the unemployed which hon. Members in all parts of the House desire to see.

While it may be a disappointing Budget from the point of view of relieving one section or another of the community, I am not at all certain that it is not disappointing, also, from the standpoint of the Opposition, seeing that my right hon. Friend has not relieved the Income Tax payer while giving no relief to anyone else. The policy of equality of sacrifice has become, for the moment, equality of no relief; at any rate, no section of the community has been placed in a privileged position. I say quite frankly, even though there may be hon. Members of my party who disagree with what I am going to say, that as the representative of an industrial constituency I very much hope that, when a situation does arise which makes it possible for relief to be given, consideration will be given first of all to those in this country who are on the verge of starvation—a long time before it is given to Income Tax payers. I make no apology for that statement, for this reason. Since the party opposite, in their wisdom, passed the Anomalies Act, and since the author of the means test, who will be contesting a seat at Wakefield to-morrow, first established it, we have drastically weeded out any who were drawing State money without qualification, and those now drawing unemployment pay are those who are the real victims of the industrial situation. When it is possible to give relief I hope the Government will first of all relieve those who are unemployed and who are on the poverty line by establishing a higher standard for them.

6.0 p.m.

The Budget has shown that the views put forward by the Home Secretary, when opposing the Import Duties Act, were hopelessly wrong. So far from being a disappointment the Import Duties Act has not only provided revenue, not only attracted foreign manufacturers to this country, not only relieved unemployment, but also made that contribution to the balancing of the Budget which was so essential. But this Budget, like any other, will be judged in 12 months' time by its effect upon industry, and as a representative of one of the divisions of Sheffield I make no apology for expressing even greater curiosity, perhaps, than possesses some other hon. Members, as to the source of the £5,000,000 of revenue under a Treasury Order about to be made but which, at the moment, is wrapped in mystery. When we remember that the capital value of shares in the iron and steel industry has fallen during the last seven years from £76,000,000 to 28,000,000; when we remember that those engaged in the iron and steel trade in Sheffield have to thank the system of "free imports without Free Trade" for that result; when we remember that the Home Secretary described our tariff proposals as robbing the poor to help the rich, we are anxious to know at the earliest possible moment what additional help is to be given to the great basic industry of iron and steel. Hon. Members representing mining divisions ought to be interested in this question, because they will be called upon to furnish three or four additional tons of coal for every extra ton of steel manufactured in this country. Hon. Members representing the railway men will welcome the prospect of 12,000,000 tons of coal per annum brought from the pithead to the steel works, and if only such an announcement is made, a new era will be open not only for my own divisio but for may other industrial areas in this country.

If I may make one criticism of the Budget it is this: There was a section of the speech of the Chancellor of the Exchequer which can be summed up in one word, and that word is "committees." It appears that the Government have a mind of their own on the question of tea, but they require a committee to produce a mind for them on the subject of sugar. The Government are able to make up their mind on the subject of beer, but they require another committee to deal with the question of the taxation of co-operative societies. If these committees represent a difference of opinion or a compromise in the Cabinet, then they are much to be deprecated. I recollect a speech delievered by the right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain) very early in the lifetime of this Parliament in which he said that this Government would be excused anything except inaction, and that postponement and methods of delay were to be strongly deprecated. Surely if there are two questions upon which all the available evidence has been examined, produced and tabulated they are the sugar industry and the working of co-operative societies. These are matters upon which the Government can make up their mind without the postponement incidental to a long and tedious inquiry.

There is one other reference which I would like to make. Hon. Members in to-day's Debate have said rightly that we may have a brighter outlook after the Conferences at Lausanne and Ottawa, and that the financial prospects of the country may then be very different. Even if those two conferences meet with 100 per cent. success, the country will still be faced by an internal debt of approximately £8,000,000,000. That problem will still remain with us, and the fact that we have in office a Government which, whatever hon. Members opposite may say in this House and on the platform, does command the confidence of the vast majority of the people of the country. That fact is more likely to create circumstances more favourable to a large conversion operation than any other. The hon. Member for Limehouse (Mr. Attlee) asked the Chancellor of the Exchequer to announce the conversion scheme in his Budget. But a conversion scheme which has in it an element of surprise is by far the most likely to adhieve success, and when the price of gilt-edged stocks have risen sufficiently, that will be the moment for the Chancellor of the Exchequer to announce his scheme. It may be that one day there will have to be a further call upon the patriotism of the Income Taxpaying class.

We hear a good deal in this House about the various evils which have been brought to this country by those who are described as the rentier, or the well-to-do. I do not know why, because that word applies to the very humblest of the people, and no one can see deeds of transfer of Government stocks without realising that trade unions and co-operative societies are rentiers, and yet we never hear them abused. I feel sure that if the time should come when a tremendous patriotic effort has to be made to deal with our internal debt, the rentier will not be found wanting in meeting the demands which may be made upon him. Such an operation could not succeed if hon. Members opposite were directing the affairs of the Bank of England. They might accomplish that by an Order in Council which would take only 24 hours, and when that period had elapsed it is true that the buildings and the staff of the banks would be in the hands of hon. Members, but when they reached the banks they would find them like Old Mother Hubbard's cupboard, because as soon as it was known that they were going to lay their fingers on the banks of the country, anyone with money there would immediately draw it out.

May I make one reference to a situation in which many of us find ourselves who have recently taken our seats for the first time in this House? About one-third of the Members of the present House of Commons have had their first taste of Parliamentary life during the last five months. Many of us are engaged in the affairs of our own business struggling by day to keep our own finances solvent and by night to keep the finances of the nation solvent. Some of us are spending 15 hours a day struggling with adversity, and perhaps that is an undue strain upon those who have not become accustomed to it. The size of the Government majority makes it difficult for us to intervene in Debates, but we have discovered that there is much to be done outside this House, and if we can help the Chancellor of the Exchequer by acting as liaison officers between the employers, employed and unemployed in our own division, we shall be doing something to help the right hon. Gentleman to lead the country up the steep hill to better times, and then we shall have played our part in bringing national success to the National Government.


My hon. Friend the Member for Hillsborough (Mr. Braithwaite), who has just made an admirable contribution to our Debate, has dwelt on the fact that hon. Members can do much to support the Government outside this House as well as inside. He has certainly shown how effectively he can help here. His speech was informed by no little knowledge, as well as flavoured by the salt of humour, and although 15 hours a day working is a very severe task, I trust that the hon. Member will intervene as frequently as possible in our Debates in addition to the tasks he has undertaken in helping the Government and the country outside this House.

There can be no doubt that there was a certain feeling of disappointment in the air when the Chancellor of the Exchequer closed his speech yesterday afternoon. It was in large measure the disappointment of resignation. We now know definitely that we are not going to get what we knew we had no right to expect. The right hon. Gentleman at the close of his speech drew an eloquent parallel between the efforts of this nation and a climber climbing up a steep mountain, encountering ever fresh obstacles to be overcome before the summit is reached. I know only too well the feeling when, after climbing for many hours, you think you are just at the top, and the guide tells you cheerfully that there are only two more hours in front of you. Those are moments of temporary disappointment, but one plods on. That is what we all feel that we have to do now. I do not think anyone in this House would ask the Chancellor of the Exchequer to imperil the great task upon which he is engaged by any premature relaxation of effort

I hope the right hon. Gentleman will not think that I am unduly critical in what I am going to say. There was also mixed with that sense of disapointment a certain measure of disappointment due to a rather different cause. We all knew how limited the opportunities of the right hon. Gentleman were, yet some of us felt that there were in certain directions opportunities for pursuing a new policy which he either rejected, or was induced to reject, and which we should have liked to have seen him carry out. We could not help feeling at a time when the one object of our endeavour should be to increase production in order to help employment, that several matters were dealt with a little too much from the point of view of purely Treasury and immediate revenue considerations, and not from the point of view that ought to be paramount.

To put it plainly, some of us felt that there is still too much of the Snowden flavour hanging about this Budget. Let me take one or two instances from the point of view of stimulation both of Empire and of home production. I think we were all delighted to hear that the grave mistake of abolishing the Tea Duty has now been rectified. When that measure was being taken, I cannot understand why the Chancellor of the Exchequer did not take the opportunity of rearranging the coffee and cocoa duties. It has always been the rule that those duties have gone more or less parallel both in respect of the duties themselves and of the preferences going with them. We are now to have a preference of 2d. per pound on tea, but the preference on cocoa and coffee is still left at ¼d., which is less than 10 per cent.

The hardly pressed producers on the Gold Coast and in East Africa, owing to the fact that cocoa and coffee do not come under the 10 per cent, duty, are actually worse off from the point of view of preference than if there had never been a duty placed upon their products at all. Surely, there would be no difficulty in making a slight re-arrangement, say by making the Empire duty ld. and the foreign duty 2d., instead of the present duties of 1¼ and ½d. That would give an effective preference to the coffee and cocoa producing Colonies without any sacrifice of revenue, and, by an arrangement of that sort, it would also be possible for the Chancellor of the Exchequer to put some reasonable protective duty on manufactured articles containing cocoa and coffee, which are outside the purview of the Advisory Committee and, therefore, are left outside the whole scheme of national Protection. I am not going to suggest that the amount of additional employment given would be very much, but it might run to a few thousands, and every additional man employed to-day means a real assistance to the revenue of the country.

I now come to the case of the Sugar Duty. Of course, I acknowledge gratefully the fact that, at long last, some additional help has been given to Empire sugar production. But I wish the Chancellor of the Exchequer could have seen his way to deal with that subject on somewhat broader lines. A further preference of 2s. per cwt. is the absolute minimum which would, under normal conditions, enable the Empire sugar industry to try to make headway. Under the really desperate price conditions of to-day, even that amount is really inadequate to help at any rate some Colonies to carry on. Under the Chancellor's proposals, the second is not given to the whole of the production that the Colonies send here, but only to a fixed amount of 275,000 tons. It is true that that is somewhat in excess of the amount sent in the last year or two of extreme depression and disaster, but is it really a fair treatment of the case when we remember that in 1929 Mauritius alone—one only among the sugar-growing Colonies—sent us 275,000 tons, and that, therefore, the distribution of that amount among all the sugar growing Colonies means a preference stereotyped on a basis of minimum output, and not at what one might call even a reasonable and normal amount?

In that connection there is a small point to which I should like to draw the Chancellor's attention. He indicated that the 275,000 tons would be distributed among the Colonies in proportion to their exports. As practically the whole of the Mauritius export is to this country, whereas nearly two-thirds of the exports of the West Indies and British Guiana goes to Canada, such an arrangement would give the West Indies and British Guiana a disproportionately large share as compared with Mauritius. I hope that my right hon. Friend will correct that and make it proportional, not to their export generally, but to their export to this country.

I frankly confess that I am sorry he has not included the Dominions in this additional preference. I assume, naturally, that this question is left over for Ottawa; but we shall have plenty of things to bargain about at Ottawa when we get there, without introducing too obviously the element of holding up things for a bargain at this stage. I think it was very wise of the Government to go back on what I believe had been an earlier decision, and let Dominion produce come in free under the 10 per cent. duty. I think that they would have paved the way for Ottawa better if they had also made their sugar preference general. After all, the Dominion sugar producer is going through a very difficult time at this moment. I cannot help, in the light of what is being done at this moment, reminding the Committee of the fact that the Natal sugar industry has laid itself out in every way during the last few years to buy all its machinery and equipment from this country. Irrespective of any South African Government preference, it has given a voluntary preference of 15 or 20 per cent. right through in order to get British machinery. I heard only the other day of a single firm who spend £75,000 on British machinery, when they could have got equally good machinery from elsewhere at a saving of £10,000 or £15,000. When that is the position, I think it might have been a broader and bigger policy to have given this preference to the whole Empire.

I know that, owing to the particular way in which the Chancellor has arranged the preferences, that would have meant a further loss of revenue. But, frankly, I cannot understand why he should have adopted the method of giving additional preference by a reduction, when the whole thing could have been done far more simply and effectively, not only from the point of view of Colonial and Dominion sugar, but from the point of view of the home sugar industry as well, by the simple addition of a small extra duty of, say, ¼d. a pound on foreign sugar. Nobody can say that at this moment that would entail any undue hardship on the consumer. The price of sugar is lower than it has ever been. It dropped by a further ¼d. only a few weeks ago, and the present retail price of 24d. a pound contrasts with what, at sterling value, is a price of ¼d. in Germany, Belgium and Czechoslovakia. Although we wish to give the consumer a "fair show," surely it is wrong that he should get momentary cheapness—and permanent unemploy- ment—as the result of a policy which demands goods at a price below that at which they can possibly be produced. You cannot in the long run sweat your own producers in the Empire and at home and expect other producers in this country to flourish in their capacity as consumers.

More than that, the alternative method would have made all the difference to the revenue position. As it is, the Chancellor of the Exchequer sacrifices £1,100,000 directly on his Customs revenue, and, owing to the beet sugar position, he will probably sacrifice £500,000 more. If he had put on an extra duty of ¼d. a pound, even if he had given a preference to the Dominions, he would have made between £2,500,000 and £3,000,000 of extra revenue, instead of a loss of £1,100,000, and he would have saved that amount of subsidy in respect of beet sugar, so that he would have been at least £4,000,000 better off. I do not know what—unless it be what I have called the Snowden touch about this Budget—has caused the Chancellor to disdain so fruitful and powerful a source of revenue as sugar. Nine years ago, this country was deriving a net revenue from sugar of £38,000,000 a year. The reduction of the main duty, and the subsidy to beet sugar, have together progressively lowered the net yield to, as far as I can make out, something between £7,000,000 and £8,000,000 in the new Budget. Surely, in these circumstances, there was no reason why the Chancellor should refrain from such a minute addition to the Sugar Duty as the one I have suggested, and one so fruitful of revenue.

If he had made such an addition, I cannot help thinking that he might have had something in hand to help the poor beer drinker. Whether he could have afforded to remit the whole of the additional duty put on last autumn, or only a. part of it, I am not prepared to say, but I feel certain that, if account is taken, not only of direct revenue, but of the indirect revenue lost owing to reduction of beer consumption, his estimated loss of £10,000,000 is put far too high. Although I am in only a very small measure a beer drinker myself, I should like to put in a word for what is, after all, one of the simple, traditional, and very few, luxuries of the working man. Beer in such quantities as the ordinary working man can afford is not likely to do him any harm, and, as a simple tonic and a healthy form of nourishment, containing, I believe, plenty of vitamins to help to make up for the normal monotony of his fare, it is a drink which should be, at any rate, not so savagely discouraged as it is at present. Certainly, when the poor agricultural labourer has to pay 6d. a pint for a liquid which contains about three barleycorns of sustenance, and not enough alcohol to exhilarate a tired mouse, he has some reason to feel ill-used. I should have thought that in these times, when psychological factors come into account, that this extra burden which prevents many a poor man from going to his only club is one that might very well have been lightened.

6.30 p.m.

From that point—I am sorry that I have to make certain points of criticism —I pass to what I cannot help considering is another opportunity missed. The Silk Duties were framed when we were still maintaining a Free Trade system. They impose an average duty of some 25 per cent., but, so far as helping employment is concerned, they very largely take it away again through the Excise. At a time when all the other great textile industries are receiving a measure of protection, over a large part of their field at the rate of 50 per cent. for the time being, I should have thought it was an obvious corollary that the Chancellor of the Exchequer, who deliberately excluded the Silk Duties from the purview of the Advisory Committee, should so rearrange them as to give them approximately the same protective effect that he knows is going to be given to the other textile industries. If he is absolutely in need of revenue, and cannot wholly abolish the duty upon raw natural and artificial silk, might I make the suggestion that at any rate he could halve the duty on artificial silk yarn and greatly reduce the duty on raw natural silk, with very little loss of revenue, and with a great stimulus to both industries It really does seem absurd that we should go on with a duty of nearly 30 per cent. on raw natural silk, the raw material of what, if we helped it, might develop into an industry comparable with the linen, artificial silk, woollen and cotton industries, and which was at one time one of the biggest industries of this country. After all, this country is one of the biggest consumers in the world of the products of natural silk, although our policy hitherto has prevented us from consuming silk goods manufactured in this country. I should have thought, now that we have adopted a general change of policy and are concentrating on employment, that this was an obvious measure for the Chancellor of the Exchequer to take, and I feel that, by failing to take it, he is rejecting an opportunity for employing a good many more thousand people—it might easily run into 20,000, 30,000 or 40,000. It means that he is rejecting an opportunity for improving our national productive power. Another smaller opportunity missed is in connection with the match trade. There again we have a duty of 250 per cent.—4s. 4d. per gross of boxes—levied impartially on the just and on the unjust, the home producer and his foreign competitor. Owing to an arrangement due to the control of most of our match producers by the Swedish Match Company, a good half of our supplies come from abroad. I believe that a very small addition to the Customs duty would transfer the greater part of our imports, something like £1,000,000 worth, to workers in this country without any injury to the Revenue at all. In that same connection I should like to plead for some measure of preference to the lighter. I remember very well the trouble into which I got the then Financial Secretary to the Treasury when, listening to my words, he thought it would do no harm to suggest that such a thing might be considered. In those days of awful fiscal orthodoxy, he was frowned upon as if he had committed a horrible offence. To-day, when we are putting duties on everything else, why should not the maker of the British self-lighting matchbox have some advantage over the foreign maker without any prejudice to the revenue?

The whole key to our position to-day lies not in trying to find revenue. No re-arrangement of Revenue Duties is ever going to get us out of the position in which a third of the national income goes, in one form or another, to taxation. It can only be done by such an increase in the volume of our production and employment as will first of all get rid of the greatest source of all waste, the waste of keeping at public expense men who would much sooner keep themselves by their own exertions, and secondly, by broadening the shoulders that bear the burden. On that aspect of the Budget it is difficult to speak, apart from the omissions that I have criticised, because we only know that there is an item, which is expected to bring in £5,000,000. Whether that small item represents an inadequate addition to the 10 per cent. scheme or an addition so drastic as to involve a very great increase in production is one of those mysteries the solution of which is to be vouchsafed to us later, and which I cannot deal with now. The one thing that matters to-day is production, and that depends upon two closely inter-related lines of policy. The first is our fiscal policy, and the second is our monetary policy. You cannot divorce the two. You cannot frame a monetary policy unless your fiscal policy gives you control of your balance of trade, and you cannot frame a satisfactory fiscal policy unless you know broadly what your monetary policy is going to be.

It is vital to the business world to know what is the monetary policy of the country. Monetary policy has always been one of those things, little followed and little understood, but exercising a tremendous and pervasive influence on the humblest home and on the fate of the mightiest Empires. My right hon. Friend (Sir R. Home) quoted Aristotle's saying that "money is a matter of law" in order to remind us that monetary policy is something for which this House is directly responsible. He might perhaps have carried on the Aristotelian quotation which went on to say that "its value depends on its quantity". The adequacy or insufficiency of the volume of money to the requirements of national or world production has had the most potent influence on the whole course of history. My right hon. Friend quoted a most apposite and suggestive passage from Alison to show the influence of currency contraction upon the fate of the Roman Empire. But that instance does not stand alone. Can anyone doubt that the discovery of America and the immense volume of new currency brought into the Old World played a tremendous part in that amazing efflorescence of European energy and effort in industry, art and science in every direction which characterised the 16th century? Or, to come nearer to our own time, can anyone doubt that one of the causes of the long depression after the Napoleonic wars was that the supply of currency, in the banking conditions of those days, was inadequate to the expansion of industry consequent upon the industrial revolution? It was not till you got the great gold discoveries in California and Australia from 1849 onwards that you got the stimulus of adequate money supplies and 30 years of economic prosperity. At the end of the 30 years you had a number of Governments demonetising silver, thus suddenly and drastically reducing the volume of money and bringing about the same kind of phenomenon with which we are confronted to-day. The fortunate accident of the discovery of the great gold field in South Africa redressed that situation and enabled the world to go on.

In dealing with a matter of such supreme importance, it is vital to know what the Government's policy is. For the last six months the Government has, naturally, been engaged in protecting sterling against two dangers. The first, the danger of lack of confidence in the world outside due to the unbalanced state of our Budget; the second, the drain upon sterling arising from the unbalanced state of our trade account. There is, however, another factor against which we need protection, and against which the Chancellor of the Exchequer is now providing protection in the Exchange Equalisation Account, and that is the danger of speculation. There is at this moment a very large volume of liquid money, "bad money," in the world rushing from one investment to another exactly like a mass of water loose in the hold of a ship, slopping from one side to another and continually aggravating the instability of the situation. The Chancellor is to be congratulated on having provided himself, in this Exchange Equalisation Account, with an instrument, a "mass of manoeuvre", adequate, hut by no means excessive, to deal with that dangerous fluctuation. He will use it, I trust, to pursue a monetary policy that is in the interests of production in this country and in the Empire. There is one point in what he told us that I am not altogether happy about. He mentioned that he was fixing the relation of notes to their gold backing on the old parity and described that as a conservative valuation. An overvaluation of 30 per cent. is not a conservative valuation. It only indicates that someone is still hanging on to the gold mentality and is still concerned with a deflationary policy. Surely under present conditions our gold reserve is like any other security at the back of our notes, and ought to be taken at the average of the actual value over any reasonably short period of time.

I would support my right hon. Friend in earnestly pressing the Government to tell us their general monetary policy. Do they, for instance, subscribe to the general objective laid down by the Macmillan Committee that it is essential to influence the price level so as to raise it a long way above the present level and to maintain it there with as much stability as possible? Ten months have passed since the Macmillan Committee reported, and we have never been told whether the Government in any degree associates itself with that authoritative report. There is one thing that I should like to point out about that recommendation of the Macmillan Committee. It referred to the raising of the international price level. There was no question then of dissociating our price level from the world price level. More than that, it was impossible for us at that time to think of setting up a price level for this country alone seriously different from the price level outside. That would, undoubtedly, have very rapidly involved us in far too serious a rise in prices. The first effort we had to make Last autumn was to control sterling and prevent it running away. But, after we controlled it, an entirely new phenomenon arose. That is the fact that something like 500,000,000 people in the rest of the world were prepared to follow our example, and attach themselves to a controlled sterling. We enjoy to-day the advantage of a sterling price level over an immense area, which includes the greater part of our producers of foodstuffs and raw materials and, happily, does not include our most formidable industrial competitors. That completely alters the situation. It enables us, once we control our own sterling, to follow a price level policy which for many purposes is as effective as making a world price, because whatever we do will be followed, as long as our policy is a reasonable one, by the other countries that adhere to sterling.

In this connection there are two aspects of the sterling level that we have to consider. There is, first of all, the level of sterling relative to gold. That is a very uncertain and fluctuating factor, because it is affected not only by changes in the value of sterling, but also by changes in the value of gold. A far more important issue is what is to be our price level relative to the price level at which most of our contracts were made, at which our business undertaking's shouldered the burden of their overhead charges, the level at which wages were more or less stabilised after the War and at which also retail prices were more or less stabilised 7 That is a far more important issue. The question which we are entitled to ask is whether the policy of the Government is, or is not, to endeavour to bring back the sterling price level in terms of commodities, of wholesale prices, to the general level of 1928 or 1929 7 Only if you do that will you get any real revival of production in this country or in the Empire. At present, as my right hon. Friend pointed out so eloquently, we are in a vicious circle in which the producer cannot produce at a profit and therefore cannot buy the things he wants from us and cannot even pay the debts he owes. We must get out of the Serbonian bog of the present price level. To do that should be the first and main objective, and the declared objective, of the policy of this country. On that issue we have had no declaration yet. I would also add, now that sterling is the monetary basis not only of this country but of a great many other countries which have associated themselves with us, that those who manage it ought to remember that they must manage it in the common interest, and not merely from the point of view of the immediate narrower interests of this country, still less merely of the City of London.

It is essential, when we go to Ottawa, that we should go with our minds made up upon the general outlines of a monetary policy which will meet the interests of the Dominions as well as of ourselves. Exactly where that level is to be found, how we are to find a level to meet the interests of the Empire producer generally and yet also hope to associate Canada with ourselves, is not an easy matter to solve. I am not in the least suggesting that the Government should at this stage make up their minds upon the details of their policy. It may well be that the details of any policy cannot be settled even at Ottawa, but will require some expert conference to follow. All I plead is that the Government should go to Ottawa with the general direction and objective of their monetary policy clearly defined to themselves, and defined in such a way that we should have a reasonable hope of persuading the rest of the Empire to associate themselves with us. I do not know whether the Cabinet have instituted any cabinet committee to deal with the monetary problem at Ottawa as they have appointed a committee to deal with the fiscal policy, but I respectfully urge that the monetary question is going to be no less important at Ottawa than the fiscal question, and that our representatives ought to go to Ottawa as well equipped, not only by study but also by definiteness of purpose, on the one theme as on the other.

I fully agree with what my right hon. Friend the Member for Hillhead (Sir R. Horne) said when he indicated that a solution of the monetary problem for the Empire and for such other countries as may associate themselves with it in the sterling system, while it is the most immediate thing and of immense importance, is certainly not the only thing at which we should aim. Clearly the world would be better off if we can eventually establish a monetary system which would enable free exchange to take place over the whole world at a price level stable between the different countries in the world and also stable between one year and another so as to prevent the recurrence of the disasters to which we have been subjected in the last two or three years. Such a system, to my mind, should include the whole world and therefore ought, in one form or another, to fit into the scheme the great silver currency markets of the East. You must, no less than in an Empire scheme, secure a price level sufficiently high to enable world industry and production to be carried on.


You must not leave out the United States.


I do not despair of the United States joining in at all. We must try, step by step, to secure a general world system. At the same time, I am convinced that the right way to find a world solution is to deal with our own problems first. We have to build up progressively. Let us give this country a sound foundation of industrial and monetary policy, and on that foundation let us build the super-structure of a sound Empire production and monetary policy. When we have done that we shall be in an infinitely stronger position, for the good of the world as a whole as well as in our own interests, to link up again with gold or with silver, to re-establish a world system, at such time and on such terms as will not only coincide with our own interests but will, in our opinion, really endure and save the world from the recurrence of the calamities through which we have been passing.


From the criticisms Which have been passed upon them by two ex-members of a Conservative Government, including an ex-Chancellor of the Exchequer, the Government have evidently displeased the people for whom those Members speak in the Budget which has been brought before the House. The Secretary for Mines must be considerably amused at the manner—he is stifling his mirth—in which both the right hon. Member for Sparkbrook (Mr. Amery) and the right hon. Member for Hillhead (Sir Horne) have appealed to the Chancellor of the Exchequer to remove the tax upon raw silk in orde,- to stimulate industry in this country. Two such "dyed in the wool," as the Americans would say, Tariff Reformers always maintain on public platforms, and in this House when they are dealing with other materials, that it is the foreigner and not the consumer in this country who pays the tax. Yet we have both protagonists of Tariff Reform and of full-blooded Protection actually appealing to a Protectionist Chancellor of the Exchequer to remove the tax upon an article coming into this country because it is injuring the production of goods made from that article, and stating that the removal of the protectionist tariff will stimulate the industry in this connection. I leave the Chancellor of the Exchequer, the Leader of the House, and the Financial Secretary to the Treasury to square their particular ideas with the new ideas of Free Trade under Protection put forward by the right hon. Mem- ber for Sparkbrook and the right hon. Member for Hillhead.

The one thing which arises from the Debate as far as it has gone is the almost unanimous consensus of opinion on the Tory benches in favour of the proposal put forward from the Labour benches, in the Debate on the Address, and also when we were discussing the Bill in regard to the Gold Standard. The consensus of opinion of Conservative speakers to-day has been to admit the truth, strength and force of the points put forward by the hon. and learned Member for East Bristol (Sir S. Cripps) on those two occasions. The right hon. Gentleman the Member for Sparkbrook, the right hon. Gentleman the Member for Hillhead, Members who have been making maiden speeches, and others have all directed their remarks with regard to the Exchange Equalisation Account which was adumbrated by the Chancellor of the Exchequer towards insisting upon a definite statement of the monetary policy of the Government. You cannot have a settled industrial policy in this country—it is their statement, as I have understood it—by the great commercial firms of the country unless the Government are prepared to state, first of all, a settled monetary policy for the country.

What is the monetary policy of the Government? Have they given the House a statement upon their monetary policy? The criticisms of the right hon. Member for Sparkbrook and the right hon. Member for Hillhead are in themselves sufficient to show that the Government have left not merely the House of Commons but the whole country in the dark as to the monetary policy they intend to pursue. I should imagine that the Tory section of the Government will not take the statements which have been made by the Chancellor of the Exchequer as easily as will the other sections of the present National Government. The right hon. Gentleman opposite said that there was rather too much of the Snowden touch about the Budget. Probably some of those who have now to pay more for their tea will think that there is rather too much of a Snowden flavour about it also.

7.0 p.m.

In bringing in the Land Clauses of his Budget Viscount Snowden made a definite statement as to what those Clauses were likely to accomplish. He said that the Land Tax would lift the crushing burden of industry, and I desire to ask the Financial Secretary to the Treasury whether the burden is to continue? Is the crushing burden, as stated by Viscount Snowden, the Lord Privy Seal, to continue? There has been no mention made by the Chancellor of the Exchequer of the fate of the Land Tax. Is it to be continued in suspense? It must be repealed in this House. He is already performing one illegal action by holding up the valuation. That was laid down by Act of Parliament, but the Attorney-General has not yet compelled him to obey the law. Is the Land Tax to remain in operation for a period which is favourable to the Chancellor of the Exchequer or to the National Government Can the Financial Secretary to the Treasury or the Leader of the House inform the Committee what is Lord Snowden's attitude towards this holding up of his pet scheme? Can the right hon. Gentleman take us into his confidence and let us know some of the remarks which Viscount Snowden made across the Cabinet table?

The LORD PRESIDENT of the COUNCIL (Mr. Baldwin)

I cannot give Cabinet secrets away.


All the right hon. Gentleman can say then is that certain remarks have been made by Lord Snowden and, knowing the invective of the Noble Lord in the past, we can imagine what those remarks were. This law has been passed and has not been repealed, and we are entitled to know what the intentions of the Government are in this matter. We hope that, when the Financial Secretary to the Treasury replies, he will tell the Committee what is going to be done with the Land Tax. If the Land Tax had been put into operation, there would have been, according to Lord Snowden's estimate, a nest-egg of several millions available for the Chancellor of the Exchequer.


indicated dissent.


If, as Lord Snowden said, it was going to remove the crushing financial burden from industry, then surely the removal of that burden would mean money available for the Chancellor of the Exchequer. The Financial Secretary cannot have it both ways. Has the Chancellor of the Exchequer definitely repudiated every estimate formed by Viscount Snowden of the receipts likely to accrue from the imposition of the Land Tax? The Home Secretary is also a member of the Government and held the same ideas about the Land Tax, and the right hon. Member for North Cornwall (Sir D. Maclean) was also an advocate of the Land Tax. Then there is the right hon. Member for St. Ives (Mr. Runciman), the new Tariff reformer, who now leads Birmingham from St. Ives, feeding them with cheese from St. Ives. What is the view of these right hon. Gentlemen towards the Land Tax? Have they changed their ideas and, if so, what is the reason for their change of outlook Has the Prime Minister changed his ideas about the Land Tax? He went up and down the country advocating its imposition in order to spread the benefits of housing and to increase the prosperity of the people of this country. Can the Leader of the House tell us whether he still holds those views or, if he has changed them, what his new opinions are? We hope that the Financial Secretary to the Treasury will let us know what the views of those Members of the Government are now as compared with their views when they voted for the imposition of this tax.

The right hon. Member for Hillhead (Sir R. Home) told us that the Committee was finished with what he called "bankrupt Budgets." In other words, this was the first Budget brought forward that was balanced. I deny that entirely and I assert that, if ever there were a bankrupt Budget introduced it is this Budget. There is an estimated loss of £8,000,000 smuggled away into some other account and not shown in the balance sheet of the nation. That is admitted by the Chancellor of the Exchequer, and was in fact stated by him in his Budget speech yesterday. In addition to that, there is a further loss of £22,000,000, which he says is not a loss at the present moment because of the present price of gold. If the price of gold falls to-morrow, that loss may be more than £22,000,000. This Budget, then, is hiding a definite loss of £8,000,000 and is screening a further sum of £22,000,000, which is practically lost to the nation, making £30,000,000 in all. Yet the right hon. Gentleman says that this is the first Budget that is balanced, although in it there is £30,000,000 on the debit side of the national balance sheet. We want some explanation of that from the Financial Secretary to the Treasury. If we are not going to have a Budget that is going to balance itself, let the Government and the Treasury be honest with the Committee and with the nation. The Government formed the National Government to balance the Budget, they went off gold to balance the Budget, they fought the election to balance the Budget, and, with all this array of Tory, Liberal and National Labour Members, they ought to have been able to balance the Budget. Yet their first Budget is in an unbalanced condition with £30,000,000 to the bad, which is not shown in the balance sheet at all. If the directors of any firm were conducting a business on those lines, they would be beside Hatry at the present moment.


The previous directors lost £3,000,000.


The hon. Member knows perfectly well that the last directors did not lose £8,000,000. That was a report bolstered up by the Tory leaders and by the Tory Press, who worked the wangle in this country. Do not let us begin talking about old history or the hon. Member, who was not in the House of Commons at the time, will be made acquainted with certain things that happened in that period. We are now asked to wait until the Lausanne Conference. The Chancellor of the Exchequer is following the lead of the Prime Minister. I can remember the jeers of the Opposition whenever the Prime Minister, when leading the Labour party, announced that he was going to set up a commission or a committee to inquire into some question. We can jeer now; they will have to cheer. Two committees are to be set up to make inquiries into something which it is the duty of the Chancellor of the Exchequer and the Treasury to solve without setting up a committee at all. As of old the Prime Minister, when he comes to a wall, instead of trying to climb the wall and to overcome the difficulty, has resorted to his old practice of saying, "Let us set up a committee and stave off the day when we have to face the difficulty and, when that day comes, there may be somebody else in our place to meet the difficulty." Now we are going to Lausanne to solve the problems of this country. What are we going to do there? We have a right to know what are the intentions of the Government. Are they going to discuss monetary policy? Are they going to discuss Reparations and inter-Allied debts? Are they going to discuss the cancellation of those debts? I can remember, when in 1921 I advocated a lower rate of War Loan interest, that I was taunted with asking the Government to repudiate legitimate debts. Cancellation of inter-Allied debts is not repudiation of debts, however, but is wiping them off.

Can the Government go to the Conference at Lausanne and discuss international finance and the wiping off of debts, which were incurred between nation and nation for the conduct of the late War? If they can do that at Lausanne, as has been already done at other conferences at which no settlement was reached, what about the internal debt? That is the greatest burden on the people at the present time and to meet the interest on the internal debt has been the greatest difficulty of every Chancellor of the Exchequer since the War. What steps are the Government taking to reduce that burden on the nation, which costs us over £300,000,000 a year? It can be reduced, and it does not require repudiation. There are precedents for the Chancellor of the Exchequer or the Government taking action in this matter. Pelham in 1749 passed an Act of Parliament to reduce by ½ per cent. the rate of interest upon a certain debt held by people in this country, a loan which had been raised for the purposes of the Government. That Act was carried and the interest was reduced from 4 per cent. to 3½ per cent. by Act of Parliament. In 1750 another Act was passed reducing the interest another ½ per cent. to 3 per cent., and William Pitt himself commended the action of the Government in passing those two Acts by saying that it was a wise proceeding for the Government to have adopted. Goschen also reduced the interest upon certain funds. [Interruption.] I am not saying whether it was by conversion or Act of Parliament.


They got their money back!


It was a voluntary conversion.


In the Budget?


It was a voluntary conversion by Mr. Goschen.


I am not concerned whether it was voluntary or not. The fact was that it was a reduction. There were two reductions. The Chancellor of the Exchequer has held before this House and the country the wonderful patriotism of the Income Tax payer in meeting his obligations. Why cannot he appeal to his patriotism again Why cannot he invite those who hold War Loan to accept a smaller rate of interest? In Pelham's time only £3,000,000 of the sum that was outstanding was not put into the loan at the lower rate of interest that the Act of Parliament had given the Government power to pay. Are the Government to-day afraid that the holders of War Loan are not patriotic enough? If not, why is that step not taken? It probably will have to be taken when the weight of the debt has strangled the nation. It is the greatest burden upon the nation to-day.

We want to know from the Financial Secretary to the Treasury what the intentions of the Government are in these matters. While they are putting taxation upon tea and upon sugar, and while they are taxing the workers more heavily than it is possible for them to bear, they forget that even amongst the working people, with their limited income, the limit of taxation can be reached. Those limits are already reached in many of the homes of the workers, where unemployment is rife. The Government have already touched the bottom of the pockets of the workers, yet they are going to impose heavier taxation upon them. While they are doing that, they continue to pay £322,000,000 in War Loan interest. I would ask the Financial Secretary whether any steps are to be taken at Lausanne not merely to arrange for the cancellation of debt by the different nations, but to consider the adoption of a domestic policy by our own Government that will enable this country to wipe off a considerable portion of the deadweight of the debt which is at present resting upon us, which would enable the Chancellor of the Exchequer, whoever he may be, who follows the present Chancellor of the Exchequer to come forward with a Budget that will really balance, not a Budget which is a distinct evasion of all the Budgets that have been brought before us and a false balance sheet which would not be accepted by the annual meeting of any public company.


The right hon. Member for Hillhead (Sir R. Home), in his profound and illuminating speech, referred to the heavy artillery of debate. We have had, if I may use the phrase, the big guns this afternoon, and some apology is due from me, the merest trench mortar, for venturing to inflict a maiden effort on the Committee on an occasion of such importance as the Budget Debate. But the importance of the occasion must be my excuse. The Debate has taken a very wide range and has travelled some distance from the actual proposals of the Budget Resolutions. I am afraid that my powers will not permit me to follow right hon. and hon. Members who have talked about monetary policy, the future of international finance, and matters of that sort. I propose to deal with the more concrete aspects of the Chancellor of the Exchequer's proposals. Those proposals represent one of the greatest tests which the National Government have yet had to face, and I believe that the National Government have faced that test triumphantly. I congratulate them. I also congratulate the Chancellor of the Exchequer upon the courage that he has shown in laying before the House a Budget that is both honest and businesslike.

The right hon. Gentleman is well aware that one of the first reactions to his Budget was a feeling of disappointment not only inside this House but outside. That disappointment is not really justified. It is a disappointment which is the result of too high expectations, expectations founded upon an inadequate realisation of the difficulties which face the country. Only a few weeks ago I received a letter from a responsible professional body urging upon me their claims to a share in the surplus, which they estimated at that time to be £50,000,000. The right hon. Gentleman told us yesterday that there was no surplus, and that the claims which had been urged upon all of us by various sections of the community must be disappointed. If I might adopt a metaphor which has been used several times this afternoon, I would say that the right hon. Gentleman passes his dividend this year and the shareholders may be at first a little disgruntled, but they have, at any rate, the consolation of knowing that the capital value of their holding has appreciated owing to the activities of the new board of directors, day by day, and is appreciating constantly.

After the masterly and lucid exposition of the Chancellor of the Exchequer yesterday, no one on this side of the House can doubt that he has taken the right course in drawing up the Budget as he has done. He budgets for a national expenditure of £766,000,000, which compares with £783,000,000 in the revised Estimates of last year, a reduction of £17,000,000 upon Viscount Snowden's September Estimates. That is in addition to all the economies which were put into effect by Viscount Snowden, and it is a fact that ought to be borne in mind. The right hon. Gentleman deserves every congratulation for having been able in six months to make a further reduction of £17,000,000 upon the already reduced figures. It is worth while comparing those figures with the figures for 1930, for which the Labour Government were responsible. They represent a reduction of £40,500,000 upon the 1930 figures. The most distressing feature is that, although the figures are so much lower than the figures for 1930 and 1931, they are still vastly greater than the figures for 1929. Our expenditure in this country is still £37,000,000 greater than it was under the right hon. Member for Epping (Mr. Churchill) in 1929. That means that, in spite of the sacrifices of the country, in spite of the demands which we have had to make upon the people, we have not yet been able to keep pace with the extravagant expenditure of the Socialist Government. There is still this vast gap of £37,000,000 which has to be made up. It means that the strictest economy is still vital.

I have been at some difficulty in trying to imagine any one single item, any large spectacular item upon which substantial economy is still possible. I am sure that the Chancellor of the Exchequer and his advisers at the Treasury have gone through the accounts with a small tooth comb. Although I can see no large single item, I am sure that there must be a very large number of smaller items upon which economies might be made. If, as one of the humblest of new Members I might make a suggestion, I should like to say that a great deal of money is spent upon printing, papers and books for Members of this House which is unnecessary. I believe I am right in saying that a Committee is considering this matter at the present time.

The Chancellor of the Exchequer paid a striking tribute yesterday to the spending Departments, which, I believe, will continue to be worthy of the confidence he has reposed in them, and will overhaul their accounts and make economies wherever possible. I want to say a few words about the Defence Services, which are very often unduly attacked as spending Services. The Defence Services in this year's Budget are responsible for £106,000,000, a decrease of £5,000,000 over last year and £6,500,000 over the year before. Again, that is very creditable. Those of us who listened to the speeches that were made on the Army, Navy and Air Force Estimates will realise at what cost that reduction has been brought about. The Defence Forces this year have reached their lowest level of expenditure since 1913. They are only the comparatively small sum of £28,000,000 above the level of 1913, a result which reflects the greatest credit upon all concerned.

One sees how unjust any criticism of the Defence Services is when one looks at the Minority Report of the May Committee, a document which no one would say was unduly favourable to the Defence Services. On page 233 of the Minority Report it is stated that the 1931 figures only represented 5 per cent. of the total increase over 1913, whereas the increased expenditure upon Social Services, Health, Education and other Social Services, represented 22 per cent. of the total increase in our national expenditure from 1913 to 1931. It is the fashion on the Labour benches to say: "You have your expenditure on the Defence Services, and that is an obvious way in which you can make economies." Painful as it is to me to find myself in agreement with hon. Members above the Gangway, I agree with them that there is a great deal which can still be saved upon the Defence Services, and every hon. Member on the Government side would be delighted to see that saving effected. But not one penny of that saving can be made apart from a substantial amount of international disarmament by agreement. The key of economy in this direction lies not at Westminster, nor even in Whitehall, but at Geneva, and all of us on this side of the House are definitely hopeful that that key may be found in the very near future.

7.30 p.m.

May I turn to the revenue side? There are two outstanding features in the revenue side of the account. In the first place, there is the lamentable falling off in the Inland Revenue and, secondly, there is the gratifying success of the Import Duties. The causes of the falling off in the Inland Revenue are perfectly obvious, and it would ill become me to take up the time of the Committee in enlarging upon them. I should like to say a few words about the second feature of the revenue side, the success of the Import Duties, and the fact that nearly £33,000,000 of revenue have had to be brought in from the Import Duties in order to balance the Budget, apart from all the sacrifices and extra taxation. It is only by bringing in that £33,000,000 of revenue that we have have been able to show a surplus this year. Some of us were perhaps a little doubtful whether the level of 10 per cent. was sufficiently high but those doubts have been magnificently resolved and we are now convinced that it is the right level. You get the right degree of exclusion to benefit your industries and yet sufficient admission to prove a benefit to the Exchequer and to secure the revenue that is needed. In considering the success of import duties, so far as revenue is concerned, it is important to note that this invaluable sum has been brought in without raising the cost of living. It is clear that any substantial relief to the Income Tax payer or the Super-tax payer or the petrol user must be based on the continued success of import duties. We believe they will be a success, first, from the point of view of the actual revenue that they will yield—and we hope that in this respect the Chancellor of the Exchequer has under-estimated the revenue he is likely to obtain—and, in the second place, in bringing about a general improvement in trading conditions which will increase not only Income Tax returns but the returns from Super-tax and Death Duties. Here again the improvement which we expect in 1932 will not be visible this year and will not be available for distribution amongst hungry mouths until the Budget of 1933. Those who supported these import duties are very happy in finding that their support has been so amply justified and we hope that the conversion of hon. Members on the Liberal benches is only a matter of time; a short space of time.

I do not propose to follow the details of the Budget proposals. I have mentioned the courage of the Government in presenting a businesslike and honest Budget, but I desire to utter one word of criticism. I, in common with many other hon. Members, am uneasy about these committees. I have in my possession a copy of a cartoon drawn by Leech many years ago in "Punch," which represents Lord Beaconsfield standing behind a counter and serving Britannia. His shelves are stocked with committees and commissions, departmental committees and select committees, and it was a jibe against him in those days that whenever a question came up for decision he farmed it out to a committee or commission. I have the greatest admiration for Lord Beaconsfield as I have for the present Government, but I hope they are not going to fall into that error. I sometimes wonder whether the Prime Minister and the Lord President of the Council realise their extraordinary personal ascendency over the country. If they wished they could put any Measure through. If it is any lack of courage on their part which makes them delegate their responsibilities to committees or commissions their diffidence is entirely unjustified, because they need have no fear of the country following them in any path they choose to take.

One of the greatest necessities of this country at the present moment is strong and active leadership, and it will be forthcoming, as it has been in the past, from the Treasury Bench. The Chancellor of the Exchequer has given us a lead in this Budget. He has shown the country that our need for economy is not yet finished. We have a long way to go yet and any hopes of a rest by the way are premature. Sometimes in the past it has been possible for a great statesman to stand out as the champion of a great moral principle. The Chancellor of the Exchequer stands to-day as the champion of the principle of financial rectitude, and the country will follow him gladly and happily along that path. Other nations of the world will in the future show that they are grateful to this country for following the lead of the right hon. Gentleman along this path.


I should like to congratulate the hon. Member for Bristol South (Mr. Lindsay) on his maiden speech. He has stated his case very clearly and we shall be only too pleased to listen to him on any future occasion. I listened with great interest to the speech of the Chancellor of the Exchequer yesterday, and as I glanced around the House from time to time I could not help contrasting the gloom of yesterday with the enthusiasm of last November. I have a great deal of sympathy with the supporters of the National Government in their gloom of yesterday. I myself have had a similar experience. I remember the enthusiasm of May, 1929, and the gloom of April, 1930, and April, 1931, when the Government of which I was a supporter did not come up to expectations. The reason I have no doubt was the same in both cases. It is entirely due to the fact that Governments, acting on present lines, are the playthings of economic forces which they are making no real attempt to control or direct, and because they are the playthings of these economic forces they inevitably disappoint their supporters.

The statement of the Chancellor of the Exchequer yesterday must have sent a cold shiver down the spine of most of his supporters. He was introducing the first Protectionist Budget; we were entering the golden age of Protection. How did he accomplish his task? He did it with solemn warnings. He talked about the necessity of hard work in the future, of strict economy, of firm courage, and unfailing patience. In other words, in spite of the fact that it was the introduction of the first Protectionist Budget, gloomy indeed was the atmosphere of the golden age of Protection, which hon. Members opposite have so frequently described. I can also easily understand how interests outside, which have often made their voice heard in this Parliament, are very disappointed; and the working people of the country have nothing for which to be grateful. You have taxed the working man's new potatoes when they are just beginning to come into the country and now you refuse to take a penny off his beer. The working classes share the same sort of disappointment as do these various interests in the country.

The speech of the right hon. Member for Hillhead (Sir R. Horne) this afternoon was a curious commentary on the frantic efforts of the Government last autumn to save the pound. If I could have closed my eyes and just listened to the voice I should have imagined that I was listening to some of my Socialist colleagues of 10 years ago, because the speech of the right hon. Member for Hill-heal was merely an echo of things which have often been said during the last 10 or 12 years by members of the Socialist party. We have never listened to a more direct condemnation of the frantic efforts which were made last year to save the pound. What a ramp it was, what a huge conspiracy, to discredit the Labour Government because the pound was in danger. To-day the burden of the speech of the right hon. Member for Hillhead has been: Do not let the pound rise in value. What becomes of all those dire consequences which we were told would follow a flight from the pound in the light of what the right hon. Gentleman has said this afternoon? He talked about the real debt burden and told us that it was £14,000,000,000 or £15,000,000,000. That is the statement of an ex-Chancellor of the Exchequer, which we shall remember and use throughout the length and breadth of the land. But the right hon. Member for Hillhead is simple enough to imagine that his political associates are going to get us out of the difficulties in which we find ourselves. These same political associates, to whom he looks for deliverance, were responsible for a return to the Gold Standard and these same political associates have made a huge series of blunders during the last 10 or 12 years which has led us into the conditions we find ourselves in to-day. And they are still in charge of the nation's affairs. Their past record, in my view, is one of long political failure, and I am quite sure that we need not expect anything of any real value from hon. and right hon. Members who occupy the Front Bench.

The most we can hope for now, says the right hon. Member for Hillhead, is to go back to the conditions of 1928. A little while ago we were told that we must get back to normality, to pre-War conditions. What were the conditions in 1928, so far as the great mass of the people were concerned? In that year we had over a 1,000,000 unemployed and the mass of the working people were in the direst poverty. I wonder whether the right hon. Member knows anything of the conditions in some of the mining areas in 1928. Now he is asking the House of Commons to go back to the conditions of 1928. In that year we had a plethora of goods of every kind, but the cry of want was heard in every city and town, and in every village. An ex-Chancellor of the Exchequer this afternoon urges the Government of which he is a supporter to take us back to the conditions of 1928. Seldom has the House of Commons listened to a more damning description of an economic situation which is beyond the control of its defenders and supporters, than when it listened to the speech of the right hon. Member for Hill-head this afternoon.

What shall we ask, what ought we to ask of any economic system? It is a simple question which we might all put to ourselves. The answer is that it should bring to the masses of the people the maximum amount of happiness, contentment and satisfaction of human needs that is possible with the full use of the productive processes available for the community at any given period. We have a right to ask that of any economic system. I am sure that the speech of the right hon. Member for Hillhead was an admission that the system under which we are now living has broken down, and that the chances of its survival, even for a time, depend, as he told us, on three things. Its survival depends, first of all, upon a rise in prices; secondly, upon some management of the currency; and, thirdly, upon the cancellation of War Debts and Reparations.

Take the question of a rise in prices. From the standard of orthodox economics it may be right. I agree with all that the right hon. Gentleman said about the lack of purdhasing power on the part of the primary producing countries. I agreed with him when he argued that that may have been one of the causes of driving us further and further into depression. But a rise in prices might very well leave millions of the workers worse off than they are now, and that is something we have to consider, because we know from bitter experience that as prices rise wages climb laboriously after those rises, and sometimes only as the result of industrial warfare. We have very great reason to be sceptical of a rise in prices.

Then take a managed currency. In the hands of financiers and bankers a managed currency might very well be a serious menace to the working classes. If we are to have it at all, let us have it with some sort of real social control, and not leave it entirely in the hands of financiers and bankers. I am afraid that one by one the hon. Members who support the Government are giving away their economic creed—giving it away stage by stage as this Parliament goes on. They call in the State, first of all, to assist trade and industry. No longer do they depend entirely on what they call initiative and enterprise and ability. The State must give trade and industry protection in every form, because no longer dare they try to go along the old lines in face of world competition. So they have thrown over that part of their creed. The right hon. Member for Hillhead greeted with great satisfaction the statement of the Chancellor regarding the £150,000,000 borrowing power which he seeks, in order to set up this exchange agency. The right hon. Gentleman looks upon it with very great approval indeed. What does it really mean? Money is a social tool, it is the medium of exchange, and the right hon. Gentleman, one of the high priests of capitalism, asks that the State shall come in and manage the medium of exchange.


It always does, in every country.


That is a matter of opinion. From the point of view of some of us, that is not the case. To real social control we should have no objection, but the kind of thing foreshadowed in the coming Finance Bill we strongly object to. Those developments will drive us in the end to a point where there must be social control of the productive processes, and that is just where hon. Members opposite all run away from the implications of the things that they are now saying. They say, let trade be protected, let us have a managed currency. But until you have social control of the productive processes the anarchy and confusion will continue. At the close of his speech the right hon. Member for Hill-head quoted a passage from a historian who ascribed the Fall of Rome to the lack of a sufficient quantity of currency. After that very vivid description the right hon. Gentleman gave it as his opinion that the historian was more or less correct. As fie read the quotation there came into my mind another passage from another writer, Dean Farrar. I remember that in one of his books he writes about the fall of the Roman Empire and has a passage which runs as follows: In the heyday of the Roman Empire there cannot have been, at the zenith of its powers and influence, less than 6,000,000 slaves at the base of society, born to a childhood of degradation, passing to a manhood of hardship and an old age of unpitied neglect. That slave population, even slave labour, became uneconomic in the Roman Empire. Were the right hon. Member for Hill-head here, I would remind him of the uneconomic character of slave labour, and further, that there is no way out of the dilemma that he sees so clearly until we are prepared to embark upon a policy which will raise to an infinitely higher level than the present, the conditions of life of the mass of workers of the country.


I must crave the indulgence of the Committee in rising to speak for the first time. I feel gratifled that I am enabled to make some remarks on the question of finance, not that finance is a likeable subject—at least I do not find it so—but because I find that it lies at the base of the whole of our present position. It seems to me that until we -have settled our financial difficulties we shall make no progress in any direction. The fundamental problem which confronts us is to get more work for the people of this country, and every other item of policy must be made con-tributary to that object. It may be presumptuous for me to congratulate the Chancellor of the Exchequer, but at least I can say that I do not think he has received quite the credit that is his due for the Budget which he has produced. It is true that there are certain points open to criticism. Without going so far as some of those who have preceded me, I think I would subscribe to the greater part of what was said by the right hon. Member for Hillhead (Sir H. Horne) and those who adopted a similar line of argument.

But there is a great deal in the Budget for which we should be very thankful. We now have a genuine Sinking Fund. It is smaller than it used to be, but we 'have abolished the robbing of hen roosts, the practice of borrowing for unemployment, the practice of selling capital assets when such a course happens to be handy. I think we may further congratulate ourselves that the Budget is now a true statement of the national position. But, although the Budget is balanced, there is one fact to be borne in mind. It is not balanced out of income; it is balanced very largely by the use of capital. I am not quarrelling with that, because I think it is inevitable in the present crisis. But in any long period view we must. bear that in mind. Not only is a good part of the Income Tax paid this year out of accumulated savings—one can leave that on one side, because we do not know how much it is—but the whole of the Death Duties are taken direct out of the capital savings of the country and cannot fairly be considered as revenue at all. Nevertheless they are more than twice the amount of the Sinking Fund.

Let me take the figures for the last four years; those for this year have already been given. I find that in the last four years Death Duties have yielded no less than £308,000,000, whereas even the apparent Sinking Fund is just over £200,000,000, and if I may take the figure which appears in the "Economist" as accurate, the net sum applied to wiping off debt is under £38,000,000. It may be that that is not quite right. I confess that, like many new Members, I do not feel skilled enough to scan the national accounts with confidence. I do not say that that is the fault of the national accounts; it is probably my fault. Nevertheless one is diffident in the matter. Let us take it that the "Economist" is wrong, and that perhaps twice as much has been paid off. Even so it means that out of every £1 which has been taken out of the capital savings of the country by the Chancellor of the Exchequer during the past four years, only 5s. at most has been applied to paying off debt and 15s. at least bas been spent, and we have nothing to show for it.

8.0 p.m.

We cannot go on like that. We cannot increase the yield of the taxes. Everyone agrees that the yield of direct taxation has now reached its limit, and I think that many people agree that the yield of indirect taxation is approaching the same limit, at least as regards some taxes. The Beer Duty has been mentioned. It is possible that even such a tax as the Entertainments Duty is defeating its own object by cutting down the source from which is is taken. We may take it that the Government has made every endeavour to reduce expenditure during the last six months. Nevertheless, what do we find? We have, of course, the dead weight of debt that can hardly be got rid of without a conversion; but when we come to the Civil Services we find a positive increase. I find that in 1924 the Civil Services Votes amounted to only £228,000,000. I am not sure whether I am comparing like with like, but I think I am doing so when I ray that this year the Estimates are £330,000,000, an increase of £102,000,000 since 1924. That is the case, although the Estimates this year are cut to the bone. It is true that it is more than accounted for by unemployment and derating, but nevertheless the money has to be found. It appears to me that the only way to find the money is to endeavour to raise prices, as has been suggested this afternoon. I took some comfort from the statement of the Chancellor of the Exchequer yesterday that he thought he was entitled to expect a slow but continuous recovery in values. I hope that that is not merely a pious hope, but that it means that the Government's policy will be steadfastly directed in support of that object. Whatever our views may be, we all agree that policy can achieve the raising or lowering of prices; and, if we have come to a state of things in which the Budget cannot be balanced without raising prices, I hope it means that the Government are determined that any movement shall be in that direction. We have considerable freedom now by being off the Gold Standard and by virtue of the new Exchange Equalisation Account which is to be set up. Let us use that freedom boldly. We can pursue two objects. We can try to get the price level stable or try to get the exchanges stable. I rather think, although I speak with great diffidence, that we must pay at least as much attention to getting the price level stable as to getting the exchanges stable. At least, the price level must go up sooner or later.

There is no doubt that at the present time we are confronted with a situation in which any course entails great risks. But the greatest risks are entailed by doing nothing. It has always been a feature of Conservative thought that when things are going well, you leave them alone, but it must be a corollary to that to say that when things are going badly you are not afraid to take strong and, if necessary, drastic action. I think there is at present a unique opportunity for the Government to co-ordinate our policy on several points in the same direction. Budget, tariffs, currency and, above all, our Empire policy can all, it appears to me, be directed towards the same object. If we direct all these engines towards the one object we shall surely achieve that object, which is the restoration of prosperity in this country, and prosperity means neither more nor less than this, that every man in the country can get a fair day's wage for a fair day's work.


The Committee will allow me to offer on my own and on their behalf hearty congratulations to the hon. Member for Stirling and Falkirk (Mr. J. Reid) who has given us such an excellent and admirable speech. It is the sort of speech that we should expect from a Scottish Member, and I am sure the Committee will join with me in the hope that he will address us on many other occasions on financial matters. I am sorry that the hon. Member for Govan (Mr. N. Maclean) is not in his place, because I do not think that we should allow to pass his statements on the subject of loan conversions. If those statements were made, I will not say in ignorance, but from a lack of knowledge of the subject, they should be corrected. If they were made with a desire to mislead the Committee, and I hope they were not made with any such desire, then we ought to drop very heavily upon him. The hon. Member referred to the conversion of loans in the reign of George II, I think, he said, under the Pelham Ministry. He quoted examples of British loans being converted to a lower rate of interest, and I think he led the Committee to assume that those conversions were carried out without the acquiescence of those who lent the money. My hon. Friend the Member for South Croydon (Mr. H. Williams) has been good enough to get me the Act of Parliament relative to this matter, and I find that there is no vestige of foundation in it for the statement of the hon. Member for Govan. The Act will be found on page 545 of the Statutes-at-large, 16th George II, 1743–1750, Chapter 22. It is an Act for giving further time to proprietors of the annuities, of the rate of £4 per cent. per annum, to subscribe in the manner and upon the terms therein mentioned and for the redeeming of such of the said annuities as shall not be subscribed. Clause 3 contains the following: It is further enacted by the authority aforesaid that such part of the national debt incurred … which shall not be subscribed before the said thirtieth day of May one thousand seven hundred and fifty, shall be redeemed and paid off. That contradicts the insinuation made by the hon. Member for Govan to the effect that the rate of interest was reduced whether the owners of the capital agreed or not. The Act of Parliament distinctly provided that the money was to be paid off, if the owners did not take the reduced rate of interest. It would be wrong of the hon. Member for Govan to make any statement in a contrary sense. I do not like to say that it was an unworthy attempt to mislead the Committee, but a statement in a contrary sense would have the effect of misleading the Committee. If he misunderstood the matter then it ought to be put right. He then proceeded to quote an instance which I myself am old enough to remember. He referred to the conversion by Goschen of the Consols Loan in 1888 and he led us to suppose that that conversion was compulsory. He gave these instances with regard to the present dead weight of debt and he adduced the case of the conversion in 1888 as if it had been compulsory. When Mr. Goschen converted his 3 per cent. Consols to 2¾ per cent. and afterwards to 2½ per cent., he gave the owners who refused to take the reduced rate of interest the option of taking the money. There is no ground whatever in the hon. Member's argument on the two examples to support his implication that there should be a reduction in the National Debt without any option. I am glad that the hon. Member is now in his place. I have already quoted the Act of Parliament of 1749.


There were two Acts of Parliament—one in 1749 and one in 1750.


I will not trouble the Committee by reading the extract again—


But is it not the case that the Act of 1750 extended the time for those individuals who did not make full use of the time given under the Act of 1749? There was a time limit for them, either to transfer their holdings to a new and lower rate of interest or to receive the money. [HON. MEMBERS: "Hear, hear !"] But the right hon. Gentleman must recall that I said that only £3,000,000 had to be paid off, out of a total of close upon £50,000,000.


The point is that the hon. Member led the Committee to believe that if the holders of this loan did not accept the conversion they would be compelled to do so, but here is the statement, clearly, that the amount which shall not be subscribed before the thirtieth day of May, one thousand seven hundred and fifty, shall be redeemed and paid off. That knocks the bottom out of the hon. Member's case. He is quite right that there were two Acts, the second one extending the time to that date—


In giving my quotation. on that point I intimated plainly that only £3,000,000 had to be paid off. That is, only £3,000,000 was not transferred into the stock upon which the Act of Parliament reduced the interest. The first Act of Parliament in 1749 was followed by another Act in the following year extending the time for those who wisihed, either to transfer to the stock at a lower rate of interest, or to accept at par the money for the stock.


I leave to the Committee that explanation merely remarking that we heard nothing from the hon. Member about the option but were given to understand that the owners of the stock were bound to take the lower interest. He went on to say that the interest upon the present National Debt was £322,000,000. That is not so. If he will look at page 18 of Statement No. 63, issued by the Financial Secretary to the Treasury, he will find that the amount of the interest is £276,000,000. The hon. Member has not got his facts right.


Is that internal and external combined?


He will find in the statement to which I refer, that £276,000,000 is the interest on the total. I know this thing by heart, having lived with it for years. The debt figure of £7,544,000,000 includes the American debt and the Straits Settlements debt.


As the hon. Gentleman says that my hon. Friend is incorrect in his statement, will he make it quite clear whether the figure he mentions is the interest charged on the whole National Debt, or on the internal debt only?


The hon. Member for Govan said that the interest on the National Debt was £322,000,000—


I cannot allow myself to be misrepresented. If I say the interest on the National Debt, I mean on the whole National Debt and not on a part of the National Debt which is called the internal debt.


Here are the words used by the Government in the Financial Statement, for which I am not responsible—


Nor am I.


These are the printed words for which the hon. Member's friend Lord Snowden is responsible.


Your friend.


The item is described "Interest and management, of National Debt £276,000,000." I do not depart by one comma from that statement. I had no intention of dealing with the point which the hon. Member for Govan raised as to the interest on the National Debt, but as many other hon. Members on that side have got into the habit, apparently, of thinking that the National Debt, burdensome as it is upon us, is held by the accursed capitalist and rentier, and that, if the interest upon it is reduced by violent involuntary conversion, the poor and the general body of people will not suffer, it is necessary to make the position plain. The average interest on the nominal National Debt amounts to 3⅝ per cent., gross, on the whole of it. Lord Snowden last September told us that the average interest was 3½ per cent. but on the calculation in the Financial Statement issued yesterday it works out at £3 12s. 6d. per cent. gross on the nominal total amount. From that must be taken Income Tax and Super-tax and when you bring it down to the net amount you find that it becomes more like 2¾ per cent. than 3⅝ per cent.—a very reasonable amount. But the National Debt runs through the whole life stream of this country. There is not a man, woman or child, rich or poor, in this country who would not be affected if any violence were done to the national credit or the National Debt. The National Debt is held by 15,000,000 people of whom 14,500,000 have less than £10 per week. Social service and insurance funds are represented in the National Debt, and there are the National Savings Certificates, every endowment of a charity, of a school, of a chapel, of a church, or of a university, the great insurance companies, friendly societies, trusts for dead persons and for infants, trade unions, railway union funds—all are interested in the National Debt, and any attempt to do violence to the credit of the country by forcing a conversion against the wishes of the holders, or any breaking of faith, or anything which could be construed as leading to repudiation, would not only injure the well-to-do, but would injure some of the poorest among us.


I made no mention of repudiation, except to point out what has been done in the past by Acts of Parliament passed in this House, and I cannot allow the hon. Baronet to ride off at a tangent like that and accuse the party to which I belong of being out on a policy of repudiation. I made that clear in my speech, and if he is labouring that point, he is taking up the time of the Committee vainly.


I do not agree with the hon. Member. The Committee heard what he said and will judge between us. I have risen to say what would follow if his policy, as I understood it, were carried out, but I will leave that point, which I had not intended to deal with had he not innocently—I will not say evilly—misled the Committee with regard to Conversion of Loans.

We should be deceiving ourselves as Members of Parliament if we did not admit that this Budget has caused grave disappointment to our constituents, but the answer to that is quite plain. It is a burdensome Budget, but it is an inevitable Budget, and the present Chancellor of the Exchequer is not responsible. There has been quoted here something from Farrar, and earlier in the evening something from Alison's "History of Europe." Let me also quote something to follow what fell from my right hon. Friend the Member for Hillhead (Sir R. Horne), who talked about the lack of currency from Spain and Greece wrecking the Roman Empire. I would like also to quote, though from memory, from that delightful book by Thomas Hodgkin which deals with Italy and her invaders. Hodgkin points out that what wrecked the Roman Empire in Italy was the oppression of the Byzantine taxation. Just before Justinian's time Byzantium broke the Roman Empire in Italy and brought darkness upon Europe for 400 years by what was called the Logothete and the Angaria—that is to say, the tax gatherer and the thumbscrew of excessive taxation. That is what we have been through for 2½ years. Exactly what wrecked, in the fifth century after the Christian era, the Roman Empire and brought darkness to civilisation for 400 years, we have had here under the parasitic Socialism of the last 2½ years. It was developed under the reckless principle of Mr. Greenwood. I remember him saying, quite well, that the nation could afford anything it. desired, and he was assisted by Mr. Snowden, who, as Chancellor of the Exchequer for some years, was working on the principle of taxation for the purpose of redistributing wealth.


One of your leaders to-night!


The present Chancellor of the Exchequer is not responsible for the disappointment of the country at there being no relief in this Budget. It is the late Government that is responsible. Last year impending disaster was hidden by borrowing in a dishonest Budget, and I remember saying in this House when I spoke from that box, a year ago almost to a week, that if that Budget had been proposed by a trading firm, no auditor would have given it a certificate as being an honest presentation of the position of the nation's finances.


They would not give it to this Budget.


Yes, this year we have an honest Budget. I remember listening to the Budget last year, and the present Leader of the House will doubtless remember my turning to him and saying, "God help the man who has to mop up this mess." We knew last year that the principles, policy and finance of the Socialist Budget must do us a great deal of harm. The Revenue accounts yesterday proved that in the near future this country cannot hope for a natural growth of wealth which will produce enough revenue to enable us to reduce taxation. There is no reserve of taxable resources in the country, so badly has it been treated. What I am going to say may give offence to some if I say it, but I think that in all honesty I ought to say it. If this country wants reduction of taxation, the electorate much make up its mind that it can only get that relief, if it wants material relief, by a material reduction in the expenditure on social services. If there is not to be a reduction in expenditure on social services, it will be very difficult for us for two or three years to come to hope for any appreciable reduction in taxation.

A very important point has been dealt with by some hon. Friends of mine on this side, and I would like to ask if we could hear snore about it. I refer to the £150,000,000 to be used to support the exchange. I suppose we shall learn a good deal more about how the Dollar Exchange Fund is to be used. I think it is a good proposal, but I doubt a little whether the support will ever be put into full operation. I believe that the mere existence of the power to use it will render it very little necessary for it to be used. But if it were used in full and £150,000,000 were borrowed for the purpose of buying securities, gold or otherwise, it might have the effect of inducing some inflation. by creating instruments of credit available for a backing for currency. It will have the effect certainly of warning speculators in exchange that if they gamble in sterling for their own profit,. they will run a very grave risk of this. scheme being used in such a way as will snake them feel very sorry they ever started to gamble in sterling exchange.

A few weeks ago we saw violent oscillations in the dollar exchange. We saw how difficult it was to control or manage the exchange without a metallic anchor for our currency. The Bank of England and the Government had to intervene, but it was difficult to regulate the exchange. £150,000,000 is a large sum, but it may be found that the volume of exchange on London is so great that speculation or violent oscillations in the exchange cannot be controlled over a long period. Moreover, I would ask my Leaders not to lose sight of this, that if the two exchanges, the dollar and the sterling, start moving about violently, it may also then be necessary to control other exchanges—a very difficult task, which may almost prove to be too much for our Exchequer. We must be warned. It may be that the stream of international business centring upon London, and the cost and difficulties involved, may operate so as to cause what hon. Members below the Gangway call "management" to be ineffective. The stream may be too great, and it may be impossible for us to "manage" it. Therefore, the sooner it is convenient for us to get back once more to an anchor, metallic or otherwise, the better it will be for the country.

There is a good deal to be anxious about, and I do not see very much to be happy about. We have a long and difficult row to hoe, but one thing cheers me up. Although gold has pushed itself away from the sterling note, and the pound note will not buy as many grains of that perfectly useless commodity called gold as it would in August last, I am grateful to see that the pound note will buy as many ounces of bread and butter, cheese and meat, as it would before we went off gold. When we get back to the anchoring, whether it be gold or anything else, we shall be in a much stronger position than we thought last September we should be when we parted company with the Gold Standard. The hon. Member for Govan made another statement about the £8,000,000 loss in supporting exchange. But he overlooked the fact that it was not our Government that involved us in that loss. If he looks at the Financial Resolutions, he will see that the loss was incurred last August. We are not responsible for that. None the less, our exchange losses last autumn cause me some apprehension. We are assuming a higher value for our stock of gold and are earmarking the profit on that gold against loss. There can only be a higher value for gold if we go back to a Gold Stanclard of less than 113 grains to the pound. The Chancellor of the Exchequer did not define the position very strongly—and I think that he was right in not doing so. But this fact emerged —he assumes a profit on our gold. We are assuming on paper an unrealised profit against which is actually a realised loss. The Chancellor of the Exchequer cannot help himself, but the country must make up its mind that it may have to face a very considerable capital loss as the result of the expenditure incurred very properly to try to save sterling last autumn.

8.30 p.m.

I want to part from the subject of currency to deal with two points, one of which was dealt with, though not in a very exhaustive manner, by my right hon. Friend the Member for Hillhead. There are two items in our national income which require future consideration. One is the fall in our profits from mercantile shipping, and the other is the fall in our income from overseas investments. Between 1927 and 1931 our shipping income fell from £140,000,000 to 280,000,000. Apart from the contribution which our shipping income makes to the sources of our taxable revenue, if anything goes wrong with the prosperity of our mercantile marine it is of paramount importance to many trades. The coal, engineering and shipbuilding trades, and a thousand and one other trades, get their living out of shipping, and they all suffer. What are some of the principal reasons why we have lost some of our shipping trade? We have embarked upon a policy of defending ourselves with a fiscal weapon. We must not allow any longer a policy of inverted tariffs to be used against us by foreign nations imposing against our mercantile marine a form of tariff. This they do by giving their own mercantile marine a subsidy. Such subsidies should be met by a notification by us to those countries which give them that they are regarded as being tariffs directed against us. They give an unfair benefit to their mercantile marines which is injuring our income and reflecting itself in a loss of revenue from taxation. It is a form of dumping and unfair competition, and is in the nature of a foreign hostile tariff against us. Of late years foreign nations have also used a weapon which we used in the Navigation Laws against the Dutch in the time of Cromwell, when we insisted on goods being carried in British bottoms. It has become a habit of certain foreign nations to insist that their imports and exports should be carried only in their own ships. That penalises us very much. We have now a fiscal policy of Protection, and we should say to other countries that if they treat our ships like that, we shall regard it as unfair treatment and we shall take fiscal steps to see that we get fair play for our ships.

With regard to overseas investments, I used an expression the other day; whether it is justified or not I do not know, but I offer it to the Committee again now. I said that overseas investment is with us a national industry. It has in the past provided an immense help to our export trade. We have found, however, during the last five years that there has been a shrinkage in the income from those investments of no less than £120,000,000 a year. If we capitalise it at 5 per cent., it means that a capital of £2,400,000,000 has been sterilised, if not lost. The collapse of foreign investments is universal, and above all there has been an abuse of credit and of our confidence. This policy of overseas investment, which gives us taxable revenue and provides incomes for our people and helps to pay for our food, needs a thorough overhauling. I think that it would not be inadvisable for the Treasury to set a team of young economists to work to see whether the undiscriminating policy of investing money abroad so as to give a fillip to our export trade has not degenerated into a cause of wastage of British resources.

Any form of paper can be floated in this market. In answer to questions last week by my hon. Friends the Members for North Newcastle (Sir N. Grattan-Doyle) and Rochester (Sir P. Goff), the Financial Secretary stated that £39,000,000 of loans were issued, under the supervision of the League of Nations, in this country. Most of them are now worth about one-third of the amount at which they were issued. But, although issued under the supervision of the League of Nations, only £2,500,000 of such loans were issued in Paris. The Financial Secretary was asked why that was so, and why there was the great disparity between the amount issued in England and the amount issued in France. He said that we must ask the issuing houses. That is true up to a point, but the French Government dominates the policy of their issuing houses, and where we allow an indiscriminative policy of investment abroad, and allow 'an unrestricted flotation of foreign paper here, the French Government put a strong hand on the process of issuing foreign loans in France. The result is that we have had to endure a very grave loss in the last two years, while France has escaped it. We can now see ourselves faced with the loss of most of the money subscribed to the loans which were floated here under the supervision of the League of Nations, and France has escaped.

We have heard the hon. Member for Dumbarton Burghs (Mr. Kirkwood) asking for financial facilities to be given for the building of the big Cunarder. I agree with the President of the Board of Trade that facilities should not be given, although I do not want to go into that matter now. But think of the folly of allowing the paper of the fraudulent Swedish companies to be floated on our market during the last five or six years for no reason whatever! I see in the "Accountant"— and the "Accountant" is not a very sensational journal—that £300,000,000 has been lost all over the world through the frauds and defaults of that series of Swedish companies. Their securities were floated here, with no question asked of the issuing agents or firms about the accounts beforehand. No assurance was obtained as to whether there had been any proper auditing of the accounts; and although I do not know much about those investments myself, I am given to understand that the accounts of those companies, which we allowed to be floated here on the savings of British subjects, did not have an auditor's certificate attached. In that way this country has lost a large amount of money which would have been much better employed in this country. Buying Swedish paper created no export trade. Even if the money had been lost here in a bad investment we should have had some assets remaining. It would have been better to give the money now lost towards the Cunarder than allow it to go to Sweden, and be thrown down the sink.

I know that oversea investment is our business, hut during the last few years we have lost, probably, £1,000,000,000 in South and Central America. We are told to invest money abroad; indeed, we are almost pestered to do so by those who are interested. When we invest new money abroad, we send abroad goods which represent investments in oversea loans. But unless we get interest on that money and due repayment of that money, those goods are nothing more than gifts. For a long while we have thought that many of our exports which have gone out as a result of our investments abroad have represented actual trade done. They have not. We have not received payment either of interest or capital in respect of many investments. If therefore exports which are sent abroad under those conditions are supposed to be elements in increasing the wealth of Britain, the sooner we take the contents of our factories and our houses, our stocks, our tables and our chairs, and send them abroad, stack them ashore on the other side of the Atlantic and set light to them, the better—if selling exports without payment is the way to create wealth. It is no good issuing loans here which go out to South or Central America in the form of exports and then finding the loans valueless. There are lots of assets abroad which have been created by those loans. Assets in the form of railway material or harbours or docks exist in foreign countries, while we have nothing but worthless paper, with which we might as well light our pipes. If that is what is to happen, then let us lend our money at home, because even if we lose it here we shall, at any rate, have some assets to look at, and we shall have provided employment.

We have got into the habit of saying that the Government must not interfere in these things. It is not interference that is called for but intervention. Things have changed in the world. The facility with which foreign paper can be floated here has degenerated into licence, which has done us harm. I noticed a statement made by Sir Arthur Salter in a book which he has written—roughly to this effect: A large amount of the money lent to South-Eastern Europe of recent years has not only been lost by the lenders but has done the borrowers more harm than good. I think unrestricted flotation of foreign paper in Britain is a source of weakness to us and must be tested and reviewed. Just as we now require the machinery in a factory to be fenced so that a workman may not injure his arm or hand, so now we must intervene in the unrestricted system of lending money abroad. Otherwise, we shall find that a great deal of our resources, which would be of more use to restore our own industries, have been wasted as a result of unrestricted, undirected, indiscriminate flotation here of foreign investments. It is high time we looked into these things.

As to the call for reduced taxation, I have already dealt with some of the incorrect statements on the Debt charge made by the hon. Member for Govan. How are we to reduce taxation? Roughly speaking, the expenditure of this country can be divided under three heads—expenditure on defence, expenditure on social services and the Debt service. The Debt service costs £276,000,000 a year, though when we have deducted the Income Tax and the Super-tax the nett cost is really very much less. I hope that in due course, and before very long, there will be a voluntary conversion of our great 5 per cent. loan, because not only would that mean a reduction of the burden in the form of interest but it would set the keynote of interest on all loans for industrial and other purposes. But the country must not think that if by such a stupendous undertaking as the conversion of £2,000,000,000 of 6 per cent. War Loan we get the rate of interest down from 5 per cent. to 4 per cent. that the saving will be £20,000,000. It will be nearer £16,000,000, because if less interest is paid on the Debt there will be less Income Tax and Super-tax taken off to go back to the Treasury. An hon. Member for Bristol said the defence services could be reduced. I doubt it. The total expenditure on the defence services, including pensions, is £104,000,000 a year. You might get it down a few millions. I do not think it would be possible to cut many millions off there without endangering the safety of the country. We are, therefore, driven down to reviewing the £330,000,000 of civil expenditure of all kinds as an area for future economies.

In view of the fat that there is not a large reserve of taxable revenue in the country at present, nor is there likely to be for a few years, if the people want a reduction of taxation they will have to face the unpleasant necessity of asking the House to, reduce its expenditure on social services. The theory of Mr. Greenwood that what we desire we can afford was tried in Australia, and we see what happened there. It wrecked the finance of Australia, and will cause years of trouble. We have Seen the result here of straining our finances beyond our strength. I will add that if expenditure. is not checked we shall perish. We were thrown off the Gold Standard, because we borrowed for unemployment. Our paper was suspected. It was our finance which had upheld our credit throughout the world until then. It is no good grumbling at what the Chancellor of the Exchequer has done unless we are prepared to face the very unpleasant remedy which I have outlined. He was powerless.


I hope the hon. Member will tell us what social services he will cut down.


I say they will all have to be looked into. We shall have to see where expenditure can be cut down v ithout doing harm to the.

people. Our expenditure on the social services is larger than we can afford. We cannot take very much off the expenditure on defence, and there is very little to be taken off the small average rate of interest on our Loans which are held throughout the country.


Oh, yes, there is. You can make a big slice there.


Very well; but let the hon. Member try to do it without injuring the poorer of our citizens. Unless we reduce the social services we shall have very little opportunity of reducing taxation. We have heard the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) and one or two others talking about currency problems, and saying that in order to get out of the Serbonian bog we must secure a general world-system of raising prices. That sounds all right, but it is very nebulous. I do not know what it means. I am incompetent to understand nebulous currency remedies of brilliant economists who lecture to us in the school of too-clever-by-half. I do not believe that you can juggle with currency standards, weights and measures, or lengths or alter the number of minutes there are in an hour. All that is nothing but self-deception, and they may call their remedies what they like. They tried their methods and artifices with rubber, with copper and tin and with coffee and failed; all this tinkering and juggling with values is contrary to the laws of economics. If you break the laws of supply and demand, or try to, they will turn round on you, do more harm than good and in the end probably break you.

A Noble Lord made a speech in Liverpool 18 months ago; he told us that this great fall in the value of raw products had been brought about by a shortage of gold. That statement went all through England and it was talked about for months. Prices continued to fall. But, since that speech was delivered gold has been available, not only from the bowels of the earth but also £40,000,000 of gold which has come out of India, more than ever in one year before. There has been no shortage of gold. One of the main reasons has been overlooked why there has been a fall in the value of natural products. It is not a fall in the supply of gold. That other reason is that by the fixation of nitrogen we have been able to purchase better and cheaper artificial manures. This has enabled agriculture to produce many times more produce in a given number of acres than was produced before without any great increase in cost. Nitrates have done more to break down prices than the alleged shortage of gold, and that ought to be taken into consideration when you are trying to alter your price levels. An hon. Member has spoken about the Serbonian bog, but he overlooks the fact that chemistry will beat him in currency "management" all the time, just like the sewing machine has beaten hand work. All this talk about altering the price level by giving a man a £1 note and telling him it is 26s., or giving a man 15 cwt. and telling him it is a ton; or giving him 27 inches and, telling him it is a yard, is all nonsense. There may be and is something in raising prices by a natural process of demand and supply, but if hon. Members think they will put the world right by calling 20s. 26s., they will make a great mistake and will eventually fail after much mischief has been done.


I agree with most of what the hon. Member for Farnham (Sir A. M. Samuel) has said, but I strongly differ from him when he says that what the country needs to-day is to cut down the Social Services. I know the hon. Gentleman is not only expressing his own view, but he is stating what is in the minds of a good, many hon. Members opposite. I challenge that argument immediately.


I spoke only for myself.


I cannot allow that argument to pass unchallenged. The hon. Member did not answer a question which was put by one of my colleagues as to which Social Service he was prepared to cut. Would the hon. Gentleman cut down the Education Vote, which amounts to £52,000,000, or would he cut down War Pensions which account for £49,000,000? Would hon. Gentlemen opposite be prepared to cut down the amount voted for National Health Insurance, or Widows' Pensions Most of the speakers who have dealt with this question have not told us where they would make cuts in the Social Services, or why they would make them. I agree with hon. Members opposite that the total expenditure of the country is far too much, but I want to know where it is suggested that further cuts could be made.

Last September a good many cuts were made, and the working classes especially were called upon to bear a large share of the burden of those cuts. At that time we were told there was going to be equality of sacrifice, but the Budget proves up to the hilt that that is not so. Last September the House did another thing. It passed a Bill giving power to the Chancellor of the Exchequer to convert the interest on the National Debt, and it was said that that was shop-window dressing and that there was no intention on the part of the Government of using the powers of that Bill to convert the interest on the National Debt. I consider that this is the wisest and best way of cutting down the expenditure of the country. The interest on the National Debt is £276,000,000, and the country cannot keep on paying the interest of that amount unless the House is prepared to face a very unpleasant task. It is said that we have the power to make the conversion and reduce the interest if we can get the moneylenders to lend the necessary amount to the State.


I do not think the hon. Member was in the House when I dealt with that point. The rentier class consists mostly of people with incomes under £10 per week. Every insurance company, trade union, friendly society, and trustees of wills belong to the rentier class, and the hon. Member must get out of his head the idea that if he reduces the interest on the National Debt the moneylenders would suffer. As a matter of fact, the poorest of the poor would suffer.


I challenge that statement, because it is not the middle class or the wealthier class who will suffer.


I can show the hon. Member a list of those who are the holders of the National Debt, and I am sure he will be surprised to see that 90 per cent. of the holders are very poor people.


It will be extremely interesting to see that list, because I think I should be justified in saying that, when the hon. Member was Financial Secretary to the Treasury, he tried more than once to get to know who were the people who lent the money to the State, and he never could get to know. If he will show one that list, it will be most useful information. Why should we continue to pay 4. 4½ and 5 per cent. for this money? Poor people who invest their money in the Post Office Savings Bank have to be content with 2½ per cent., and, if that is the case, why should those who have lent this money to the State be paid more than 2½ per cent.? In my opinion, they would have no ground of complaint, because during the War the great bulk of the National Debt was created to protect them and their money, and, if the money had not been raised in order to protect them and their interests, they would not have had the money. They are the only people who have never suffered, who have never made a sacrifice. They claim to be patriots, but they are just the people who, while others have been making sacrifices, have never made any themselves. Much of the money which is now invested in the National Debt was made by profiteering during the War, and now 4, 4½ and 5 per cent. is being claimed for it.

9.0 p.m.

If the Government find it impossible to get these people to convert into a lower percentage, then, in my opinion, the only hope for the country is for the House to take a bold stand with them, and determine upon fixing a rate of interest. I confess that I myself would fix the rate at not more than 2½ per cent., and, if these people are patriots and want to help the country, they will not complain while the country is in its present financial condition. If the Chancellor of the Exchequer fixed the percentage at 2½, that would give him at least £100,000,000 in this Budget. We have to remember that last September the unemployed were called upon to suffer a cut, the teachers were called upon to suffer a cut, those who drink beer were called upon to pay 1d. a pint more for their beer, and those who go to the cheaper seats in the cinemas were called upon to pay a tax. I speak as a lifelong abstainer, but I consider that the beer drinkers in this country have a strong ground for complaint. I represent a division of miners. Many of them are not teetotallers, but one represents them in this House, and one recognises that, if they want a pint of beer, they are entitled to have it, and, in view of the low wages which these men are receiving, it is not fair to them, in my opinion, to continue to pay this high rate of interest to the moneylenders who have lent money to the State, and to make these men suffer every time they buy a drink. Teetotaller as I am, I would vote for reducing the price of beer by 1d. a pint in order to help these men who are receiving such low wages. When we claim that, instead of touching the Civil Service, a cut should be made in the interest paid on the National Debt, we are not, in my opinion, claiming too much. Apart from the cuts that the working classes had to suffer last September, we find that under this Budget they are going to be further taxed. They are going to be taxed by an increased price for tea, in addition to the prospect that they have to face, as a result of the wheat quota, of having to pay an increased price for their bread. I hold that it is not fair to the working classes of this country to go on taxing and cutting them and at the same time to allow the rich to escape. The hon. Member for Farnham has said that the bulk of the National Debt is held by poor people, but, as a matter of fact, they have less ground of complaint than anyone else, because those who hold the National Debt simply draw their interest and pay it over as Income Tax and Super-tax. The State is really providing these people with money to pay their Income Tax and Super-tax, and their sacrifice for the country is no sacrifice. To cut the social services will, I hope, be one of the last things that the House of Commons will ever think about.

With this Budget, the stock of the National Government is going down as quickly as it possibly can. The Chancellor of the Exchequer talked yesterday about whisky going down, but there is no doubt that the stock of this Government is going down, and, with another Budget like this one, it will go down still further. The Budget of last April, when we were on the other side of the House, was one which we had difficulty in defending. Like this one, it could have been drafted by a schoolboy, but there was some excuse for it then, because the late Chancellor of the Exchequer, Lord Snowden, had been ill, and he got off his sick bed to present the Budget. It was clear at that time that the Budget had not been drafted by him, but had been drafted for him—that some official at the Treasury drew it up and said to him, when he got out of his sick bed: "There is your Budget; go and read it to the House of Commons." It was quite clear, also, when we heard the Budget yesterday—which was one of the dreariest I have ever heard—that the same permanent official who drafted the Budget for Lord Snowden last year bad drafted this one, and had said to the present Chancellor of the Exchequer: "There is your Budget; go and read it to the House of Commons."

Hon. Members opposite are going to have the same experience that we had last year. Before the Government broke up, our trouble was that we had to go to the country and defend it, and we had a hard job to do so. It was a difficult task for us to defend our own Labour Government, and hon. Members on the other side are going to have the same difficulty that we had. They will have to go to the country and defend this Budget. They will find it an awkward job.

A Budget like this does not show any statesmanship. It does not attempt to grapple with the real questions that ought to be grappled with. The only place where the total expenditure can be cut is on the National Debt. There is no other place except the Defence Services. At a time like this, £87,000,000 is far too much to spend on the Defence Services. Just as the Chancellor of the Exchequer ought to have got at least £100,000,000 by cutting down the interest on the National Debt, so he might have got another £30,000,000 by cutting down the Defence Services. If there is going to be any hope for the country, this House has to turn its attention to cutting drastically, first, the interest on the National Debt, and, secondly, the huge amount that is spent on the Defence Services.


In rising to address the Committee for the first time, I would, as is customary, ask the indulgence of hon. Members. I should like, first, to refer to indirect taxation, which falls very heavily on the working-class. Take the Entertainments Duty, the Tobacco Duty and particularly the tax upon beer. Beer at the present price is quite out of the reach of the unskilled working-man, and, although I quite understand that in the position of national finances no reduction could be made in this Budget, I hope the Chancellor of the Exchequer will take the first opportunity when trade recovers to make some reduction in the Beer Duty. If indirect taxation is a burden to the working-class, direct taxation is most extortionate and confiscatory at the present rate and hits the employing and the working-classes alike. The employers pay their direct tax in cash and the workers in short time, unemployment, and low wages. I believe we are to-day living on our fat—on capital and on fortunes which were accumulated in better times, in days of cheap labour, long hours and low wages. Take the Death Duties, for example. There can be no doubt that they are paid exclusively from capital, and, therefore, are a great burden upon industry. Again the Surtax, which rises to the incredible height of 9s. 3d. in the pound on big fortunes, is largely a tax upon capital, and Income Tax has to be paid on top of that at the rate of 5s. in the pound. I should like to point to what M. Siegfried, the able and friendly French critic, said, that in France the National Budget was always on the wrong side but every private house was in credit, while in Great Britain exactly the reverse is the case. That statement is uncommonly true. We balance our Budget, but we do so by bankrupting the individual and handicapping industry all round. This burden cannot be supported indefinitely, any more than a man can be expected to swim the Channel with a brick tied round his neck. Fortunes are being squandered and cannot be replaced as easily as before, because, for the reasons I have stated, money is more difficult to accumulate than in the past. High taxation and a continual deflationary process are rapidly bringing about an increasing depression which will ultimately bring ruin to the nation if it continues. Primary producers can no longer sell their products at a profit. The same applies to the manufacturer—there is no one who can buy his goods—and our overseas investments are depreciated so it is a gloomy picture that I must draw of the national finances.

The question is: what is the remedy. Economy seems to loom out as one possibility. The national income is computed at £3,000,000,000. It is a dreadful thought that the Budget totals something like 25 per cent. of that income. I believe that one means of restoring the country to prosperity would be for the Government to make up their minds that the national expenditure must be heavily curtailed. I would suggest that they might fix on a maximum sum of £600,000,000 as their budgetary estimate and that they might appoint a commission to explore how best that desirable objective can be brought about. Members of the Government declare from time to time that a lot of the expenditure is statutory and is very difficult to reduce. We are here with a large majority, and I suggest that we should take such steps as are necessary to repeal legislation that has been passed in order to bring about a drastic reduction of expenditure.

May I make one or two comments on the National Debt? This stands at the staggering figure of £7,420,000,000, and the Debt Service alone is £276,000,000, pretty nearly 40 per cent. of the total national burden. This is an intolerable load on industry and must be coped with. Unlike commercial debt, it is utterly unrepresented by assets. It was incurred largely for munitions, which were blown into the air, and there is nothing to show for it except the interest to be paid on it. The difference between it and a commercial debt is that a commercial debt is usually incurred with the object of expanding industry, and the interest and the money to fund the debt are raised from the profits from the expansion of the business. I believe tariffs may be of some service in restoring the balance of trade and putting some of our men hack to work.

I notice that the Chancellor is inclined to see consolation in the circumstance that, if things are not too good here, they are very much worse in many foreign countries. That is poor consolation. It must be remembered that many foreign countries have been undergoing long periods of prosperity whereas we have been wallowing in unemployment and high taxation ever since the War. It rather reminds me of the attitude of the man who went to see a friend whom he found lying in bed suffering great physical pain and tried to comfort him by suggesting that he at any rate was suffering very little because a neighbour of his across the road was expected to die that night. Economy and conversion might do a great deal towards re-establishing our financial position, but these measures are not enough to meet the enormous liabilities of debt service, social services and Government services which have to be met.

How, then, are we to deal with the problem apart from debt conversion and reduction of taxation? In facing the matter we have three alternatives. The first is to continue, as at present, with a falling revenue and bad trade, and taxation becoming an increasing burden, with a deflationary process. The second alternative seems to be the repudiation of some of our liabilities. I do not think that hon. Members on any side of the Committee would support any such policy if it could possibly be avoided. The third alternative—and it is the one which appeals to me most—is the suggestion that prices should be raised, and thus check the vast deflationary movement. I calculate that if this were done the effect would be, first of all, to restore some hope to the agricultural industry, which is nigh bankruptcy. As soon as the price level was raised, it is obvious that the purchasing power and employing capacity of the country districts would be increased, which in turn would create a demand for manufactured goods. As the employment figures improved, and proportionately as the price level was raised, the burden of debt would correspondingly be reduced, and, incidentally, as the price level was raised, we should also reap the advantage abroad of being able to export our manufactured goods on more advantageous terms.

These, I maintain, are very weighty considerations. Some hon. Members may shudder at the thought of the course which I propose. They may say that it is nothing more or less than inflation. I contest such a theory. I would define inflation as the wholesale printing of currency regardless of the corresponding increase in production. That, of course, would simply mean that there would be a violent rise in the price level, causing a demand for increased wages, and then you would have the dreadful process of wages chasing prices until the nation was bankrupt. I propose a different thing altogether. I would describe it as reflation, which I would define as controlled expansion of the note issue to keep pace with increased production. As soon as it was made clear that the price level was to be raised artificially, countries which have their currency based on sterling would proceed to lay in stocks of goods against a rise in prices. That would set the ball rolling, and we should then see an increase of production followed by judicious expansion of the currency, which would continue until such time as the unemployment figures were very much better than they are now. I believe that the ultimate result of such a policy would be to abolish unemployment altogether, or as nearly so as possible. As production increases, the simple process is to increase the note issue in a corresponding degree.

I will deal with some of the arguments against such a policy. It is contended that if currency were expanded ahead of production it would cause a sharp rise in the cost of living which would be undesirable. I entirely agree with that theory. It is utterly unnecessary for the price level suddenly to be raised so as to cause a sharp rise in the cost of living. The answer is simply that if it was found that too much currency was in circulation and that it got ahead of production, it would simply be a question of curtailing currency until production had caught up and gone ahead again. The principal argument against reflation is possibly that there would be a rise in the price level which would cause an increase in the cost of living, and in turn a rise in wages which would negative any benefit that might accrue. I contest that argument wholly. If the price level were considerably raised, the situation, as I see it, would be that the primary products which we import would be increased in price to us considerably, but against that we should be doing a greatly increased home trade, and the fact that the primary products had gone up considerably to us would not affect the cost of manufactured goods to any great extent, for the simple reason that the cost of primary products is a fractional part of the cost of manufactured goods.

For example, take the loaf. Although the wheat from Canada might cost us a good deal more to import, wheat is only about a one-tenth part of the cost of the loaf. If you take wool from Australia, by the time it is brought over here it would cost us considerably more if we raised the price level, but it must be remembered that wool is a very small portion of the cost of the production of a suit. Under a system of reflation the increased demand for bread and various commodities and manufactured goods in this country would be so great that I do not believe that it would have the effect of increasing the cost of living to a great extent, for the reason that you would get full production. Full production decreases overhead charges and enables manufacturers to manufacture goods more cheaply. That largely counters the argument that the increase of cost of primary products caused by increasing the price level would put tip the cost of living. It must be remembered that there is a great lag in the fall in the price of manufactured goods as compared with raw materials, and therefore the price of raw materials can afford to rise very considerably without any need for a rise in the price of manufactured goods. Take the case of rubber. Rubber, as a commodity, has fallen to under 2d. a pound, but the fact remains that the price of the motor tyre has fallen very little compared with what it was 18 months ago. Therefore, one could afford to raise the price level very considerably before tyres need cost the consumer any more.

Again, there is an important point to be recollected in that the wages level in this country is based on a figure when the price level was something from 30 per cent. to 50 per cent. higher than at present. It is an extraordinary thing that the economists of the nineteenth century should have been worrying about how they could increase production sufficiently rapidly to keep pace with the population. To-day, only 100 years on, we are much perturbed because we find what we call over-production. Personally, I do not believe in this so-called disability of over-production. I think it is purely a question of currency and maldistribution.

I do not wish to detain the Committee any longer, but I should like, in conclusion, to emphasise that if we do not do something on the lines I have suggested, sooner or later we shall be faced with a position in which we shall have to repudiate some of our obligations or at least to take some drastic measures which would amount to repudiation. If we fail to take action on the lines I have indicated, this country will sink slowly into the morass of stagnation, and we shall see the beginning of the decline of industry and production in this country and ultimately of Western civilisation. Before I sit down, I would like to ask the Chancellor of the Exchequer three questions. Is it the policy of the Government to wait upon events and leave things as they are? If that is done, the situation is fraught with peril. Again, I ask: dare I hope that the Government will adopt some policy for the restoration of the prosperity of this country on the lines of the remedies I have suggested? Finally, I ask: has the right hon. Gentleman any alternative suggestions to make by which this desirable position can be brought about?


It is a great privilege to be called immediately after the hon. Member who has just sat down. I should like to congratulate him on his handling of a complicated subject and to express the hope that the local paper of Salford will report his speech in full so that his constituents may realise the great interest in affairs taken by this House. In the Budget we are discussing this evening the Chancellor of the Exchequer has not followed in any respect either of his predecessors. He has not attempted to stage a firework display from Epping or to climb the theoretical heights of Snowden. I say, with all sincerity, that I believe this Budget to be a courageous one and a wise, honest and far-sighted one, because it faces the facts of the situation, does not try to be dramatic, and is admirably adapted to meet the situation.

The "Times" newspaper, in a leading article the day before yesterday, said this: The economic prospects of the world during the next few months are so uncertain that it will be impossible to forecast with any degree of accuracy many of the items on both sides of the balance-sheet which in the normal year might be taken more or less for granted. 9.0 p.m.

Here I should like to pay a tribute to the way in which the "Times" has not only presented the news but commented upon it during the past year. In his Budget Speech the Chancellor referred to the fact that he was omitting on both sides all items of international, inter-Colonial and inter-Dominion debts. The Budget is our domestic concern. This Budget is an historic one, because, in view of the crisis last year and the proximity in which this country then was to the edge of a precipice, it has demonstrated to the whole world what we can do and what our people can do if they get their backs to the wall. The position of this country among the nations of the world is unique. Our influence is so great that any action which we take is reflected all over the world. Although, as the "Times" says, it may be true that there are factors in our Budget which are affected by circumstances outside our control, it is equally true to say that the deliberations and decisions of this House in our Budget are reflected all over the world. The reason for that is that British policy, backed by British character, is the greatest force for good and the greatest stabilising force in the world. Every hon. Member who is in business, and who knows what it means to take risk in business, will realise that the first aim and object of statesmen all over the world should be towards stability—the stabilising of currency and exchange.

Therefore, when we consider our Budget for the year it is important to remember its effects on the world, because until every country adopts a policy which approximates to our own there is no hope of a permanent and lasting revival of trade and commerce. We have tried to put our house in order, but you cannot play a cricket match by yourself. You must have 10 other efficient players and 11 others to play against. The first step towards world recovery is to come to some permanent settlement of the Debts and Reparations question, a settlement which is vital to the world and to this country and its finances. We should have the courage to give a lead in this matter. This country and the world may defy economic facts for a time, but in the end those facts will beat us, and, if ignored, will crush us.

I should like to say something now which may appear to many hon. Members to be quite elementary. If we owe our fellow-countrymen a debt, we can pay him in pounds, shillings and pence, but if we owe a foreigner a debt, before we can pay him we have got, with our pounds sterling, to buy sufficient marks, dollars, escudos or lire, or whatever foreign currency is required to pay it. That may appear elementary, but in my own study of the Debts and Reparations question, over and over again I have seen that so-called experts have demanded payments from Germany and have not considered how the exchange could be secured. Of course, that statement, vice versa, is true in regard to other countrieso who owe us money. If their currencies are depreciated, then they find it more difficult to buy pounds sterling in which to pay us any money which they owe us. This fact must always be borne in mind by our statesmen. I feel most strongly that the general principle which the statesmen all over the world have got to follow, as basic and fundamental to any material and economic recovery, is that of the old English proverb, "Live and let live." If in a Committee Room of this House to-night there was a meeting of international experts, with plenipotentiary powers, there can be no doubt that they could agree on some basis of settlement for Debts and Reparations. The difficulty always comes with the politicians—the politicians of other countries, who do not feel able to carry their electorate with them. I say "the politicians of other countries," because we in this country last year had the courage to tell the people the truth, and we know the kind of response we got at the General Election.

I want to remind the Committee, briefly, of the history of the proposals regarding the amounts that Germany was required to pay. I will only give in broad outline the total figures that were 'demanded at each stage. It is important that the Committee and the country should realise the size of the amounts that have been demanded. The Supreme Council of the Allies at Boulogne in 1921 demanded that Germany should pay £13,450,000,000. In 1921, at Paris, that amount was reduced. to £11,300,000,000. Later, the Reparations Commission in London fixed the sum at £6,600,000,000.

Hon. Members will notice that at each stage the demand was decreased. Then came the Dawes Plan, which was an attempt to restore confidence in Germany and to enable her to meet her obligations. The Dawes Plan did not succeed and the Young Plan took its place. It is only fair to say that under the Young Plan Germany made regular payments up to 1931.

Let me point out what Germany has paid, for it is not generally known. In 1922, so far as I can find out from the statistics, Germany paid in cash and kind £275,000,000. Since the Dawes Plan in 1924, up to June, 1931, she paid £520,000,000, making a total of £795,000,000. I give these figures as rapidly as I can to show from the whole history of these debt negotiations how fantastic the proposals were and that the experts did not understand the difficulties they were creating nor the magnitude of the sum they were demanding. The realisation of that fact took concrete form in 1921 when President Hoover, on behalf of the United States of America, who are the greatest creditors under the debts and reparations proposals, fearing that the economic, financial and political collapse of Germany at so critical a juncture in international finance might precipitate a general default among the allied debtors, proposed a year's moratorium. I would ask the Committee to allow me to read part of that proposal of President Hoover: The American Government proposes the postponement during one year of the payment of inter-Governmental debts, reparations and relief debts, both principal and interest, not including the obligations of Governments held by private parties. I would 'ask the Committee to note the closing words of President Hoover: The essence of this proposition is to give time to permit the debtor countries to recover their national prosperity. I am suggesting to the American people that they be wise creditors in their own interests and be good neighbours. A realisation of the facts was beginning to dawn on President Hoover, and I only wish that the men who have control of the policy of America would realise, as I believe they are beginning to realise, that it would be not only much better for the world but that it would pay them better not to be so much "wise creditors in their own interests" as to be "good neighbours" in the comity of nations. That announcement of President Hoover was a belated realisation of the policy laid down by Lord Balfour in 1921.

We are discussing the Budget for this year for this country, and I would remind the Committee of what our commitments would be if there had been no Hoover moratorium. Under the Young Plan this year we are due to receive from Germany £21,500,000, from France £12,500,000, from Italy £4,000,000 and from other Allies £1,500,000, totalling about £40,000,000, and we are due to pay £38,000,000 to America in December. The moratorium ends on the 30th June next. With a depreciated pound working out at 3 dollars 60 cents or 3 dollars 70 cents, it means that instead of £38,000,000 we have to pay £52,000,000 or £54,000,000 to America. That is the great question which will affect not only this country but all other countries, and which will come up at the Lausanne Conference. During and since the War to a great extent this country has been the middleman. The credit of this country was the great factor in the successful prosecution of the War. America lent money to this country, which was re-lent to the Allies. Dr. Bruening, the German Chancellor, said on 9th January of this year: It is clear that Germany's situation renders it impossible to continue political payments. That may be a very easy thing for Dr. Bruening as a debtor to say, but I would point out that a special advisory committee was set up by the Bank of International Settlements for the purpose of testing the sincerity of any statement of that kind. The recommendations of that committee are so important that I would ask the Committee to allow me to state them in a shortened form. The great point about that committee is that it was an independent committee. It reported that Germany would be justified in declaring that she will not be able in the year beginning July next to transfer the additional part of the annuity, (that is, after the termination of the Hoover moratorium). The German problem calls for commercial action which the Governments alone can take. But the problem has assumed a world wide range. Action is most urgently needed in a much wider field than that of Germany alone. Already the crisis has taken formidable dimensions. Accumulating difficulties which, if not dealt with, will only prove the forerunner of further catastrophes. Transfers from one country to another, on a scale so large as to upset the balance of payments, can only accentuate the present chaos. The adjustments of all inter-Governmental debts (reparations and other war debts) to the existing troubled situation of the world is the only lasting step capable of re-establishing confidence, which is the very condition of economic stability and real peace. The report of that, independent committee must be seriously considered, and in my opinion adopted by statesmen of all countries if we are to have a revival of trade and commerce throughout the world. What is the avowed policy of this country with regard to debts and reparations? Lord Balfour in 1922 made the now famous statement that: In no circumstances do we propose to ask more from our debtors than it is necessary to pay our creditors, and while we do not ask for more all will admit that we can hardly be content with less. The present Chancellor of the Exchequer on the 2nd of February this year said: The policy of His Majesty's Government is that a comprehensive and permanent settlement of the reparation question must be reached as soon as possible. We believe, as successive Governments of this country have believed in the past, that this aim could best be realised by a general cancellation of reparations and war debts."—[OFFICIAL REPORT, 2nd February, 1932; col. 25, Vol. 261.] Having given as briefly as I can a review of the history of these negotiations and the present policy of the Government, let me refer to a question, much more important, which will arise in the course of a few weeks. That question is this: If Germany and the Allies do not or cannot pay us, are we to pay America? That is a question which must be faced and upon which a decision must be taken. I think it is necessary to remind the Committee, and in fact to remind the world, of the valiant efforts which this country has made to keep her bond. We have lost £900,000,000 to Russia. That fact is often forgotten, but it appears in the national accounts every year; and we have paid to America in excess of what we have received from Europe £200,000,000. In addition we have shown our sincere and earnest desire to help in solving the problems of the world by reducing our armaments in greater proportion than any other country. In my opinion War debts and reparations must be cancelled for the good of the whole world, or at the very least the demands upon Germany must be reduced to a, point which Germany can pay without being crippled. The presence of 65,000,000 of virile people in the middle of Europe cannot be ignored and if they are pressed too hard there is a danger of their being driven by despair into the arms of Bolshevist Russia.

I do not advocate that, Germany should be let off scot free. I should advocate conditions being imposed upon her as to armaments, as to her power to dominate world trade, and also there should be certain other conditions to placate French public opinion. But, if it is thought desirable to maintain the principle that Germany must be made to pay something in the way of debts and reparations, I would respectfully suggest to the Government, and to our representatives at Lausanne, that they should adopt the principle that the amount Germany is to pay should not be settled by her old enemies but by some body such as the Special Advisory Committee, who would decide the amount Germany is to pay not from any political bias but on her capacity and ability to pay, without being ruined. Creditor nations may say that it is easy for a debtor nation to say that the debt should be cancelled but, nevertheless, cancellation, I honestly believe, is a necessary condition for the recovery of the world, and it does not matter whether the suggestion is put forward by a debtor or a creditor it is true; and France and America are beginning to realise it. They are beginning, too, to realise the truth of what Lord Balfour said in 1922. France at the moment is going through a very bad time. She has a budget deficit, and it may be that the bitter times she is experiencing will conduce to a more helpful attitude towards this country. As regards America, there have been two remarkable statements within the last two days. One is by Mr. Al Smith, a member of the Democratic party in America, who said: To forget about debts for 20 years is a far better way to restore trade than the present method of sitting idly by, clamouring for payment of debts, which we know cannot be paid, thereby losing to farmers, manufacturers and working men of the United States of America more thousands of millions than the whole of the European debt. That is the statement of a democrat. More remarkable still is the announcement made by Dr. Murray Butler, a Republican and President of Columbia University. He says: What is needed is a quick, drastic and permanent reduction, or the complete abolition of all existing inter-Governmental obligations arising from the world war. I would draw the special attention of the Committee to his next words: The world crisis is essentially a crisis of confidence, and until the present paralysing uncertainty respecting inter-Governmental war obligations is ended world confidence will not and cannot be restored. Each Government concerned will enrich itself and its people by joining in wiping out these obligations entirely. Not being a good speaker, I would say that this sums up the whole point I aim trying to make. I ask the Committee also to remember the wonderful services rendered and the conclusions which were published by Sir Walter Layton, our British representative on the Young Plan Advisory Committee. They are worth studying and they tend towards the same conclusion. It is impossible to transfer huge sums for which there is no commercial basis without dislocating the currency and exchange of the world. Stability is necessary for profitable trade, and is necessary to give the leaders of trades and commerce all over the world sufficient confidence to make the first step towards getting work for the 20,000,000 unemployed existing in the world to-day. America has all along demanded payment of War debts and reparations. There are only three methods by which we can pay her. We can pay her by gold; we can send goods; or we can render services. There is no more gold left to send. America has set up a high tariff wall and will not take goods or services.

I want to point out that, however hard it may be for us to pay our debts to America, it is ruinous for America to receive them, because it is all one-way traffic, and the more goods we send to America in payment of debts and reparations the more we put men out of work in America, and widen and strengthen the vicious circle. So we come back to the principle that Lord Balfour laid down in 1922, perhaps not an expert exposition of policy but instinctively British. Are France and America incapable of taking the large view and of gaining that vision without which the people perish? Cannot France realise that, however great may be her fear of Germany—that fear is ingrained in the heart of her people—she cannot ignore the existence of Germany, and that if Germany goes bankrupt not only will Germany be dragged down, but the rest of Europe will be dragged down with her. The mere possession of hoards of gold does not mean security nor can it bring peace of mind or prosperity to France.

10.0 p.m.

I want to ask a question: By what right can this country go to Lausanne and lay down a policy on which I contend we have every right to take a lead in this matter? First, because we have met all our obligations, until we were forced off the Gold Standard, despite most gallant efforts to remain on it. We have set our own house in order, as this Budget proves. The biggest gesture to the world, the biggest factor in the restoration of the credit of this country, was the result of the last General Election, when the people of this country put the Socialists out of office, anyhow for the time being. We have repaid our creditors nearly all the £130,000,000 borrowed, almost six months before the due date. Then there was the mentality and character of our people, who refused throughout the crisis to run on the banks and exchanged their gold for bits of paper on which there was nothing else but the imprint of the Bank of England. No other country in the world did it. I know a working man who had 55 sovereigns hidden in a gas pipe at the end of his garden, and exchanged them for banknotes because it would help his country. That kind of British pluck saved this country. Whereas other countries have hoarded their money and have had no confidence in their banks, our people with their little savings were content to part with their gold hoards for bits of paper bearing nothing else but the imprint of the Bank of England. That was because a National Government was in power and they had confidence in it.

I have made the suggestion that, if possible, all War Debts and Reparations should be cancelled. Here is a most important point to note: If all War Debts and Reparations were wiped out entirely the Internal Debt per head of the population in England would be £150, in France £56 and in Germany £8. In the United States, the heavier sufferer from cancellation, the amount would be only £27 per head. So even by this proposal England still is giving the turn. I hope the Government will take their courage in both hands at Lausanne. The position of this country has been restored. Our credit is on the upgrade. If the Chancellor of the Exchequer and whoever goes with him will say what our monetary policy is, what they propose to do about debts, then I believe we are in such a dominant position that we can give a lead to the world which the world must follow, and thus we shall not only be once again a great factor in saving the world, but incidentally we shall save ourselves too.


The Financial Secretary to the Treasury who has sat patiently through the whole of this Debate must have been very much cheered by the hon. Gentleman who has just spoken for the kindly words he said about the Budget. I too have sat through the whole of the Debate. I congratulate the hon. Gentleman on his speech. I agree with at least nine-tenths of his criticism, and my only remark is that it is 12 years too late. It was a very elaborate and understanding speech. I hardly understood why he treated the Committee to so long a speech. I felt that somehow he must have got hold of Keynes's "Consequences of the Peace." As a matter of fact he made use of the very great truism that the true principle of life of a nation is to live and let live. I fought the 1918 election when a National Government which called itself a Coalition Government was championing "Make the Germans Pay." When I used the kind of arguments that the hon. Gentleman has just used, I was almost lucky to escape from the platform. So the hon. Member is a pro-German 12 years too late.

Anyone who has watched this House continuously for the last three months, and particularly for the last few weeks, must have been very much surprised at the change which has come over the House during the last 24 hours, particularly the change on the Government benches. Last week the President of the Board of Trade made a speech which led the House to believe that trade was booming. The Press gave us great headlines; we were establishing industries at such a rate that hon. Members opposite almost believed, although the Budget results did not seem on the surface to guarantee it, that a shilling instead of sixpence might come off the Income Tax. That was the attitude of hon. Members, and there was a general spirit of "whoopee" in the House. But it was interesting to watch the faces of hon. Gentlemen opposite yesterday as they listened carefully to the Chancellor of the Exchequer while he gradually led them on, as Chancellors of the Exchequer are wont to do. But when he came to the subject of Income Tax towards the end of his speech there was nothing for them. However, they plucked up courage when he came to the subject of beer, and, indeed, I myself thought there would be something there. I think the Chancellor of the Exchequer was so clever that he almost persuaded himself that there was something there, until he reached his last sentence upon that subject. But there was nothing and about the only thing which the right hon. Gentleman did yesterday was to create a new record by setting up two committees in one speech, so that the Labour Government no longer hold the championship for setting up commissions and committees.

I am sorry that the Prime Minister cannot be here, but we must feel proud that the right hon. Gentleman is going to retain the honour which he gained in that respect. I assure hon. Members opposite that as long as the right hon. Gentleman the Prime Minister is there, and as long as the Government is composed as it is at present, they can always hope for more committees. I suggest to Conservative Members and to the National Government that they ought to snake a bonfire of great heaps of those hectic leaflets which were used at the last election about the commissions and committees set up by the Labour party. Why, this Government cannot make up their own minds about their own Budget without a committee. I think this must be the first time that a Chancellor of the Exchequer has assumed that he is going, to get a certain amount of revenue for the purposes of his Budget, but is depending on the decisions of a committee for that revenue. I submit that that is not a businesslike way of conducting the nation's affairs.

I gather that we ore not to know until the week-end the decisions of the Tariff Committee. I understand that Liberal Members of the Cabinet have already decided to fight those decisions. At any rate so we are told in the Press. I shall be very pleased to know from hon. Members opposite the truth about that matter. There is one Cabinet Minister present, the First Lord of the Admiralty, and perhaps he will be able to tell us what is going to happen in that connection. He wears his usual good-natured smile, and he does not seem to disagree with what I have said. Are these Ministers going to speak and vote against these proposals? Are we going to have the rare sight of Cabinet Ministers voting and speaking against the Budget of their own Government? It so, I wonder how much longer hon. Gentlemen opposite are going to tolerate that kind of thing. I must confess that I have more respect for the gentlemen who have a policy and carry it out directly than for the gentlemen of the "Mr. Facing-Both-Ways" description, Members of the Government and Members behind the Government who are acting in the way I have described.

Stage by stage this Government is transferring the burden of taxation to the great mass of the people. That is what they call redistributing the burden, and the Liberal Members of the Cabinet are making themselves parties to that policy. Someone challenged my hon. Friend the Member for Limehouse (Mr. Attlee) when he said that the people paid the £27,000,000 in connection with the Import Duties. But the right hon. Gentleman the Member for Sparkbrook (Mr. Amery) and the right hon. Gentleman the Member for Hillhead (Sir R. Horne) apparently had no doubt on that point. In regard to the tax on raw silk, they had no doubt that that was a burden on industry and that the people in this country were paying for it.


The hon. Gentleman will pardon me for interrupting, but I listened patiently to a colleague of his making the same misrepresentation earlier, and I must correct it now. The point is that raw natural silk is not produced in this country, or, except to a very small extent, in the British Empire, and in those cases no one has ever suggested that the duty is not paid here. But that has nothing to do with the case of a duty on an article which is produced or which can be produced, either in this country or in the Empire. In that case the results are entirely different.


I suggest that the right hon. Gentleman's explanation does not make the slightest difference to the case. The contention in his speech and in the speech of the right hon. Gentleman the Member for Hillhead was that there was a burden upon industry because of this tax on raw silk. Therefore I say we are quite right in suggesting that the import duties place a like burden on the people of this country, but the point I was making was that the £27,000,000 in respect of the import duties and the £5,000,000 expected to come from the duties which are to be announced at the week-end constitute an added burden on the people of this country. Then there is the £6,000,000 in respect of the Wheat Quota Bill to say nothing of all the other burdens that are to come directly upon the great mass of the people.

In addition, there is to be 4d. a lb. on tea. The right hon. Gentleman spoke of the grave mistake of abolishing the Tea Duty, which was done by the right hon. Member for Epping (Mr. Churchill). I do not really think the right hon. Gentleman, when he makes a statement of that kind, shows that he has the slightest acquaintance with the life of the great mass of the people of this country, and that is characteristic of Budgets of this description and of the whole policy of the Government. If any hon. or right hon. Member opposite had any intimate acquaintance with the day-to-day life of the great mass of the people—

Lieut.-Colonel Sir WALTER SMILES

Tea is still the cheapest drink in the world.


That depends on what kind of household you are talking about. It is dear to some people, according to their income. I say that hon. and right hon. Members, if they had any intimate acquaintance with the life of the people of this country, could not willingly lend themselves to the policy of what they call re-distributing the burden of taxation in such a way that, stage by stage, they add to the burden of life of people for whom life is already a very great burden.

As a matter of fact, the Conservatives are simply carrying out their old policy. They believe that there is a certain kind of standard of life due to certain people, and that the people in the mass, who live their poor lives, are there because they are not quite so worthy or not quite so clever and, therefore, are suffering as a result of their own shortcomings. But stage by stage this truth is coming home to the people of this country, and hon. Members can take it from me that the people do not misunderstand what the fact is, and that in truth the Government are preserving and conserving the conditions and the position of their own people, regardless of the effect upon the great mass of the people of this country.

One of the most striking speeches that has been made in this Debate was that of the right hon. Member for Hillhead, and it was a strange speech to come from that quarter. As a matter of fact, I would interpret his speech as an injunction to the Government to take the Bank of England by the scruff of the neck and make them carry out a certain policy. I will say to the right hon. Gentleman that I remember well that when the Gold Standard was re-established he said it was perhaps necessary, but with unflinching logic he showed what would be its effect on the trade and industry of this country. I think he said then that it would immediately add something like 10 per cent. to the cost of the goods that we would sell, and, as everyone knows, that was the case. I do not think it would be denied that because of the demand for reductions in miners' wages that followed, it brought us finally into the great cataclysm of 1926. The coal-owners themselves complained at that time, immediately, about its effect, but still we continued with that policy, and, with what I should call amazing stupidity, when the National Government were formed they tried to hold on to the Gold Standard. Indeed, I believe there are still some who regret its passing, but the right hon. Member for Hillhead and the right hon. Member for Sparkbrook too wanted a change in our monetary policy. They wanted to know what the Government's policy was.

I shall be very much obliged to the Financial Secretary if he will tell us what their monetary policy is. I shall be obliged, and the Committee will be, if he will tell us if they have a monetary policy. The striking thing to me was that we should have had the speeches that we have had to-day from the benches opposite after the attacks that were made on Labour's monetary and financial policy at the last Election. I remember how our late lamented friend, who was everybody's friend—William Graham—was attacked by Lord Snowden, who used the most scathing language about the control of monetary policy that he had advocated. It would be a good thing if the right hon. Member for Sparkbrook, the right hon. Member for Hillhead and other Members on that side were to look up the speeches which they made during the Election and see what their policy was then.

With regard to the £150,000,000 for the Exchange Equalisation Account, I suppose that the Chancellor of the Exchequer was as explicit as he could be in a long speech, particularly when he was dealing with a technical and complicated subject, but the Committee is entitled to a much more definite statement about it than they have had. I listened very carefully to what the Chancellor said, and I have since read his speech, but I find that there is nothing that indicates anything but that the Chancellor means to use the credit of the State for the benefit of a private corporation. [HON. MEMBERS: "No!"] Well, this is what the right hon. Gentleman said: The new powers, combined with the powers already possessed by the Bank, upon which, of course, the main responsibility for the management must continue to rest, will enable us to deal far more effectively than we could otherwise have done either with an unwanted inflow of capital or, if the alternative should again arise, with an outflow of capital from this country."—[OFFICIAL REPORT, 19th April, 1932; col. 1426, Vol. 264.] There is nothing to give the slightest indication but that the Bank of England will have the whole control and use of this £150,000,000, which is to be obtained by means of the State. That amount has to be borrowed, and the Committee are entitled to an explicit answer upon that point in order that we may know exactly where we are.


The Chancellor of the Exchequer explained clearly that the Issue Department of the Bank of England is separate, and that its operations are for the benefit or otherwise of the Exchequer and not of the banking department.


It is a question whether the Issue Department is separate.


It is common knowledge.


The Financial Secretary will probably give us some explanation on that point. That still leaves the other point to be answered, whether the Bank of England is to continue uncontrolled to manage the monetary affairs of this country, when the whole of industry and commerce depends upon its results. I had intended to say something about land values. It is a scandal that numbers of people are to be allowed to continue to exploit this nation for their own particular benefit, and that the Government should not only not interfere but actually countenance it by neutralising the legislation which has been put upon the Statute Book.

But what about trade in general, because, after all, that is the keynote of things so far as the wellbeing of the country is concerned? We have heard the most remarkable parallels cited in Debate to-day. I do not know that even the oldest Member has heard a more striking parallel than that of the right hon. Member for Hillhead when he likened our position to that of old Rome when she fell to pieces. That came from a supporter of the Government which was going to be decisive, going to bring new life to the country, and it was accepted and cheered by hon. Members who a few weeks ago were very hopeful and optimistic about things in general. There is this fact, that one great industry is being strangled by the Government's present policy. There is not the slightest doubt that some of the great collieries in the North and in South Wales are being closed as a direct result of the Government's policy. We are asked to wait until the Ottawa Conference. That gives very small hope so far as we are concerned. The President of the Board of Trade tries to sidestep the suggestion that the German coal quota is retaliation for our tariff policy. He says it is discrimination, but I always think he is talking with his tongue in his cheek, because he knows that the discrimination is that retaliation for his own policy.

10.30 p.m.

I should like to have had time to mention another fact which I am afraid is going to have a profound effect upon industry. All I will say is that I am glad that Conservative Members are interesting themselves in the present situation of the coal industry, and I trust the House will not allow this problem to drift into the danger zone, where it may so affect our trade, and affect our contracts as to bring about difficulties which might challenge the right hon. Gentleman's Budget arrangements. I want the hon. and gallant Gentleman the Financial Secretary to have time to answer, and all I will say in conclusion is this that we on this side are not surprised by the Budget. We know very well that if there had been a surplus it would not have gone to the workers, and we know that if in future there is any surplus it will not go to the workers. Hon. and right hon. Gentlemen opposite have this to their credit, they made it quite clear during the election that they stood for a redistribution of the burden of taxation. They did not cover it up, they told the people in general, but the workers as a whole did not understand what it meant. They were quite clear about their policy on tariffs, and I do not know what "kick" the Liberals have about it. I never had any doubt about it. As far as I could gather when Lord Snowden complained the present Chancellor of the Exchequer, to use the American phrase, answered him by saying "Sez you!" The right hon. Gentleman was very explicit on the point that if his Government were returned to power they stood for a policy of tariffs but the tariffs do not seem to have brought much grist to the mill. If the undermining spirit which has been exhibited among Conservative Members during the past few weeks goes on to the same extent in the country as it has done in this House the Government will be running danger- ously near undermining the institutions of this country.


The Debate to which we have listened to-day has been characterised by several well-informed maiden speeches, and it has had the unusual character of being a Debate on a second Budget in one year. The opposition to this Budget has had to be conducted under the disadvantage of not having an ex-Chancellor of the Exchequer or an ex-Financial Secretary to offer criticism. The front Labour Bench has taken up the burden of criticising the Budget under very great difficulties, and we all recognise the difficulties under which they have had to carry out their task, but that shows the extent to which the crisis has gone. It also shows in itself the justification for the proposals which we are bringing forward in the House. They are the proposals of a crisis which continues. We warned the country of this crisis on the last Budget. That crisis solemnly dawned upon the party opposite during last summer, but they ignored it until the full weight of the storm burst upon them. These proposals are the stern vengeance of the laws of arithmetic; multiplication, addition and subtraction are always a shock to the House, and addition and subtraction always is a shock when the bill comes, and every part of the House and the country is staggered to find that 3 and 1 make 4 and neither 3 nor 5.

I have been asked several specific questions, which I wish to answer before dealing, if time permits, with one or two general questions which arise out of the Budget proposals and out of the world situation in which those proposals had to be brought forward. To examine them without comparing them with the position in which other countries find themselves, and with the position in which this country found itself a year ago, is to leave out a part, and an essential part, of the picture that we have to examine. The hon. Member for Chester-le-Street (Mr. Lawson) asked one or two specific questions, beginning with a joke or two—of which I do not complain—about the Government having secured a record by setting up two committees in one Budget speech. The difference between this Government and that Government is that, although both set up committees, this Government acts on their reports when they come in—[Interruption.]

I have heard of a committee, the May Committee, which was set up, as far as I remember, by hon. and right hon. Gentlemen opposite, defended by them in the Lobby, and run away from by them when it sent in its recommendations. I have heard of the Holman Gregory Committee, set up by hon. and right hon. Gentlemen opposite with terms of reference drawn by the hon. Member for Chester-le-Street's own departmental chief, and run away from by the party opposite when the time came to act upon the recommendations of its interim Report. There is another committee, which we have set up, which is also in the act of reporting—the Tariff Advisory Committee; and I think that hon. and right hon. Gentlemen opposite will find that there will be no delay whatever in acting upon its recommendations, and that its recommendations will be of an order which will leave little room for criticism about the determination of the Government in carrying out proposals which ore put before it by advisers of its own choosing. [Interruption.]

The hon. and learned Member for East Bristol (Sir S. Cripps), the ex-Solicitor-General, seems to find something extremely humorous about the suggestion that advisers are of the Government's own choosing. I suppose that, in the case of all the committees which were set up by his Government, all the members were selected by someone outside the Government, and not by the Government itself. When the hon. and learned Gentleman, in some future administration, is again a distinguished ornament of this Bench, he will know that the advisers of a Government have to be chosen by that Government, because there is no other way in which the Government of the day can take responsibility for setting up a committee.

One or two minor points were raised by the hon. Member for Chester-le-Street, such as the repetition of the statement that, because a tax on raw silk would raise the cost of silk, any tax upon raw material would raise the cost of that material. That statement has been already dealt with by my right hon. Friend the Member for Sparkbrook (Mr. Amery), but it may be necessary to say once again that no Protectionist, and, indeed, no person at all, would deny that a tax upon a material which was not produced either in this country or anywhere else in the Empire would have an effect totally different from that of a tax upon a foreign material competing with a material which is produced somewhere in the Empire. [Interruption.] I do not wish to fall into controversy across the Floor of the House with the hon. and learned Member for East Bristol, because he is paid for these controversies—


I am not paid for these controversies, but the right hon. and gallant Gentleman is.


I can only say that, when the hon. and learned Gentleman is in office, he is paid higher for these controversies than I am. [Interruption.] The point of criticism of the hon. Member for Chester-le-Street was that the speeches delivered by my right hon. Friend the Member for Hillhead (Sir R. Horne) and other Members on this side of the House were identical with the speeches which he and his colleagues had delivered. When we denied that, he challenged us to show in what respect they differed from the speeches which he and his friends had delivered. I will give it him in one word—£70,000,000 worth of economies. If we had not made that £70,000,000 worth of economies all this policy would have been of no avail whatever and, if his party had been willing to face up to £70,000,000 worth of economies, it would still be in office and Lord Snowden would be proud to be Chancellor of the Exchequer.

There was one final point, the question of the Exchange Equalisation Account. The hon. Gentleman asked whether it was the policy of the Government to give advantages to a private institution, the Bank of England, to enable it to make profits by managing public credit? That I took to be the accusation. Let me read again the statement of the Chancellor on this point yesterday. He said: I propose to wind up the old Exchange Account and to use the assets as the nucleus of a new account to be called the Exchange Equalisation Account. The new account will be the old account enlarged. The old exchange account was not the exchange account of the Bank of England, and the new account will not be the exchange account of the Bank of England. He went on to say: The new powers, combined with the powers already possessed by the Bank, upon which, of course, the main responsibility for the management must continue to rest, will enable us to deal far more effectively than we could otherwise have done either with an unwanted inflow of capital or, if the alternative should again arise, with an outflow of capital from this country. It is clear that the phrase "combined with the powers already possessed by the Bank" are in parenthesis, and the right hon. Gentleman's statement was that "the new powers will enable us," that is to say the Government, "to deal far more effectively than we could otherwise have done either with an unwanted inflow of capital, etc." He went on to stress that. He said, most specifically: My proposals only affect the Issue Department, and I have given this preliminary description in order to show that they do not confer upon the Bank any new privilege or any new profit. He states further: The management of the Issue Department is by law entrusted to the Bank, but its profits can concern only the Exchequer, because the Exchequer is entitled to any interest earned or any profits made in the Issue Department. Finally, in case there should be any mistake about this, my right hon. Friend repeated, speaking of both the Exchange Equalisation Account and the Bank of England: I ask the Committee to observe that both of these account are worked for the credit of the Exchequer, fur the use of the Exchequer, and for the account of the Exchequer."—[OFFICIAL REPORT, 19th April, 1932; col. 1427, Vol. 264.] It seems to me that that answers the question of the hon. Gentleman.


Will this money be under the control of the Treasury or of the Bank of England? That is what we want to know.


It will be under the authority of the Treasury. As has been said, the ultimate control will be the control of those who are responsible for it—the Lords of the Treasury. They can, of course, delegate their authority to whom they will, but the final management will remain with the Lords of the Treasury alone.


Will the Government proceed by way of a Bill?


My right hon. Friend stated that these proposals would be found in the Finance Bill, and it will be possible for the House to consider them. Further, the Resolution dealing with the Exchange Equalisation Account is being put down as first Order on Monday, when a specific Debate will arise on the Exchange Account, and all relevant topics to the Exchange Account can be raised in detail when authority is being sought to establish the Exchange Equalisation Account.

Several other questions were asked, and I wish to deal with them, if I can, very briefly. The hon. Member for Lime-house asked two specific questions. He asked what was the position of multiple shops in connection with the Tea Duty? How do the Home and Colonial Stores and the co-operative societies and others stand? I am advised that "person" covers "company," and therefore that the 1,000 lbs. weight of tea applies to all the stocks in the possession of a "person," which includes a company or an organisation such as the co-operative stores. Therefore, as it stands at present, the stocks in their retail shops us well as in the wholesale houses will be subject to the Excise Duty of 2d. on the lb.


Does the right hon. Gentleman consider that that is equitable as between the multiple shop in a town and the individual shop?


I should think that an opportunity of discussing the wider question of equity will arise, but time passes on. This is a question of interest to traders, both co-operative and others, in the country, and I wish, as far as possible, to deal with questions of importance to the trading community of the country. Why, said the hon. Gentleman, should all sugar-beet have relief, both those who had agreed to give the uncovenanted increase and those who had not done so, but he will note that all beet-sugar factories found it possible to pay the rates, and even higher rates than those which were covenanted, and, having done so, we consider that they are all entitled to this improved assistance.

The speech of the right hon. Gentleman the Member for Hillhead, which was of the greatest interest to the whole Committee, raised questions which obviously demand the consideration and attention of the Chancellor of the Exchequer himself, and the Chancellor of the Exchequer will, if his health permits—and I have every reason to suppose that it will permit him to speak to-morrow—will be in a position to deal fully with that speech and with the questions arising out of it. But on the particular question as to the policy of the Government with regard to the Exchange Equalisation Account and with regard to the position at which the pound stands, the Chancellor of the Exchequer spoke on Friday, the 11th March, and gave an indication of what he considered was as far as his discretion allowed him to go at that time on the matter. He said most distinctly: I have no hesitation in saying that we do not desire to see the pound forced up to a rate which will be injurious to industry and I do not know if the hon. and learned Gentleman really wished to ask me to say what was to be the ultimate policy, as I think it is apparent to the House that at this time it is not possible to say what is going to be the ultimate rate or the time at which it will be possible to stabilise the pound."—[OFFICIAL REPORT 11th March, 1932; col. 2157, Vol. 262.] Certainly, it would ill befit the Financial Secretary to the Treasury to go further than that in the matter. I think that even the Chancellor of the Exchequer himself, in speaking to-morrow, will not wish to trespass on the verge of discretion very much further than the indication he gave to the House of what his monetary ideals are for the present time.

The hon. and gallant Member for North-East Bethnal Green (Major Nathan), in a speech which towards the end, turned into a questionnaire, began by not only admitting, but enthusiastically receiving, the whole of the fruits of the tariffs, and even contending that, given all those fruits, there still would not be enough revenue to balance the accounts of the country. He even prophesied a shortfall of as much as £10,000,000 in the annual revenue. I ask him again, as the Chancellor asked last night, where should we be if we had not been able to carry the proposal that £27,000,000, or ultimately £33,000,000, of revenue should be raised through tariffs? Would the hon. Member propose to put that on to the direct taxation of the country, and, if not, what indirect taxation would he put it on?


As the right hon. Member challenges me, my aim would be not only to secure revenue but, as I pointed out this afternoon, also to secure a reduction in expenditure by disarmament and otherwise.


"Disarmament and otherwise" is one of those noble phrases which are so difficult to translate into practice. I have always found that, after allowing for a little money from disarmament, it nearly always comes down to putting it upon otherwise. It is like the famous story of the family which met to consider ways and means, the family accounts having fallen into a state of disorder, and it was agreed in the end that the kitchen matches should be used in the drawing room, and for the rest of the money father would need to work harder. The right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) produced an interesting speech, also dealing with details of monetary policy, into which, perhaps, the Committee has been a little too apt to take refuge this evening as an escape from the hard facts of arithmetic which, after all, are at least half, and I venture to think more than half, the problem we have to consider.

It is quite true that the great currency questions are of the greatest importance in the future of the world to-day but none will deny that these questions demand also a certain amount of international co-operations and that no country can fully solve them by itself. There is one thing, however, that we can fully solve ourselves, and which we must solve ourselves, and that is, are we going to balance our Budget and to pay our way and make sure that we give to the country each year an honest picture of the financial events of the past year and an honest forecast of the events which are likely in the year to come? Unless we can do that in this House, all our fine words at international conferences will go for nothing, and it is in virtue of the deci- sions that this great financial Committee of the nation has taken, and of the wholehearted way in which those decisions of this Committee have been endorsed by the nation at the recent election, that we are able to speak with the authority with which we can now speak when we go to international conferences.

The proposals which the Government have brought forward have inevitably been a shock to the Committee and a shock—though I do not think so great a shock—to the country. The Estimates which were laid before the House allowed for £766,000,000 of revenue to be found. The Estimates are the Budget, and the revenue side is merely meeting the Bill. If we decide on Estimates of that size, then we shall have to impose harsh, severe and crippling taxation to carry out the decision which this House has taken. This is no longer a matter for the Government. It is a matter for the House of Commons and it will tax the House of Commons to the full, even with the accumulated effort and wisdom which the House of Commons possesses, not merely to make these great decisions but to stand up to them and to resist week by week and month by month the inevitable pressure which comes upon the House of Commons and upon individuals to relax their grip, to slacken their efforts and to allow, little by little, unconsidered expenditure to sweep away the great economies which they have desired to make.


Is that to be taken as an invitation to the House to refuse some of the Estimates which are now being presented?


Undoubtedly. On the day when the House of Commons refuses any Estimate that is laid before it, nobody will be more pleased than the Chancellor of the Exchequer and the Financial Secretary to the Treasury, except that they believe that when that day comes they will both be taken up to Heaven in a fiery chariot. The enormous weight of the Estimates is swollen and governed by the Estimates which we have had to make for what I might call our Supplementary Budget—the great Budget dealing with the question of unemployment. We have to find this year a sum of not less than £65,000,000, including £20,000,000 for the fund, £41,750,000 for transitional payments and over £3,100,000 for deficiency grant, because the fund itself is not meeting by its incomings its inevitable outgoings. There we have a figure in regard to which it is possible to make economies with the good will of every section in the House. [HON. MEMBERS: "Oh!"] Yes, every section. In so far as we can transfer men from the unemployment account to the productive account we shall have the enthusiastic good will of hon. Members in every section of the House, and it is in relation to that that our tariff policy must be judged. The second half of the Government's policy, the constructive side of the policy, not merely the taxation which we are now imposing, is the attempt which we are making to restart the wheels of industry in this country. It is an experiment and, like all experiments, it may have difficulty in succeeding. It is a new departure. It may be that this new departure will not be fully successful, but let hon. Members bear in mind the fact that the income upon which this enormous deficiency which we are met to consider has arisen is the income of the last year of Free Trade which we inherited, and that it is being saved by revenue from the first year of a protective tariff.

We are at the beginning and not at the end of our task. We were called here to do a gigantic work—to balance the Budget and to get this country on to an even financial keel. It was for that purpose that the country practically swept the Opposition out of existence. If we fail we fail not because of the efforts of the Opposition—we must clearly bear that in mind—but the responsibility will fall on the House, and on the whole of the House. The Government is the interpreter of the House of Commons. It is confronted with a task which would tax the energies of any set of men and will tax to the full the energies of this Government, supported as it is by the enthusiastic good will of the House of Commons and, I believe, still supported by the confidence and the hopes of the great majority of the people of this country.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Captain Margesson.]

Committee report Progress: to sit again To-morrow.