HC Deb 21 April 1932 vol 264 cc1649-770

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 with Finance.—[Mr. Chamberlain.]

3.30 p.m.


I do not share the mild but general disappointment with which the main facts of the Budget have been received. I did not expect much, and I am readily resigned to receive nothing. I wish, of course, that my right hon. Friend, before restoring the Tea Duty and according so important a preference as 50 per cent., could have been in a position to assure us that a counter preference would be afforded to us by India and Ceylon. But, no doubt, he will be pursuing that important aspect. I wish, of course, there could have been some relief upon the allowances of the smaller class of Income Tax payers, the black-coated working men, who were so seriously affected by the venomous provisions of the October Budget. I should have been glad to hear in his speech some greater encouragement that there was a prospect of a conversion operation in the present year, but perhaps there are good reasons against his enlightening us on that matter.

Of course, above all, I regret very much that he has not found himself in a position, for one reason or another, to remit the additional duty on beer. I must in that respect claim full liberty to associate myself with any view that the House may take in favour of a mitigation of the present position. It seems to me that the Chancellor of the Exchequer could easily make such a concession without altering the Budget. There is this exchange stabilisation fund for which he is claiming, very rightly, borrowing powers up to £150,000,000, and in which there is a nucleus composed of money similar to that which has been used in the past year to the extent of £10,000,000 to defray current expenditure. Therefore, there is no insuperable reason why the matter should not be reconsidered, and I would earnestly ask my hon. Friend if he will not reconsider it between now and the concluding stages of the Budget.

When I have said that, looking at the position as a whole, I cannot reproach him for not having divested himself of reserves and resources at a time like this. I cannot reproach him for having given us a Budget of marking time, and, although we are all, alas, crunching the gravel of the barrack square for another 12 months, he has probably been wise 'and prudent in what he has done. I have heard it said, and from my own personal experience I have found the observation just, that every Chancellor of the Exchequer makes his first Budget. All the rest make themselves. It seems to me that my right hon. Friend has been wise to postpone the making of his first Budget till a more genial season, to another year, and it is to that Budget that we shall look forward with hope and eagerness.

Further, we do not know all the difficulties of the Chancellor of the Exchequer. In this House party is dead and Debate is reduced to very modest proportions, but the old struggles of party are proceeding within the bosom of the Cabinet, and it may well be that, if my right hon. Friend had begun to make remissions when he necessarily had few remissions to give, all sorts of stresses would have arisen inside the Executive itself. It might well be that the celebrated agreement to differ might have degenerated into an agreement to part, and our famous National Government, the star team as its co-parent has so proudly dubbed it, our sole defence, under Providence, at the present time, as we are so often assured by Ministers themselves, might have passed in a flash, untimely, from life into history. A great many of us would regard such a step as premature at present. I, therefore, do not intend to criticise in any hostile spirit the policy that my right hon. Friend has announced. I treat it as an interim policy dictated not only by financial but by political considerations.

But I cannot follow with the same docility the Chancellor of the Exchequer in the account he has given of the transactions of the past. He spoke on Tuesday in terms of warm eulogy of Viscount Snowden's courage and determination in October last. But that is not all the story. The contributions to our affairs by the Noble Viscount did not begin in October last. I think we must look back a little further. Here I hope I shall not embarrass my right hon. Friend the Lord President of the Council, the leader of the Conservative party, if I say a few words in defence of the record of the Conservative Administration over which he presided. I do not want to put him in a difficulty now that he has developed, late in life, such a keen relish for hunting with other packs than his own, but I think he need not feel unduly ashamed of what took place in those days.

There is a good deal to be said on behalf of that Administration. At any rate, they had great difficulties, not in all respects as great, or perhaps not so incessant, as the difficulties which confront the Government of to-day, but nevertheless they had their difficulties. The political opponents of that Government used methods to attack them which were most injurious, most devastating to finance. The general strike and the prolonged coal stoppage which the Socialist leaders organised or fomented cost the Treasury, directly in revenue or in expenditure, upwards of £80,000,000, of which I gave full details to the House, which affected the Budgets of three succeeding years. That was a very heavy blow to us. It reduced the provision for the repayment of Debt to an enormous extent; it disappointed our hopes and intentions in that respect; it forced us to maintain direct taxation at levels which were directly hampering to trade, and it weakened the strength of our country in a great many ways which cannot be brought into arithmetical account.

In those days economy was also very difficult. It got a good cheer on Tuesday last. It always will get a good cheer. But it was even more difficult then than it is to-day. I remember—and I am sure my right hon. Friend the Chancellor of the Exchequer remembers too—our poor little Economy Bill of 1926. It only tried to save a small £17,000,000, but what a hullabaloo was raised. Not only Socialists but Liberals, and we expect much better of Liberals—joined in this cacophony of abuse. I made a calculation that the word robbery was used 87 times, confiscation, 10; plunder, 10; steal, 3; raid, 11; theft, 2; filch, 1; grab, 1; cheat, 1—the present Foreign Secretary contributed that particular word—breach of faith, 19; betrayal, 5; outrage, 1; infamy, 1; rascality, 1; perfidy, 1; mean, 15; paltry, 1; despicable, 1; shabby, 1; and dastardly, 3. That gives an idea of the sort of difficulty with which we were confronted in endeavouring to secure a very moderate economy, and, of course, when the General Election came, every effort was made to rouse prejudice upon the economies which we had made. We had stolen the soldiers' money, we had filched the money of the friendly societies, and my right hon. Friend the Chancellor of the Exchequer was specially pilloried for having pinched the babies' milk. It was a propaganda vile and unscrupulous, but at the same time undoubtedly effective and profitable.

I hate to be in disagreement with my right hon. Friend, but I am sorry to say that no one was more forward in this work than the late Chancellor of the Exchequer. No one showed more courage and determination in putting this point of view. He revelled in the trials of His Majesty's Government in making good the losses of the general strike. He obstructed all economy except, of course, cutting down the Navy, which goes without saying. He also at the same time presented himself as the champion of financial orthodoxy and was always very strict, stern and punctual to mark the slightest shortcoming in those who then held the responsibility for our finances. Notwithstanding this fact, from time to time he promised the abolition of almost all the indirect taxes, except, of course, the taxes on liquor. Tea, sugar, silk, petrol, and, of course, all the wicked McKenna and Safeguarding Duties, all were to be swept away, and he extolled the salutary effects of ever-increasing direct taxation in toning up the efforts of the producing and capitalist classes. Thus did the Noble Viscount prepare himself for the responsibilities which he was eagerly seeking and which he was soon fated to assume.

I have always regarded the Socialist assumption of office in 1929, after the General Election, as an event very damaging to our national repute and prosperity. The spectacle of a body of men so newly engaged in organising a general strike, and containing leaders in police strikes and other subversive movements, the spectacle of such a body of men being placed in plenary command of the whole Government, dividing among themselves all the offices of honour in the State—I cannot expect them to cheer—such a spectacle, was one which was not compatible with any steady or intelligible standard of personal conduct or civic duty among public men. To foreign countries, of course, it was incomprehensible. They at once predicted the disasters which so speedily ensued. The confidence in Great Britain was profoundly shaken, and it was profoundly shaken at the very time when it was perhaps most necessary that our prestige and authority should stand high. We must be thankful indeed that those days are ended. I am thankful with others that they are ended.

I have always been able to keep my enthusiasms for the present National Government within the bounds of decorum, but now I am going to pay them a compliment, and, as far as it goes, a sincere compliment. I say that they are far more imposing and impressive—perhaps I had better not do it by halves—I will say that they are even more imposing and impressive abroad than they are at home. Here we know too much about them, or about some of them. Here the details of their performances can be observed at close quarters, but distance lends enchantment to the view, and certainly, with all their faults—and they are neither few or small—they are an enormous improvement upon their predecessors.

I was much refreshed during my travels in the United States by the contrast in the repute and prestige of Britain and of the British Empire now than when I went there two or three years ago. In 1929 you could not persuade Americans that we were not a declining or a decaying Power. I did what I could. I said that the English Socialists were not like the Continental Socialists, and not like the Russian Socialists. I said that their leaders had a bourgeoise outlook, or else they were political careerists. I said that they would never try to carry into effect, in office, their crazy doctrines and the crazy pledges which they had given to gain office. I said that I was always sure that if things came to the pinch they would far rather betray their party than betray their country. I did all that I could for them, but it was not much good. How different is the position to-day. To-day, we are looked up to—I can say it after travelling through most of the great cities in the middle, west and eastern parts of the United States—with admiration, and with admiration tinged with outspoken envy. We must all rejoice unfeignedly at such a transformation, such a material transformation, in our affairs, so necessary to our credit and our power to cope with the difficulties which are upon us. There, I think, I have paid my compliment to the Government.

Let me, after what I think is an agreeable interlude, return to the late Chancellor of the Exchequer. I come directly to his Budget of April last. Here I must be very careful of the Rules of Order. The late Chancellor of the Exchequer is now a Viscount. He is a peer of Parliament. He has marketed what I might call the surrender value of his life policy in Socialism on terms happily advantageous both to his country and himself. He has been translated from these spheres to those dim splendours at the end of the corridor which are the goal of so many rising demagogues, where he is protected from any comment that is not strictly governed by gravity and restraint. In my historic retrospect I have to deal not only with the Budget of October last, but with the Budget of April of last year, and I will couch my remarks as far as possible in an impersonal form. I will speak, not of the late Chancellor of the Exchequer, but of the "late Financial Administration." I think that will be satisfactory to the most tender susceptibilities.

We can all see now that the April Budget was a gross deception. The figures given to Parliament by the late Financial Administration were figures and estimates which could have had no warrant in the facts as they were then known to the Treasury. I must admit, less sceptical as I am than the present Chancellor of the Exchequer, that I accepted the assurances that were offered to us from the Treasury Bench. I know well the care with which the Treasury officials prepare their Estimates. I know well the elaborate, the minute, and the intricate processes of experience and calculation which take place before the forecasts of the forthcoming year are made. I know that 40,000 accounts are searched through, codified and classified, before a forward estimate of Income Tax is made in any one year, and that is one branch alone. It seemed to me incredible that the Chancellor of the Exchequer's figures, even if they were a little over sanguine—many people may be over sanguine—were not substantially true. I could understand if it had been a few millions out one way or the other; but what happened? Five months later the late Chancellor of the Exchequer had to produce the courage and the determination to confess that his Estimates were wrong by £75,000,000.

Of course, he did right to bring those facts to the mind of Parliament and the country. Observe that in the interval no sudden new catastrophe had occurred—no war, no earthquake, no pestilence, no general strike, nothing out of the ordinary, except the great world depression which, indeed, had become more acute. Unemployment had grown and its cost had grown. But all these were tendencies which were gradual, which were progressive and which, I say without fear of contradiction, were plainly apparent at the time of framing the April Budget. They were apparent even to outsiders. Members of the Opposition, without any secret sources of information, were able, and foreign countries no doubt were able, to form their own judgment. The Committee will remember the last speech of our charming friend and colleague, the late Sir Laming Worthington-Evans, whose loss we feel so much and whom we miss so much. Only three days before his death, in a speech which I think was the best I ever heard him make, he gave a most true and careful analysis of the financial position and showed that the statements that were being made to us were almost certainly false. Such views were also taken in other quarters of the House. If ordinary Members of Parliament were able to de- tect what was taking place, how much more must the true facts have been apparent to those who possessed day by day official information and who had only to look at the grim figures placed before them each week by their subordinates to see exactly how matters stood.

What did the late Financial Administration do? He—I beg pardon—it breathed no whisper of its guilty secret. The summer months were occupied in the futile follies of land taxes, or in unwholesome intrigues—if I may say it without abusing the hospitality of this bend—about electoral reform. So the summer slipped away. So the precious weeks were wasted, one by one, until, finally, the exposure could be staved off no longer, until foreign nations saw quite clearly what our position was, until panic broke out among foreign investors in London, until the flight from the pound began, until this rich country and Empire, with its measureless resources, was reduced to quivering on the verge of bankruptcy and repudiation, and until the late financial administration had no resources but to throw itself upon the patriotism of the Conservative Opposition it had so harshly, so deceitfully, and so wrongfully misused.

Betwixt the stirrup and the ground, Mercy I askt, mercy I found. 4.0 p.m.

So much for the April Budget. Now I come to the October Budget, which is very important, because it governs our affairs to-day. We are back upon the October Budget. My right hon. Friend —I do not blame him—has not made, I think, any alteration. I do not say that it was within his power. This is a prolongation of the October Budget. He said that the late financial administration showed great courage and determination in that Budget. That may be true. I do not wish to detract from that, but there was very little skill or wisdom, if I may say so, in the construction of that Budget. It was a bad, clumsy, vicious, partisan Budget, which cast our finances in an awkward mould, and a mould from which it will be extremely difficult to extricate them. I say that the late financial administration took the fullest advantage of the crisis which it had so largely created, and used and exploited the loyalty and patriotism of the Conservative party, in order to give effect to its narrowest prejudices.

It was very difficult to bring any effective criticism to bear in the national circumstances which prevailed. After all, we all felt that any Budget that was balanced was better than no Budget at all. We could not consider the details; the House simply refused to consider them. The worse they were, the more ready it was to accept the position because of the greater issues involved. But I must remind the Committee that I pointed out from this bench, that if the remissions which Viscount Snowden and I, in our tenures as Chancellors of the Exchequer, made in tea and sugar from 1924 onwards had been put back in the taxation, we should get a revenue from tea and sugar of £20,000,000 a year, if my memory serves me aright, and that the price of tea and sugar would still have remained lower than in 1928, when people were quite pleased at the price prevailing. It would have been quite easy and, in my judgment, only common justice to have restored those remissions when, for the second time, the direct taxpayer was meeting an avalanche of £50,000,000 or £60,000,000 of additional taxation. Had that course been taken, there would have been no need to strip the small Income Tax payers of their much-needed allowances, and no need to lay a foolish, excessive, uneconomic, improvident, unprofitable and unfair tax on beer, and there would have been no need to propose cuts of such rigour that we were drawn into that series of disgraceful incidents which occurred in the Fleet. So much for the Budget of October.

Now let us consider the late Financial Administration's outlook upon finance, the question of currency and the monetary problem. Let us see what happened. One example will suffice. He borrowed, I think, £120,000,000 upon very costly terms to keep us on the Gold Standard, and to prevent the exchange from going down; whereas a few months later his successor and colleague, with his assent, and, I think, with general assent, is now taking power to borrow £150,000,000, not entirely in a comparable manner, in order to make sure, not that the exchange does not go down, but that it does not go up. We live in times 'when very few people who take a prominent part in public affairs will not find themselves confounded from time to time by events, and from time to time forced to take a new view, but I venture to think that never has stultification—and self-stultification—been more swift and perfect than in the case of the monetary outlook of the late Financial Administration. In those days we were led to believe it was about to retire from public life, and such a prospect naturally excited widespread sympathy, but, after the election, in which it so distinguished itself, it was announced that we were still to have the advantage of its able services, and it may well be that Viscount Snowden—I may safely refer to that now—is now exercising a control upon our policy for which, I venture to think, the character and the composition of the House of Commons afford him little justification.

To complete my right hon. Friend's eulogy of his predecessor, I have ventured to look back at some length into the past, but now I have done with yesterday—only yesterday—and I come to the politics of to-day. I have been away for some time, and an extraordinary change has occurred since I left this country. I left a Free Trade country. I come back to find full-blooded Protection, tariffs of all kinds, revenue tariffs, retaliatory tariffs, bargaining tariffs and definitely protective tariffs in actual working, or being rapidly and ardently erected. It seems to me that the Government have very properly deferred to the will and the weight of the new Parliament, the representatives of the people, as I predicted, before I went away, they would have to do, and it seems to have proved as easy to effect this fiscal revolution as—what shall I say?—as it was to keep order in India once you made up your mind to do so. I come back to find a vast, far-reaching, and, for a generation at least, irrevocable change already accomplished, and I ask you, Sir Dennis, what must I do in this new situation? I must do my duty, and I see my duty clear. I must accept this new situation with good will. I must accommodate myself to the decision which I had for some time regarded as necessary and inevitable, to which my fellow-countrymen have come, and I must labour loyally, whatever my views might have been in the past, to make our new pro- tectionist system a real success. It is absolutely necessary that the fiscal policy of Great Britain, be it Free Trade or be it Protection, should be sincerely and faithfully applied in all its scientific integrity. It is necessary to all of us, whatever our views might have been, that the fiscal policy of our country, Protection, should now be given as fair and as good a chance as Free Trade was given in bygone days.

It is very fortunate that this memorable and historic departure, this solemn abandonment of Free Trade, this casting down of so much of the teaching of Mr. Cobden and of Mr. Bright after 70 years, should have been effected with so great a measure of consent among all parties in the State. It is a public advantage that our fiscal policy should stand not on a party but on a national foundation, built by a National Government. I did not see the Home Secretary. I know that some of the Ministers have made speeches or given votes against it, and I am told that we are to be treated to further exhibitions of the same kind in the future. But what does all that matter except to the individuals concerned, as long as these Ministers are willing to remain an inseparable part of the great political engine which is so swiftly carrying these remarkable changes into law? Speeches may be irritating, they may have to be answered, but speeches are soon forgotten. Actions speak louder than words. The solid, over-powering fact remains that Protection has been carried by a united National Government, and that all Free Trade resistance has been effectually crushed by its combined strength. If the deed were to be done, surely it were better done in this way than by a party majority, and I think that, in a peculiar manner, no man has helped this more than the Home Secretary by the assiduity with which he has discharged his function of a quacking decoy duck.

Protection having been resolved upon, I hope it will be carried out wholeheartedly. Obviously, we must not overlook the interests of our shipping industry. We must not overlook, in anything we do, the exporting capacity we have developed in the higher ranges of manufacture. We must not overlook our need to receive from abroad in goods the in- terest upon our vast foreign investments. Above all, we must not inflict hardship upon the mass of our people. But those are considerations of which every Government dependent upon universal suffrage would be mindful and bound to study, and which none would dare ignore. These considerations—here I have a word of comfort for my Free Trade friends—will impose certain natural limits upon the new policy, and will, I firmly believe keep our British tariffs at a reasonable and salutary level. Therefore, even the Free Traders of Clacton need not be unduly alarmed. The facts of our island situation are their ultimate guarantee against anything like too excessive tariffs which have injured so many foreign States, and are, we all know, so great a curse in the modern world. I look forward with keen interest to the future development of this new system. We must all wish that its success will fulfil the highest hopes of those responsible for it.

As I left the politics of yesterday for those of to-day, I now leave the politics of to-day for those of to-morrow. Whatever be the success of our British tariffs, I do not believe that they alone will solve our social and economic problems. Still less will they alone solve the world problems, or end the awful and deepening economic depression of mankind. Those problems, that depression, industrial, agricultural, maritime, still confront us, as they confront all other countries. We are in a far better position to address ourselves to these problems than we were last year, and than we were six months ago. We have gained an immense threefold advantage. We have in this new House of Commons, and, mark you, it is this new House of Commons which is the real dominating and decisive factor in our politics at the present time, a guarantee of political stability. We have in this Budget, I know my right hon. Friend will forgive me, this bleak Budget, at any rate the assurance of financial solvency, and we have a weapon of unequalled, almost unprecedented, power in a country like ours which is quitting Free Trade after so many generations—the weapon of fiscal freedom. With these three advantages we had not got last year, advantages which no other nation has in the same way—political stability, financial solvency and fiscal freedom—surely, thus armed and equipped we can march forward against the main causes of world misfortunes with good hopes that we may solve them, and certainly with the assurance that no one will fight a more valiant battle than the people of this island to find a way through their difficulties.

Many diseases are more easy to diagnose than they are to cure, but it is something, at any rate, to diagnose an evil, even if you cannot immediately prescribe a remedy. Fortunately, there is very general agreement in this country among thinking men upon the evil. No one who heard the speech of my right hon. Friend the Member for Hillhead (Sir R. Home) yesterday, or observed its reception in all parts of the House, can doubt how wide is the measure of prudent and general agreement gathering upon the monetary question. It is accepted almost without dispute in England that the prime cause of all our troubles is the attempt to pay these huge sterile War Debts and Reparations across high tariff boundaries that will not receive goods, and thus payment has to be made in gold. The small and limited supplies of gold, which have hitherto served as the foot-rule or measure in our affairs, have been purloined and misappropriated for a purpose for which they are wholly unequal, for liquidating these gigantic debts.

This it is which has led in three short years, very suddenly and very swiftly, upon America stopping relending to the unhealthy engorgement of gold by particular countries, which have a special benefit from Reparations and War Debts. It is this which has led to the consequent cornering of gold and the consequent sterilisation of large portions of gold and the consequent enhancement in the price of gold, and to the automatic and simultaneous diminution in the value of everything else which is made to-day or can be made by our efforts to-morrow. There is the root evil. Out of all the tangles and clouds of argument we can see quite plainly this knobbly point projecting: the artificial enhancement in the price of gold and the consequent fall in the price of everything that is measured by it. Gold is a measure. It is a measure between the efforts of one country and another, between man and man, between class and class, between the past and present; but I regret and grieve that it is a measure which has played the traitor. Poor devil; it may not be its fault; but that is the fact.

When I was moved by many arguments and forces in 1925 to return to the Gold Standard I was assured by the highest experts, and our experts are men of great ability and of indisputable integrity and sincerity—


And they are always wrong.


The hon. Member is not always right—that we were anchoring ourselves to reality and stability; and I accepted their advice. I take for myself and my colleagues of other days whatever degree of blame and burden there may be for having accepted their advice. But what has happened? We have had no reality, no stability. The price of gold has risen since then by more than 70 per cent. That is as if a 12-inch footrule had suddenly been stretched to 19 or 20 inches; as if the pound, avoirdupois, bad suddenly become 23 or 24 ounces instead of—how much is it?—16. Look at what this has meant to everybody who has been compelled to execute their contracts upon this irrationally enhanced scale. Look at the gross unfairness of such a distortion to all producers of new wealth, and to all that labour and science and enterprise can give us. Look at the enormously increased volume of commodities which have to be created in order to pay off the same mortgage debt or loan. Minor fluctuations might well be ignored, but I say quite seriously that this monetary convulsion has now reached a pitch where I am persuaded that the producers of new wealth will not tolerate indefinitely so hideous an oppression.

Are we really going to accept the position that the whole future development of science, our organisation, our increasing co-operation, and the fruitful era of peace and good will among men and nations; are all these developments to be arbitrarily barred by the price of gold? Is the progress of the human race in this age of almost terrifying expansion to be arbitrarily barred and regulated by fortuitous discoveries of gold mines here and there or by the extent to which we can persuade the existing cornerers and hoarders of gold to put their hoards again into the common stock 7 Are we to be told that human civilisation and society would have been impossible if gold had not happened to be an element in the composition of the globe 7 These are absurdities; but they are becoming dangerous and deadly absurdities. They have only to be asserted long enough, they have only to be left ungrappled with long enough, to endanger that capitalist and credit system upon which the liberties and enjoyments and prosperity, in my belief, of the vast masses depend. I therefore point to this evil and to the search for the methods of remedying it, as the first, the second and the third of all the problems which should command and-rivet our thoughts.

This new House of Commons contains a great number of new and young legislators. I commend this problem to them as the supreme topic of the age. You may ask me for a remedy; what would I do? I am not going to be led into that intricate domain in which experts differ fundamentally upon questions to which they have given a lifelong study, but I do see two practical forward steps which we may take, and which we ought to take. A major step if possible; a minor step if the major is denied to us. What is the major step? Here I am going to be quite precise. The major step is obviously the close and effectual comradeship of this country and the United States of America, the two great creditor nations of the world, the two great English-speaking nations, in an agreed purpose to reflate and revaluate commodities in relation to gold up to, let us say, the 1928 level; that is to say, up to a level which affords the producer of prime commodities and raw materials, the industrialist or the agriculturist, a reasonable reward for his toil, and which by affording him a reasonable reward will enable these prime producers to buy again the manufactures of the cities and workshops of the world.

Therefore, I say that His Majesty's Government should address themselves urgently to the Government of the United States, and they need not be afraid in so worthy a cause of encountering a rebuff. If to-morrow the English-speaking people were agreed upon the main purpose, if they were agreed upon a policy, France, in spite of her hoarded gold, would have to seek admission to our councils the next morning, and these three Powers, together with others, would be able to give guidance and chairmanship and primacy to the councils of nations, without which all may speedily degenerate into chaos or a melancholy low level of misfortune. I may be told that we cannot talk to the United States of America because they are busy about their election; that we do not know who is going to govern the United States; that we do not know whether they have at this moment the inherent capacity to make an arrangement and carry it through. We may have to wait for many critical months, and we may find after that that no agreement is possible. All right, do your best, but, if nothing can be done there, let us fall back in the meanwhile upon what I must regard as the minor step, the second best, which, nevertheless, may prove a highly practical policy and may become the means of our economic salvation. Let us fall back, as His Majesty's Government, as far as I understand their policy, seem most wisely disposed to do, upon what I will call the magnificent congregation of sterling communities. Let us make the best of that in default of a better. We can live on that, even if we may not thrive.

I read a speech last week by the Norwegian Minister of Finance, delivered in the Norwegian House of Commons upon the sterling policy of Norway, and he said: Do not let us quit the convoy. 4.30 p.m.

or words to that effect. It is a curious similitude; it is an echo of the last years of the War, when Scandinavian convoys were conducted to and fro across the North Sea in the teeth of every menace by hostile fleets and submarines by the power of the Royal Navy. "Do not let us quit the convoy." In this case, instead of the Royal Navy, it is the power and virtue of Britain which guards the sterling convoy and brings the good ships safely across the ocean into port. Great responsibility falls upon us at the present time. We have to steam a steady pace. We have to consider the slower and weaker ships. We have to adapt ourselves to circumstances, and be vigilant to ward off dangers; and we have to gather an ever-increasing company of vessels within the protection of the sterling convoy.

We shall have other opportunities, in the successive Debates upon the Finance Bill, of returning to these all-important monetary questions. Meanwhile, the measures of the Chancellor of the Exchequer give a greater steadiness to sterling, to fit it for its duties, without depriving it of that element of flexibility which the confused conditions of the world require. They ought to claim our hearty accord. It is for these causes, among several others, that I will certainly give my general support to the Budget which the Chancellor of the Exchequer has just opened.


It is the custom during our Budget discussions, especially after the opening statement of the Chancellor of the Exchequer, to follow with some interest and eagerness the observations of predecessors of his in the office of Chancellor of the Exchequer, and in no case do we look forward with greater eagerness than we do to the observations which might fall from the right hon. Member for Epping (Mr. Churchill). I am sure that I am speaking on behalf of the whole Committee when I say that we rejoice to see him back in his place once more, and not only back in his place but back with his accustomed vigour and virility. I was soon quite sure that he was in his old frame of mind and was his old self, for in the first five minutes of his speech he proposed another raid. I was sure that he was looking at things very much as he used to do—looking round for new hen roosts on which to descend, though of course he himself would not on this occasion be entitled to lead the operations. His speech seemed to fall into three separate compartments. The first dealt with our past, to which he devoted some 35 minutes; the middle portion dealt with our present, to which he devoted 10 minutes; and the rest of his speech dealt with the future, to which he devoted a quarter of an hour. If the right hon. Gentleman will reflect again, upon re-reading his speech, he will find that a good deal of the third portion cancelled out completely a good deal of the first portion of his speech.

The right hon. Gentleman is very disturbed at a situation that has undergone some transformation during his absence, and in his despair he addresses the Chair and says: "What shall I do in this new situation? Protection has become the law of the land. I am disconcerted." The right hon. Gentleman need not feel disconcerted at all. When there was a Free Trade Government in office he gradually moved towards Protection. Now that there is a protectionist Government in office the obvious thing to do is to preach Free Trade, for in that way only can the right hon. Gentleman preserve any semblance of consistency with the rest of his public life.

I ought also to offer a word of welcome to the Chancellor of the Exchequer, and to say that I rejoice to see that his temporary indisposition has not interfered with his presence here to-day. As a preliminary observation I would call the attention of the right hon. Gentleman once more to the singular silence which he observed on two matters during his Budget statement. One was the matter of debts and reparations, with which he dealt very slightly, and the other was the matter of disarmament. In our judgment these two problems are very closely interrelated. The right hon. Member for Epping has just returned from America. I too have had the privilege of travelling in the United States on two occasions since the end of the late War. I do not know what was the experience of the right hon. Member for Epping, and of course I did not move in precisely the same influential circles as be did, but I say, based upon my own experience, that American opinion is going to be far more indisposed to consider any question of remission of debt if we remain unable to assure America of our intense desire and purpose to bring about a limitation of armaments for ourselves and in Europe.

They used to say to me quite frequently, and I am sure they say still, something like this: "If you in Britain and in Europe have money to spend upon armaments, you can afford to pay debts." That may be a foolish point of view for them to take. It may be a wrong attitude from many points of view, wrong perhaps in their own interest. But it is there, and I am sure that unless we can bring about—we have great authority at Geneva if we would only exercise it—a substantial change in Europe in its attitude towards armaments, we shall find closed one of the most fruitful paths whereby we may approach successfully the mind and heart of the American people in regard to inter-national debts. The road to the United States may very well be found to pass through Lausanne and Geneva.

Another observation I want to make is on the question of Reparations. I listened yesterday with great interest to many speeches from the opposite side, starting with that of the right hon. Member for Hillhead (Sir R. Horne), followed by other leading and influential members of the Conservative party, and I wondered where these people had been living for the last 12 years. The right hon. Member for Epping this afternoon referred, quite rightly with approval, to much that the right hon. Member for Hillhead said yesterday. The right hon. Member for Epping cannot be entirely unaware that many of the general propositions advanced by the right hon. Member for Hillhead yesterday have been iterated and reiterated from Labour platforms in this country ever since the War, and not only from platforms up and down the country but from the Floor of this House. We are glad to have this endorsement, at this very late hour, of Labour's point of view concerning the whole principle of Reparations and War Indemnities. I very much hope that the Government will press for an intensive and immediate consideration of this problem, for in that way alone can we get some measure of relief for the individual people of our country and for the business of our land. I will pass from that by fortifying myself with one quotation from the present President of the Board of Trade. Incidentally, the speech was delivered, significantly enough, on the occasion of the annual meeting of the Free Trade Union, and this is the passage to which I refer: But under the reparations system you deliberately refuse to those who have paid reparations the payments in return which would have been made in our own or in American goods and services. With reparations it is all one way. One half of international trading transaction is completely destroyed, and it is the great producing countries like ourselves and the United States of America who have suffered most from this state of affairs. That indicates broadly what would be our own view with regard to one aspect of this most important problem.

I come now to the discussion of the Budget statement itself. It is quite clear from many speeches by hon. Members in all parts of the House in supporting the Government, that they are very much obsessed with one proposition. I do not imply that it is not entertained quite honestly and conscientiously, but the fact that it is so entertained adds significance to the repetition of the statement in these Debates. It was that the limit of direct taxation has long since been reached, and that on that account some redistribution presumably of the incidence of taxation should be considered by the Government. I say at once that I challenge that proposition entirely. Not only that, but I propose to adduce facts and figures in support of that challenge. Let me, first of all, redistribute the figures of this year's Budget in such a way as to examine it from the point of view of the allocation of direct and indirect taxation in regard to revenue and expenditure.

In the White Paper with which we were favoured on Tuesday we find that Income Tax is responsible for providing £260,000,000, Surtax £66,000,000, and Estate Duty £76,000,000, or a total of £402,000,000. Set against that figure war expenditure, that is expenditure in respect of debt interest and so forth, £286,300,000; Sinking Fund, £32,500,000, and a sum of £49,856,000 in respect of war pensions connected with the Army, Navy and Air Force. You find that direct taxation provides a slight excess over the total of those last three figures of something like £33,000,000. If we take that balance of £33,000,000 and allocate it to what I shall call, if you like, the civil Budget, what do we find? There is the £33,000,000 by way of the balance from direct taxation which I have indicated; there is also £16,700,000 from self-balancing services, the Post Office and the Roads; there is £174,000,000 odd from Customs, £125,000,000 odd from Excise, and £48,000,000 for miscellaneous services, giving a total of £398,144,000. On the other side, place Defence, £104,000,000; Social Services, £193,000,000; other services, £99,000,000, and an estimated sur- plus of £798,000, and you get £398,000,000 on one side, including the balance to which I have referred, Customs and Excise, and other miscellaneous services; while on the other side of my balance sheet you get exactly the same figure—£398,000,000.

There is no question about the figures. I have taken them exactly from the statement. The deduction which I make from them is my own. The right hon. Gentleman, perhaps, will controvert it, but I submit that when you examine what I have called the War budget, putting into it your National Debt, Sinking Fund and war pensions, the whole of your direct taxation is just £33,000,000 more than enough to meet that bill, and if you put that balance of £33,000,000 with the other services which I have indicated, you find that the totals just balance each other. In other words, I am entitled to argue that the Income Tax, Surtax and Estate Duty payers get back their money with the exception of some £33,000,000, and that the whole of the civil services are provided out of Customs and Excise and other miscellaneous returns. I think that is a fair presentation of the general figures in the Budget allocating them between what may be appropriately described as war services and civil services.

Now I come to discuss in some detail the allocation of direct taxation, and the sources of direct taxation, comparing the position in that respect with the position in regard to indirect taxation. From now onwards in this statement I shall not use a single figure on this question of taxation other than those which I have obtained from the statistical abstract presented by the President of the Board of Trade. On page 168 of that abstract we find the singular fact that taking the income brought under review for Income Tax purposes under Schedule A, the total amount of income thus brought under review in 1913–14 under the head of land ownership was £52,000,000. The same item in 1929–30 was £49,000,000 in spite of the fact that in the intervening 10 years the expenditure upon roads, involving the improvement of land to the tune of tens of millions of pounds, was £180.8 millions. If the Chancellor is looking for a new source of taxation he may find it there—in that source of land ownership as distinct from land occupation. I submit that before the right hon. Gentleman talks about the limits of direct taxation having been reached he ought to examine that source of income concerning which there is so much silence, not only among the Tory Members but among the late Labour and Liberal supporters of the Government as well.

Another very interesting fact emerges from the same abstract. Will it be believed that in the boom years from 1916 to 1920 the total income of weekly wage earners brought under review came to the following colossal figures. In 1916–17, £205,000,000; in 1917–18, £394,000,000; in 1918–19. £590,000,000; in 1919–20, £863,000,000. If we add these four figures and compare the total, with the total brought under review in respect of Schedule D, which relates to business concerns, professions and employments, and includes such things as coal mines, gas works, iron works and waterworks we find the astounding result that the wage earners were reviewed as to four-fifths of the total of all under Schedule D. Yet we are told that the people who possess great wealth are, in some curious way subject to special and unfair visitations on the part of the Treasury. I turn from Income Tax revenue to Surtax revenue.


Before the hon. Member leaves that very interesting point may I ask him a question? He has referred to a total derived from the workers. Between what levels of income has he found those figures?


I did not talk about a total derived from the workers; I spoke of the total amount of income brought under review, which is a different proposition.


Between what levels?


Perhaps the hon. and learned Member will allow me to proceed with my argument. The time is very short, and I want to make my point. Turning to Surtax, we find on page 173 of the same abstract some interesting figures. Hon. Members are, of course, aware that Surtax begins at a certain figure and goes on in certain well-regulated steps or categories. Taking the categories from £2,000 a year to £10,000 a year, we find in 1928–29 as compared with 1920–21 an increase in every category except two, and the two in which there is a drop are the categories between £7,000 and £8,000 a year and between £8,000 and £10,000 a year respectively. But those drops were by no means formidable. Looking at the number of persons in the table given in the abstract I find that there were only 10 less in 1928–29 than in 1913–14 in the £7,000 a year to £8,000 a year category, and there were only 66 less in the category between £8,000 a year and £10,000 a year. There were only 21 less in the category between £30,000 a year and £40,000 a year as compared with the year before the War, and in fact in the category of £100,000 a year or more there were actually more people in receipt of that income in 1928–29 than in any year since 1921–22. I submit that if we examine the official returns indicating the distribution of wealth in the country we shall find vast resources still relatively untouched, and we must compare that state of things with the attack which has been made on the standard of the workers in the period of time under review.

5.0 p.m.

Coming to Estate Duty we find that some 34,000 people died in 1913–14 leaving estates up to £5,000, and in 1930–31 there were 61,000 odd. The average amount of estate in 1913–14 was £1,627, and in 1931–31 it was £1,860 or an average increase of £233. But when we come to the estates of a much higher denomination we find that of estates between £100,000 and £150,000 there were 155 in 1913–14 and 214 in 1930–31, but the average increase in those estates was £120,000, indicating quite clearly that the resources of taxation in the matter of direct taxation upon those with vast aggregations of wealth are by no means exhausted.

I have discussed briefly the official returns indicating the distribution of wealth and the measure of burden which those have been called upon to pay during certain years which I have made comparable. Now let me turn to the contribution of the poor, of the wage earners, during the period of slump. Will it surprise the Committee if I tell them—and I base this calculation on page 126 of the "Ministry of Labour Gazette" of this month—that the loss in wages suffered by the workers of this country from 1920 to 1930 has been round about £587,000,000 per year? Anyone may work out the figures for himself. I speak subject to correction, and if I am proved to be wrong, I shall be the first to acknowledge my fault, but I challenge it, and I say that for the last 10 years the wage earners of this country have suffered a loss per year of £587,000,000. Indeed, in this very year itself, in the two months that are recorded in this return, there has been a loss in wages of £400,000 per week, at the rate, that is to say, of another £20,000,000 drop in wages per year.


And it is still going on.


It is still going on, as my hon. Friend says. [An HON. MEMBER: "You forget the drop in prices!"] After all, I have already examined the reduction of incomes from that kind of thing. I submit that when hon. Members opposite re-emphasise, as they have done in the last two days, the great burden which direct taxation involves on the well-to-do, I am not denying it, but I beg them to put side by side with that proposition this equally important fact, that the workers in various ways have suffered an extraordinarily heavy cut as well. Let me take building societies, because the attack has been in various ways upon workers' thrift. In the last 10 years, 1920–30, building societies have advanced on mortgages alone £545,000,000, and all those loans have to a certain extent been compelled to make their contribution to the National Exchequer. But they also indicate this fact, that the workers, in order to try to preserve a roof above their heads, have been driven to the task of borrowing heavily.

Let me give another figure, which is rather more striking. Take insurance company returns. In the year 1920, taking the ordinary business section, the surrenders were roughly £2,670,000; by the year 1930 those surrenders had risen to £18,388,000. Nothing could disclose more clearly the tremendous burden which poverty has imposed upon the poor than this, that they have been driven in their extremity to surrender their savings through the medium of insurance at almost any price in order to keep the wolf of hunger away from the door. But that is only the ordinary business section. Let me take the industrial busi- ness section, in which, in 1920, the surrenders were £340,000, and in 1930 they had risen to £3,791,000. They had increased over 10 times from the amount surrendered in 1920 as compared with 1930. Let us, if you like, pay all attention and every regard to the claim which hon. Members opposite make that the direct taxpayer has been called upon to make a big contribution. I concede it, but what is that contribution, after all, as compared with this terrible inroad made upon the resources of the poor and the thrifty?

I must develop this point a little further, because it is vital in the interests of the workers and their claims that this thing should be brought right out. Let me take Poor Law relief. In 1920 the net total relieved in England and Wales was 576,418; that figure by 1931 had mounted up to 1,123,000, or more than double. They were 150 per 10,000 in 1920, and they were 276 per 10,000 in 1931; and I invite hon. Members to visualise the population of a town of 10,000—not a very big town, but a small one—and imagine that out of those 10,000 there were 276 in receipt of 'Poor Law Relief. It is an appalling figure. Those figures have been steadily increasing in the lifetime of every Government, although an hon. Member opposite seems to think it is something to be ascribed to the last Government.

Now let us take the rates contribution in respect of this period, because it is still a question of direct and indirect taxation. The local rates in 1918 provided for this burden £13,000,000 odd; in 1930 the sum had mounted to nearly £34,000,000. But the Government grants in respect of this had not mounted at this alarming rate. No, the Government's contribution in 1918 was £2,500,000, in round figures, and in 1930 it had just crept up to £3,400,000, or not nearly a commensurate rise when you contrast it with the enormously enhanced burden on the shoulders of the local authorities up and down the country. And all this burden of the local authorities, after all, comes ultimately on to the backs of the workers in the neighbourhood, those who live in the neighbourhood, and, to a lesser degree than two years ago, but to some degree anyhow, upon industry in those neighbourhoods, though to the degree that it has been removed from the shoulders of industry it has been pushed on to the shoulders of the day-to-day workers.

Let me take the burden with regard to unemployment, for we are dealing with the burden of this thing during the slump. This very month the Ministry of Labour return discloses this singular fact. I will read the passage, so that I may not be accused of misquoting: The table shows that of the 1,600,000"— I give round figures— wholly unemployed insured men on the register at 31st March, 1932, there were … 800,000 with applications for transitional benefit. Of 1,600,000, using round figures, 800,000 are now applying for transitional benefit, and surely this is an indication of the burden that is falling on the poor too. Are not they paying for the slump, and paying, not out of what they possess, but, I am sorry to say, out of what they almost do not possess at all, for all that they are likely to have if they get their transitional benefit is some 15s. 3d. per man. I am not denying that the well-to-do have been called upon to make a contribution—I am coming to that matter in a moment—but the poor in the period of the slump have been literally dragged and driven to the very summit of Calvary, and when they have been got there they have been mercilessly crucified on a cross of gold.

Now let me turn to an examination of the actual incidence of taxation—Income Tax—that falls upon the well-to-do. In 1920–21 the actual income—I am speaking carefully and using the exact words of the return—reviewed for Income Tax purposes amounted to £2,661,000,000; in 1929–30 that figure had gone down to 22,530,000,000. Those are actual incomes. If you deduct from the actual income exemptions for insurances and allowances of various sorts, you will find that the taxable income, which is the material figure for us, in 1920–21 was £1,356,000,000. In 1929–30 the taxable income was £1,347,000,000, a drop of only £9,000,000. In the next column on page 167, we find this. We are told that in 1920–21 the effective rate levied on each pound of actual income was 31.85 pence. In 1929–30 the effective rate levied on each pound of income dropped to 22.19 pence in the pound. I invite the right hon. Gentleman to give us some indication of the ground which these figures afford in support of the proposition that in the intervening years there has been some stupendous addition to direct taxation.

In point of fact, there has undoubtedly been a reduction in the actual income reviewed for Income Tax purposes, but there has also been a substantial change in one form or another of allowances, abatements and reliefs in respect of children and so on, and even in regard to life insurance premiums. The result is that the effective rate of tax on each pound of actual income has gone down in the last 10 years from 33 pence in the pound in 1920–21 to 22 pence in the pound in 1928–29. I hope that the right hon. Gentleman will not tell us the old story that he told us in September and October, and invite us to shed tears over the fact that life insurance premiums have to be provided. He nearly persuaded the House last October that Income Tax payers were paying more in tax than they ever received in income. In the return to which I have just referred, life insurance premiums in regard to Income Tax are provided for and the result is as I have indicated. I will sum up my argument in this way. I do not deny that those who have to pay Income Tax feel the burden, but they have no right, on the figures that I have produced, to make a claim that their burden, proportionately to that of the poor, is heavier in its incidence. I dare say that we shall have repeated opportunities of returning to the examination of this problem during the later Debates.

I want to say a word or two with regard to a proposal which the Chancellor of the Exchequer made on Tuesday. I am intrigued, to say the least, concerning this sugar duty business. Why is it that sugar has to be established in every country in the world with public money? It is so with cane sugar in the Indies, and it is so with beet sugar in Belgium, France, Germany and Great Britain. For some unaccountable reason private enterprise has never been able to set it up without State or some other adventitious aid. What is the explanation of this tremendous State interest in sugar? Is it merely the food value of sugar? Is it the work that is provided? Is it because it is a help to agriculture? I ask these questions because someone tells me that there is something of substance in this point. Is there some connection between sugar and the needs of the Army, the Navy and the Air Force? Has it something to do with munitions? The Home Secretary took special trouble at the end of July, when we were in office, to denounce the sugar subsidy. He came down fortified with volumes of figures in support of his contention. I am told that, if we base our calculations on the data most widely applicable to the raw sugar passing through British refineries, we find that in the Customs year 1930–31, 470,000 tons of Empire sugar were entered for home consumption at a cost to the national Exchequer in remission of duty of approximately £2,000,000. During the same period slightly under 415,000 tons of home grown sugar cost the taxpayer nearly £8,000,000.

Brigadier-General Sir HENRY CROFT

Is it not a fact that the hon. Gentleman's party claim to be the authors of the sugar subsidy?


That is so. We learn, as the hon. and gallant Gentleman learns, but his job now is not to deal with us. It is to deal with the Home Secretary. In July last he was a tremendous opponent of this proposal. Now, not many months after, he is apparently a supporter of it. Let me give another fact. During 1930–31 the beet-sugar factories trade profits averaged 9s. 10d. per ton against 5s. 3d. paid in salaries and wages. In the Home Secretary's speech in July last is a record of companies making fabulous profits. I must remind the hon. and gallant Gentleman that under the subsidy of the Labour Government there was—theoretically, at any rate—a provision that the farmers and those interested should participate to some degree in the benefit accruing from the subsidy. On the other hand, this subsidy is practically a blank cheque without any provision of that sort whatever.

The whole of the provisions of this Budget, in the question of the allocation or apportionment of direct taxation, or the allocation of national revenues to national needs, the allocation of the nation's resources from customs and excise, and in all the operations as adumbrated by the Budget, will be subjected to the closest scrutiny. From the scrutiny to which we have already subjected it we have come to the conclusion that the Budget is unjust in its incidence and imposes new burdens, though indirectly, upon the shoulders of those least capable of bearing them. The Budget is inequitable in its incidence, unjust in its character, and for that reason I promise the right hon. Gentleman, on behalf of my hon. Friends, the most vigorous opposition to it.


We have listened with great interest to the elaborate statistical essay of the hon. Member for Caerphilly (Mr. Morgan Jones). I am sure that no one can complain of the manner in which he presented his case, and of the moderation with which he offered his arguments, though we were a little alarmed at the emphatic words with which he closed his speech and the threat of penalties to come on the examination of the Budget by his friends. When the hon. Gentleman spoke so strongly about the sugar subsidy—and I am one of those who think that there is good cause for considering whether there is not a better method of dealing with the sugar question—he would have been a little fairer if he had pointed out that the present arrangements do not differ in their application from the arrangements when the Socialist Government were in Office. Therefore, his rather emphatic arguments could have been applied with equal force against his hon. Friends. The hon. Gentleman tries to persuade us that the direct taxpayers are actually paying less than they were before, but if he were able privately to examine the accounts of any direct taxpayer and advanced that suggestion, he would find that he was very unpopular.


I challenge the hon. and gallant Gentleman to contravert the proposition in my argument as to the rate of Income Tax in respect of the years to which I have referred.

5.30. p.m.


I hope that I am not so ill-mannered as to contradict the hon. Gentleman, but I suggest that if he asked anyone who is a direct taxpayer whether he is in fact paying less to-day than in the period mentioned, he would very soon be answered satisfactorily by the evidence that could be produced. Before I offer a few remarks upon the Budget speech of the Chancellor I would like to express my sympathy with him in his sufferings from lumbago in the last few days. I am sure I am voicing the opinion of everyone in the Committee when I say that we hope he will speedily throw off the attack. It is a most painful and depressing complaint. To whatever party we belong we must all agree that what the country needs is safety, security and soundness in our financial arrangements, and I think we can say the Chancellor has kept those as his watchwords. Never in our history, probably, has it been more essential to show the world that we have finished once and for all with national gambling. We had quite enough of that last year. The Budget of April, 1931, was a gambling Budget, it was gambling in "futures," and within about four months most of us realised that it was on a faulty basis and never could balance, that it was, indeed, a last desperate throw of a gambler who was afraid to face up to the difficulties which he knew confronted his country. We are thankful that the present Chancellor of the Exchequer has avoided everything which might be described as spectacular, and reverted to the financial traditions of this country. We know it will give increased confidence to all those countries which are watching Britain as the one steady rock in a turbulent financial sea.

I also want to congratulate the Chancellor of the Exchequer and those associated with him on the wise new national policy in the promotion of which he took such a great part, and congratulate him, too, upon the fruits of that policy which are already evident. On certain occasions many of us have complained of the delay in putting that policy into force, but, slow though its application was, I think we must all agree that the country has avoided a second financial crisis owing to the fact that the policy is now in operation. There is not the smallest doubt that without tariffs the taxpayer would have been called upon to pay another 9d. of Income Tax—unless the money had been raised in some other way—and it might easily have been 1s. I think it would have been the latter figure, because in addition to the revenue of £33,000,000 which is to be raised by tariffs there is the saving to the Exchequer brought about by the fall in unemployment directly attributable to the tariff. On the other side of the picture we may say that had the emergency tariff for which we asked been put into operation in September, there would undoubtedly have been relief for the taxpayers at the present time, and relief of a substantial character. Our present position is the penalty of searching for formulas and endeavouring, during long and weary months, to placate the implacable. It would have been better if the Members of the Cabinet had been invited to agree to differ at a much earlier date, so that we could have adopted our policy more speedily.

Everyone interested in Imperial affairs will want to congratulate the Chancellor on the Imperial aide of his Budget. We in this country often fail to realise how extremely valuable our Empire production of tea, rubber and other commodities is to this country. We send the fine flower of our race to the tea plantations, and a great art of the wealth invested in those enterpriser comes back to this country in the form of dividends or pro fits, and a portion of it goes into the Exchequer. From our own point of view it was an unwise policy not to act more speedily, and to allow so many plantations to suffer such grave distress, but the policy of the Chancellor will have gladdened the hearts of every man engaged in tea planting under the British flag, and will help to keep in their occupation many thousands of natives who otherwise must have been dismissed. In regard to sugar, many of us would have preferred the Chancellor of the Exchequer to deal with it in a somewhat different way, although we rejoice at the increased preference. Many of us feel that it would be far more to the advantage of this country in the long run if an increased duty were imposed on imported foreign sugar, and if the subsidy were lowered in this country so long as the home producer had the same privilege against his foreign competitors. It would have been a greater advantage to the taxpayers in the long run and would have done no harm to the sugar producers. Further, I think many of us are extremely sorry that the Chancellor did not clear up the anomaly of the duty on raw silk. I believe I am right in saying that it is the only raw material on which taxation has been deliberately imposed, and that action seems to be at variance with the principle adopted in the recent fiscal policy. I hope this question will be considered seriously during the Committee stage of the Budget.

I have one serious criticism of the Budget to make, and that refers to the Beer Duty. At the time of the crisis those who were leading the country impressed on us that it was highly desirable that there should be equality of sacrifice in every direction, and no one looking back on those days will deny that the response to that appeal from all sections of the community was really remarkable, but it always seems to me that in this one particular the Chancellor of the Exchequer of that day forgot altogether about equality in order to pursue the political views which he has always held. Working men who regard beer as a normal beverage suddenly found it subjected to a greatly increased burden. A great many of the police, soldiers, sailors and airmen regard beer as a very normal beverage, and found the extra duty an additional burden; and the unemployed workman, in addition to the misery of his position, and in addition to suffering cuts in benefit pay, was also laid under tribute in respect of one of the very few comforts of life which it is possible for him to enjoy.

I submit that the increase in the Beer Duty in the last Budget of Lord Snowden was harsh and unjustifiable, and I believe I am right in saying that it has caused deep resentment among all the workers. Nothing could have been finer than the response of those to whom I have referred—with one or two exceptions—in the national emergency, and surely it is not wise to leave our people with this feeling of injustice and a daily reminder of a, tax which they regard as harsh and unfair. I do not know how the Chancellor arrived at the figure he presented to the Committee on Tuesday when he said that if he were to take off the extra duty he would incur a loss of £10,400,000. Only £3,250,000 has been raised in seven months, and I cannot understand how he calculated the figure as £10,000,000 for a full year. The information I get from all over the country is that with the present duty in force consumption is going from bad to worse, and I think he has not yet seen the full effects of the increased duty. Surely the Chancellor cannot have made any allowance for an increase in consumption if he lowered the price 1d. either by taking off the duty or altering the gravity. Surely he could have hoped to raise an additional £1,000,000 to £2,000,000. If there were any desire to interfere with the liberty of the subject, to say that he shall no longer be able to consume beer, this policy would be very highly successful; but I venture to think the Chancellor will find that his revenue in the coming year will be seriously affected by the course he has taken.

I think I was the only Member who realised what would happen at the time of the last Budget. I warned the late Chancellor that he would not get his revenue, and he has not got it, and the tragedy is that the position will go from bad to worse. I want the Chancellor to tell us, also, whether he expects to get his revenue from other sources which are all affected indirectly by this harsh taxation. Supposing that by a remission of the extra duty of 31s. per barrel he lost £5,000,000—which, I believe, is somewhat near the real figure—has he taken into account the losses which are bound to occur, with the duty at its present figure, in the various allied industries? I think I can say it is a definite fact that breweries have kept on thousands of workers, giving them light jobs, in the belief that the duty would be lowered and in the hope that they would be able to put them in full employment again, being most anxious not to dismiss them. It is a definite fact that the production of all the allied trades is down by something like 50 per cent., with consequent grave results to employment. It is a definite fact, also, that the blow which Lord Snowden dealt at the barley growers of this country is having an alarming effect throughout the Eastern Counties, and in Lincolnshire and Yorkshire, where large barley crops are grown. The result of this policy was that a very much less quantity of barley was required, estimated at 500,000 quarters, and as this was not required for malting purposes it had to be used for feeding purposes and there was a drop of 10s. per quarter in its value. That has deprived the barley growers of this country of their normal profit. But that is not the end of the story. I hope we shall consider all these questions very carefully, and I want the Committee to realise that some of the best farmers in the Eastern Counties are now either bankrupt or approaching bankruptcy. This result does not stop there, because the whole of the hop industry is seriously affected. I know of many men in the industry who have been unable to sell their hops, and to them this is a very serious matter because, if they cannot sell them to the brewing industry, they cannot sell them to anybody else with advantage. The result has been a very great drop in the value of hops.

The Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor) will no doubt be glad to hear that there has been a great drop in brewery shares since Lord Snowden introduced his last Budget. The drop has been simply colossal, but what will be the effect of that upon future Budgets in regard to Estate Duties, Surtax and Income Tax? Since that time the big breweries have rationalised themselves on a large scale. In that they have been successful, and on that account they have been called a, prosperous industry. Is it wise in the present condition of this country to go on with a policy of that kind, inflicting a heavy burden which that industry cannot bear? It is much more serious to those who are employed in that industry in one form or another. As far as I am concerned, I shall have great hesitation in voting on this subject, because I am intimately connected with this industry, and I handle large quantities of barley. I think this is a question upon which some of my colleagues have the same right to "agree to differ" as Lord Snowden. Psychologically this is unsound, and when our countrymen are rallying so splendidly, and have been willing to make all these sacrifices so bravely, it is a great mistake to leave millions with this constant feeling of discontent.

I am one of those Members of this House—I believe it is a habit with many hon. Members—who spend something like 30 evenings every year chatting with purely working class people, and they are the very best workers in the world. I know some of them are feeling an intense resentment on this question, just as during the War it was almost unthinkable that the Government would deprive the people of their legitimate refresh- ment in order that they should not be unhappy as long as the difficulties confronted them. The Government would be wise to consider this question, and I hope the Chancellor of the Exchequer will seriously consider whether it is not wise that he should put this matter right at once.

I would like to say a word about the future. I suppose we all agree that many things depend upon the success of the Ottawa Conference. I beg the Government and their representatives at Ottawa to go there with an absolutely free hand to consider any proposals which may be put up from any of our Dominions. Some time ago there was a division of opinion in regard to a certain Bill upon which there was some rather indefinite declarations from the Front Bench. I hope that we shall have a free hand at Ottawa, and now that we have taken a step in advance in regard to our internal trade, we should do everything we can to stimulate our export trade. The only hope of substantially increasing our export trade is by developing our trade with the overseas Empire.

During the last 10 years our Empire overseas has been buying £300,000,000 of manufactures every year from foreign countries. At least £200,000,000 of that is capable of being supplied by British manufacturers, and those manufactured goods could be produced as efficiently in this country as abroad. That opens up a very wide vista for this country, and we hope to be able to secure that vast trade by giving our Dominions and Protectorates every advantage for their products. It would mean the employment of 1,000,000 more industrialists in this country. We want to get into touch with the primary producers in Kenya, Uganda, Nyasaland, North and South Rhodesia, Nigeria and the Malay States. When we look at the position of our trade with those countries the picture is rather a tragic one, and I hope we shall go to Ottawa with the determination to do everything in our power to bring about a great co-operative agreement, so that all the people of the British Empire will be able to register a vow to the effect that no part of the Empire shall be allowed to go down in ruin if the rest of the Empire can hold it up. I am sure that every land under the British flag will prefer the products of our Empire in preference to those of the foreigner.


In addressing the House for the first time, I ask the indulgence which is always extended to hon. Members who find themselves in this position. As I listened to the Chancellor of the Exchequer the other day I realised that it was a very hard Budget, but it has been dealt with in a commonsense way. This morning I received a great many letters from the division I represent, Maidstone, from hop-growers to beer drinkers emphasising the importance of reconsidering the beer question, and I hope that there will still be time for the Chancellor of the Exchequer to reconsider the way he has dealt with this subject. The Chancellor of the Exchequer said very truly that this country has reached the limit of direct taxation, and that the only hope for the future is to stop waste and economise.

In the circumstances, I will endeavour to make a practical and constructive suggestion relating to one of our national industries which so far has not been referred to by anybody. If we can get the same results by less expenditure without reducing salaries, I am sure everybody will be very pleased to do it. There is a way whereby we can get a direct saving of something in the neighbourhood of £3,000,000 without in any way hurting any other industry and yet increasing employment in that industry. I refer to our building trades. This is a department of Government activities which is very seldom referred to as a whole. Actually at this time the Government invest not less than £10,000,000 per annum in buildings and through subsidies directs the spending of another £20,000,000, making a total of not less than £30,000,000 in regard to buildings directly under the control of the Government. The Government and the municipalities of the country control about 45 per cent. of our national expenditure on building, and the latest figures that can be found relating to our national building programme show that it involves a sum of £250,000,000, and no effort, as far as I have seen, has yet been made to see if any economy can be achieved in regard to that great industry.

The Government have within a radius of one mile from this spot no less than eight architectural departments, each of which has got its full complement of draughtsmen, quantity surveyors, specification writers and all the other paraphernalia necessary to enter into contracts. In addition to that, there are four other supervising architectural departments, making 12 in all, and every one of them is doing the same work. All those 12 departments could be brought under one head, and by doing that there is no doubt that a very considerable saving could be made. By adopting this suggestion other advantages would naturally also result. I can speak on this subject from a wide experience, because in my own office in the past I have frequently done much more than several of these departments. It would be easy to have all these departments under a single organisation, and that would make for greater speed and increased production. What is more, it would enable the information accumulated in those offices to be circulated among all the branches of which the Government have charge. The practice has developed in Government matters of getting a small appropriation made so as to get the Government committed to a large undertaking. The Government have also had a very unsatisfactory method of appropriating money for building operations.

6.0 p.m.

I will only give one example which, I think, will he convincing to anyone who will take the trouble to look into the matter. On page 59 of the Air Estimates hon. Members will see that there are no less than five aerodromes going on at this time. But the appropriation is not on a sufficient scale to allow of their completion in one year. The money is voted gradually for one, two, three, four or five years. In other words, it means that the Government provide a little money at a time to carry on an undertaking. The result of this system is that the contractors have to keep a skeleton staff which is no use for other purposes, and they employ this staff year after year. I have examined certain of these Estimates, and I know it is a definite fact that the Government can save at least 10 per cent. on many of these aerodromes if they were built more expeditiously as commercial concerns would build them. The matter is not one for procrastination. If, instead of putting money into five separate aerodromes, we were prepared to appropriate enough for two, and build them, as they could be built, in one year, they would be available two or three years ahead of the time that they now take, and we should not have these overhead expenses going to the builder, which have to be paid by the taxpayer. From every point of view, the method adopted by the Government in constructing these works is not an economical one. It would not be fair to say that this goes on in all Government Departments; it does not; there are certain Departments that are better than others; but this is a typical example of what is being done.

If the Government would insist that the work should be handled as a commercial concern would do it, it would prevent the accumulation of great costs due to changes and variations. I think I am not overstepping the mark when I say that, in the case of one of these aerodromes, there are about 100 variation orders per year. That means new drawings, new specifications, and new quantities, all of which have to be paid for, and all of which add to the cost of the work. The Chancellor of the Exchequer should definitely insist that a Government Department, before it enters into a construction work, should have made up its mind as to what it wants, so that, when it lets a contract, the man to whom the contract is let knows what he has got to do, down to the last detail. As matters now stand, unfortunately, many changes are made, and all of them have to be paid for. Again, the maximum amount that can be built in a year should be appropriated for, and not the minimum. If that were done the financial loss that is now caused by this unnecessarily protracted method of procedure could be very materially reduced.

There is another point to which I would like to draw attention, and which is much more serious, and is a sure sign that there is something wrong in our present building methods. The Chancellor of the Exchequer, when he goes to Ottawa, will see buildings being built that cost the same price per room as in England, but the workers on those buildings receive much higher wages than the workers here. The carpenter, for instance, in Canada or the United States, receives £2 15s. per day, whereas our carpenter in England gets 12s. 8d. The plumber in England gets 12s. 8d., but in the United States he gets £2 15s.; and, while a bricklayer in England gets 12s. 8d., a bricklayer in the United States gets £3 4s. per day. In other words, the wages in the United States are over three times as large as they are here, and, at the same time, the total cost of similar buildings is exactly the same on both sides of the ocean. There must be something wrong with our system if that is the case.

I was so worried about this matter that I personally had the design and drawings made for a very large building, and had the figures taken out on both sides, and the variation was not 3 per cent., although, as I have said, the workers on this side get 12s. 8d. per day, and on the other side about £3 for the same work. The reason why the worker on the other side of the ocean gets this greatly enhanced wage is that they follow the system of mapping out what is required of the contractor before the work is undertaken; in other words, he produces what is known throughout the industrial world as a time and progress schedule, which shows when the mason shall start and when he shall finish, when the carpenter shall start and when he shall finish, when the material shall come on to the job, and so on, so that everything is known in advance, as would be the case with any practical man handling any systematic business operation. Also, it is known exactly when the building will be available for use. That system has never been adopted in the case of any Government building, but a system which would give results such as I have indicated is one that the Government should certainly consider.

I have been the chairman of a committee that has been investigating this subject for about two years. The committee includes the chairman and secretary of the Building Trades Operatives, the chairman and Secretary of the Building Trades Employers, architects, surveyors, and others, and their agreed report, after going into this matter for two years, is to the effect that the possible saving on direct constructional costs may be put as high as 10 per cent. when the fullest degree of team work and co-ordination is attained. That report has been signed by each member of the committee as an official representative of his branch of the industry, without a solitary exception. This saving of 10 per cent., which all the people interested in this industry agree is possible, applied to the £250,000,000 which, as I have already mentioned, is the national annual building expenditure, would mean a sum of no less than £25,000,000.

I am sure that, if the Minister of Health were here at the moment, he would be very pleased if he could cut 10 per cent. off the cost of housing; and I am sure that the Minister of Labour, who announced only last week that there are more than 241,000 men unemployed in the building industry, who are costing us £190,000 a week, would be very pleased to know that a cut of 10 per cent. in the cost of building could be made, for the adoption of such methods would immediately lead to a great many people starting undertakings which they are not starting to-day, and a consequent great reduction in the unemployment in this great industry. There is no doubt that the very first charge on any man's income is his rent, and a reduction in the cost of houses is a most needed consideration.

Undoubtedly, a great building programme in factories is necessary if we are to bring our factories up to date, but many factories at the present time are being held back purely by reason of high costs. If the costs could be cut by any amount such as I have indicated, many owners would go ahead. But the Government, being the biggest builder in the country, and influencing more building than any other agency, must take the lead. The, Government must recommend this co-ordination in its own Departments; it must make up its mind in its Departments what it wants before it undertakes work; it must make its appropriations from the Treasury on the scale that is necessary for the year's maximum building, as in the case of the aerodromes to which I have referred. Any one of these could be built in a year if the work were properly undertaken. In addition, the Government should insist upon its spending Departments getting k time and progress schedule before it allows money to be spent, so that it may know exactly when it is going to get the buildings for which it has contracted. The Government cannot afford to ignore this possible saving of no less than £3,000,000 which will accrue to it direct. The saving to the ratepayers throughout the country would be very much more than this from the reduced cost of municipal expenditures, and the saving to the general public, again, would be vastly more still from the savings that would accrue if such methods were in universal use. This commonsense and well-known system of building could be started to-morrow without any legislation, by the Chancellor of the Exchequer sending out a Departmental instruction, and, though the results would not develop at once, such a lead by the Government would in time result in a saving that would be equal to a 6d. in the £ reduction in the Income Tax.


All those who have listened to the maiden speech of the hon. Member for Maidstone (Mr. Bossom) will agree that he has done remarkably well. He has brought a new mind and much expert knowledge to the subject; and there is one other thing for which I would commend him. I noticed that he sat for the whole of yesterday anxiously waiting to get in, which shows how tenacious he has been in making his maiden effort. He will find, as time goes on, that he will have to sit for a long time before being called upon, the more so because he belongs to a very large party. That is one of their difficulties. They may find some satisfaction in having swept everyone else out of the way, but, against that, they have to set the difficulty that they will find in being able to speak in this House. However, they must take the good with the bad.

The annual Financial Statement brings to the House of Commons every year a number of people who only seem to come here on that particular occasion, and I feel somewhat upset at the way in which they are able to get called and to spend very little time in the Chamber. They just come in, get their speeches off, and after spending three-quarters of an hour or an hour here, they are off again. It does not seem to be altogether fair. The hon. and gallant Member for Bournemouth (Sir H. Croft) to-day has made a brief incursion into the Chamber, and has made his speech and gone off again. The right hon. Gentleman the Member for Epping (Mr. Churchill), a former Chancellor of the Exchequer, who has just returned from America, has done the same thing; and last night the right hon. Gentleman the Member for Hillhead (Sir R. Horne) also did the same thing. Probably we shall not see them again for months.

In listening to the speech of the hon. and gallant Member for Bournemouth, I did get some satisfaction, because I often get enjoyment from the satisfaction of others, and this afternoon the hon. and gallant Member was quite pleased with himself. He has got practically all that he wants. He has got his tariff policy, and, if only he could get 1d. taken off the pint of beer, he would be quite satisfied and everything would be right. He is now going to harass the Government until he gets ld. a pint taken off the Beer Duty. I should have liked to remind the hon. and gallant Member that, when the last increase of duty was brought in, we on these benches opposed it, but we did not get much satisfaction from hon. Members on the other side. We shall again give them the opportunity of showing whether they mean what they say. We shall have an Amendment to reduce the Beer Duty by id. per pint, because we believe it is wrong to put so high a duty on the working man's beer. That will be a test for a. number of hon. Members who have spoken so well on this point this afternoon and yesterday, and it will be rather interesting to see whether they stand by their principles or not.

Last night the right hon. Gentleman the Member for Hillhead dealt with the question of monetary policy. He certainly brought a fresh mind to bear on the subject, and he went a long 'way towards getting me to try and follow his argument; but when I remembered that the right hon. Gentleman had charge of this particular business for a long period, and was never able to do anything material in regard to it, I began to wonder whether it was because he is now out of office that he was so assiduous in bringing the matter forward. I cannot understand why it is that these gentlemen, immediately they get out of office, begin to follow a fresh line of thought, and why they did not do so when they were in office. I think it is done for the purpose of trying to confuse Members on this side. I confess at once that on the subject of what is called high finance I am entirely lost. I am always trying to find out whether Members on the other side know anything about it, and I am never able to satisfy myself that they know much more than I do. I always notice, however, that they keep drawing these shadows across our path in order to confuse us, so that we may lose sight of what we ought to get, namely, the removal of all these distinctions and questions of high finance, which obscure the real issue. I wish that the right hon. Gentleman the Member for Hillhead had remained last night to hear the hon. Member for Farnham (Sir A. M. Samuel), who ridiculed the idea of raising prices. To raise prices all round means increasing the cost of commodities, and I do not see the slightest economic value in that. I should like to hear the matter further explained by these two protagonists of high finance.

I want to get down to what this Budget stands for. To a certain extent I am bound to agree with the Chancellor of the Exchequer. I do not see he could have done very much more than he has done in the circumstances. It seems to me that he has laid out a long-term policy. I claim him to be one of the smartest men in the House and I think he said to himself, "I am not going to give anything away this time, because I can see four or five years of the National Government"—and I think he was right—"I can hold my policy now. When I get near going out will be the time to give what I have to give." Whatever he has done, he has laid out a Budget which is not open to our criticism except in certain aspects. My criticism will be devoted to the question Where this policy is leading us. He said direct taxation had reached its limits, inferring that later on direct taxation will be reduced—certainly not increased. There are only two other ways, increasing indirect taxation or cutting down some particular service. I cannot think he is going to cut down the interest on the Debt or to touch the defence services. That only leaves the social services. If the social services are cut into, it means an added burden on the poorer people. An hon. Gentleman who spoke from the Front Bench last night, in analysing the position and saying where economies ought to be made, dealt with the social services. I hope the Chancellor of the Exchequer will not follow that line of thought. If he does not, the only other step is indirect taxation.

I claim that this has already gone far enough. The Abnormal Importations Act has imposed £1,000,000 of indirect taxation, and the people will have to pay it. [HON. MEMBERS: "No."] That is my point of view. If not, someone else must explain how it is done. Then we get £27,000,000 from the 10 per cent. Imports Bill. The working-class people have to pay that. [HON. MEMBERS: "No."] I suppose the foreigner will pay it. Then why not make it 20 or 25 per cent., as you have no love for the foreigner? Make the foreigner pay if you can. However, I think we shall have to pay that £27,000,000. To-night we shall get a White Paper which will mean another £5,000,000 of taxation, and there is a further £3,600,000 from the Tea Duty. Does not that go on to the poorer class? The rich people drink tea, but not in the same proportion as working-class families. That is not all. There is the Wheat Quota Bill, which will cost another £6,000,000. That is altogether £42,000,000 of indirect taxation. Indirect taxation has gone too far altogether and, when hon. Members speak about direct taxation having reached its limit, when is indirect taxation going to reach its limit? Indirect taxation means poverty in the home and not getting the ordinary necessities of life. At what point do you intend to stop? Is it when it reaches sheer starvation that it will stop or where? There must be a limit. When hon. Members speak of direct taxation, I wish they would have in their minds thousands of poor homes in which ld. or 2d. is put on to foodstuffs by Bills passed by this Government and recognise what it means to those homes. If you visualise that, in honesty you will say this cannot go on.

While we have wealth in the country—and it is not exhausted by any means—it ought to bear the burden. I claim that direct taxation can be further imposed by means of the Death Duties. It has been said many times that, if you go on with your direct taxation, rich people will take their money overseas. That was repeated last night. The hon. Member for Farnham and I have had the same thing across the Floor and he warned me, "If you go on with direct taxation you will have British money going overseas." Last night he said something different. He said people who had invested money overseas found that their investments were not safe, and he advised them to invest in this country. The tale about money going overseas has gone by the board. This is the best country even yet. I would advise rich people not to drive this point too far. I believe the Chancellor could get more than the extra £10,000,000 that he is expecting from the Death Duties. I claim that we ought never to fall short of £100,000,000. In place of £76,000,000, it ought to be £100,000,000. The man who goes away cannot take it with him and it is going to a good cause—the State. He will be able to look down and say, "I have left my money to a good cause." I have here a report from Newcastle: A committee was recently appointed by the clergy of Newcastle to consider the problem of unemployment and the effect of the operation of the means test. Following is their report, signed by the Archdeacon of Northumberland and six other clergy. 'Our attention was first arrested by the almost unanimous request on the part of the unemployed men that what was really most needed was food. In visiting, we have observed that the mothers are suffering from under-nourishment, particularly in families where there are several children. This is endorsed by doctors in charge of welfare centres, who affirm that long continued unemployment is tolling increasingly on the health of mothers.' There you have an example of indirect taxation and all that it means. The Chancellor speaks of reducing unemployment. I am not quite satisfied on that point but, granted that he is right, at least the attention of the Government ought to be directed to giving the poor a decent standard of life until what you say comes to pass and the tariff policy improves our conditions. I hope that, if and when there is a surplus, the first use that will be made of it will be to restore to the unemployed the full 10 per cent. that was taken from them. They are certainly entitled to it.


Those of us who supported the formation of the National Government some eight months ago have no cause for apology or repentance.

6.30 p.m.

When I compare the situation to-day with what it was in August last, I think the country may well congratulate itself. We were then borrowing £1,000,000 a week for unemployment, the May Committee calculated that we should have a deficit of £74,000,000 this year, we had to borrow £130,000,000 from abroad and the trade balance was £100,000,000 against us. These things have been largely righted owing to the efforts of the people and of the Government. Therefore, though this Budget may be a humdrum one, and although it may be disappointing, I shall give the Government my hearty support. In my judgment, these are almost stupendous achievements to have been accomplished since last year if we recollect what happened then. The' hon. Member who spoke last seems to think that those of us who are not in favour of taxes, direct or indirect, are enemies of the worker. I assure him, as one who has devoted all his life to the interests of the workers, that you can have no improvement in their conditions while taxation, direct or indirect, remains at such high levels. I believe that direct taxation directly concerns the workers. It is absorbing funds which are necessary for employment. The funds are not there to give employment. [Interruption.] Where will you get the 6 per cent. from? The hon. Member must not think these 6 per cents. are earned so easily. No employer will employ labour unless it is commercially profitable to do so. We had a speech just now by a member of the late Government who deplored the fact that wages were declining and that we have unprecedented unemployment. The reason I believe to be because taxation is higher than it has ever been in our history. High taxes mean low wages and irregular employment. I want to draw attention to the fact that the position in which we find ourselves to-day is due to 14 years of extravagance. That extravagance was started by the Coalition Government of 1918. They laid, broadly and deeply, the foundations of expenditure. I remember that in 1920 I had the honour of moving a Motion rationing the Government to £800,000,000 a year. It was seconded by that good Conservative Sir John Marriott. I am sorry that he is not in the House to-day. [An HON. MEMBER: "He is!"] Well, I am sorry he is not on these benches. He is a first-rate economist. Since then we have had a number of General Elections, and at every General Election promises have been made by all political parties which have had the effect of directly increasing the burdens of the taxpayer. The electorate has been greatly enlarged. What is the lesson it has taught? That you must come to the State for everything when you want help. It is State help, and not self-help. My hon. Friends opposite talk of State management, and some of my Liberal Friends talk of State expenditure. I am an unrepentant individualist. I believe, with the late Mr. Gladstone, that we can spend our money more profitably than the Government can spend it for us.

I have been sadly watching the House of Commons, and have come to the conclusion that it is no longer the guardian of the public purse. On every occasion that a Member speaks he demands more money to be spent, and that money must come from the taxpayer. If I said that we must economise, I should be cheered, but if one particularised the economies he would have opposition on every hand. [An HON. MEMBER: "What about the farmers?"] The farmers have done their duty. They have gone through a period of unexampled stress and strain, and I am sorry that hon. Gentlemen opposite have not more sympathy for them. Every modern election—and I speak as an old Member of the House, and as an old Liberal—is a kind of insidious bribery. The time has come when we should evolve some machinery to check the ever-growing expenditure. Although as a Liberal I voted for the Parliament Act, 1909, I am not sure that I should not like to see the reform of the Second Chamber taken in hand with some control over the expenditure voted by this House. I have come to that view after long experience.


You are getting older.


Yes, I am getting older and wiser. I think that economies could be made in Whitehall. We have too many civil servants there. They find work to do. There is a Housing Bill going through Committee upstairs. Is it really necessary, or is it because some civil servants of the Ministry of Health want something to do? The civil servants will always find work to do, and that means money from the taxpayers. We have had new Ministries started. I think that it was about the year 1917 when the Mines Department was started. Has that Department solved a single difficulty for the mines? Did not my right hon. Friend a short time ago speak of the miners' strike and the General Strike of 1926? I admit that the Department is now under very able guidance because a West Country Liberal is at the head of it. I ask the hon. Gentleman the Member for Leigh (Mr. Tinker), who, I understand, has had a good deal to do with mines and mining, what the Department of Mines has done?


Surely, the right hon. Gentleman is not claiming that the strike of 1926 is due to the Mines Department?


I am saying that the Mines Department did not lire-vent the strike, and if such Departments are to be any good they ought to be able to bring better conditions into the industry. We have a Labour Department. It distributes unemployment relief. There is a Transport Department. I really think that there could be a great economy in officials in Whitehall. The right hon. Gentleman the Member for Hillhead (Sir R. Horne) yesterday said that the national income was £3,000,000,000, and that the rates and taxes were £1,000,000,000. We cannot go on bearing this enormous burden of expenditure. We are told—and some of my Liberal friends will, I have no doubt, adduce this argument on the Budget—that imports are paid for by exports. We have £1,000,000,000 paid to rates and tax receivers, and I would ask what commodities do those rates and tax receivers export to pay for the commodities which they consume. I observe that the late Solicitor-General the Member for East Bristol (Sir S. Cripps) is amused. My memory is a pretty long one, and I almost wonder what sort of a, "throwback" he is.


To a grandfather who was a Chartist.


I remember a certain hon. Gentleman who at one time sat on those benches. He used to deliver most powerful die-hard Tory speeches, and his name happened to be C. A. Cripps, and now, I think, he is Lord Parmoor. Therefore, I can always think that there is a little streak of something in my hon. and learned Friend which I do not understand. We have the new Import Duties. I do not like them. I hope that my hon. and right hon. Friends who believe in tariffs will not be disappointed, but I do not think that we can do without the revenue from them this year. We shall have acute controversy, I understand, in the Government itself. I would ask my Liberal friends how they would raise the money necessary for the expenditure of the country without those Import Duties? I also remember that in the last Parliament some of my Liberal friends urged Lord Snowden to expend more money. I did not take part in that insistence myself. If the money had been expended, naturally it would have to be met by taxation. I am sorry to note that all my Liberal friends are not on the bench, but I would say to any of them present, let us try during the period of this Government to find points of agreement rather than points of discord. If it is to be a National Government, we must do that. I emphasise the suggestion to my hon. Friends, because there are some of them who would not have been in the House of Commons had they not had the support of the national vote at the polls.

The Chancellor of the Exchequer is optimistic. He talks about the obstinate millionaires not dying, and hon. Gentlemen opposite say that we can get any amount of money from Death Duties. I do not believe that the millionaires are there to die. I do not believe that there is a multiplicity of these large fortunes. There has been a great fall in the value of securities, great landed estates have been broken up, and I really do not think that the Chancellor of the Exchequer will get the £76,000,000 of Death Duties. Take the Stamps Account. Stamps depend upon Stock Exchange activities. The Stock Exchange was not very active yesterday, I understand. This is where I part company with my Socialist friends. [Interruption.] I have been parted company with them for a long time. They think that you can go on indefinitely increasing taxes.

The estimate of the Chancellor of the Exchequer is that Income Tax will be down by £38,000,000. I shall be surprised if the drop is not greater. It says in this morning's papers that the great P. & O. Steamship Company has passed its dividend. There will not be much tax got out of that. During the past year, and especially in the last two or three months, we have had the greatest patriotism on the part of the taxpayers, but I would say to the Government that they cannot go on banking upon it. It is too much to ask. I was in my constituency the other day and a chemist who had just paid his Income Tax said "Well, I have paid my Income Tax, but it is very much like subscribing to a church or a bazaar. I cannot keep on doing it." I make that suggestion to the Government.

I will put two other points to the Government. I will not detain the Committee on the question of War Debts, although I feel very strongly about them, but I hope that before any agreement is made to pay any more War Debt by this country the House of Commons will have an opportunity of considering the matter. The other point I wish to put to the Financial Secretary is that I have not heard much about the repeal of the Land Taxes. I hope that it will be effected in the present Budget, but the Chancellor of the Exchequer did not mention it in his Budget speech.

When I deal with the fall in prices hon. Members opposite sneer at the farmer. Let me put to them what the farmer has gone through. In this House in 1920 we passed the Agriculture Act, which guaranteed the farmers a certain price for their product, while guaranteeing the labourer a certain wage. That was excellent, but the next year the Act was repealed. Assuming that a farmer—and there were many of them who did it—upon the strength of that Act bought his holding. Assume that a farmer had £1,000 of a mortgage on his farm, on which he paid 5 per cent. That represents £50 a year. Seven years ago he could have paid that rent on 150 bushels of wheat. To-day it requires 250 bushels. Seven years ago it would require 15 sheep to pay that rent; to-day it requires 25 sheep to pay it. I ask hon. Members to think of those men who have suffered from the great fall in prices, while their fixed charges, such as wages and tithes, are still there.


It is the same for everybody.


I would ask the right hon. Gentleman to think of the producers. When I am talking of the farmers, I am talking of the labourers as well. The labourers are not being employed to-day. That is one of the saddest things in the situation. Agricultural labourers are out of work. Some of the finest men cannot get work because the price of the product is so low that the farmers cannot afford to employ them. I know what I am talking about. Let hon. Members go into any country district and they will find that agricultural workers have great anxiety over their future. I voted, and other hon. Members voted, for a Wheat Bill and other Measures for the agricultural industry. That was not for the farmer alone but for the agricultural worker. In thousands of instances these men have had to work longer hours at lower wages or be deprived of employment altogether.

I am glad that the Chancellor of the Exchequer is taking steps to establish an Exchange Stabilisation Account. I hope that in handling that account—of course, we do want to prevent the foreign speculator getting at the pound—he will take into account the advice of business men, and not rely wholly on the Bank of England.


Hear, hear!


The hon. and learned Member and I agree upon that matter. I do not regard the Bank of England as being an omnipotent deity in these financial matters. They have made many mistakes in the past, but I am not sure that if more directors were appointed by right hon. and hon. Members opposite that they would not make many more mistakes. I would not like to see that. I do ask the Government to go outside the Bank of England for their advice on this matter, and I would ask them, finally, to remember that we certainly cannot sustain on low prices the present heavy taxation and debt charges.


We have listened with pleasure to the speech delivered by the right hon. Member for South Molton (Mr. Lambert). He has expounded very sound doctrines to which the majority of the Committee can subscribe. I will not follow him in attempting to discuss the Stabilisation Account. There is a special Resolution dealing with that subject, on which the details might more conveniently be discussed. I will only say that there are many hon. Members who feel great anxiety as to how this Fund is to be used and, more particularly, who is to be responsible for using it. My right hon. Friend addressed himself to the remarks which fell from the benches behind me on the subject of the Income Tax, and he very properly said that the Income Tax is now so high that the taxpayer is over-taxed and the tax does not yield so much. There is no elasticity and resiliency in the tax. In fact, it is falling in its yield year after year. That must naturally be so. It is so also with regard to the Death Duties. As the State takes so much in respect of the estates of those who die, whether they be large or small, they are scattering the capital which somebody has saved. If the Death Duties are to be maintained in their yield, that capital must be replaced. How can anyone replace capital having regard to the rate at which it is being extracted by the State and put into the ordinary current accounts of the year? We, have to bear enormously high Income Tax and Surtax while dividends and earnings are falling in all directions.

The Income Tax payer has done admirably, but his efforts cannot be maintained at the high pressure of the past year. The Chancellor of the Exchequer is more optimistic in his expectations of the yield of the forthcoming Income Tax than he is in his estimate of the yield from Death Duties. You cannot, for instance, get the same yield twice from a millionaire's estate. On the first occasion the 'amount of tax taken may be 50 or 60 per cent. What, therefore, is left for the tax gatherer on the next occasion? The financial situation has been saved by the new Import Duties. Even those who oppose these duties will acknowledge that fact. We are dealing with the finance of Viscount Snowden's last Budget, the last half-year of which has ended. It has been carried forward into next year, with the addition of the increased Customs Duties and the reimposition of the Tea Duty. In regard to the latter tax, it is a source of great satisfaction to many of us that the imposition of the Tea Duty gives an opportunity for a marked preference for Empire tea. The other changes in the Budget are not of great importance.

The Committee will expect me to say something on the subject of the Beer Duty. [HON. MEMBERS: "Hear, hear!"] I am glad to hear from hon. Members that I am not mistaken. The beer drinker, who ultimately pays the tax, is overtaxed, just as is the Income Tax payer, and that is plainly shown by the falling off in the revenue. Viscount Snowden estimated that the increase of 31s. per standard barrel would give an increased yield at the end of the financial year of £4,500,000. As a matter of fact, only just over £3,000,000 have been collected. The Estimate for the current year is for an increase of only £4,500,000, whereas Viscount Snowden's Estimate was that in a full year the 31s. duty added to a standard barrel would yield £10,000,000. Therefore, the Chancellor of the Exchequer 'and his advisers are expecting a further fall in the consumption of beer, if those figures mean what they appear to mean. Clearly, this increased taxation is destroying a source of revenue. The beer drinker and those connected with the business are becoming angry over this taxation. They think that they have been penalised and selected to bear burdens which they are not able to carry, while other people who consume alcohol in other forms have been allowed to escape, or to pay very much less. If the Chancellor of the Exchequer wishes to preserve his revenue and not lose one source which has been very valuable and is to some extent valuable to the State, he may be obliged to consider taxing cider, which is manufactured for sale and sold in very large quantities. When one examines cider offered in bottles for sale, one finds that the alcohol content is four-fifths that of a standard barrel of beer, measure for measure, and yet this four-fifths of alcohol escapes taxation.

There is also an increasing consumption of foreign wines which are fortified with spirits. The reason for that is that a large number of people are going to get their alcohol in some form or another. If you over-tax one form of alcohol they go to another, and they find that they can get more alcohol in some of these cheap foreign wines, which are fortified with spirits, or from some compounds called "Bran-Vin" and some others with names of that kind. I have never been able to understand—and I am speaking for many inside and outside this House —why beer should be specially selected for penalisation, and why it should be criminal to produce and sell beer while it is the correct thing to produce cider which contains four-fifths of the quantity of alcohol that is contained in beer. People outside are beginning seriously to resent this form of taxation, and it is a cause of great disappointment that the Chancellor of the Exchequer has not seen his way to reduce the excessive taxation on beer. Previous to the last increase in taxation, beer was over-taxed and the revenue was inclined to fall. One was hoping that the present Chancellor of the Exchequer would have seen his way to reduce the taxation.

7.0 p.m.

It is no use telling people that he cannot do it because the state of the national finances does not allow him. The amount at stake is not so large that it could not have been replaced from another source. I may have to take part in a debate on this subject on a future occasion and to raise it again in this Committee, and I shall only add that it is not only the beer drinkers who are suffering but the farmer, who feels the effect of the tax in the decreased consumption of his barley, and the hop grower, who feels it in the decreased consumption of his hops. All the trades that contribute to this industry are being penalised. The Chancellor of the Exchequer, too, is losing a substantial sum in Income Tax and is having to pay unemployment benefits on account of the unemployment caused by this excessive taxation.

With regard to the subject raised by the right hon. Gentleman who has just spoken, the attention of the Government has been rightly drawn to the strong and growing feeling in the country that further economies must be made in the national expenditure. I am not in any way decrying the efforts of the Government. They have made a beginning, but what we are asking is that these efforts shall not be desisted from until they have produced really striking and palpable results. We all know that we are spending too much. Surely it is not beyond the capacity of the Government to go through every Department of Government with a small tooth-comb and to discard ruthlessly from the Estimates everything not absolutely necessary. My right hon. Friend suggested various directions in which they could make substantial economies. It is not often that I criticise or question the general proceedings of the Admiralty, but there is one matter on which they are most decidedly wrong, the enormous staff which they have retained since the War. Then there is the Air Ministry. I believe that we are still the only nation in the world which has an Air Ministry with all the costs of a great Department. Owing to this arrangement a great many services are duplicated, which might well be merged with those of the Army and Navy. There are probably some millions of pounds to be saved in that direction.

I would reinforce what my right hon. Friend has said about every large Government Department spending money. Many Departments are required to carry out past Measures of this House, which have become obsolete or of less importance, yet we go on spending money and extending the Civil Service. It is an enormous burden not only because of the expense of salaries and wages but because of the cost of their operations to the State. The Road Fund, for instance, is a subject that might be inquired into very closely. Very large sums are collected for the Road Fund and are largely outside the control of the House. One sees up and down the country most wasteful expenditure on roads, which very often amounts to great extravagance. There is not only the maintenance of the roads, but the cost of the changes made in other directions, changes which are not required for the traffic, extravagant widenings and improvements, all of which cost money, all of which employ officials. In many cases, too, these works cost the ratepayers as well as the taxpayers money.

The Chancellor of the Exchequer has had to face a most difficult year. We, who have had some experience in watching public finance, recognise those difficulties to the full. We do not blame him for them or criticise him for them except where we feel it to be our duty. Looking back on the state in which the finances of the country were left last September, the change from then to now is most satisfactory. Still more needs to be done, and the utmost vigour needs to be applied to the management of the national finances, and to the reduction of expenditure and taxation. We expect much from the new Customs Duties. We recognise that the Chancellor of the Exchequer has great difficulty in estimating what they will bring in, especially as there will be changes made in them on the recommendations of the Advisory Committee which the Government have set up. Although I have complained of its details, I support my right hon. Friend's Budget, subject to the complaints and criticisms which I have made.


I do not propose to detain the Committee for any length of time unless my enthusiasm carries me away in a manner I do not anticipate. I shall reserve my comments on the Budget statement for the Debate on the emergency Budget that will probably be necessary about September. I should like to associate myself with one point made by the hon. and gallant Gentleman who has just sat down. There seems to be a very general feeling in the House that the penny, which was imposed on beer in the recent Budget, has had a very deleterious effect on the revenue resulting from beer and that that tax ought to be removed. I am not a beer drinker; I have personal habits just as deleterious as the consumption of beer. I do not agree with the view that the reduction in consumption is solely, or even largely, due to the imposition of the last penny of tax. The serious fall in the purchasing power of the people is a more important factor in the reduced yield of the Beer Duty than the last penny of tax. I hope and believe that the spread of greater sobriety and the offer of alternative beverages and alternative entertainments are also factors which are producing a diminution in consumption.

I would not like the hon. and gallant Gentleman to believe that the removal of the recent penny tax would immediately result in a tremendous expansion of consumption, because I do not think it would. However, as there is a very wide and strong opinion on this subject in all parts of the House, an opinion which, if carried into the Lobbies, will provide very considerable embarrassment for the National Government, I shall associate myself very actively with any movement of that description. I shall be very much surprised if in the long run there are many of the critics and rebels found in the same Lobby as myself. I have noticed that the voice of beer is always very loud in this House and always very potent. I want to say a word on behalf of those who indulge in my special vice, namely, the consumption of tobacco. It is very seldom that anyone speaks up for the tobacco smokers. There are probably far more tobacco smokers in this country than there are beer drinkers. In these modern and advanced days both sexes engage in the consumption of tobacco and it makes a very handsome contribution to the annual revenue of this country. Yet, though we are told that the cost of living is going steadily down, the cost of tobacco to the ordinary man is 100 per cent. higher than it was in pre-War days.


What about the coupons?


I am not going to start acting as an advertising agency for any particular brand, but I do recollect that in pre-War days the 3d. packet of cigarettes contained its little additions to the actual cigarettes. I urge the Chancellor of the Exchequer that, when that great day comes—it may be said, as it is about Socialism, that it will never come in our time—when the Chancellor of the Exchequer can remit taxation from somewhere, to remember the millions of inoffensive cigarette smokers in this country who are enemies to nobody but themselves. I have made these remarks, which I do not want the Chancellor of the Exchequer to take too seriously, because the way in which this nation collects its necessary and annual revenue is always a matter of humour to me. To think that a great nation keeps itself financially solvent by taking pennies from the people going to football matches, halfpennies from the people going into the pictures, pennies from people drinking a glass of beer or smoking cigarettes. It is more the economics of a ragshop than of a great nation. Think of the motley way in which we collect all these taxes, and the attempts of this and that section to get a little taken off which they think is burdensome and put on to someone else. To me it is more matter for humour than for serious consideration, and if I were to examine these various taxes in detail and talk about the unfair incidence of this tax as against another I should think I was wasting my time.

The most intelligent proposition that has been made since the War to meet the revenue problems of this country was the proposal made by the Labour party in the latter years of the War for a levy on capital. They tried it out at one election and did not win, and then dropped it like a hot brick. It was the one sound and intelligent proposition, a big cut once and for all on capital values, which were inflated at the time, on personal incomes which were inflated in those days and, on the value of property, which was inflated. To-day after 14 years of national work our national capital has deteriorated to a far lower point than it would have been brought by a big immediate cut of a capital levy imposed at chat time. You could have the reorganisation of your national life and an entry into a new era of prosperity on a decent economic foundation. During my 10 years in this House I have never yet seen a Chancellor of the Exchequer who has not been struggling with hand-to-mouth problems. I have not seen a Government that has been able to cast off the irritating preoccupations of day-to-day problems, able to look forward with some statesmanlike plan for the development of this nation.

I listened with great pleasure to the speech of the right hon. Member for Epping (Mr. Churchill). Everyone who was fortunate enough to be present will agree that his effort to-day was masterly of its kind, and particularly in his denunciation of Lord Snowden's Budget of 12 months ago. He was on the Opposition side at that time and practically his was the only voice raised in this House in praise of that Budget. I sat up there, and I denounced it. The right hon. Gentleman the present Chancellor of the Exchequer denounced it, as did other speakers, but the right hon. Member for Epping threw bouquets. I have refreshed my memory by looking up the Debate of last year. This is what the right hon. Member for Epping said: I could hardly believe my ears as I heard the Chancellor of the Exchequer unfold a long series of proposals which were virtually an acceptance, in fact and in form, of the financial measures and expedients which I devised and practised, and which he derided and condemned — Like his predecessor"— His predecessor was the right hon. Gentleman himself— the right hon. Gentleman was confronted with a financial emergency which he hoped would be of short duration … Even the very form in which these accounts are now presented to Parliament in the exclusion of the self-balancing revenue and expenditure, in the separation of the Sinking Fund from the ordinary expenditure of the year, even down to the intensified blue colour paper for the Financial Statement—in every step the right hon. Gentleman has followed meekly, and, I might almost say, reverently, those very footprints which the last four or five years of his life have been spent in abominating. To-day I do not have to say 'Ditto to Mr. Burke.' I am even more fortunate. Mr. Burke has said 'Ditto' to me, and I need not at the outset confess that these spontaneous tributes are gratifying to me in my present loneliness." [OFFICIAL REPORT, 29th April, 1932; col. 1658, Vol. 251.]


He said he was taken in.


I know he said that he was taken in, and as a get-out it was as good a get-out as was available. The hon. Member for Aberdeen East (Mr. Boothby), who was closely associated with the right hon. Member for Epping in his more official days, will realise that the man who was taken in in 1931 is not immune from the same danger in 1932. He believed that the Budget of last year was a safety Budget, just enough to carry us through, no serious disturbances, enough to let the business world bring about that great revival which they have promised us now for 12 years, but which so far has not eventuated. Is not that very like the general motive of the present Budget? The one bright feature about the speeches of the right hon. Member for Epping and the right hon. Member for Hillhead (Sir R. Horne) is this. In their previous contributions to Budget Debates they have told us exactly what ought to be done and exactly what the results would be; to-day they admit a problem for which they cannot produce the precise solution. They look to Geneva, to Lausanne, and to Ottawa. One of them looks towards New York with hope, and the other towards New York and Washington with some suspicion. He thinks they have too much gold and that as long as they have too much gold they will not be inclined to be particularly friendly.

We admit very readily that a world solution will have to be found for the immediate problems which we are trying to tackle, and I want the Government to consider very seriously whether attempts to get a European solution, or an Empire solution, or an attempt to get a purely insular solution, as we are trying to do to-day, may not work against one another and all work against the possibility of one solution. I am as modest as the two ex-Chancellors of the Exchequer and I am wondering whether a genuine courageous effort to get a world solution would not bring a speedier and more lasting result than attempts to get a partial solution for one bit of the earth's surface, for one section of the world's population. The right hon. Member for Epping always dates his misfortunes back to the outbreak of the General Strike in 1926. He talks as though that were some damnum fatale, something that an unkind providence threw down on the shoulders of the good man Christian struggling up the hill Difficulty.

I think that the general strike was a tremendous catastrophe—[HON. MEMBERS: "Hear, hear!"]; perhaps for different reasons than those which actuate the "hear, hear." It frightened the leaders of the Labour movement. It turned them from Socialist revolutionaries into what we were when we were in office. But the right hon. Gentleman, in looking to the general strike, must remember that it was the greatest failure of that Government. The fact that the strike took place represented failure, and he has to remember that his return to the Gold Standard in 1925 was not completely dissociated with the general strike of 1926. The interest of the general strike was this, that while those people who had most political influence and power believed that prosperity would be restored to this country along the lines of economic deflation and increased privation of the people at the bottom, a belief which is still prevalent, there was a belief, perhaps not very clearly formulated but very definitely held, that the prosperity of this country would be restored, not by increasing the privation of the masses, but by an increased ease of life, a higher standard of existence, and by increasing the labour power of each individual.

7.30 p.m.

The right hon. Member for South Molton (Mr. Lambert), who spoke this afternoon, went round the various Government Departments showing that economies might still be made in Whitehall, that there were many people who could be dispensed with, although the head of each Government Department tells us that they are now cut down to the bone. But suppose you could turn out several thousand people who are holding Civil Service positions on to the streets. What do you want them outside for? What are they going to do? What is the right hon. Member for South Molton going to do with thousands or clerks from Whitehall if they are put on the streets? He is present, and I ask him. In his pursuit of economies, in his cutting down of staffs of public services, what is he going to do with the people whom he turns out? They are doing jobs in Whitehall now. Is he going to send them up to the Clyde to build ships? Is he going to send them to Lancashire to weave cotton? Is he going to send them to Northumberland and Durham to take coal? Or is he going to send them down to Devonshire to plough the fields?




But the right hon. Gentleman has told us that his friend's the agricultural labourers of Devonshire are unemployed just now. Is he going to suggest that Whitehall clerks should take their place? Along that road of economy there can only be increased privation for the people and increased difficulty for those who are trying to run industry. I did not intend to get on to this subject at all, but I want to say thus further: I do not believe there is yet a realisation of the nature of the crisis that this country, not separately and distinctly but this country in common with the rest of the world, is facing. I see regularly in this House and outside it people with an optimism that it is quite pleasant to see but which would be quite misleading to foreigners, seizing on any little symptom that seems to be an indication of approaching prosperity, and exaggerating that symptom out of all proportion to its consequence in the economic life of the nation.

I would remind the Chancellor of the Exchequer that one of his colleagues who is in this Government and was in the last, only a month before the crisis of last August told me in strictest confidence that he had it on the soundest information that at last we were round the bend, and that we were about to go up, not too quickly at first but steadily up, on a rising tide of prosperity, until we reached a boom such as this country has never known before. There are Members of the present Government who, perhaps whistling to keep up their own courage to some extent, go to the dispatch box here and get hold of some very minor fact and say, "This is the new dawn. Someone has declared a dividend of 5 per cent." I do not believe it; I never have believed it.

I hate playing the part of Cassandra. I have no qualifications, except perhaps external ones, for the part, but I do say that there are worse times in front of this nation, more critical periods, and that better times are not coming until far greater sacrifices are offered than have yet been made, and until new conceptions of the type of life that we ought to be living and could be living at this period of the world's history, have penetrated more clearly and fully into the minds of men and women generally. There is the shocking paradox of the present time, the paradox that is now being realised by most of us, the paradox of tremendous capacity to produce, wealth increasing every day, accompanied by diminishing standards of life for the big mass of the people, at one and the same time, the menace and the opportunity for men and women who are big enough to realise the greatness of the possibilities of the age in which they are living.

I hope that before months have passed a new spirit, a new mood, a new confidence is going to develop in this land, a realisation that in these days a great nation can never be great and be founded upon the starvation of a big proportion of the population. I apologise for the duration of my remarks and for the fact that, they have been general rather than particular. But I do believe that the events of the near future will compel all of us to be more serious, and to devise bigger plans, bigger schemes, bigger ideas, and to prepare for bigger sacrifices than the proposals that the Chancellor of the Exchequer has laid before us.


The House will, I am sure, extend to me that indulgence which is usually given to those who first address it. It is with a certain amount of timidity that I rise to speak on an occasion such as this, especially since, although agreeing with and supporting the Budget as a whole, I want to say one or two words of criticism. The Chancellor of the Exchequer has seen fit, under the present economic conditions, to give us a very carefully and very cautiously balanced Budget. In its larger aspects I suppose one can but praise the statement which the Chancellor made on Tuesday, but there are one or two items to which I would draw attention and in connection with which I hope that the right hon. Gentleman can show a little more consideration for our people and for people in other parts of the Empire. In the first place I suppose most of us would like to congratulate him on having reimposed the tax on tea, but I must say that I think it is a pity he could not have seen his way to use at any rate part of the revenue derived from that tea tax for the purpose of reducing the tax on beer. Tea is but a beverage, just as beer is, and I suppose that it is quite feasible to say that if one beverage is taxed in all fairness the other beverage should be taxed. But the main point is that beer is overtaxed. In fact I think it bears such a heavy burden, and that the tax forces up the price so that the ordinary poor man cannot afford to drink it.

If it is true that the consumption of beer remains at a fairly steady level, I suppose that the Chancellor's fears that he will lose revenue if he brings about a reduction in the tax on beer might be fully justified, but I imagine that he is basing his opinions on the experience of last year. I wonder if he clearly realises the fact that the habits of British people are very very slow in changing, and that we have not yet seen the full effect of the increased price on the consumption of beer. I maintain that the consumption of beer will show a very rapid decline this year. This tendency, no doubt, will be exaggerated by the fact that the Chancellor of the Exchequer has not seen his way to restore any of the cuts in pay and benefits, and has not been able to relieve the Income Tax payer. In the end I believe that the revenue would stand to gain rather than lose by a reduction on the tax on beer.

Let me turn back for a moment to the Tea Duty. As I have said the reimposition of this duty is an act of justice as between one class of drinker and another. But it means much more than that. It means that we can give assistance to our Empire and, what is more, to the great dependency of India. Consequently I am rather depressed that the Chancellor has not seen his way to provide that there shall be no tax on Empire-grown tea. This is a time when we should be striving to get a freer freedom of trade within the British Empire. It seems a pity to begin now to erect unnecessary inter-Imperial tariff barriers. In my view it would have been far better if 6d. had been put on foreign tea and if Empire tea had been allowed to come in free of duty. Moreover, I feel that in any case this special Empire concession should have been accompanied by certain reciprocal arrangements for the furthering of freedom of trade within the Empire.

The value of the tea preference both to India and Ceylon is almost incalculable. India could, and I am certain would, have given us great reciprocal concessions if she had been approached beforehand. Ceylon is a self-governing country. She has tariff barriers, but at the moment she gives no concession whatever to us. I do feel that it was the duty of the Secretary of State for the Colonies to have taken these Budget proposals into account, with a view to gaining concessions and advantages for the manufactures of this country in the markets of Ceylon. I feel that we could have done that some time ago, but it is not too late yet to take steps in that direction before the Resolutions now in front of this Committee become law. I hope that the Secretary of State for the Colonies will give serious consideration to that point of view.

Then we have the sugar industry and it is gratifying to see that, not only has assistance been given to the beet sugar industry in this country, but that the British West Indies stand to benefit by increased preferences on Colonial sugar. I am convinced that the whole population of the Empire are anxious to see us develop our resources to the fullest possible extent and I aim very glad to see that we are at last making a start with sugar. True, it is only a, small start and I have great fears that the duties will not be sufficient to enable us to make the, fullest possible use of our requirements within the British Empire. Nevertheless, the principle is there and it only remains now for that principle to be extended. The Committee may rest assured that Empire countries will respond to encouragement and that if this policy is extended great strides will be made and remarkable new developments will take place in Empire trade. The benefit arising from the prosperity of those countries will be felt in every factory and workshop in this country.

It is right too that this policy should be applied first of all to the oldest of our Colonies. The soil of the British West Indies is rich and the crops of that country ought to be profitable. Yet the productive capacity of those islands has been completely ruined through the lack of markets. The United States denies entrance to all sugar coming from our Colonies in favour of the sugar from Cuba and Porto Rico. These American sugar-producing islands not only have the advantage of sheltering behind these markets, but are at the same time able to dump all their surplus sugar into this country in competition with the British West Indies. There are limits to the consumption of sugar even in the United States and consequently as I say those countries dump their surplus here to the great detriment of the British West Indies. If that state of affairs continues it must end in the total ruin of those islands. On the other hand Jamaica and the Barbadoes cannot dump their surplus sugar into the market because they are met by high tariff barriers.

I repeat that in my view it is essential that the Secretary of State for the Colonies should proceed with the utmost of possible speed to get the Colonies of this Empire into a single Customs union with this country. In so doing he would not be walking in a new path. France herself has set us an excellent example. The whole economic policy of the French colonies is based on the idea of a Customs union. We must bring Trinidad and Jamaica into a Customs union with us just as France has brought Martinique into a Customs union with herself. It is true that a certain amount of revenue would be lost if these different preferences on duties to the Colonies were abolished but that loss would be amply restored to us in the increased prosperity of those Colonies and the increased commerce in the manufactures of this country. I appeal for courage in this matter of Colonial policy. Let us have from the Government just this little leaven to lighten that too solid mass of dough which the Chancellor of the Exchequer gave us to digest on Tuesday.


The Frome division of Somerset is one which has sent good Members to the House of Commons and the family from which has sprung the Noble Lord who has just addressed the Committee, is one which has in every generation found great servants for the State. I am sure that the Committee would wish me to congratulate him upon his admirable maiden speech, which showed that we may look forward on many other occasions to contributions from him of great value to our Debates. During the afternoon a very wide field has been covered in this Debate and the hon. Member for Bridgeton (Mr. Maxton) covered as much as most in the characteristic oration to which he treated us. I wish to get back, however, to the details of the accounts of the year but I should like before doing so to make one remark regarding the Resolution which we are discussing. It is strange that no one should have mentioned up to now the fact that the wording of this Resolution is going to limit considerably our Debates on the Import Duties when those Duties come up for discussion. This has been very cleverly done on the part of someone—whether the Chancellor of the Exchequer himself or his expert advisers I do not know—but I understand that after the passage of this Resolution it will be impossible, in future Debates, for a private Member to move for example any new Clause which might affect the new tariffs, or for a private Member to move to put anything on the free list. Our Debates are going to be restricted to the Resolution which was put through on the first day of the Budget discussions. That is one more milestone along the road of depriving private Members of their full opportunities of debate. In any case that is my reading and the reading of several of my hon. Friends of what this Resolution implies, and I hope that the Chancellor of the Exchequer will give us some words on this point before he closes the Debate.

With regard to the general Budget, I think if we had been sitting on the other side of the Committee the comments which would have been made by some of my hon. and right hon. Friends including the Chancellor of the Exchequer himself with regard to the proposals of the year, would not have borne printing. I remember someone saying in connection with one or other of the Budgets of Lord Snowden that he simply went to the Treasury, called for the figures, saw what was the deficit which had to be met and said, "Clap it all on to the payers of Income Tax, Surtax and Estate Duty." The whole thing could be done on a half-sheet of notepaper, and then he came down to the House of Commons and explained it in a half-hour's speech of considerable acidity to everybody within his hearing. The present Chancellor of the Exchequer apparently has done much the, same thing except that his speech was more in sorrow and grief; it also lasted considerably longer and was more interesting to listen to.

Two right hon. Gentlemen who have spoken within the last hour have mentioned the subject of economy and I propose to direct the attention of the Committee seriously to that subject. The Budget I leave for a moment. It is a sombre and grim story but it is merely the account of the year's expenditure and income, and most of the attention has been directed to the source from which the income is derived. Far too little attention has been paid to the governing trouble—the amount which has to be found in the way of expenditure. I know that I am greatly daring in what I am about to say. Practically no one thoroughly understands the accounts of this country. The Estimates and Revenue Accounts and all the rest of it are, without years of study, incompre- hensible to the mass of Members and I feel that Agag's steps were elephantine compared with the delicacy with which I shall have to tread in dealing with the subject. But there is no doubt that the mandate of this Government and those who support it is economy. Those who were in the last Parliament and who have to face the electorate as a result of the second Budget last year know all about that. The economies had been forecast and we had to stand the brunt of the attack, because we were the people who had voted for them. Other people perhaps could "get away with it" and when cross-examined could reply "If you had been in the House would you have done so and so?" They were able to give the soft answer but those of us who were here in 1929 had actually voted for these cuts and drastic economies.

The Treasury used to be called the watchdog of the national finances but I am afraid that in the last two years there is ample evidence that it has tended to connive at expenditure if it has not actually been a spending department. But I hope that it is the duty of someone in the Treasury to keep the May Report on a table and read it once a, month and see how ordinary administration is being dealt with in comparison with the recommendations of that Committee. It is always said, and has been said in this Debate by the right hon. Gentleman the Member for South Molton (Mr. Lambert), that when you talk about economy people always say "Where are you going to economise?" Fortunately, we have now a book of reference. We have the May Committee's Report and, what is even more important, the Government's White Paper of what they intended to do as a result of that report. Staffs were mentioned by the right hon. Gentleman. Here I have a curious set of figures chosen at random concerning three important departments. It will probably surprise most Members of this Committee to know that the Ministry of Agriculture has a staff of nearly 1,500 which costs over £500,000 a year. I do not suppose there are two Members here who could give any reason for the existence of that vast staff. The Board of Trade has a staff of 1,700 and a salary bill of over £500,000. Curiously enough the Board of Education which one would expect would have to do much more work both at headquarters and in inspection all over the country compared with the other two departments I have mentioned has a considerably smaller staff. It has a staff of 1,300.

Is it not remarkable that we pay the Board of Trade £500,000 a year in salaries alone, to keep 1,700 people, and the Ministry of Agriculture £500,000 a year to keep about 1,500, and then, when it comes to try to reach a comparatively simple decision which concerns those two Departments, with regard to sugar, it is found necessary to get an outside body to do it. These are the things which people mean when they say that there ought to be some cutting down of the Civil Service. For example, I am sure that the Chancellor of the Exchequer himself does not know, because it is a matter of detail, and would probably be surprised to know, that the Ministry of Agriculture spends in the travelling expenses of people going about this country almost as much as all our diplomats and consuls all over the world, including the Far East. It is astounding, but so it goes on. If you read the May Report you will find recommendations which we shall have to ask about later, about shorter holidays, longer hours, whether the retirement age of the police will be put back, whether marriage gratuities will be given and so forth.

8.0 p.m.

There is an enormous field which one can only hope the Chancellor keeps on investigating, because if there was one thing that was disappointing in his Budget speech, it was that the actual word "economy" did not appear until his last sentence, when we were told: Hard work, strict economy, firm courage, unfailing patience—these are the qualifications that are required of us."—[OFFICIAL REPORT, 19th April, 1932; col. 1439, Vol. 264.] We agree, but when he was speaking earlier—and this is where I am perhaps being rash—he told us that there had been reductions of a total of nearly £79,000,000, instead of the £70,069,000 which had been anticipated in September, and anyone who had not gone into the figures either before or since would have assumed from that, "Is not that splendid? We have actually saved £9,000,000 more than we set out to save last September." That is the ordinary meaning of those words, but I would ask the Chancellor if his advisers and anybody else in the House who is interested will get the Memorandum on what the Government was going to save, the Memorandum which was the foundation of the various economies in the autumn, the Memorandum which indicated the economies which we had to defend at the General Election, and the economies which, when we were, quite rightly from their point of view, attacked by innumerable people because we had found it necessary to make cuts in their salaries and wages, were the economies regarding which we said, "They are all being taken as a whole; we are sorry about you, but it is all part of the scheme."

If the right hon. Gentleman and his advisers will look back on that Memorandum, they will find that there it was definitely stated:

"The full saving for 1932 is as follows," and you have items totalling £70,000,000. Such calculations as I have made indicate to me that in regard to that particular £70,000,000 of saving to which the Government gave its assent, there was no evasion or qualification. There is nothing about "It is estimated that we will save," and so on. That field is a comparatively narrow one, because I am, for the purposes of my argument, excluding altogether unemployment insurance, on which they saved a great deal more, because the figures of the unemployed never reached the figures anticipated at that time, thank goodness, and because it is almost impossible for anyone to follow through what might have been the reductions in salaries and pay. If you cut those items out of the £70,000,000 economies which they set out to make, you leave somewhere about £30,000,000, in which I estimate we have failed to save nearly £11,000,000. There is a short fall on that estimate in the region of £11,000,000 out of the total of £70,000,000.

I will give the Committee one or two examples, and the first is the Defence Services themselves. It distinctly says in the Memorandum: A total reduction — will be made in the Estimates for the Defence Services in 1932 of £8,600,000. If you take the net decreases in the three Services' Estimates in that year, you cannot make them total more than £5,270,000, so that you have a short fall there of about £3,500,000. Under Education again, you have a definite statement in the Memorandum: The saving in 1932 will be £10,300,000. It does not say "is estimated," but "will be." The concessions which were made on teachers' salaries, the difference between 15 per cent. and 10 per cent. on their cut, I understand, represents about £2,250,000, and if you take that from the £10,300,000, that makes about £8,000,000 as the sum one would have expected to save, but the net decrease on the Board of Education Vote is £6,371,137, so you get a short fall of over £1,750,000 on that Vote. So it goes on, and the figures are very interesting. With regard to the Ministry of Health, it quite definitely states in the Memorandum: The savings to be secured on these votes will amount to about £1,250,000. There is the saving word "about" there, but the actual net decrease is in fact £315,000, which is a very long way from "about £1,250,000." Under Agriculture, there is a short fall on that Vote of about £250,000. On the Forestry Vote there is a short fall of a like amount, but the Memorandum says: The expenditure of the Forestry Commission in 1932 will be reduced by £478,000. Actually, it is reduced by £218,000. I am bringing these facts forward because those of us who plead the cause of economy are always asked, "Where would you economise?" Here I have a text, not from the present Government, but from the previous National Government, of which the right hon. Gentleman the Chancellor of the Exchequer was a Member, and he is therefore largely responsible. Here are definite cases where we understood in September that there would be economies, which have not been carried out. I will give a couple more. Under the Colonial Development Fund the saving was to be £250,000. It states: The grant to the Colonial Development Fund will be restricted to £750,000 next year (saving £250,000). As a matter of fact, it is true that it has been restricted, but to £700,000 and the saving is £50,000, not £250,000. When you come to the Unemployment Grants, in the last field with which I will trouble the Committee, the saving is there esti- mated at £500,000. The Memorandum says: This … will result in an estimated saving to the Exchequer of £500,000 in 1932–33 as compared with the amount which it would have been necessary to provide had existing rates of grants been continued. I agree that those words are rather woolly, and that it is not quite clear what they mean, but having expected a saving of £500,000, you find in the Estimates that on one of the Unemployment Grant Votes, Class V, Vote 9, there is a net increase of £500,000, and on the other one, Class VI, Vote 15, there is an increase of £250,000, so that actually on the Unemployment Grant Votes there is an increased cost of £750,000, whereas the White Paper told us of a saving of £500,000. When all these things are totalled up, I say, with all deference, that out of the £70,0000,000 which we talked about in September, there has been a short fall in savings of about £10,000,000.

I agree that the Chancellor of the Exchequer said in his speech that they had made more savings over the whole field. I am glad of it—the more the better—but there is still no reason given to us why there should have been the short fall in this particular group of Votes. Therefore, when I am asked, "Where would you economise?" there is your answer, in the very Votes on which the National Government said they would economise in the White Paper which was published at the time of the crisis. I am fortified in my hope that this may be done when I refer to the remark of the Financial Secretary to the Treasury last night. He was arguing, "It is no good blaming us, because it is the House which sanctions the money, and the poor old Government and the Treasury only have to devise ways and means of finding it. Therefore the blame lies with the House." That was the argument, and it is an argument which anyone who has been more than a year or so in this House has heard put up by Members of all Governments. "The House is to blame, not the Government, not the Treasury." I was rash enough to ask: Is that to be taken as an invitation to the House to refuse some of the Estimates which are now being presented? The right hon. and gallant Gentleman replied: Undoubtedly. That is spendid news, but he went on to talk about a fiery chariot, and he said: 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"— And then, jocularly— except that they believe that *hen that day comes they will both be taken up to Heaven in a fiery chariot."—[OFFICIAL REPORT, 20th April, 1932; col. 1608, Vol. 264.] Then the sprouting angelic wings that I see on his back will be singed. But for all that, if the Financial Secretary was serious in the first part of his reply to me, may I take it that one of the arrangements reached by this Government, which agrees to differ on matters of high policy within its own fold, will be to allow this House of Commons, constituted as it now is, to take a much firmer line with regard to every kind of Estimate, and will not consider a defeat on an Estimate to be such a defeat as to involve the resignation of the Government? If that is true—and it is the only implication of that word "undoubtedly," possibly given in an unguarded moment last night—we shall get back some form of control to this House, and the National Government will indeed be justified. I see the right hon. and gallant Gentleman smiles—


I am smiling at the thought of the House of Commons cutting down expenditure, when, as the hon. and gallant Member knows, it does nothing but press the Government to increase expenditure, of every description, on every possible occasion.


That is always said from the Government Bench. That is what they always say, but some people do not press for expenditure all the time. Some people are exempt from that general accusation. Anyhow, I find it hard to believe that the Government will allow free votes on the Estimates, because the public purse, after all, is the authority of the Executive, but in these hard times, when there are many Members who have some contribution to make towards proposals for economy, all that I say is that if the right hon. and gallant Gentleman really meant what he said last night, I congratulate him and the Government on their very wise attitude.


I want to add a few words to those already expressed of dissatisfaction at the structure of the Budget proposals. I have been informed that this is the first Protectionist Budget, and I am prepared to accept it as such, but I regret that the protection which it affords does not cover the people to whom protection should be directed. The sponsors of the Budget, I have no doubt, have performed the task they had in view of relieving the direct taxpayers of as much as they possibly can. It seems to me that they are indulging in the old game of hiding the pea—hiding the pea of taxation—because I can see no evidence in any of the statements that have been made, or in the proposals themselves, that very much attention is paid to the great burdens that lie on the unemployed and those who are in receipt of very low wages. The word "national" is associated with this Government, but if it be national I cannot understand why it is so blind to the opportunities that have presented themselves to them of attending to the interests of those to whom I have referred.

One of the objects that the National Government had in view was to save the people from having their Post Office Savings Bank deposits interfered with. But what is actually taking place? The money in the savings bank, which was saved by working-class depositors, is now being drawn out in order to subsidise members of the household who, through the medium of the means test, are being refused what every young man and woman is entitled to, namely, recognition in the form of benefit pending the time when this great country can allow them to work for their livelihood as every man and woman is entitled to. Surely a country such as this was after the War, with the potentialities of production which far outdistanced anything that we anticipated would be at our disposal, should have taken advantage of the outstanding example of the benefits of cooperation that were displayed in the War and continued it. Not having continued it, the Government are not entitled now to a free hand in further depressing the conditions of the people.

The newspapers have given various titles to the Budget. It has been called "A nothing for anybody Budget," but I think that that is wrong. It continues the burdens that are on the backs of the people who are unable to bear them. In fact, it increases those burdens. An hon. Gentleman who spoke earlier used certain figures to show what the working-class have lost in the last 10 years, or, in other words, have contributed towards keeping this country in the forefront of the industrial nations. He did not, however, state a figure that was large enough. I have here the figures presented by the Commissioner of Inland Revenue covering the 10 years prior to 1930. He states that the total loss in wages in those years is no less than £615,000,000. When these figures were being quoted, an hon. Member interjected that the coat of living had gone down in that period. I am prepared to admit that, but if the cost of living went down in that period, what is the justification for this country allowing those who live on land, investments and other forms of industrial control to increase their incomes by £308,000,000 while the working people were losing £615,000,0004 If the reduced cost of living is to be used to justify a reduction in workers' wages, it does not justify the interests to which I have referred increasing their incomes by £308,000,000. The Commissioner of Inland Revenue informs us that the ownership of land and houses increased in those years by no less than £132,000,000; British and foreign investments by £75,000,000, and salaries of public officials by £193,000,000.

Yet we have a Budget which pays no regard to this great increase in incomes, and is intent on penalising the people who can least bear it. It is right, as the right hon. Member for Hillhead (Sir R. Horne) informed us last night, that the historian must be allowed to speak, but we must also bear in mind what the prophets of the past have said. It has already been said in the Debate that the question of reparations has been pressed more than any other aspect of the international problems since the War. There has been a continual repetition of the folly of reparations from the people who occupy the benches on which I now have the honour to sit. We are now faced, after all the preaching, with the same story from the people who have opposed us throughout those years. At the same time, we are told that the money that has been lying at the disposal of the people of this country has been directed to Germany, and has made her the finest equipped country in the world outside America—in the opinion of the American bankers themselves. We have also been told by the hon. and gallant Member for Bournemouth (Sir H. Croft) that this country will not let down any part of the Empire that requires succour. I claim that there is a vast population in this country which is unable properly to defend itself, which also requires protection at our hands. They are entitled to it, and I press that they should receive it. In 1914 they were led to the shambles; now they are being led to the shearing shed, and it is our duty to protest as much as we can.

I was interested in the statement of the Financial Secretary last night in reply to an interjection that, if certain circumstances arose, he would wish to be taken up to heaven in a fiery chariot. I am placing my own interpretation on what the word "fiery" means when I assume that it means "flaming." I would like to inform the right hon. and gallant Gentleman that either the chariot or the description was wrong, because if it were a flaming chariot, it would go in a direction opposite that which he thought he would take.


I do not mind being held up to ridicule on my facts and figures, but on my Biblical knowledge I do. Elijah was taken up to heaven in a fiery chariot. It will be found in the Old Testament. He went to heaven in a fiery chariot, because the mantle had fallen on to his successor. What I said last night indicated that the mantle would fall on our successors in the House of Commons.


I only wanted to use that reference as a stepping off ground in order to bring to the notice of the Financial Secretary the fact that there are such conditions in parts of Glasgow which I represent that quite a few chariots would be required to take the people out of surroundings that are anything but helpful to their enjoying a reasonable life. I regret that no relief is to be given in respect of the taxation falling upon certain types of cinema houses. The Financial Secretary will know that in his constituency cinema houses which were known at one time as "tax free houses" are being closed down. I have details here of two houses in the St. Rollox Division which were mainly tax-free houses. Before the tax one of them had a weekly attendance of 6,600. Since it has become liable to the tax the attendance has fallen to 4,600. That shows the extent to which people who are in dire need of relief from their doleful surroundings and anxieties have been unable to indulge themselves. In another cinema in the same locality, although a little nearer to the hon. and gallant Gentleman's division, the admissions between November, 1930, and March, 1931, totalled 121,000 and in the corresponding period of 1931–32 had fallen by no less than 16,000. I respectfully suggest that the little advantage which people enjoyed in the past through being able to occupy these cheap tax-free seats might very well be restored to them. It might be an economy, because if we balance the advantages of 21 hours' entertainment, warmth and comfort at the pictures against the cost of light and heat in the dismal and depressing surroundings of their poor homes, that in itself makes an ample case for the restoration of the advantages which they had until recently.

The incidence of the Tea Duty has already been touched upon by other hon. Members, and I want to refer only to the question of equity in its application. The hon. and gallant Member, in answering the points placed before him last night, made it quite clear that the intention was that any quantity of tea not exceeding 1,000 lb. in possession of a person would escape the imposition of the duty, and we have also been informed that for that purpose a company may be held to be a person. I suggest that that will create conditions in retail circles which will not lead to fair play. The only equitable thing is to apply the relief to the unit which immediately transfers that tea to the purchaser of the tea. In any case I think modifications will have to be made, because the notice sent out to owners of stocks of tea does not carry out the intention expressed by the hon. and gallant Gentleman. The second paragraph of the notice reads: Stocks of tea on which duty is chargeable. The duty is applicable in respect of the aggregate stocks of tea which, on 20th April, 1932, are in the ownership or pos- session of any person or institution holding on that day in the aggregate more than 1,000 lb. I am informed that it, has been found that Customs officials hold that a person or company having 999 lb. of tea, escapes the duty on that tea, but that a person or -company holding 1,001 lb. of tea pays duty not on the 1 lb. alone but on the whole 1,001 lb. That is a point which will have to be attended to, together with the other point which was -put yesterday by the hon. Member for Limehouse (Mr. Attlee).

8.30 p.m.

As one who is a representative of the co-operative movement I would refer next to the proposal to appoint a commission which will for all time settle the great problem of taxation on co-operative societies. I am pleased to learn that this is to be the final settlement. I do not know why previous investigations should not have been the basis of a final settlement, but I am inclined to think that as long as prejudice continues there will be no finality in this matter. For 50 years there has been an agitation against co-operators on this point. Strange to say, the principles of co-operation which worry these critics so much are now being recommended to farmers and industrialists. They are being told, "There is no hope for you unless you co-operate with one another." The people who are saying that are at the same time in full cry against what they call the profits of the co-operative societies. I humbly suggest to those who are following the "Tally-ho" for taxation on what they call co-operative profits that they should attend to their own doorsteps first. I have here a statement made by a, witness speaking on behalf of the British Chambers of Commerce at the last Royal Commission on the Income Tax. He expressed the opinion—and this was a Chamber of Commerce witness—that the evasion of Income Tax cost this country nearly £8,000,000 a year, and I have absolutely no doubt that a considerable part of that evasion lies at the door of the people who are now in full cry for the taxation of co-operative profits.


The hon. Member suggested that there is now a demand that farmers should co-operate, and, therefore, there is an analogy between that -proposal and the escape of taxation by the co-operative movement. May I ask him whether he is suggesting that the farmers who are invited to co-operate should be allowed to escape payment of Income Tax?


No, that was not the point that was being made. I was dealing with the application of a principle which is foreign to that of private enterprise, and pointing out that, notwithstanding old antagonisms, it was now recognised that that principle must be applied in certain directions if people are to exist as producers. I understand the feeling that may exist. There are many people in this country whose expectations of continuous and reasonably-healthy profits are not being fulfilled. In one year during the War no fewer than 3,081 companies were floated in this country, with capital totalling £46,000,000. Now times are rather lean. That is the reason, why we should not hamper the cooperative movement in, this way, because that movement is responsible for fostering the life and activity of a personal character which it is desirable that we should develop. I do not see how we can do anything but oppose these attempts to tax co-operative societies.

I desire to refer to the Press stunts on this matter. A paper which deems itself very important, and claims to lead the world of thought, has gone the length of stating that the turnover of co-operative societies amounted to about £400,000,000. That is many millions out. All the details of production and sale by the co-operative societies of this country are open to anyone who desires to see them. It has been suggested that, taking those figures as the basis, there is a possibility of the taxation of co-operative societies to the extent of £2,000,000. In view of the fact that there are three ex-Chancellors of the Exchequer with seats in this House, I cannot understand how, up to the present, co-operative societies have managed to escape a taxation which is now estimated would bring in a revenue of anything from £2,000,000 to £4,000,000. To talk about raising such a revenue in that way is absolute nonsense.

It has also been said that there are no definite figures available relating to the trading profits of co-operative societies for last year, but that is also absolute nonsense. As a matter of fact, there is a complete record kept of the trade of every co-operative society in Great Britain if anyone wishes to see it. The amount of the reserves of these societies are also open for inspection to anyone who likes to go to a public library to see the details. I would like to 'point out to hon. Members that co-operative society capital is subscribed by working-class people who are not only shareholders but also purchasers. Their capital is invested in that way, and it is through the activity of that capital that they are purchasing. The dividend they receive is not paid on the capital but on the purchases. They are also shareholders, but the shares bear a fixed rate of interest, and we must not associate that with the dividend paid on profits.

This system differs from the ordinary private concern, because those who put money into private undertakings are seldom purchasers. They have no interest in the business, and they have no other interest except as investors. That is a fundamental difference which should be borne in mind. The Income Tax Acts make it quite clear that the tax is to be levied, not on individuals, but on the private incomes of persons. I know that limited liability companies, in certain circumstances, may collect the tax at the source, but that is different from the case of industrial and public societies which are allowed special consideration. A society registered under the Industrial and Provident Societies Act, 1893, is exempt from paying tax under Schedules C and D unless it sells to non-members, and the number of its shares are limited by rule. In some instances 50 per cent. of the taxable proportion of purchases is returned at the sale, but in other cases where a personal limit is imposed all comers must be taken, and the law lays down other conditions with regard to surplus capital. I can imagine what hon. Members opposite would say if prosperous companies were forced to accept conditions of that kind. The personal limit on the individual is one that is fixed by law. The question of mutuality also comes in and it is thoroughly well understood that mutuality eliminates profit, and it may create a surplus. In my opinion, however, that is quite a different thing. There is a standard book on the Income Tax written by an ex-official of the Income Tax Department from which I quote the following: When the buyer and seller are identical there is no trading—and any so-called surplus is net profit. Co-operative members in any district can fix their own price, and they can make their takings balance outgoings if they think it is expedient to do so. On this point, the Deputy-Chairman of the Board of Inland Revenue says: Surplus is a book-keeping balance held over for the purpose of determining what portion of purchase price shall be returned to the purchaser. I have quoted statements on this question by well-known authorities. If mutuality is rejected I ask hon. Members to recollect what the right hon. Gentleman the Member for Epping (Mr. Churchill) said on 8th March, 1927, when he was Chancellor of the Exchequer. He said: The profits could not be taxed at the source as in the case of an ordinary company—the, vast majority of the millions of members of co-operative societies were below Income Tax exemption limit, and such procedure would only lead to many million claims for repayment, involving serious additional cost of collection. Notwithstanding that opinion from one who was listened to to-day with the greatest pleasure, we now see the Government bending to prejudice on this matter. I will now say a word or two about investment income. In my view, what the small trader has to fear more than co-operative societies is the establishment of large multiple firms who plant themselves down in various districts with the money of small traders which they get from the bank. Some attention has to be paid even to the small trader. On this point, I will give a quotation from the report of the Committee on National Debt and Taxation known as the Colwyn Committee. They say: Although, theoretically, Income Tax is levied on profits, when a trader endeavours to ascertain his costs with a view of fixing prices, he often takes into account, at least indirectly, the amount of Income Tax he will have to pay, and, if conditions permit, fixes his prices at such a level as would yield him the minimum net income he desires to obtain. If that be correct, this personal tax, apparently, is passed on by the small trader to someone else. I will only read one further quotation, taken from the Treasury Memorandum. It states: 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 to account for the Income Tax on behalf of their shareholders. It is merely a variation in the machinery of collection, not in the principle of the tax. 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. I think that that also is quite specific and definite enough for anyone. I do not understand, and I am not going to ask, what is meant by the statement that under the existing law the co-operatives have a privileged position. I think that that is the term that was used. I shall wait with interest to see what alterations in the law justify such a statement as that. I also note that it is stated that mutuality is being departed from to a great extent. I would like to know where that information came from. There is only one source of authentic information on that matter, and it has never been applied for up to the present time.

The question of profits has been touched upon by the Chancellor of the Exchequer. The profits of co-operative societies are said to be escaping. Let me say again that, before the Royal Commission of 1918, the deputy chief inspector stated that to bring co-operative surpluses within the Income Tax law would mean the repeal of existing laws, and the invention of some new definition of profits; so that I am not prepared to accept the word used by the Chancellor of the Exchequer in his statement with regard to the committee. How can we have an impartial committee when, from the Chancellor's own words, he has prejudged the case? In his opening statement he promised an impartial committee, but I cannot see how that is possible.


The Chancellor of the Exchequer went on to say quite distinctly that all these contentions were hotly denied.


I do not want to be unjust to anyone. I have the right hon. Gentleman's statement here. He said: There is another subject to which I have given a good deal of consideration in the last few weeks, and that is the position of the co-operative societies. Under the existing law the co-operative societies enjoy a privileged position."—[OFFICIAL. REPORT, 19th April, 1932; col. 1432, Vol. 264.] That is a clear and definite opinion, though I think a prejudiced one. I do not know how the right hon. Gentleman is going to measure partiality or impartiality, but I respectfully suggest that it is a waste of time to bring into being any such committee to reinvestigate conditions that have already been worn threadbare by statements such as those which I have quoted.


In rising to speak this evening, I claim that indulgence which the House is wont to give to those who have the privilege of addressing it for the first time. I should like to assure the Committee that it is not my intention to detain them for very long. With all due respect to the Chancellor of the Exchequer, my first impressions on hearing his Budget were impressions of disappointment, but, remembering oft-repeated advice, I decided to sleep on it. I have done that twice, and, although I must say that I have not in the morning experienced the feeling of the morning after the night before, nevertheless there has been a complete absence of anything of the kind that we usually attribute to Mr. Kruschen.

I have heard it said—I am not sure that it was not said by the right hon. Gentleman's brother—that there comes a time in the affairs of men and of nations when the path of courage is perhaps safer than the path of prudence. I am not sure that we have not arrived at that time, and, in any case, I think a mixture of the two is extremely desirable; but in this Budget I find only prudence. I do not quarrel with the presence of prudence, but I think very few people will disagree with me when I say that some psyschological effect which will engender confidence in the future is required to-day. Some psychological fillip, which will jerk men's minds out of their present feeling of depression, is wanted, not only in this country, but in the world, and I am rather disappointed that there is nothing in this Budget which will give any greater feeling of hope than exists at the present moment. Many great economists and bankers, as we have been reminded in this Debate, tell us that there cannot be prosperity until the general price level of primary products is raised, but I have not yet heard from any of them, either upstairs or in this Chamber, any concrete suggestions as to how that desirable end is to be achieved. It is, however, my humble opinion that what will go further than anything else to achieve it is the psyschological feeling to which I have referred, that things, not only in the abstract but in the concrete, are going to get better.

I believe that nothing would increase industrial activity in this country so much as a reduction of direct taxation. It would increase industrial activity generally, and would provide what the National Government was elected to bring about, namely, increased employment. I fully realise the difficulties of the Chancellor of the Exchequer. In the first place, we know that the yield from direct taxation will be very much smaller this year, owing to the period of depression through which we have passed; and we also understand that, as was stated very plainly this afternoon by the right hon. Gentleman the Member for Epping (Mr. Churchill), there are other considerations within the Cabinet which perhaps tie his hands to some extent. At the same time, I think that, without affecting the balancing of the Budget to any extent that would jeopardise the stability of sterling, and having regard to the abnormal conditions in which we are living, some alteration of the initial incidence of taxation might have been tried. The Chancellor of the Exchequer cannot tell, nor can anyone tell, within a million or two, what the Import Duties are going to bring in, and I suggest that there there might have been a little latitude allowed to bring that relief which would mean so much to the man, and particularly the married man, with a small income. I will give a small illustration. Take the man with a small income who got a slight relief in the family allowance or the initial allowance. He might have been able, instead of denying himself, to buy a few more gramophone records, a new wireless set, or perhaps, an overcoat. If you multiply such examples many times, that would help to get the wheels of industry turning again, and, though the amount may be small in the individual case, it is large in the aggregate.

This brings me to the question of the expected increase in the return from Stamp Duties. There is no doubt that these duties are directly affected by people's hopes for the future. If people think that industrial activity is going to increase, and times are going to get better, there will probably be increased activity on the Stock Exchange—new issues perhaps. All that swells the revenue from the Stamp Duties, and, of course, the converse is the case. Furthermore, perhaps those gentlemen whom the Chancellor wishes to speed to another and happier world, instead of being ex-millionaires, might find themselves millionaires again, to the great advantage of the Exchequer. Hon. Members opposite, of course, will not agree with me with regard to direct taxation. Even some of my Liberal friends, while always ready to say a great deal about the crushing burden of direct taxation, are nevertheless very fond of clothing themselves in the mantle of the demagogue as soon as concrete means are suggested whereby those taxes may be reduced. There is not the slightest doubt that money going direct to the Exchequer becomes dead, but, if it can be passed through the hands of various people before it gets there, it will set the wheels of industry revolving more quickly. The high level of direct taxation is one of the largest contributory causes of the present scale of unemployment. Hon. Members opposite see in this method of high direct taxation a means of destroying what they are pleased to call the capitalist system. I can imagine the Leader of the Opposition communing with his hon. and learned Friend, perhaps somewhat on the lines of the poet: Ah! love, could thou and I with fate conspire To grasp this sorry scheme of things entire, Would we not shatter it to bits And mould it nearer to our hearts' desire. I do not know what the desire of the hon. and learned Gentleman is, but I have heard the desires of the Leader of the Opposition described as a chain of soup kitchens surrounded by illimitable bathing pools. That may be a fair picture—many a true word is spoken in jest—but it is certainly not our idea of a heaven upon earth. This scheme, for which we on this side of the House do not claim protection, nevertheless, after all is said and done, provides food and clothing and a standard of living for those employed second to none in the world, and we are not prepared to allow it to be shattered in order to give place to some Utopia which exists only in the minds of hon. Members opposite. The Leader of the Opposition, in the Debate on the Wheat Quota Bill, said that what they were concerned with was to see that the consumer should enjoy the products without paying tribute to landlords, dividend hunters and capitalists. Our object is to see that we enjoy the products without paying a far greater tribute to the inefficiency and lack of enterprise of a State-run machine. In my opinion, progress is the child of the spirit of adventure, and spirits of adventure are not encouraged in Government Departments.

9.0 p.m.

I should like to add my word on the subject of the Beer Duty. The business side of the question has been put most ably by the right hon. Gentleman the Member for Hillhead (Sir R. Horne) and others, but I should like to put another side of it to the Treasury. We have had painted to us a picture of the nation in the form of a mountaineer climbing up and getting over one ridge, and seeing that the peak was not as near as he thought it was and that there was another ridge to get over, and so on. I suggest to the Treasury, would it not help his weary footsteps if he might have a drink on the way instead of having to wait until the end? I do not wish it to be thought that I am one of those who do not attach the greatest importance to sound finance, but could not the Chancellor of the Exchequer see his way to making some small gesture, perhaps the shadow rather than the substance, which would give that psychological fillip which in my opinion, and I think in that of many others, is so necessary to engender that hope in the future without which we shall not see the return to prosperity which we all desire.


I am sure I am voicing the opinion of the whole Committee when I congratulate the hon. Member most heartily. A maiden speech is a horrible business. I think it must stand out as one of the most dreadful ordeals in the life of any of us. I am sure everyone will agree with me that the hon. Member has come through that ordeal triumphantly, and we shall look forward to hearing him in our Debates on many future occasions. There does not seem to be very much left at this stage to say about the Budget. Almost all the things that I have thought of have been said much better already. But I think there is one aspect of it that has been insufficiently emphasised on either side of the House, and that is the courage that it took for the Chancellor of the Exchequer to make the speech that he did, and to open the Budget that he did. A second aspect of it to which insufficient attention has been drawn is the triumphant vindication of the tariff so far as it is imposed for revenue purposes. I echo the question of the right hon. Gentleman the Member for South Molton (Mr. Lambert) and I would ask those sections of the Liberal benches that still maintain that they are opposed to tariffs in all forms how otherwise could they or would they have balanced the Budget? I do not think there is any doubt that the cumulative effect of the Budget speech upon hon. Members on all sides of the House was rather depressing, at moments almost overwhelming, but I have no doubt that the Chancellor is wise to nurse his resources at the beginning of what we must all hope will be a long tenure of office and that he will be more than justified by results.

One aspect of the Budget only causes a great many of us to feel a genuine sense of grievance. It was with a feeling of increasing dejection that I listened to the right hon. Gentleman when he came to discuss the question of the duties upon beer and whisky. I think he might have helped us all to bear the burden that we have to bear by reducing the duties upon certain classes of alcohol. I would make a special plea to the Financial Secretary to consider the Whisky Duty as well as the Beer Duty. A great deal is said against whisky as a, beverage, but it really is a very good drink indeed. It has wonderful consoling properties, especially in times of difficulty and trouble, and I think the right hon. Gentleman would do very well to consider not only the national beverage of England but the national beverage of Scotland when he comes to introduce the Finance Bill.

If there was a real, moral objection to imbibing whisky, it ought to be prohibited altogether. But if you merely want to get revenue out of a duty upon whisky, I submit most sincerely to my right hon. Friend the Financial Secretary to the Treasury that in the case of whisky you are bound to raise more revenue if you reduce the duty. The present duty upon whisky is so savage, unfair, and venomous that it has practically reduced the manufacture and consumption of whisky in Scotland to the lowest possible limit, and distillery after distillery has closed down, causing great distress in the North of Scotland during the last few weeks. A modest, moderate wise reduction in the Whisky Duty would, I am convinced, not only bring more employment to the North of Scotland but a great deal of consolation to the hearts of many British subjects, and would at the same time fortify rather than diminish the annual revenue.

Several speakers in the course of these Debates have drawn attention to the crushing burden of direct taxation, especially upon the smaller Income Tax payers. Many of us regret that the Chancellor of the Exchequer has not been able in the present Budget to restore some of the allowances to the lower range of Income Tax payers, who are the hardest hit class in the whole community at the present time. Take the case, for example, of the local doctor in a village who has a wife and several children to maintain. I can give instances of cases where doctors have been driven seriously to consider the necessity of "putting down" a motor car owing to the punitive rate of taxation levied upon them at the present time.

When we come to ask how the burden of direct taxation is to be lightened, the question is difficult to answer. "By economy," my hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) would say. Yes, I agree, but economy, where? We have to face up to the question. Is it to be on unemployment benefit? I do not think that any hon. Member would suggest that we could go very much further than we have done at the present time regarding unemployment benefit. Is it to be on social services? Conceivably there is more to be done as far as education is concerned. Is it to be on the actual cost of administration? I submit that the Civil Service of this country is the most efficient in the world, and while you might scrape off £1,000,000 or £2,000,000 or more from the actual cost of administration in the country, you would probably do it at the expense of the most loyal and efficient body of men serving any country at the present time. When we come to the question of Defence every hon. Gentleman knows that we have cut our Fighting Services to the bone.

When my hon. and gallant Friend the Member for Gainsborough talks about economy in the way he does, I say yes, provided you can combine it with efficiency, economise wherever you can. But it is no good making a tremendous song and dance about the saving of £1,000,000 or £2,000,000 here or there, when during the last few years you have actually doubled the value of the money with which all your expenditure is paid. It is a question far transcending in importance any possible cuts of a few millions. I am convinced that there is only one method left to this House and to the Government of achieving a large economy, and that is by a conversion operation upon a very considerable scale. My right hon. Friend the Member for Hillhead (Sir R. Horne), in his admirable speech yesterday, pointed out that falling prices would be all right if you could guarantee a corresponding and simultaneous fall in your cost of production. Taxation and fixed interest charges are two of the principal items in the cost of production. They have not fallen. I believe that Australia's amazing success in extricating herself from a financial situation out of which at one time it seemed impossible for her to get is due to the cut which she was able to make in fixed interest rates during last year.

I am not advocating for a moment a compulsory conversion of any kind or form in this country; but I beg of the Chancellor of the Exchequer not to rule out the possibility of a conversion operation on a large scale to deal with War Loan during the summer months which lie ahead. There you can effect a real saving, and with that saving you can lighten the burden upon the overwhelmed taxpayer in the course of next year. The only reason why I regret that the right hon. Gentleman did not see his way to make a bold venture and reduce the standard rate of Income Tax by 6d. with the deliberate object of cheapening money and raising the price of longterm British securities is lest he should have abandoned for the time being the hope of a conversion. I believe that even without that reduction he can still achieve a conversion, and I hope that he will assure hon. Gentlemen that he has not, at any rate, abandoned all hope of a conversion not only in the future, but in the near future.

During the last two days tremendous and amazing emphasis has been laid upon the importance of currency and of monetary policy. My right hon. Friend the Member for Hillhead, my right hon. Friend the Member for Sparkbrook (Mr. Amery) and my right hon. Friend the Member for Epping (Mr. Churchill) made this question the principal theme of their speeches. We have been assured that it was really the fortunate discovery of gold which was responsible for the glories, first of all, of the Elizabethan Era in this country, and, secondly, of the Victorian Age, and we have also been assured that it was actual currency shortage which brought about the downfall of the Roman Empire. I agree most heartily. I could find it in my heart to wish that some of my right hon. Friends had thought of all this some time ago. I do not want to say "I told you so," but I have been boring this House upon the question of currency without cessation for the last eight years. It is not too late to retrieve the situation even now. The most satisfactory feature of the whole of the Debate is the fact that attention should have been so sharply and dramatically drawn to what I have long believed to be the fundamental economic problem of our time, and drawn by right hon. Gentlemen who, although they are not at the present moment members of the National Government, have sufficient weight, and command sufficient attention in this House, to ensure that this vital question will now receive the National consideration and the consideration of this House which it has long deserved, and is only now beginning to get in due measure.

The most satisfactory feature in some respects of the whole of the Budget has been the establishment of the Exchange Equalisation Account. By doing this the Chancellor of the Exchequer has regained a measure of control over monetary policy, and I hope very much that the main objective of that policy, in season and out of season, will be to raise prices once more to the 1928 level. I will quote an observation of Mr. Keynes, who, writing in "Lloyds Bank Review" the other day, said: It is not sensible to be afraid of inflation, when the problem of stopping the deflation is so extraordinarily difficult to solve. The real risk lies in recovery being too slow: and a bold policy will be the least dangerous. I believe that to be true. An hon. Gentleman said that no concrete proposals had been made by those who claim that we owe our troubles in principal measure to the falling price level. I venture, now that the right hon. Gentleman the Chancellor of the Exchequer is here, to suggest two steps which can be taken at once by this country. The first is that he should give, not necessarily to-night or in the course of the next week or two, but in the course of a reasonable time, some indication in general terms of the monetary policy of this country for the benefit not only of this country but of other members of the sterling area. It might be possible, for example, to announce at a later stage, an interim figure, which could be altered from time to time, above which the Bank would purchase gold. The Exchange Equalisation Account would be used to purchase gold. I suggest that as one line of policy.

The other line of policy is the reduction of the Bank Rate and of short-term rates to the lowest possible level, and I think we can regard the step in that direction that has been taken to-day as an indication that that is to be the policy to be pursued both by the Treasury and the Bank of England, a fact which must afford us very considerable satisfaction. But, as hon. Members on both sides of the House have pointed out on several occasions during this Debate, this problem in its wider aspect is an international and not a national problem at all. Under modern conditions, and we cannot get away from it, price stability is dependent upon international economic cooperation. With international economic co-operation it can be achieved, but without it, in the long run it can never be achieved. Some hon. Members yesterday and the day before suggested that we have raised a Frankenstein in this currency question which is likely to overwhelm us in the future, because we do not know how to use it. The only Frankenstein so far as currency is concerned is the folly of humanity at the present time. If we could get sense into the governments of the leading nations of the world so far as this question is concerned, I am convinced that the Frankenstein would disappear quickly enough.

When you are asked how you are to achieve price stability through international co-operation, you are forced back to a consideration of the Genoa Resolutions on currency in the light of recent events. When you read them it is difficult to believe that they were laid down as long ago as 1922. The late Sir Laming Worthington-Evans, to whom the right hon. Member for Epping (Mr. Churchill) paid so well deserved a tribute to-day, described those Resolutions at the time with great prescience as a financial code worthy to rank with the legal code of Justinian. Those Resolutions pointed out the danger, which materialised so quickly within so short a time, of simultaneous and competitive efforts on the part of the countries of the world to secure metallic reserves. They said that if the countries of the world were to go back to an international gold standard it was essential to do two things: in the first place to economise the use of gold and, secondly, to stabilise its value in terms of commodities.

To accomplish the first object, they recommended the establishment of a gold exchange standard, under which the currencies of each participating country were to be exchangeable at par. To achieve the second object they recommended the deliberate regulation of credit by the central banks of the world, acting in cooperation. They further recommended that a meeting of the central banks should be held at the earliest possible moment. That meeting has never been held, although the Resolutions were published to the world in 1922. Nothing was done, no attempt at international economic co-operation was made. What was the result? Gradually, steadily, remorselessly the stocks of gold available for monetary purposes in the world have disappeared into the vaults of the Bank of France and of the Federal Reserve Bank of New York, with the result that while the value of gold has steadily increased the value of everything else in the world has steadily decreased, and now for 12 years we have suffered from deflation.

The commodity price level has fallen since 1920 60 per cent., of which it has fallen 40 per cent. during the last two years. How, under these conditions, can anybody engaged in the production of goods, whether primary or secondary, be expected to keep his head above water? What has been the result of the deflation such as we have encountered during the last 12 years? Wealth has been steadily transferred from the producer to the rentier, from the active hand into the inactive hand, until to-day Sir Josiah Stamp estimates that we are transferring the real wealth of this country in that manner at the rate of £200,000,000 a year. There is a huge increase in the real burden of all fixed charges—the National Debt, fixed interest-bearing securities, wages, taxation. All the burdens that press down the producer have been doubled and almost trebled since 1920, and the impossibility of adjusting their costs of production, including wages, to the continuously falling price level has made it impossible for any producer, particularly the primary producer, the farmer, for 10 or 12 years now to make a profit.

I do not see, I cannot see, how it is possible in the face of what has gone on for the last 12 years to look any further in order to find the fundamental cause for the trouble in which we find ourselves at the present time. Every debtor country in the world is unable to sell its goods and cannot buy goods from abroad, and the result is that the economic life of the whole world is gradually coming to a standstill. I have heard it suggested that there is overproduction, but I cannot accept that theory in so far as the general body of commodities are concerned. How can you accept that theory when you have all over the world millions of people who are underfed and under-clothed? How can you accept the theory of over-production when the actual production over quite a wide range of basic commodities for the last three years has been amazingly steady, and yet you have had a general catastrophic fall in the prices of all these commodities during the last two years.

We have to look for an extrinsic cause of the trouble, and I believe it to be the breakdown of the machinery of exchange owing to the lack of lubricating oil. Surely the remedy lies in the release of that lubricating oil; by the provision of adequate supplies of currency and credit to conduct the trade of the world. Surely the remedy lies in the restoration of the price level by that method, and above all, perhaps, in inducing the people of the world to stop hoarding as they are doing at the present time. The right hon. and learned Member for Hillhead, in a very interesting spesech in the City the other day, said that civilisation based on a complicated system of credit will plunge to ruin if the spirit of hoarding prevails. I believe that statement to be profoundly true. The trouble has got beyond the field of mere economics. It has become largely psychological. Production is adequate. The capitalist system, whatever right hon. and hon. Members above the Gangway may say, has proved that it is capable of producing all and more than all that humanity requires at the present time. It is distribution that has broken down. The world to-day is frozen with fear, and the only thing that I am anxious about in regard to the Budget is lest it should have a bad psychological effect and induce people to be even more timorous than they are at the present time.

I do not altogether agree with the hon. and gallant Member for Gainsborough. The ultimate solution is not to be found in retrenchment. The supreme need is for expansion. Let us have Government economy by all means, but there is no good persuading people that the only thing to do is to put their money into a stocking and to sit upon it. In that way lies ruin for the whole world. The Chancellor of the Exchequer will not be judged by this Budget, or by any Budget, but by Ottawa. I hope that these questions of currency and monetary reform will be put on the agenda at Ottawa. It has been suggested that we might have a central bankers' clearing house for the Empire—a very valuable suggestion. The Chancellor of the Exchequer will be judged also by Lausanne at which I hope that we shall hear the last of these accursed Reparations and War Debts. He will be judged also by the subsequent International Conference which must, and can, if it possesses the will, give prices to the producer and money to the people to pay those prices. Those are the two fundamental objectives not only before this county but before the world if we are to regain prosperity. In the last six months we have regained the economic leadership of the world, and I hope and believe we shall hasten to save civilisation while there is yet time.


As the hon. Member for East Aberdeen (Mr. Boothby) said, if we can only greet this Budget with sad satisfaction, those who sit on these benches cannot question the wisdom of the Chancellor's proposals, nor can we hesitate in our support of the Budget. Even on this occasion, surely the many hearts of the Liberal party may be expected to beat as one and even the Member for East Edinburgh (Mr. D. Mason) may be found in the Lobby of the Government he was elected to support. Yet there are one or two points on which we require further information to guide us. The first is the fourth Resolution we adopted on Tuesday last—which amends the Import Duties Act and which has been overlooked. It was overlooked in the speech of the Chancellor, no doubt as a result of his desire not to offend Liberal and Free Trade susceptibilities. He did not make it plain that the Resolution gave power to the Tariff Committee to take articles out of the free list as well as to add articles to it. We thought we had made that list inviolate. We remember the enthusiastic efforts of the Conservatives who, with quixotic generosity, refused to let the foreigner pay the tax on a great number of commodities included in the free list, and we felt that we did not want to have all that fight over again. Therefore, we should like to know exactly what is the intention in giving this new power to the Tariff Committee to take articles out of the free list as well as to add to it?

I am not sure that one of the provisions of the Budget is likely to achieve the result which is intended. The hon. Member for East Aberdeen has said, and I agree with him entirely, that the problems of currency are at the root of our present economic troubles. There is no problem that more urgently needs solution than that of currency; but I am by no means convinced' that the Exchange Equalisation Account is likely to give us the relief from currency troubles that it is expected to give. I feel that the proposals are like the curate's egg, chickenhearted. They do not go quite as far as they might, nor do I think that their true inwardness has been revealed. They appear to me to be a return to the Gold Standard at second-hand. I can see no other meaning in this Exchange Equalisation Account than that we are tying ourselves to a currency based on gold. If we are going to do that, we are refusing to ride in the golden chariot, but are content to be dragged in its wake. It would be far better if we were to return to the Gold Standard out of hand, albeit a debased Gold Standard, rather than tackle the problem in this sort of way. Previously, we managed to keep our exchange stable by the manipulation of the Bank Rate, but recent experience has proved to us that the Bank Rate will no longer serve the purpose. Therefore, this new device has been introduced, and it seems to me something like a new game of international poker with bills of exchange as the cards.

9.30 p.m.

Our object, after all, is not really the stabilisation of the exchange but the stabilisation of prices. Prices are a ratio between goods and something else. Are they to be the ratio between goods and gold? If that is so, then prices must inevitably fall. Are they to be the ratio between goods and a fiction based on gold? If so, what is the fiction I We cannot be told, because nobody knows. It seems to me there is one other way of dealing with this problem. Sooner or later the fact will force itself upon this country that prices can be stabilised only as long as they represent the ratio not between goods and something else, such as gold, but between goods and goods themselves. In other words, we should agree that gold will no longer serve as a basis for currency, that we must abandon the Gold Standard, and instead of our pound representing a definite amount of gold, it should represent a definite amount of goods, or, to use a technical term, the basis of currency should be a selected and weighted commodity index instead. Only then will price fluctuation be prevented. Let me give an illustration. From January, 1930, to January, 1932, the price of raw wool has fallen from £6 8s. to £3 16s., and in the same period woollen worsted has fallen from 4s. 4d. per square yard to 3s. Producers of both raw wool and woollen manufacturers are in consequence being driven to bankruptcy and despair. If the prices of raw wool or of woollen manufactures had been stated in terms of one another, or in terms of any reasonably and intelligently selected group of commodities, then the prices would scarcely have changed at all, and production would have gone up. I think the object which is indicated by the Chancellor in the Resolution would be achieved if instead of giving us this instalment of a financial policy the Chancellor would give us a long-distance and complete financial policy.

I have one further and final suggestion to make. Last year we had two Budgets. In these days, is one Budget in the year likely to be sufficient when economic forces are moving with such rapidity and causing such tremendous events? Would not it help people to bear the burdens that they are called upon to bear if they were able to be told that if conditions improved and there was a possibility of any alleviation, then in the autumn a Budget might be introduced in order that they might be given these reliefs? Were that done the country would be encouraged to stick it and pay its taxes which I am quite sure in any case it will, although, perhaps, not quite so willingly as if it could look forward shortly to a little relief.


This is the first time I have had the honour of addressing this House. In general, I should like to congratulate the Chancellor on balancing the Budget and restoring the world's confidence in British stability, but in particular I am very disappointed that nothing has been done in regard to the Silk Duties. I have the authority to speak for the Silk Association of Great Britain and Ireland which includes the rayon or artificial silk and the real silk. I propose to state their case, and to give two alternatives, neither of which will reduce the revenue of the Chancellor of the Exchequer and both of which wilt allow industry to rehabilitate itself and thus reduce unemployment, which, after all, is going to be one of the tests of this Government. Great Britain is the only country in the world which levies a tariff on its prime raw materials. With the exception of an infinitesimal amount which comes from Cyprus, the prime raw material for the real silk industry is not produced in any part of the British Empire. Let me deal first of all with real silk. A few years ago we employed approximately 150,000 people. Now we employ less than 40,000 in the real silk industry.

My alternatives are that the Government should take off the duty on the prime raw material or leave the duties exactly as they are, plus a comprehensive protective duty of say 30 per cent.; whether it is a specific duty or an ad valorem, duty is immaterial, provided we get a, comprehensive protective duty. Let me state what raw silk is and how the present duties affect the industry. Prime raw silk can be divided into two categories; first, nett silk and, secondly, waste silk. Nett silk is the thread that is wound from the cocoon; waste silk is the silk that is left on the cocoon and which is unwindable, after the thread has been taken away, or which is on an unwindable cocoon and has to be taken off. That is termed waste silk. In 1925 when the right hon. Member for Epping (Mr. Churchill) was Chancellor of the Exchequer the value of nett silk was 26s. per lb. The right hon. Gentleman levied a duty of 3s. per lb., equivalent to 11½ per cent. In 1931 the value of nett silk had declined, and the average price was 11s. 9d. per lb., with the result that the duty was equivalent to 28½ per cent. Take the case of waste silk. In 1931 it was 1s. 9d. per lb., with a 1s. per lb. duty, which is equivalent to 60 per cent. I ask, how is it possible for any industry to survive when you are paying 28½ per cent, and 60 per cent., respectively, on the prime raw material of that particular industry?

It may be said that the decline has been caused by the present depression in trade. Outside the United States of America England is the largest silk consuming country in the world. I have not much time at my disposal but let me give one example. Canada before 1925 imported only a small quantity of raw silk. They put on a comprehensive scientific protective duty on the silk industry, and five years time they have built up a large and important industry. To-day they import more raw silk into Canada than we do into this country. That is a, lesson as to how an important industry can be built up behind the walls of scientific protection. But the question is why should this industry be the one to be left out of the abnormality duties, and of the 10 per cent. revenue duty. And why should it be precluded from a right which is given to every other industry, to go before the Advisory Committee and state their case; and accept their recommendation, whatever it may be. One portion of the industry only has been taken out, and that is stockings. They have been treated under the Abnormal Importations Act, but every other part of the industry has been absolutely forgotten. I am not pressing now for a removal of the duties on the prime raw material if we get a comprehensive protective Duty upon semi-manufactured and manufactured articles.

I should like to give an example of an anomaly which is typical of nearly all the articles in this particular industry. I have in my pocket a garment, a lady's garment, of underwear. It is not fit that I should show it now, this being my maiden speech, but this particular article comes from Italy and its impart value is 9½d. The foreigner pays a. duty of 3d. If we imported the yarn to make this particular article we should have to pay 4d. duty. If we imported the tissue to make it we should have to pay a 10d. duty. If that is not protecting the foreigner, I should like to know what is. It is a ridiculous anomaly. There used to be thousands of people all over the country employed in the manufacture of knitted ladies' goods. They were employed in the East End of London, Yorkshire, Manchester, and all over the country, but owing to the anomalies which now exist none of these people are employed, and this particular branch of the trade has teased to exist.

Is it not time that an effort was made to remove these anomalies? The Exchequer is paying out large sums of money to public assistance committees to support people who are unemployed, but if we had a comprehensive system of protective duties we should be able to rehabilitate our trade and put many of these people back into employment. This trade has been left out entirely. Let me give another example. Take the case of knitted ladies' undergarments; and in this case I shall give the figures in dozens. In 1926 we imported 35,674 dozens. It went up year by year on a kind of sliding scale, until in 1931 we were importing 328,022 dozens; six times as much. Is not that abnormality? Is not that more than an ordinary increase? And at the same time our own trade is going down. Take stockings. In 1927 we imported 5,821,400 dozens, and in 1931 31,436,976 dozens, again six times as much. Take piece goods by weight. In 1926 we imported 6,191,417 lbs. and in 1931 15,579,919 lbs. I will give no more figures because I know how boring they are, but I think I have made it perfectly plain that there is abnormality in this trade, and yet we are left out of the picture altogether as far as any protection is concerned. We have the mills, we have the machinery, and we have the working people who can meet all our requirements. Why not let them do so?

Another aspect of the case is this. There has been an intelligent anticipation on the part of a large firm in Switzerland, who came over here, as the right hon. Member for Hillhead (Sir R. Horne) has said, and took a mill in Dumbarton. They have started work. It was a derelict mill, in a derelict position, with all the people surrounding it receiving their subsistence from the public assistance committee. Do you conceive it possible that if this industry is not protected these people will continue? They will simply close down, lose what they have and go back. And what will be the outcry of those who are looking forward to employment and wages instead of doles, if this Government allows such a thing to happen? It is not protection that causes a decrease in revenue, because the Chancellor of the Exchequer said yesterday, and we know, that if we put on a proper protective duty we do collect more revenue. Is it not wise to have the benefit of more revenue from a protective duty and to put the people back into employment?

Mrs. Baldwin, the wife of our Leader, very kindly gave a silk exhibition, with the best of intentions, that of giving a fillip to the silk industry. Our most gracious Queen commanded that all Court dresses should be made of British silk material. The Government's own campaign is to "Buy British." And yet they allow this state of affairs to continue. If I thought that Protection would reduce revenue I would not press my argument, but the Chancellor of the Exchequer has said over and over again that these duties do produce revenue. I cannot conceive any logical reason why this aspect of the silk case has been overlooked. I seriously ask the right hon. Gentleman now to give it his serious consideration and to deal with it before the Budget is through.

I want, in conclusion, to strike a personal note. I have the honour to represent the Elland Division of Yorkshire. The Elland Division returned me as a Conservative, and I was the first Conservative returned in the history of the constituency. I fought the notorious gentleman of Room No. 13. I fought on Protection; he fought on Free Trade. In the centre of my constituency is the borough of Brighouse. Brighouse was one of the homes of the silk industry. The borough was built around the silk industry just as a coal mining village is built round a coal mine. At one time we had 43 silk mills in Brighouse, all working full time. To-day we have three working two days a week. I promised these people that I would do my utmost to bring them Protection and employment. We have the silk industry. Let us rehabilitate it. Let the Chancellor of the Exchequer send me back to these people with a word of hope. Let me get some heart. Let these people think that there is sunshine somewhere, instead of blackness, despair, misery and hopelessness. It can be done. We want to rehabilitate ourselves.

When I said that we were the largest silk-consuming country in the world I ought to have added that France is the largest European silk-manufacturing country. England takes 40 per cent. of France's total output, 40 per cent. of the total output of Switzerland and 331 per cent. of the total output of Italy, besides imports from other countries. We are taking it all from the foreigner, and in this country we have gone down. All we want is a comprehensive scientific tariff or Protection. Let us get our people into employment where there is now unemployment. If the Chancellor of the Exchequer does that the people of this country will bless him.


I take this opportunity of congratulating the hon. Member for the Elland. Division (Mr. Levy) upon the most interesting and instructive maiden speech that he has just delivered. I am sure that the House is always most anxious to hear Members who can contribute their views on some special aspect of the problems with which we have to deal. I must congratulate the hon. Member, too, on the punctuality with which he kept his undertaking. No Chancellor of the Exchequer in his wildest dreams can ever hope to satisfy a House of Commons on a Budget, not even if he were the Archangel Gabriel himself, and I am not suggesting, as the Financial Secretary suggested yesterday, that the Chancellor of the Exchequer should become an Archangel in the immediate future.

But before I come to deal with the Chancellor's proposals I want to say a word about the right hon. Gentleman the Member for Epping (Mr. Churchill), who spoke this afternoon. I regret that he is not here in order to hear what I have to say. I think that everyone who listened to his speech must have admired his wonderful qualities as an advocate. He has realised indeed that the best form of defence is attack, and attack upon an opponent who is unpopular on all sides of the House and cannot reply in the De-hate does set up a good camouflage to cover one's own weaknesses. This great attack was levelled at the Gold Standard as the root of all our evil. Apparently the right hon. Gentleman did not realise that in so attacking he was condemning himself in a very wholesale manner. Not only was the return to the Gold Standard in 1925 the root of all the present evils, but those very evils which he himself was deploring, the great strike of 1926, had their origin in that calamitous event, and the right hon. Gentleman must bear the responsibility for it. His analysis, which sought to place the whole of the responsibility upon his absent foe, will not delude the House. His final statements in the third part of his speech showed quite clearly that there were far bigger and more uncontrollable factors than even Lord Snowden which caused the terrific deflation from which the world has been suffering in the last few years.

The right hon. Gentleman introduced a topic to which I want to come in a few moments—the monetary problem of this country. Before passing to that I want to say a few words about the speech of the right hon. Member for South Molton (Mr. Lambert). He deplored the present state of affairs, and particularly instanced the case of the poor farmer who was obliged to pay as interest on his mortgages 25 sheep where before he had only paid 15. He was instancing again the calamitous fall in prices, but he did not seem to realise that his illustration was the most profound indictment of the present rate of interest both on Government securities and on all fixed interest bearing securities in this country.

The Financial Secretary to the Treasury, in his very delightful and witty speech last night, told us, first of all, that we must realise that we are still in a great crisis, and he then proceeded to say that the proposals before the Committee were the stern vengeance of the laws of arithmetic. He said that multiplication, addition, and subtraction were always a shock to the House and that addition and subtraction were always a shock when the bill came. We agree with that profound remark. The addition of a further load on the poorest classes has given the country a shock, and the subtraction of their last comfort tea is also a shock.

I think the right hon. Gentleman rightly analysed the net effect of the Budget's proposals. But does he really suggest that the right way to meet a critical difficulty is by arithmetic? It seems to be a poor weapon, and I suggest that what one hon. Member has said, in a maiden speech, is profoundly true about this Budget, namely that it lacks any courage and any ideas behind it. Indeed, that is not very surprising when one looks at the composition of the body which is responsible for it. The conglomeration which at present is in charge of the country is a conglomeration from which one could not expect any very definite movement in either direction.

Hon. Members who have had the privilege of reading the works of Dr. Dolittle will remember that great animal, which he captured in the forests of Central Africa—the "push-me-pull-you." It was endowed with two heads and four legs—one head at each end—and its only diffi culty was that both heads always wished to advance at the same time, with the result that it always stayed in the same place. One gathers that that is what is happening at the present time as regards the Cabinet. We have the extraordinary position that there is a proposal in the Budget to raise taxation of £5,000,000 by means of extra tariff duties, but, so coy are the Liberal Members of the Cabinet, that we are not allowed to know on what those duties are to be raised. It is an unprecedented position in the annals of Parliament. Parliament is being asked to approve of £5,000,000 extra duties on a blank cheque. The right hon. Gentleman is looking at the Clock. Perhaps the White Paper has already been issued, but it has not been issued in time for any hon. Gentleman or right hon. Gentleman who is a Liberal, to feel that his conscience is injured by it. Never, I venture to suggest, was there a more discredible device to salve the consciences of Members of the Cabinet, by permitting them on Tuesday and Wednesday next to put up a sham fight on duties which will already have been approved by the House of Commons, in order that they may deceive their followers in the country.

No doubt the silence about the Land Tax portends the same thing. I would venture a wager with the right hon. Gentleman, were he so inclined, that we shall find in the Finance Bill some Clause which will delay the operation of the Land Tax—perhaps until such time as Parliament decides it shall be put into force. That is an ingenious method by which the conscience of Lord Snowden will be salved, while yet the right hon. Gentleman will get his way. Surely it is better, if these things are to be done, that they should be done openly, and that the House of Commons should be taken into the confidence of that part of the Cabinet which at the moment is in the ascendency. Otherwise, I suggest that it is hardly fair to the House of Commons to put before them a Budget statement, which, owing to the incubus of Liberalism which he is forced to carry on his back at the moment, is not a complete disclosure of the real intentions which lie in his mind.

10.0 p.m.

Naturally, coming to consider the disclosures in the Budget one could not have expected that the right hon. Gentleman should bring forward a Socialist Budget and I shall not deal with it on the ground that it ought to have been a Socialist Budget. The right hon. Gentleman knows our views upon that position. But before dealing with the two main issues which arise I wish to mention some subsidiary points. The first is the co-operative issue. The argument on the cooperative issue has been put so ably by the hon. Member for St. Rollox (Mr. Leonard) that I will not repeat what he said. I hope, however, that the right hon. Gentleman the Chancellor, will correct what he said on an earlier occasion, because the Financial Secretary to the Treasury, in his absence, has informed us that, as it reads in the OFFICIAL REPORT his statement does not convey the intentions of the right hon. Gentleman. It is quite clear if one reads the passage in column 1432 of the OFFICIAL REPORT, 19th April, 1932,—which I will not do again—it has the appearance of stating that the right hon. Gentleman believes that under the existing law the co-operative societies enjoy a privileged position. We combat that view, and I am sure that the right hon. Gentleman would not wish to express such a view upon a topic which is to be referred to an impartial commission. It would, indeed, be a sad matter if the right hon. Gentleman were to give the impression that the question had been prejudiced before it had been referred to the commission.

Another point is the question of beer. So much pressure has been put on the right hon. Gentleman from every side of the Committee, as to the extra penny on beer, that perhaps it will add little weight to that pressure if I say that, as far as I am concerned and as far as this party is concerned, we are anxious to see that penny taken off beer. It seems that the authorities on these liquids believe that it would not make much difference to the quantity of tax collected, but, however that may be, that is one of the things which I believe might reasonably be done, and I should certainly support that proposal.

Two very large major points emerge from this discussion, the first being the cost of the debt services and the second the monetary situation and policy of the country. As far as the debt services are concerned it will be apparent to anyone who has followed these discussions that there is unanimity that some arrangement must be come to as regards the external debt of this country and the external War debts and reparations of other countries. The matter was put very forcibly by the hon. Member for Chislehurst (Mr. Smithers) when he urged that this country should take a lead in wiping out these debts, but I think people have hardly realised yet the close connection between the external and the internal debt positions. As the Committee know the internal debt is about £6,500,000,000 and the external debt is about £1,000,000,000. If we go to the United States and ask that some remission be arranged, as regards external debt, we shall inevitably get the answer, "How can you expect to be let off your external debt, so long as you continue to pay in full your internal debt"? If I may give the simile of a company, imagine a company which owed its shareholders a great deal of money going to some outside debenture holders and saying to them, "We intend to go on paying our shareholders in full, but we ask you to let us off altogether."

I suggest to the right hon. Gentleman that we must deal with both sides, both the external and the internal debt position, because, after all, if one examines the Budget statement, there seems to be little room for economy from anyone's point of view except in the amount of money which is paid upon the Debt services. There indeed there is vast room for economy in one way or another. It was suggested by the hon. Member for East Aberdeen (Mr. Boothby) that the economy might be accomplished by a mere voluntary conversion, but I am sure the right hon. Gentleman will tell him that that would not be a very great economy. The most that could be saved would be somewhere between £12,000,000 and £15,000,000 a year, even upon a favourable conversion of those debts which can be voluntarily converted at the present time, and that if we are to have a reorganisation of the internal debt position on anything like the scope we hope for the external debt position, we shall have to take some more drastic steps than a mere voluntary conversion.

After all, nearly every other country in the world has managed to wipe out its internal debt first by some operation or another. When we are dealing with ourselves in competition with Germany or France, we have reached the position where Germany and France have reduced their internal debts to comparatively small amounts, whereas we since 1915–16 have paid in interest and amortisation of the debt £5,350,000,000 in the last 16 years, a simply colossal sum, almost equalling the total amount of the debt, and that burden has been one which has had a profound influence upon this country, both from its internal monetary and its external trade point of view.

I suggest to the right hon. Gentleman that until something is done to cure that position, until that load on industry, which it is—a fixed debt load on industry—is removed or there is some alleviation of it, he will find himself, especially with prices at their present low level, in an impossible position. When deflation comes, fixed debts become an impossible load for industry and for the individual. The right hon. Gentleman will have to tackle that position sooner or later, and I suggest to him that while he has this vast power of Government behind him, while the country is prepared to do things to get into a more prosperous state, he has his opportunity, and it may be more difficult if he leaves it to a later date.

But War debts and reparations from the external point of view and Government debt from the internal point of view are not the only problems. There is all the load of International debt which is being repudiated day by day, by the Danubian Provinces, by Greece, by South America, wherever it may be, and that problem too will have to be tackled if we are to get the exchange position right in the world. I hope the right hon. Gentleman will not leave that out of consideration when he goes to Lausanne, that he will consider the whole problem of International debt, not merely the problem of War debts and reparations. These International debts cannot go on snowballing up for ever. There must come a time when they so clog exchange that they become an impossible burden.

If I may pass to the second problem which has emerged from this discussion, the necessity for doing something with the control of currency has long been preached by this party. On, I think, two or three occasions, I myself have put the problem before the right hon. Gentleman and begged that he will do something in order to take an active hand in the control of our monetary situation, and we certainly welcome this glimmer of hope which has come by the Exchange Fund. We do not altogether appreciate—and I am not going into the details of it now, because it can be discussed on Monday—the full implications of his policy, but as a means for mobilising foreign exchange, which is a thing the necessity for which we have always urged, it is no doubt a convenient tool, and all will depend upon how this fund is used and with what purpose it is wielded.

The control, I think, has been promised to us by the right hon. and gallant Gentleman the Financial Secretary to the Treasury, and to that we attach the very greatest importance. The control of this fund being by the Treasury will inevitably lead to the control of all currency matters and credit matters being in the hands of the Government, because it will be impossible, the right hon. Gentleman will find, to separate the control of the Foreign Exchange Fund from the control of currency generally. For instance, take such a thing as has happened to-day—the Bank Rate at 3 per cent. The right hon. Gentleman will find, if he is in control of the Exchange Fund, that an alteration in the Bank Rate will make a vital difference perhaps to exchange problems and may lead to the influx of money or may lead to money going out of the country, and it will become impossible, unless the right hon. Gentleman is prepared to take the control, not only of this Exchange Fund, but of the whole of the operations that are concerned in the regulation of currency and prices—in fact, the whole monetary policy of this country.

It has been very pleasing to those on these benches to appreciate that the whole of the House is now moving, under the lead of the right hon. Member for Hillhead (Sir R. Horne) towards a definite control of the financial situation by this House. He stated very clearly that this Committee had got to concern itself with, and take an active part in, the control of the financial policy and the monetary policy, and I was interested to read last week, under the heading of "Bolshevism run mad," an extract from a leader in the "Daily Express," in which it says: The Government must be master in its own house; the Government must dictate the nation's monetary policy, and the Bank of England must be relegated to its rightful place as a servant of the nation. With that we agree. It has always been our policy, and we trust that the Noble Lord who issues that paper will be able to drive the Conservative party into that policy, as he has driven them into others.

The most important announcement as regards the Exchange Fund will, I hope, allow the right hon. Gentleman to tell us something as regards monetary policy. I should not imagine that my strength would compel him to divulge anything, but with the assistance of the other appeals which have been made to him we have great hopes that he may say something. May I say one word, however, on this question of what are the desiderata as regards that policy? As we see it, it will be fatal if our sterling is to be bound to any exchange based on gold, because that will merely be binding us to gold by proxy, and it is essential that our exchange should be based and made stable on some criterion. That must inevitably be, we believe, a stability of wholesale index prices because, especially if we are to get a sterling group not only of the Empire but of the countries which are at the moment adhering to sterling, it is essential that we should manage our currency on a basis that will be fair to them and understood by them. The only one which fulfils that qualification is a basis which permits the owner of a pound sterling to know always what its purchasing value is in a certain list of goods.

The right hon. Gentleman will perhaps tell us whether it is his intention, when he is managing his currency, gradually to work back to the price level of 1928–9, which we agree with the right hon. Gentleman the Member for Hillhead and the right hon. Gentleman the Member for Sparkbrook (Mr. Amery) it is essential to do if we are to have a sufficient quantity of currency and credit in circulation to get back again to a freer exchange of commodities. After all, that is, we believe, the primary purpose and intention of currency. It is not a question, as we see it, of trying to get the exchange at a certain level, 3.30 or 3.60 dollars, and fix it there, because if we did we should be on gold again, but of allowing it to fluctuate on foreign exchange, if it is necessary, and to keep it fixed so that the owner of it may know what it will purchase at any given time. The fund which is being set up will be a valuable fund if it is used for that purpose and for the purpose of ironing out the casual aberrations which the exchange may work from that desired point by reason of such a thing as this body of international money which is floating about the world at the present time to the serious trouble of various capitals.

We believe that that measure of control is the first step towards the efficient control and taking over of the currency functions of the Bank of England. It is for that reason that we are delighted to see the right hon. Gentleman take it. In fact, not only has this step been suggested, but further steps in a similar direction have been suggested by hon. Members in the Committee whom one would have hardly expected to show strong Socialistic tendencies. The hon. Baronet the Member for Farnham (Sir A. M. Samuel), once so high in the financial hierarchy of the Conservative party, and no doubt a, great authority, said in his speech the other night that it was essential that there should be some control of the investment of capital moneys in this country. He gave the picture of the folly of allowing the paper of those Swedish companies to be floated on our market during the last five or six years; he was speaking of Kreuger and Toll and the Swedish Match Company. Then he pointed out that it was necessary, not to have interference, but intervention by the Government to control the proper use of capital for British purposes—again, a most admirable suggestion Which we hope that the right hon. Gentleman will accept from his back benches, although he may not accept it from these. It is absolutely essential if we are to make the best uses of our capital resources to see that people like Mr. Kreuger are not allowed to come here and carry off many millions which are apparently thrown down the drain in Sweden or some other place.

That, with the tariff policy which the right hon. Gentleman has brought in, which is another method of control of industry by the Government, is beginning to form the nucleus of what he wilt no doubt one day come to, and that is the complete Socialist conception of the control of industry and finance; and I am sure that if he stays there long enough we shall be able to welcome a Budget in which he has at last shown his conviction that that is necessary. It is that feature of this Debate upon the Budget which strikes me as being the most remarkable feature. We believe it to be far more important than any minor policy of taxation that may be discussed, because it is at last, as the hon. Member for East Aberdeen said, a realisation by the House, and by the Government, we hope, of something which he has preached for many years most ably—the necessity for thoroughly revising the ideas of the country and the House upon the importance which the monetary situation plays in the industrial life of the country. When one sees, over the last 12 years, the chaos that has been wrought throughout the world by the deflationary policy which has followed upon the hoarding of gold, it is almost impossible to overestimate the importance of the hopes which lie behind the adoption of a definite and wise monetary policy by the Government of this country, especially if that policy can be carried out either in association with the whole world through an international conference, or if, as is probable, that is quite impossible at the present time, at least in association with the British Empire and that group of countries who are prepared to adhere to the sterling exchange system, a group of countries which probably will become daily greater and greater.

If I may say one final word upon the other aspect of the Budget, it is this. The right hon. Gentleman has brought in his first tariff Budget. The effects of it, so far as the incidence of taxation are concerned, are disastrous to the poorly paid. Whether or not his expectation that they will get corresponding benefits by higher wages and more employment is realised can only be shown by the lapse of time. We are still unconvinced that in a system which is run for the benefit of private enterprise those results will flow from tariffs, but we do object to the position that before any of those benefits flow the incidence of taxation should be changed. We object all the more because the very people who k are going to bear this extra indirect taxa- tion, notably, the tax on tea, are those who suffered the cuts last October, the very people who, as anyone can see who is prepared to look into it, are unable to bear one ounce greater burden; and at the same time we are unconvinced that there are not many people who, in a great emergency—if the emergency still exists, as the right hon. Gentleman said—could not without inconvenience, certainly without starvation or suffering, bear for a time longer a larger burden in order to relieve those who are already so tragically overborne by the troubles of this country.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The hon. and learned Member for East Bristol (Sir S. Cripps) prefaced his remarks by saying that no Chancellor of the Exchequer could expect to introduce a Budget without disappointing the House, or some part of the House. I gather from the hon. and learned Member's closing words that this would not have been entirely the Budget that he himself would have introduced, hut I have hopes of him, for I observe that he has now defined Socialism so that it has been extended to the use of tariffs, for he said that there were methods, including the control of industry by means of tariffs, which he welcomed as an instalment of Socialism. It seems to me that the proposals which I thought it my duty to put before the Committee on Tuesday have been justly described as hard, grim and bleak. I feel that I have no cause to be dissatisfied with the course of the Debate which has taken place. I should like very heartily to pay my acknowledgments to so many hon. Members who gave their support to the general outline of the Budget, even though there may be certain particulars in which they desire to see it amended.

After all, hon. Members have only had a few hours to take in what I have been assimilating and digesting for many weeks. If I may judge by my own feelings when I first realised the impossibility that there could be a surplus this year on the basis of existing taxation, I can well understand that the first consideration of proposals which fell so far short of what had been anticipated gave rise to doubts and wonder whether, after all, it was necessary to be so severe. I believe that those doubts will be only temporary in character, and that as time goes on hon. Members will realise, even more fully than they do at this moment, that, in this case at any rate, "Safety First" is a good motto, and that we shall surely, hereafter, feel that the sacrifices we are making to-day have brought us a double reward.

If the Budget has been disappointing to some of my hon. Friends, I am afraid it has been equally disappointing to hon. Members opposite. They have been hoping to find in it any proposals which might serve as a pretext for a denunciation of the capitalist party on their many platforms throughout the country. In the absence of any substantial change in the present incidence of taxation they have been desperately hard up for materials, even during the Debates that have taken place recently.

10.30 p.m.

The hon. Member for Caerphilly (Mr. Morgan Jones), whose speech I had the pleasure of hearing earlier in the afternoon, declared that I had made two remarkable omissions—that I had said nothing about War Debts, and that I had said nothing about Disarmament. That was not quite accurate, because I did say something about War Debts and reparations. I explained that, in the uncertainty which necessarily must exist at present as to the ultimate fate of these two features in the international situation, I had to make some sort of assumption in presenting my statement, and I thought that the best assumption was to leave them out of the calculation altogether. That is not a notice of a definite policy; it is not a notice that we anticipate any particular solution; it is a notice that, as we do not know what is going to happen, we leave both sides out of account, and intend to deal with them when the certainty comes to us later on.

With regard to Disarmament, was I to take credit in this Budget for some reduction in the cost of armaments to this country—a reduction which could only depend upon the possibility of some international reduction to be agreed upon at Geneva? The Committee knows very well that the British Foreign Secretary has already expressed his agreement with the general outline of the proposals made by the American representative at Geneva. All the world knows, or, at any rate, ought to know, that we have set an example to all other countries in our armaments. We have, indeed, reduced our defences below the point of safety in our anxiety that it should not be said of us that we were not willing to show an example. But we cannot be certain that our lead will be followed, and it would be indeed the height of folly, in a Budget statement at this stage, to provide for anything that we cannot actually see in course of materialisation.

The Opposition, in my view, have lost an opportunity on this occasion. Since there were so few definite proposals that they could attack, they have lost the opportunity, with the exception of the hon. and learned Gentleman who has just spoken, of addressing us on the larger and more complicated, but highly important, problems which have been raised in the course of the discussion, and, with that exception, it is to hon. and right hon. Gentlemen who support the Government that we owe a number of contributions to the Debate which, I venture to say, have raised it to a much higher level than most of the Budget Debates to which I have listened since I have been a Member of the House.

I should like to say something in reply to some of the comments that have been made, but, before I come to those major problems, I would prefer to deal first with some of the particular features of the Budget which have been the subject of comment, and, perhaps, of some criticism. The one item, perhaps, which has excited more general agreement in criticism than any other, is the fact that I declared myself unable to reduce the duty on beer. I would ask hon. Members to believe that I approach this subject in a very sympathetic spirit—not from a personal point of view, but because I see in beer one of the great sources of revenue to the State, which has been for some considerable time declining, and which suffered a severe acceleration of that process by reason of the increase in the duty last September. I do not want to see such a source of revenue permanently undermined, unless, indeed, I can see some other source from which I might obtain an equivalent revenue, and I do not mind saying that, until I had the full particulars and estimates of revenue and expenditure and knew what the exact position would be I had fully anticipated that I might be able to propose the removal of the extra duty. But in the circumstances in which I find myself this year the first question I had to put to myself was, "How is the Budget to be balanced?" and, when I came to that problem and had made inquiries as to what the cost of remitting this duty might be, I found that I had no resources on which I could count which would enable me to carry out what had been my intention.

My right hon. Friend the Member for Epping (Mr. Churchill) was one of those who gave his powerful support to the view that this duty might have been removed. My right hon. Friend the Member for Hillhead (Sir R. Horne) also made a strong appeal on the same subject. Both of them had their suggestions to offer as to how the gap might be filled. My right hon. Friend the Member for Epping suggested that it could easily be done by taking the necessary money from the Dollar Exchange Account. That shows that he has not forgotten the memories of a few years ago when he dazzled us by the ingenuity with which the was able to meet recurring liabilities with nonrecurring assets. But the circumstances to-day are very different from what they were then. There may be occasions when you can safely take capital for the purpose of meeting a deficiency of income, but I cannot bring myself to the view that, in the circumstances in which we find ourselves to-day, with all the uncertainties not only in the estimates of revenue which we may obtain from the various sources which I frankly pointed out in my Budget speech but also in the uncertainty which prevails as to what may happen as to a number of international problems, it would be right or sound from the point of view of finance to take money from this capital account in order to relieve a particular trade.

My right hon. Friend the Member for Hillhead did not depart from financial orthodoxy, but he expressed the view that the removal of the duty would lead to such an increased consumption of beer that the revenue to be obtained would be equal to what it would be if the duty were kept on. My right hon. Friend will agree that on that point his expectation cannot be founded upon any very substantial data. There is very little evidence which he could adduce to support his contention. It is rather a matter of speculation, and indeed what figures we have, I think, do not support it at all. I have already stated that last year we got £3,250,000, a reduction of only £1,250,000 on the amount expected, and if he will make a simple calculation I think he will see that in order that we should get the same revenue from the reduced duty which we get from the duty as it stands to-day, it would be necessary that the consumption of beer should increase by no less than 40 per cent. It is a very sanguine anticipation to suppose that the capacity of the nation in that direction will increase rapidly enough to produce so remarkable a result in the course of a financial year.


My right hon. Friend rather misinterprets my argument. I think that the diminution which will take place in the consumption of beer under the duty will be progressive, and that my right hon. Friend will not get the revenue which he anticipates.


That is my right hon. Friend's view. I hope that he will allow me, without disrespect, to say to him that I prefer the view of those who, after all, are experts in this matter.




I admit that, taking what they consider a fair and reasonable allowance for the decline which was taking place before the duty was put on, and a further allowance for the decline expected on account of the duty, I shall get £8,000,000 from the duty this year. If that be so, the Committee will see that I could not remit the duty unless I could see pretty clearly where I was going to get the £8,000,000. I fully appreciate that in this matter I have not to consider—


I thought that my right hon. Friend said that the loss would be £10,000,000.


Yes, I did. The loss will be £10,000,000 because I do not think that the consumption would go back to what it was before if the duty were taken off. That is a view which again is, I agree, not one that one could prove, but it is founded on a good deal of experience, and it is because we believe that it will probably take some little time, at any rate, for the consumption to rise again that I anticipated that the loss of revenue in the year would be as much as £10,000,000. In the interests of the revenue which is reflected not merely in the duty itself but also in Income Tax and Surtax which may be derived from those who are concerned in various industries connected with beer, including the agricultural industry and so on, the Beer Duty is one which ought to be considered as soon as we can feel that we can afford the present immediate loss of income in order to save what will very likely be a larger loss of income hereafter. I want to correct one misapprehension which seems to have gained some currency, namely, that the decision which I announced on Tuesday with regard to this particular duty was one which was forced upon me, unwillingly on my part, by one or more of my colleagues. Whatever sins my colleagues have to answer for, at any rate they are free of all responsibility for this, because I had decided it myself, on the considerations which I have put before the Committee, before submitting my proposals to my colleagues in the Cabinet.

There were various other criticisms on points of detail, all made in the most friendly spirit. They were directed to such matters as the fortification of wine by spirit, still charged as wine duties, the failure to give preference for Empire-grown coffee or cocoa, and the failure to remove the duty on raw silk. It certainly would be a dull House if everybody said the same thing, and I do not complain in the least of criticisms and suggestions of that kind, but I should like to suggest to my hon. Friends that the Government have been making advances at a fairly rapid pace towards the views which they hold. They may have seen some advances even within the last few minutes. It would be a little unreasonable to suggest that we are to blame because we have not done everything all at once.

I would ask my hon. and right hon. Friends to remember how very cramped I must be on this occasion by considerations of revenue. Take, for instance, the question of silk, a matter which has been mentioned in several quarters and a reasoned case for which was put forward with great power a little while ago by my hon. Friend the Member for the Elland Division of Yorkshire (Mr. Levy). I am asked to remove the duty on raw silk. I estimate that that would cost £300,000. But it does not stop there. The object of the proposal is avowedly to start a new industry in this country. [HON. MEMBERS: No; to maintain it!"] I am dealing particularly with the illustration given by my right hon. Friend the Member for Hillhead, who mentioned a case where he had reason to suppose that a new factory would have been started in this country. The result would be that a certain amount of imports would be substituted by British manufactures; an excellent thing in itself, but it might cost me very well another £500,000. Then, I have to consider that if this treatment was to be accorded to real silk one could not leave out of account the raw material of the artificial silk industry. There is the question of artificial silk yarn, and if that were to be treated in the same way I should probably find myself involved in a loss that might run up to £2,000,000.

Therefore, the Committee will see that I am hampered from the beginning in regard to a proposal of that kind by the fact that it might well cost me a substantial sum of money which, at this particular moment, I should find it very difficult to lay my hands upon elsewhere. Do not let right hon. and hon. Gentlemen consider this as though it were the only opportunity of dealing with these matters. In the course of the career of this Government there will be many things to which we shall be turning our attention. We have time before us, and I have no doubt that when our finances are in an easier condition, it will be possible to give consideration to some of the views that have been expressed.

I now come to those larger questions to which I alluded at the beginning of my observations. I suppose there has been a. general recognition throughout the Committee that the finances of this year's Budget would have been in a really desperate condition if it had not been for the Import Duties. It was fortunate, indeed, that the Government acted promptly in this matter, because if you take the amount which we are ex- pecting to get from these duties, together with the revenue which I anticipate from the Tea Duty, you will have a total sum which will be equivalent to something like 9d. in the £ on Income Tax. I believe even hon. Members opposite would hesitate to impose another burden upon industry at that rate, and yet I do not know where else they could have found it if it had not been for these Import Duties. The hon. and learned Gentleman declared that tariffs bad been disastrous in their effects on the poorest classes of the country. He did not venture to give us any evidence of that statement and, indeed, he would have found it very hard to do so, because, as a matter of fact, we all know that even since the tariffs were introduced the continuous fall in the cost of living has not ceased. It has gone on just the same as if we had imposed no tariff at all. The clear and obvious deduction from that is that if you take the tariff as a whole it is the foreigner who has paid the duty and not the working classes of this country, and that he has done as he has done in other places before, and has made his contribution to our expenses in return for the opportunity we give him of selling on our market.

The hon. Member for Leigh (Mr. Tinker) stated, I understand, though I was not in the Committee, that if it was true that the foreigner paid the duty, why should not we put up the duty from 10 per cent. to 20 per cent.? Well, that is a very good idea, so good that, we have lost no time in adopting his suggestion, and we must thank him for the very useful contribution to the Debate. In spite of the essential character, from the point of view of revenue, of the new duties which we have introduced, and in spite of the fact that we expect them still further to assist our finances by diminishing the amount of unemployment, nevertheless, I should entirely agree with those who say that tariffs alone will not solve the problems of this country, much less those of the world.

It is perfectly evident that we have got to go on exercising the strictest economy in all our public services, whether national or local. I have been told that some of my hon. Friends thought that on Tuesday I did not lay sufficient stress on that aspect of the matter. I am sorry if I gave the impression to any of my hon. Friends that I did not attach the utmost importance to economy, but it must be remembered that you cannot effect economy by talking, and I have a very vivid recollection of a repeated and most unfair attack on the right hon. Member for Epping for a statement which he made in his first Budget speech, when he declared that he was aiming at a reduction of £10,000,000 a year in our expenditure. That statement was afterwards produced as a promise which he had failed to fulfil. I shall always try to profit by the example of my right hon. Friend and I think that in the matter of economy action shows up even better than promises unless one can be quite certain exactly what economy you can effect and where you can effect it.

A little while ago I was listening to the hon. and gallant Member for Gains-borough (Captain Crookshank) who has given some attention to these matters. I welcome his observations because they show that he has taken a good deal of trouble to find out whether economies which were promised have actually been carried into effect. I am sorry that his investigations have led him to the belief that some of the economies for which the National Government take credit have not, in fact, been effected, and I should like to take the opportunity now of explaining the misapprehension under which the hon. and gallant Member made his observations. He said that in the White Paper issued by the Government, in which the details of economies they propose to make are given, that certain figures in the White Paper when compared with the actual Estimates do not show the reductions which had been expected. The difference is explained in this way. The hon. and gallant Member compared this year's Estimates with last year's Estimates. The figures on which the estimates of savings were given in the White Paper were not those of last year's Estimates but were the estimates made by the May Committee on what the supply services would cost this year, after the automatic increases which were bound to take place. I find that I have not allowed myself sufficient time to say all that I had intended to say, and I must conclude my remarks by observing that we all recognise that the fundamental cause of many of the world's troubles lies in the calamitous fall of gold prices, and at Lausanne and at Ottawa we are going to do our best to try and get an agreement with other countries to deal with these world problems.

Question, That it is expedient to amend the Law relating to 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 with Finance,

put, and agreed to.

Resolution to be reported To-morrow.

Committee to sit again To-morrow.

The remaining Orders were read, and postponed.

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