HC Deb 09 May 1932 vol 265 cc1561-684

Order for Second Reading read.

Motion made, and Question proposed, "That the Bill be now read a Second time."


I beg to move to leave out from the word "That" to the end of the Question, and to add instead thereof the words: this House regrets the reversion to the long-discarded and unjust policy of raising an increasing proportion of the national revenue by indirect taxation, and cannot assent to the Second Reading of a Bill which suspends for am indefinite period the Land Value Tax, reimposes a duty on tea, and clears the way for new taxes upon staple foods without affording any relief to the great mass of the people upon whom existing taxation is a crushing burden. There can be no doubt that hon. and right hon. Members opposite view the Finance Bill of this year with a good deal more satisfaction than some Finance Bills of recent years. They may have some causes for complaint, but their approval of the Finance Bill is not far to seek. The Finance Bill which we are considering to-day marks the reversal of a policy which has been steadily developing along certain specific lines in this country for the last two decades—a policy marked by a decided tendency to remove some forms of indirect taxation and to impose direct taxation to pay for our steadily expanding social services. In the April Budget Debates of 1931 the right hon. Member for Epping (Mr. Churchill) told the Chancellor of the Exchequer of that day that that Budget marked the end of the process which had been going on for some time. I think I had better quote his exact words. On the 29th April, 1931, the right hon. Member for Epping, speaking of the first Budget of 1931 said: The Budget marks a very great decision.… It will be memorable for the fact that the Socialist Chancellor of the Exchequer, in spite of party pressure, in the teeth of the whole doctrines of his life, has declared by action, which is louder than words, that in the present circumstances the limits of direct taxation have been reached. There is the bleak revelation thrust silently but brutally before British Socialism."—[OFFICIAL REPORT, 29th April, 1931: col. 1667, Vol. 251.] When we try to see what has happened in proper perspective, the first Budget tried to hold to the process which had been going on for some time, but the second Budget of 1931 began a reversal of that process by a series of cuts of one kind or other which it imposed. It is interesting to recall the fact that that was done in the name of a crisis in respect of which the right hon. Member for Epping said the other day that there was a good deal of exaggeration about a crisis which arose last September, and a certain amount of manipulation. There was certainly enough exaggeration and sufficient manipulation to compel an ex-Socialist Chancellor of the Exchequer to be almost brutal towards some sections of the community, especially those sections who had been his peculiar concern during a long political career. That retrograde reversal of policy has been carried a step further in the present Finance Bill and also in one or two Bills which preceded it, such as the Wheat Quota Act and the Import Duties Act.

It is always difficult to see the full significance of events in which one is playing a part, but this Bill is certainly unique in one or two respects. In its 28 Clauses and three Schedules there are many references to a body which has recently made its appearance in our political life—the Imports Duties Advisory Committee. That is certainly a unique feature of the present Finance Bill. The three gentlemen of whom it is composed, to judge from the pages of the Bill, bid fair to become the country's taxation dictators. This Parliament has seen fit in its wisdom to confer on these gentlemen almost unlimited powers of imposing indirect taxation on the people of the country. The President of the Board of Trade towards the close of the Debate of last Thursday uttered a bitter jibe at my hon. and learned Friend the Member for East Bristol (Sir S. Cripps) when, speaking of this Imports Duties Advisory Committee he said: The real advantage of the working with such a committee as we now have is that that committee is not like a court of law. It is composed of three common sense men." —[OFFICIAL REPORT, 5th May, 1932; col. 1417, Vol. 265.] I have listened with a good deal of scepticism to the suggestion of the Committee as being entirely beyond the range of political influences. I have listened with a good deal of scepticism to the various essays on impartiality to which we have been treated in this House from time to time, and when the President of the Board of Trade tells us that these three men are common sense men, not specially trained to weigh evidence, ordinary human beings like ourselves, they will be susceptible to the influences which determine the attitude of mind of everyone of us on the economical and political problems of the present age. I discount a good deal of what has been said about impartiality. As a matter of fact, we all look upon economic and political questions with a bias of some kind or other according to the particular place we may occupy in society.

It has often been said that British industry wants a greater measure of security and confidence. Under a tariff system it will get less certainty than it has had under Free Trade. Under Free Trade there was only one great uncertainty and that was whether your competitors would beat you in the markets in which they were competing against you, but under a tariff system there will be many uncertainties. We are supposed to be engaged on the process of building up a scientific tariff. There can be no such a thing as a scientific tariff. That phrase has become a sort of chant with Protectionists opposite, like the chant of the medicine man and the witch doctor in tropical Africa, and with no more meaning in it than the chant of the witch doctor or medicine man. Protectionists opposite say "scientific tariff" over and over again. The uncertainty which is bound to gather around British trade with the development of a tariff system is to be found in the nature of the economic system itself. The conditions of production never remain stable for very long due to the ever-changing inventions which we may employ. The President of the Board of Trade has said that he would rather have one successful invention than 20 Acts of Parliament. Would he apply that maxim to the Imports Duties Act?

Scientific tariff enthusiasts can never have visualised a tariff system so fluid in character as to meet adequately the ever-changing methods of modern production, and it is vain for hon. Members opposite to imagine that they are the creators of certainty and security. Economic development will sweep past them leaving their archaic ideas where they should be left, in the limbo of forgotten things. I will give just two illustrations which have come to my notice in regard to increased insecurity. To-day, owing to what has been done already, a strike is in progress in my constituency. Owing to the imposition of a tariff upon our export coal a colliery in my constituency has undertaken the process of reorganisation, which has resulted in the dismissal of 900 men because of the decline in our coal exports. I do not know how many other instances could be collected from various parts of the country, but these have come under my own personal observation. This is a Bill which will long remain memorable for its reiterated refrain. I ask hon. Members to read through its Clauses. They will find: The Treasury, after receiving a recommendation from the Imports Duties Advisory Committee … may on the recommendation of the said Committee do so and so. That is the refrain which runs through many Clauses of the Bill, and if the House gives a Second Reading to it it will be carrying through the most reactionary Measure to which it has consented for a generation or more. The Amendment calls the attention of the House to the unjust policy of raising an increasing proportion of the national revenue by indirect taxation. The first Clause of the Bill is indicative of its entire character. In itself it is a sufficient justification for the Amendment and for the inclusion of the words of the Amendment to which I have just called the attention of the House. The first Clause places a duty of 4d. on tea. The Chancellor of the Exchequer told us that this would involve about £3,600,000, but the Clause is indicative of the whole contents of the Bill, which is designed to empower a body to impose further indirect taxation on the country. Incidentally, you find in the Clauses of the Bill the orbit along which the ideas of the National Government are moving.

In Clause 2 we again get into that mythical world of Imperial economic unity, whose shape and form must occupy all the waking hours of the right hon. Member for Sparkbrook (Mr. Amery). He had something to say about the Resolution on which Clause 2 is based, but it was, of course, a lament. All his speeches since the National Government came into office have been laments. I suggest that he should collect them from the OFFICIAL REPORT and publish them as a new book of Lamentations. I have also read with a good deal of interest the speech which the right hon. Member for Epping made on Saturday. He was talking to the Americans, and he said: We see nations walling themselves all into pens. Even we in England have been forced to do that. Well, we have got a pretty good pen in the British Empire. The right hon. Member for Sparkbrook can hail the right hon. Gentleman the Member for Epping as a recruit to his policy. Then he goes on to say: You are all wrong. You have forced us into wrongdoing. That merely means that we shall all go down to destruction together if we do not inflate—that is the new gospel of the right hon. Member for Epping. In Clause 6 of the Bill the Import Duties Advisory Committee appears on the scene. Nominally it is installed to restore prosperity to a decaying economic system. That is supposed to be its function. It haunts the succeeding Clauses like a gaunt spectre, with power to inflict indirect taxes on the masses of the people. In Clause 6 the Advisory Committee is empowered to remove goods from the Free List under the Import Duties Act. Behind this Clause is the clamant demand of interested parties for taxes upon meat and wheat. There can be no doubt that the power given to the Advisory Committee in this Clause foreshadows the coming of tariffs upon foreign meat and foreign wheat. [An Hon. Member: "Why not?"] An hon. Member behind me says, why not? That is confirmation of my statement from the rank and file of Members, whether it comes from the Government Front Bench or not.

Last Autumn we were told that our fate depended entirely on the preservation of the Gold Standard and saving the pound. This year the scene is changed and our fate now depends entirely on what happens at Ottawa. The cry to-day is, to me, as empty and meaningless as that of last year. Last year it was, "Save the Gold Standard; balance the Budget; make cuts and economise, and probably prosperity will return." This year the cry is, "Make Ottawa a success and the future is assured." I doubt very much whether more will come out of Ottawa than came out of the attempt to preserve the Gold Standard. Anyway, in Clause 6 of this Bill power is given to implement the decisions at Ottawa, whatever they may be, in regard to foreign meat and foreign wheat.

How illogical and contradictory is the whole policy of the Government! This Advisory Committee, with its unlimited power to impose indirect taxation, is destined in the long run either to raise the cost of living or, in the words of the Home Secretary, to cause the cost of living to remain at a higher level than it otherwise would be. At the same time wage reductions are being demanded to enable our manufacturers to sell more in the export markets of the world. I have seen it stated somewhere that if the Lancashire cotton mills run at full capacity, the home market can absorb only 25 per cent. of the production. Therefore 75 per cent. must be disposed of somewhere else. Yet the actions of the Advisory Committee are not calculated to extend the home market for cotton goods. Are they calculating, by raising the cost of living, to make it easier for the exportation of cotton goods? The entire policy of the Government is most contradictory.

Clause 21 of the Bill deals with a matter about which there was much discussion in the House, namely, the Exchange Equalisation Account. However big business and financial interests may resent the interference of the State in some connections, they have no complaints about it in other ways. In Sub-section (3) of the Clause the Treasury seems to be equipping itself to enter the ring in order to take part in a struggle for a greater share of the world's available gold supply. We have prepared ourselves for conflict on land and sea and in the air. We have an economic conflict going on. Now we are entering the ring to take part in another conflict, in which there is to be a struggle to obtain possession of available supplies of gold. The masses of the people are only remotely benefited by this form of State activity. It may be argued that some of them, owing to the establishment of this Account and the way in which it is worked, may have more regular employment because of the assistance which will be given indirectly to big business and finance. If that is so, surely big business and high finance should not grudge easing the conditions of life of millions of working people; if the State is to help them out of their difficulties, they ought not to be so critical of the State's activities in other directions.

I turn to Clause 24, and I see that there is an Amendment to it on the Paper. This is the Clause which suspends the Land Values Tax, and it is the most blatant piece of political spleen that has been witnessed for a long time. I know of no place where the Land Values Tax was an issue at the last General Election, yet no sooner had this Parliament met than the Chancellor of the Exchequer was bombarded day after day with questions from land and property interests about the immediate suspension of the valuations which had commenced. In the end the right hon. Gentleman meekly gave way. I do not know whether it was with Lord Snowden's consent or not. The happennings in the National Cabinet must be very strange indeed. The country would probably be highly amused if it could be told the whole story of what occurs in that Cabinet room. Doubtless when hon. Members go into the Lobby to-morrow night they will gloat over their triumph in regard to the suspension of the Land Values Tax. They may gloat. Their triumph will be temporary, for the day will come when this nation as a whole, either in this House or in some other way, will assert its right to the ownership of the land of these islands.

Let me come back to the point from which I started. I pointed out that the Budget of 1931 checked the process of redistributing the national wealth by means of taxation. The second Budget of that year, with its cuts, began the reversal of the process. This Budget begins the task of taking back from the working classes, by indirect taxation, much of what was given to them in some of the social services. Let us make no mistake about that. When the things foreshadowed in this Finance Bill are implemented, our working classes will be pressed down to a lower standard of life than that which they have enjoyed hitherto. When the process of social amelioration, to which I have referred, began, much of which is embodied in our social services, it began from the acknow- ledged fact that there was in this country a maldistribution of wealth. We had gone some little way to correct it. But the maldistribution of wealth still remains the most characteristic feature of our present economic 4.0 p.m. system. Out of curiosity I looked the other day in the last issue of the Statistical Abstract for 1928–29 at the incomes subject to Income Tax, and this is what I found. I know that I shall be told that a change has taken place since 1929, but the change is not so great as to vitiate the argument I am advancing. I found that incomes from the ownership of land and houses, in round figures, were £254,000,000; incomes from the occupation of land, £27,000,000; incomes from business concerns and professions, £1,064,000,000; salaries of Government, corporation and public company officials, £994,000,000; from British, Indian, Colonial and foreign Government securities, £153,000,000. The total for the year 1928 was £2,494,448,822, and the wages of the working classes, in the main, of course, are not liable to Income Tax.

I know I shall be reminded of what the Chancellor of the Exchequer said when he gave us the figures in introducing the Budget. He told us that Income Tax and Super-tax payers contributed, between them, last year, £363,400,000. When you are trying to see where the heaviest burden falls it is not so much what they contributed as what they had left as contrasted with the great masses of the working population of these islands. It was Disraeli who said that in these islands there were two nations— and it is as true now as when he made that statement—a nation of rich and a nation of poor. The appalling thing is that we are asked to give a Second Reading to-day to a Bill which, in my judgment, widens and deepens the gulf between the two nations within these islands, and opens up the prospect of a further emphasising of this economic disparity, and, indeed, it may well be the forerunner of a calamity the character of which one would not like to foretell. According to the Chancellor's Budget statement, the new indirect taxation imposed by this Government this year will be as follows: Abnormal Importations Act, £250,000; Horticultural Products Act, £750,000; 10 per cent. revenue tariff, £27,000,000; the new duties authorised last week, £5,000,000, and I may put-in here £5,000,000 for the wheat quota, and £3,600,000 for the Tea Duty. The National Government have gone on—my word they have! In this first year they are imposing upon the people of this country £40,000,000 worth of indirect taxation.

The right hon. Member for Hillhead (Sir E. Horne) drew a parallel between what he regarded as a shortage of currency in this country and a shortage of currency in the Roman Empire, and quoted from a famous historian to enforce the point of his parallel. Later in the day on that occasion, though he was not present, I made a reference to his speech, in which I pointed out the slave basis of the Roman Empire, and later on there came into my mind a quotation from Sismondi's "History of the Italian Republics," where, in one place, speaking of the patricians, he said that the old families perish through the vices engendered by luxury and idleness. Indeed, you can draw a parallel between Roman civilisation and the civilisation of to-day. Although there is a relative difference, I agree; although all people in the community reap, to some degree, the advantages of a long process of historical development, never let us forget that the terms "poverty" and "wealth" are relative terms, and, in relation to our powers to produce wealth, the people of this country are worse off than the slaves in ancient Rome. [HON. MEMBERS: "Oh!"] I say "in relation to our powers to produce wealth." You may talk about the fall in values, and the currency cranks in the world can issue all the essays they like with regard to currency. Arch-deflationists of a few years ago may become ardent inflationists of these days, but one fact remains. The technique of production, which has been elaborated in this modern age, is still with us, capable of producing unlimited wealth, and statesmen who cannot ensure that that wealth shall flow in increasing volume to those who are in crying need of it ought to abdicate and get out of the way. This Finance Bill will check the flow of that wealth, inadequate as it now is, to those who need it most, and, therefore, I move with the greatest possible pleasure the Amendment which is on the Order Paper.


The hon. Member for Mansfield (Mr. C. Brown) has delivered an interesting and, if I may be allowed to say so, a picturesque speech upon the subject of the present Finance Bill. I am not sure that he has very assiduously tackled the various propositions which are in the Amendment, nor am I inclined entirely to agree with his excursion into ancient history. The comparison between the social situation in ancient Rome and ours is, I think, drawing somewhat largely upon our imagination, and I would beg him to remember that it was the free importations of corn from Africa that ruined the Italian peasant, and brought about that very slave production which the hon. Member so much deprecated. I should have desired, as an old contestant in these lists, to have followed him with regard to various matters. I should have liked to break a lance with him, for example, upon the subject of indirect taxation, and to point out how great is his error in assuming that the mass of people really benefit by high direct taxes. I should also have wished to draw some attention to the fallacy of the idea that you are likely to get much out of the taxation of land values which he so much stressed. But, after all, these matters are, in a sense, what the French people call of the nature of old sport or old fun, and, while I might enjoy to-day with my hon. Friend a friendly battle upon these particular questions, I have some more important items to raise. I hope therefore that he will forgive me if I prefer rather to make my own challenge to-day than to take up the gauntlet, the rather battered and démodé gauntlet, which he himself flung down.

There are many subsidiary questions connected with this Budget which can be raised upon the various Clauses of the Finance Bill, but behind and governing all these questions there is the great main topic, as I see it, as to how the present provisions for national revenue and expenditure will emerge at the end of the financial year. A little study seems to me to show that the Chancellor of the Exchequer is relying upon an increase in our trade and industry, and that without some resuscitation in those branches of our national activities, the revenue which he has estimated will scarcely be realised, particularly if you look at such an item as the amount which he expects to obtain from Estate Duties. I cannot scarcely believe that the figure he has put in his Budget can be obtained unless we see in the course of the present financial year a considerable revival in industry. There are a great many of us who expect beneficial results from the tariffs, but I would like to say to my hon. Friends that we must not put too much stress upon our expectations in that regard. I think that we shall probably realise all that the Chancellor of the Exchequer expects from the tariffs in the shape of revenue. On the other hand, as far as export is concerned, I do not think that in the present condition of the world we shall get that aid in our export trade from tariffs which, in the ordinary circumstances, we should have obtained.

It is a fallacy of the Free Trade argument that tariffs never help exports. On the contrary, they are a great adjunct to your power of producing goods cheaply enough to sell in competitive markets. But if you look round the world to-day you realise the class of impediments which are opposed to the extension of your export trade. There are, for example, in many countries such severe exchange restrictions with regard to payments that you cannot expect to do as much in the export trade as in normal circumstances. It is not that your foreign customers will not buy your goods, but it is that your own people cannot afford to sell them without an assurance of payment. Accordingly, until the world is set right in this matter of exchange, exports must necessarily be constricted and impeded. The main efficacy of your tariffs is going to be in the prevention of an undue amount of foreign imports. How, for example, could we have expected this year to survive if in the midst of the present plethora of the world's production we were still the only country in the world throwing wide open our shores to all the surplus products of the nations? To what heights would our unemployment figures have soared? To what depths would have sunk the fortunes of our home producers? But these are rather negative benefits which we hope to obtain, though indeed there would be a positive advantage in the amount of employment which we should save for our own people.

We are bound, however, to look much beyond the particular advantages which I have sketched, because they are not sufficient to revive the prosperity of this country. As I see it, the crux of the situation is the fact that production in this country, at the present time, is not only not being carried on at a remunerative level, but is being conducted at a loss, which is depleting the resources of the industrialists of this country and causing an active diminution of their reserves. In such circumstances as these nobody will venture. The heart of the enterpriser is broken, and he seeks to put whatever of his fortunes he can save into gilt-edged securities. Business sags and industry shrivels.

A fortnight ago in the Debates on the Budget Resolutions, I ventured to point out to the House that the reason for that state of affairs was that the price level is too low to admit of production at anything but a loss. If I may recapitulate the views which I then brought to the notice of the House, I would suggest that with the present low prices there is not sufficient remuneration to be obtained to pay costs, including wages and salaries, maintenance charges and debt services; that if only we could raise prices it would effect a complete change in the picture, and you would have expansion of business, a margin of reasonable profit and a great increase in employment, which is the thing above all others that we most desire and require in this country. If we cannot raise prices, then I beg the House to think of what are the alternatives. I scarcely imagine that in any part of the House those unavoidable and inexorable alternatives would be welcome. What are they? They are that there should be a forcing down of wages, a compulsory cut in the rate Of interest derived from fixed interest-bearing securities, and you might in the end have to face so dire a device as that of a capital levy.

In these circumstances, I ask the Government what is their policy. I ob-serve that my right hon. Friend and Leader the Lord President of the Council in a public speech a day of two ago rather deprecated what he regarded as naive inquiries for information upon intricate topics. On the particular point which I am going to raise I do not think that any such reproach can be uttered. I wish to bring the mind of the Government back to the Macmillan Committee and its recommendations. It put forward, as our first objective, the raising of world prices. It said that, without that, the world could make no progress. What is the view of the Government with regard to the report of the Macmillan Committee? It has been in their hands for a long time, and I do not think that I can be indiscreet or presumptuous in asking the Chancellor of the Exchequer whether he agrees with the decision arrived at by the Macmillan Committee, and, if so, what he is doing to put their policy into effect.

The Prime Minister in a broadsheet issued about a fortnight ago laid it down that, in his view, a rise in prices was necessary, and he quoted from a variety of Labour Members and others to show that that was the policy of the Labour party. But he said nothing as to any means that were to be taken to effect this desirable result. If you are not going to do anything, you might as well say "Abracadabra" and be done with it. But I imagine that the Prime Minister does mean to take effective steps to bring about that which he says is so much required in the world at the present time. The Chancellor of the Exchequer upon this topic at the end of a speech the other night in the House used these words: We all recognise that the fundamental cause of many of the world's troubles lies in the calamitous fall of those 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."—[OFFICIAL REPORT, 21st April, 1932; col. 1768, Vol. 264.] I realise that what the Macmillan Committee dealt with was world prices, and I entirely appreciate the Chancellor's point of view—that you cannot affect world prices without some form of international agreement. But I suggest to him that we have a problem of our own, apart from these international agreements. The raising of sterling prices is of infinite importance to us and is of vital importance to him in realising the estimates of his Budget. Moreover, I think I am right in saying that nothing that we do need cut across anything which may be proposed at an international conference upon this topic. Indeed, everything that we do in this line will be a help at such an international conference. The world is waiting for us to give them a lead. It is said with regard to the battle of Waterloo that the Duke of Wellington remarked: It was a damned close-run thing. I am not entitled, as a private Member, to use language of that kind in the House. Nevertheless, let me asseverate that it is going to be a very close thing between the survival of the civilisation which we know, and its decline, unless measures are taken which are apt to the circumstances in which we live. Everybody engaged in business to-day knows that there is not a moment to lose in taking the action which is necessary to save the industries of this country and the trade of the world.

Now the Government in this matter have complete responsibility. I am not sure that it is entirely realised. There is a temptation among some of my friends to put the whole responsibility for the conduct of monetary policy upon the Bank of England. That, constitutionally is a great error. I ask the House to cast their minds back to the period when we were previously off the Gold Standard. Lord Cunliffe's currency committee had reported in favour of going back to the Gold Standard in the form in which we had previously known it. The Government of the day, of which I was a humble Member, took full responsibility for the conduct of our monetary affairs in the circumstances in which we found ourselves, and those who look over the old reports will find repeated asseverations of that responsibility by the Ministers of that Government including the present Lord President of the Council. In December, 1919, the Chancellor of the Exchequer of that time, my right hon. Friend the Member for West Birmingham (Sir A. Chamberlain), announced to the House the decision of the Government with regard to the policy 'which was to be followed. The Government adopted most of the provisions which Lord Cunliffe and his committee had recommended, and they proceeded thereafter as part of the deliberate policy, of which the Government was the author, so to guide their actions as to facilitate a return to the Gold Standard. The Bank was instructed by the Government to follow that course, and they took all the steps which were thought appropriate for the purpose. Perhaps this is not so relevant to the issue which I am immediately arguing, but it is a fact that every subsequent Government upheld that policy and the only question that remained was the time suitable for making such a return to the Gold Standard.

The point I am making, however, is that it is the responsibility of the Government to conduct our monetary affairs and that the Bank is nothing more than the servant of the Government in this matter and has to take the orders which are given to it. When we went back to the Gold Standard the position was similar. By a statutory enactment the Bank was bound to take all the necessary steps to keep us on the Gold Standard, and, as we know, they did it until they found that it was no longer possible. Now we are off the Gold Standard, and I venture to ask what are the instructions of the Government to the Bank in this matter now? There has been no overt declaration such as there was after the report of the Cunliffe Committee, but we must remember that, as Members of this House, we along with the Government are responsible for the monetary policy which is followed, and we are deeply concerned to know the mind of the Government upon this matter. So far as any indication is given there is not much to help.

The proclamation which got rid of the Gold Standard only suspended the obligation of the Bank of England to sell gold. That would indicate that the idea at that time was that we were going back to the Gold Standard at the old parity. I think that probably the hon. Member for East Edinburgh (Mr. Mason) is almost the only man in this country who would not be horrified if that were announced to be the policy of the Government. Nothing could be so great a detriment to all kinds of industry in this country as going back to the Gold Standard at the old parity, and I cannot imagine that there is any such idea in the minds of the Government. But there was a speech not many weeks ago by the Chancellor of the Exchequer in which he indicated that his idea would be to go back to the Gold Standard at a different parity—at a revalorised parity. He said that he was not in 4.30 p.m. favour of a purely managed paper currency. He believes in a metal basis for our currency, and his view is that it should be either gold or gold helped by something else. I was glad that he suggested the possibility of there being some aid to gold, because I am one of those who have always believed that we might be able to put a silver lining into some of the dark clouds which hover over us at the present time. However, I am not going to argue that question now, because I do not wish to divert the House from my main theme. I am supposing, by the Chancellor of the Exchequer's speech, that his view is that we should at some time go back to gold upon a different ratio, but that he thinks the time for such an operation is not now. So far as I am concerned, I entirely agree with the view that the time has not arrived when you could make such a decision, but there remains this vital question: In the interval, how are you regulating your currency? What is your objective now? You must have some objective, and, so far as I can conceive, there is no other method of regulating your currency than by having regard to the level of commodity prices.

I should have laid it down for myself that you should so manage your currency that you should keep prices stable at a level which would enable you to produce at a reasonable profit, having regard to all the costs to which you are subjected. I can think of no other guide, except perhaps, the alternative of those who regard currency and prices as something so God-given that it is sacrilegious even to mention them. Their policy is to let things drift. Well, we are in a situation in which we are compelled to manage our currency. We have no alternative. In these circumstances, to let things drift is also a form of management, but it is the worst of all forms of management. May I therefore ask the Chancellor of the Exchequer whether he is directing his dealing with currency towards any particular level of prices, and, if so, what? I hope that he will not, like Viola in "Twelfth Night," Let concealment, like a worm i' the bud, Feed on (his) damask cheek. I hope it will not be regarded as either naive or presumptuous of me to ask a question upon this matter, because, believe me, the whole of business in this country is disturbed at the present time by uncertainty. Uncertainty is paralysis, and there are certain disquieting symptoms in the situation which we do not understand. For example, the Bank rate was kept at as high as 6 per cent. from September to the month of February. I certainly understand a high Bank rate immediately after we went off the Gold Standard, in order to secure what was considered to be safety, but after the turn of the year it is difficult to understand what was meant by it. At any rate, it does not look like any attempt to raise prices, because a high Bank rate inevitably means low prices.

There is another item to which reference might be made. When I look at the Bank of England Return for this last week, I discover that while other securities have increased, which I suppose represents purchases by the Bank of England of foreign currencies and perhaps some gold, there is a correlative diminution in the Government securities held. That certainly does not indicate any credit expansion, which is the most effective means by which prices may be raised; and, accordingly, I would ask the Chancellor of the Exchequer to try to clear our minds as to whether he really is desirous of raising prices, whether that is his policy, and whether he is taking effective means by which that object may be accomplished.

I hope that I am not being regarded as intemperate in this matter, but lest anybody should think so, may I refer to the "Economist" of last Saturday? Now, of all journals I should imagine that the "Economist" is the least flighty in this country. Nobody would ever attribute to it. the irresponsibility which is sometimes indicated in some of the more excitable members of the popular Press. This is what the "Economist" says: Declaration of a policy is no less important than is formulation. Not until the Government has made known its intentions will the industrialist and the merchant be able confidently to make plans for the future. Still more important, an official declaration of British monetary policy is a condition precedent to the collaboration with us of other countries in the Empire and without, whose authorities are looking to us for a lead, and whose closer association with us in the monetary field would be of the utmost value in the common pursuance of the many other objectives on which world recovery depends. I think I might end my speech there, because what I have read indicates, in clear language and in succinct form, the reflections which I myself have had upon this topic; but I hope hon. Members will bear with me if I venture for a moment to expand the views which are contained in that paragraph.

"Declaration of a policy." Will the Government declare, as the "Economist" requests, that they are aiming at an increase in wholesale commodity prices? I myself a fortnight ago referred in this House to the year 1928, and I took that as an example of a year in which we were able to carry on our business with tolerable comfort. At least, prices were then at a height which yielded some remuneration to the people engaged in business. I suggested then that we might make that a year whose prices we should endeavour to aim at. I observe that in the last issue of the Midland Bank "Review" they selected the same year, and the "Economist" proposes that the Government should declare their intention to raise prices by 30 per cent., which is practically saying the same thing, because the drop in prices since 1928 is approximately 30 per cent. Why should not we have that declaration of policy, if the Government have formed an objective upon which they are at present regulating the currency of the country? It cannot do anybody any harm; on the contrary, it can do a vast amount of good, as the "Economist" points out, in indicating to the world which is working with us what our leadership means and where they have to follow.

Can you raise wholesale commodity prices in that way? That is a very pertinent question which anybody is entitled to put, and my answer is this: On what do prices depend? Prices depend on the amount of money that is available for spending and upon the rate which you charge to the borrower who can beneficially use the money. Accordingly, you can raise prices by expanding credit and by lowering your Bank rate. The increasing of wholesale commodity prices in relation to sterling means the lowering of sterling in relation to commodity prices, and accordingly what you have to do in order to get prices up is to cheapen sterling. You make sterling cheaper by increasing the amount of it which is available and by reducing the rate at which it may be borrowed.

In what way can you do it? Well, I suggest one way. As is well known, there are others, but I suggest this one as being obvious. If the Bank of England buys Government securities, it releases cash; it increases what is known as Bank cash. If the Bank of England buys securities in large volume, it will release Bank cash in large volume, and the banks will then become more eager to lend. Further, if you lower the Bank rate, you make the borrower more eager to borrow, and in that way you should, in normal circumstances at least, achieve your object. I have no right to rush in where, according to a great panel in the Royal Academy, an angel is fearfully treading. It is not for me to announce to an awe-stricken assembly of reverent officials the inspiring news of a reduction in the Bank rate, but, if I were that angel instead of the fool that I am, I would undoubtedly announce the reduction of the Bank rate over the next few weeks from 3 to 2½, and to 2, and even lower, if it proved to be necessary.

"But," I shall be told, "this is inflation." There are many people in this country who like to use words instead of mental processes and who think the argument is finished when they mention the word "inflation." There is no more merit about deflation than there is about inflation, and there is no more disgrace about inflation than there is about deflation. As I conceive it, our currency is not unlike the blood which circulates in the human body. You can have too much blood or you can have too little blood. In the one case you have apoplexy and in the other case you have anaemia. But there is an optimum condition between the two which is the best for your health. Your currency is just the same. It is just as absurd to condemn inflation, in the present condition of this country's state, as it would be to deny to a man suffering from anaemia the correctives which ought to be applied, on the ground that if you do it, you are in danger of giving him apoplexy.

Deflation has gone to such a disastrous extent in this country that it is time to reverse the process. You may give it the term "inflation," or you may call it "reflation" or credit expansion; but at any rate, it is absolutely necessary that something of that nature should now be done. What are the objections that are commonly put forward to such a policy? People will tell you that once you start it you cannot control it. Who that went through the experience of the three last months of last year can say that the British people are not able to control their monetary affairs? So long as you meet your current expenditure by current revenue and do not require to use the printing press to meet your ordinary expenses, so long will you be able to control any inflation that you may begin. Other people will tell you that it will encourage a flight from the pound. I fear no such consequence. The world to-day trusts our judgment, nay more, it trusts us in our character and in our qualities as much as it has ever done in our history. The outside world will perfectly understand our course if we decide to adopt the suggestions I am making. If there were any danger of a flight from the pound the Government have now under their control the Exchange Fund. I should imagine from what I see in the Bank Returns that the Bank of England has been buying considerably upon the exchanges in the last week or two, and that they are now in possession of sufficient foreign currencies to deal with any temporary flight from the pound that is likely to occur. As I told the House a fortnight ago, I have much more fear of a rapid advance of the pound than a flight from the pound.

Here again you have the corrective in the very policy that I have been suggesting, because, if you are engaged in an operation of credit expansion, it is perfectly plain that there is no longer going to be a flight to the pound which would cause a rising value, because the speculator will already be warned off; he will not come in and buy pounds when he sees that a bull operation will no longer be profitable. Accordingly, in the combined policy which I have ventured to put before the House—a credit expansion on the one hand, and the use of the Ex- change Equalisation Account on the other —it seems to me that we have a system and a method upon which we can confidently proceed.

People tell me that there are risks. Of course, there are risks. At what stage of life are there no risks? Life would become stagnant and moribund if there were no risks. It is necessary that we should face whatever risks there are with fortitude and confidence. In that way, we shall get rid of risks much more readily than by fearing them. I remember when I was still a respectable member of the Bar and had not degenerated into a politician, I had to defend an Irish client in the course of litigation. He explained to me his methods. He said, "From the time I was a youngster I made up my mind to be known as a fighting man, because, if you are known as a fighting man, it is surprising how very little fighting you get to do." If we show the world that we know our own mind, that we are engaged in a persistent policy which we intend to carry through to the end, the risk will disappear like a morning mist frightened by the fire of the sun.

Connected with that part of my argument, there arises the condition of the man to whom the "Economist" article referred, the industrialist and the commercial man who are eager for some assurance as to the future and wish to know what is to happen in relation to the pound when they are making their contracts. If you tell them that your objective is to get to a level of prices increased by 30 per cent. on to-day's level, they will start on their business with a new heart. If you can go still further and tell them that every effort will be made to prevent the pound ever rising above to-day's level —which I assure the House is far too high—I am sure that they will go about their business with much more courage and confidence than they can at the present time. There is another element attached to that view. My right hon. Friend the Member for Epping (Mr. Churchill), in one of those picturesque analogies with which he so often delights the House, gave us the emblem of the sterling convoy. How is our convoy getting on. Since he spoke Denmark and Sweden have found it impossible to keep pace with us, because of the rise in the value of our pound. Chile is in the same position. Greece has gone off the Gold Standard, and it is also at a discount with sterling. From Australia and New Zealand we get poignant inquiries as to whether the pound is going to rise because the present position makes it very difficult for them—who would do anything rather than default—to meet their obligations to this country. There are great reasons why we should keep the pound at a reasonable value.

I shall be asked what is the use of embarking upon any policy such as I have described, and I shall be told that it cannot be achieved. It will be said that America has tried and has failed. It is true that the American operations are not yet attaining very much success, but that they will attain ultimate success I have no doubt at all. In the meantime, they are suffering from two difficulties. A great shock to confidence was created by the fact that something like 4,000 banks have failed in America recently. It is true that these are small institutions compared with ours, but in the aggregate their failure involved a very large sum of money. Again, the debates in Congress, where people seem to have been very unwilling to face national obligations and to take the necessary steps to balance the Budget, created a feeling of disquiet and nervousness throughout the United States which has not been conducive to the change in confidence which is necessary for the purpose of raising prices.

We are in a different position. We have no banks breaking and tottering to their fall in this country. Our banks throughout all these difficulties have never given even a tremor. They are as sound as the people they serve. As for our political position surely it is well established and our people are steadfast. We need not fear any timid reactions to any courageous policy that we may venture to adopt. As I said in the earlier part of my speech, the world is waiting for a lead from Great Britain. British stability of character and our prestige as masters of national finance are reasserting themselves. There is a greater responsibility upon us as a nation than ever before in our history. It may very well be that the elements upon which will depend the future of the civilisation we know will be our influence and our example. Pray heaven that we shall exer- cise them with consistency and courage, with faith, and with vision.


We have listened to a remarkable speech by the right hon. Gentleman the Member for Hillhead (Sir R. Horne). I have heard the right hon. Gentleman make many speeches in this House since the time when I was the only interested listener to his maiden speech, and to-day he has made a very daring, almost reckless speech. At the same time, we on these benches thank him for the way in which he has shown so clearly the bankruptcy of capitalism and for the manner in which he has suggested that this Government is bankrupt and that our rotten system needs replacing by some other better system. The right hon. Gentleman has done that wonderfully, and there are some parts of his speech that might be printed by the Socialist movement to the advantage and encouragement of the rank and file. At the opening of his speech the right hon. Gentleman suggested that the Chancellor of the Exchequer was expecting a revival in trade. I thought that that was the theme of all the speeches to which we have been listening in the last few weeks. Are hon. Gentlemen now losing faith in the policy that they have been preaching, at the very moment when it is coming into operation? It would seem so from the speech of the right hon. Gentleman.

5.0 p.m.

What are you going to do for the mass of the unemployed if there is not to be a revival in trade? The right hon. Gentleman has told us that the Chancellor of the Exchequer will not get the revival in trade that he is expecting and believes that he is likely to get. He says that we have already stultified our export trade. We know that very well, and in the coal trade we are seeing it every day, because men are being stopped and thousands of men are working short time. The right hon. Gentleman says that it is not sufficient to restore prosperity and that business mens' hearts are broken. I thought that the Government's policy had repaired business mens' hearts and had given them encouragement as to the future. They were told that everything was all right and that all they had to do was to go to the committee of three set up outside the House—set up above this House, and in the creation of which this House has destroyed the Constitution, as far as it could—to get their broken hearts repaired. He said we might have further cuts in wages. Another brilliant thing to say to the mass of the workers, who have undergone sufficient cuts in wages already if they are to live at all, after the policy of this Government is carried into effect! He further suggested what we should have liked him to suggest and to put into operation in 1919—that we might have to put into operation a capital levy.


My hon. Friend has not been quite fair to me. I did not commend those policies. On the contrary, if he had listened to me with appreciation and with intelligence, he would know that I said that you would have cuts in wages and cuts in revenue from capital unless you took the means which I advocated.


I thank the right hon. Gentleman for his courtesy, which is very striking, but I did not say that. I said that he was suggesting that the Government might have to put into operation a capital levy.


I never suggested anything of the kind.


Well, I will leave it to the OFFICIAL REPORT to decide whether the right hon. Gentleman said it or not.


I am afraid the hon. Member did not understand the argument.


If a capital levy had been put into operation in 1919—it was the policy of the Labour party then—we might have avoided many of the difficulties of which we have heard in his speech this afternoon, especially the difficulties relating to our monetary policy and currency. They could have been avoided if we had by means of a capital levy taken some of the thousands of millions that were made as war profits. I would recommend hon. Members to read the speeches made in this House in 1920 by the then Member for Penistone, the present Lord Arnold, upon that subject. If we put the capital levy into operation I think it would be a good thing. The right hon. Gentleman's speech was a pessimistic one. I agree with him in many things he has said. I have no faith whatever in this Govern- ment, and if he is to come alongside us in attacking the Government we shall welcome him, especially if he follows up the line he has taken this afternoon, and makes further speeches on the failure of the system under which we are living to-day, which has failed to do anything to restore trade or to increase the prosperity of the people.

But I will make my own speech on the Finance Bill on my own lines. I regard this as more than an ordinary Finance Bill. In it we are getting the general policy of the Government. We can see there a determination to increase indirect taxation. The Chancellor has hunted all round to see in what way this increase could be placed on poor people. The Government do not seem to mind increasing taxation on food and the necessaries of life, but they are concerned about the direct taxpayer, and to my mind there is no doubt they intend to give that class first consideration in the matter of relief. In 1925 a Tory Chancellor of the Exchequer gave away to Income Tax payers and Super-tax payers £42,000,000—we thought then, and we think now, that was very unwise—and to-day there is far more concern on the other side of the House over the direct taxpayers than over the millions who pay most of the indirect taxation. I understand that the Chancellor of the Exchequer will raise from Income Tax payers and Super-tax payers between £330,000,000 and £360,000,000, and will pay back £300,000,000 to those who pay those taxes as interest on War Loans. I believe I am right in saying that not more than one-tenth of that amount goes to those below the Income Tax level. In addition, we gave £30,000,000 under the De-rating Act, and there is no doubt that half of that went to companies which did not need it. In this Bill we are imposing a duty on tea, additions to the Sugar Duty, and taxes also on wheat, flour and meat. Almost every article of use in the household will have a heavy burden placed on it, and before very long housewives will curse the day which gave as this reactionary Government.


May I ask—


No, the hon. Member must wait for his own chance to speak later. There is far too much interruption. It is quite as important to listen as it is to speak. The protective duties, which are to raise about £30,000,000, will have a distressing effect on the mass of the people. The effect will be costly to trade, and many firms, especially collieries and distrbutors of coal, may not be able to pay Income Tax this year as they did before. Then where will the Chancellor of the Exchequer go for the money? I suggest that what with reductions in wages, reductions in benefit payments to the unemployed, increased taxation on the people and increased prices, which are sure to come from the tariff policy of the Government, we are now lowering the standard of life of our people to a very dangerous point. A few days ago we were told by the Financial Secretary to the War Office that last year 53 per cent. of those who wished to join the Army were declared to be physically unfit. If we make it more difficult for the people to get the necessaries of life that percentage will increase.

May I make a suggestion or two to the Chancellor of the Exchequer, because I have never believed that an Opposition should be simply here to oppose. They ought to make suggestions though they may not be accepted, and are hardly likely to be. I suggest to the Chancellor that instead of trying to raise £30,000,000 by increasing the cost of nearly everything we need he should have considered getting that amount from those who receive the interest on War Loans. Whilst everyone else has been forced to make sacrifices we hand out to them more than £300,000,000 annually; that interest has never been touched, and we know that we are paying more than we should do. Why not call for some sacrifice there? Then, de-rating has not served its purpose in restoring trade. At least half of the relief has been thrown away, and there ought to be reconsideration of that subject. Then there is the cost of armaments. With a disarmament conference meeting in Geneva it would be a real gesture for disarmament and peace, and in my opinion it is necessary, to knock many millions off the sum of more than £100,000,000 we are paying this year to provide arms for the next war. I suggest the Chancellor should cut down that sum by 25 per cent., and in that way save an amount equal to what he expects to get from the taxation of food and other necessaries of life.

in the last Finance Bill, as is mentioned in our Amendment, there was a proposal to tax land values. That proposal passed through Parliament, and, in view of the vastly increasing value of land by its development and the activities of the community, we believe that if that scheme were put into operation it would give back to the community large sums of money now taken by private individuals to which, in my opinion, they have no right. The Labour party have always supported such taxation, the Liberal party have had it in their programme for 40 years, and Bills containing that principle have passed Second Reading in this House, under Conservative Governments, on half-a-dozen occasions. Hundreds of local authorities have supported the principle, and we believe there is no reasonable argument against it. Then, why should there not be some amendment of the Death Duties? Take the position of rich men who wish to avoid paying Death Duties. I believe I am right in saying that if a rich man gives £1,000,000 to his family—and there are some who do; names could be mentioned of those who have done so—and does not die within three years, that amount does not come in for Death Duty payments. Why not make the interval seven years, or 10 years? I understand that to do so would give the Chancellor a large amount of money. There may be other ways which other hon. Members may suggest. I am alarmed at the burdens placed on the most useful and the most necessary part of the community, the millions of workers, with their dependants; and because this Bill is likely to make their position worse, and because I do not think it is wise or necessary to adopt the methods by which it proposes to raise money, I shall support the Amendment and vote for the rejection of the Bill.


in rising to speak for the first time, I must confess to a certain feeling of diffidence, particularly as this is so important an occasion as a Debate on the Finance Bill, but I am encouraged by remembering the consideration which has been extended by the House to those who, in the past, have found themselves in my position. I do not wish to follow into the realms of high finance to which the right hon. Gentleman the Member for Hillhead (Sir E. Home) led us, nor do I wish to follow the tirade from the hon. Member for Rothwell (Mr. Lunn); it will be sufficient to say that the hon. Member's own self-satisfaction was equalled by his short memory of the efforts of the last Labour Administration to deal with the same problems with which we are now confronted. There is no doubt that the Budget was a disappointment to the majority of the people. That was due to its failure to realise the hopes which filled the hearts of many people after the last election, and which were fostered by the popular Press during the last few months. Although those hopes have not proved to be entirely erroneous, they were slightly on the optimistic side. Here I would like to pay my humble tribute to the Chancellor of the Exchequer for laying before the House an honest and businesslike Budget, so very different from that which was presented to the House last year.

My object this afternoon is to plead the cause of economy, to urge economy on a larger scale than that which the Government have achieved, and notably achieved, during the last few months. It is obvious that we have only stemmed the tide of the financial difficulties of the country; when we look around and see the conditions which prevail in other countries we begin to think there is still worse to come. When we look at America, Germany, France and all the smaller European countries we must feel that perhaps there is a great deal in what the right hon. Member for Hillhead said when he told us that civilisation was trembling in the balance and that it would require all our courage and determination to face the difficulties of the future. The Chancellor of the Exchequer has budgeted for an increase in Stamp Duties to the amount of £6,000,000. Is not this a rather optimistic view? I know we are expecting great things from Lausanne, and that we are looking forward to Ottawa and the monetary policy of the Government, which I hope will very soon be announced, but I fail to see how there can be any substantial revival in trade within the next few months which must of necessity be required if this large extra yield in the Stamp Duties is to be obtained.

It is equally obvious that we have reached the limits of direct taxation. This is shown very plainly by the disastrous fall in Death Duties last year. Notwithstanding this fact the Chancellor of the Exchequer has budgeted for an increase in the Death Duties for the coining year of £11,000,000, a figure that we can only hope to reach should there be an immediate, real, and lasting revival in trade resulting in an increased value of property. Should these vast sums not materialise, what is our position then? During the last few months the Government have shown their powers and capabilities of dealing swiftly with all necessary Measures, and introducing such Measures as they deemed necessary in a remarkably short space of time. I would urge the Chancellor of the Exchequer in the future to turn his attention to further and real economies if he is to achieve the end which he has set out to achieve in the Budget for next year. In this I am sure that he will receive the support of the majority of this House, and indeed the support of those outside who voted for the National Government.

I know that it is very difficult to pick out any item in a particular field and to say where large economies can be made, but I do think there is a huge field where small items of expenditure in each Department could be picked out in order to effect economy without any loss of efficiency to those Departments, or without any undue hardship to those employed in Government Departments, and the amount saved in that way would total up to a large sum and would assist our finances very materially. It would be difficult to pick out those items, but there are two cases which are worthy of being considered. One is the colossal sum which we are spending upon education. The Minister of Education took pride in the fact that we expended £100,000,000 last year on education. I agree that that is a matter for pride, but at a time like the present surely we ought not to try to run before we can walk. I ask: is it wise for the country to carry this vast expenditure at a time like this, and is it not taking a more statesmanlike view to consider the future of the child after he has left school, as well as during the time that the child is attending school? If at the age of 15, when a boy leaves school, he has to join the ranks of the unemployed, no matter what his education may have been it cannot help him.

I will give another example where I think economy might be practised. I still think that the amount spent on roads is too much. I know that the Minister of Transport has cut down his Estimates, but if you motor in the country you will find that there are still many side roads which are being turned into main arterial roads at places where there is not a great deal of traffic. I do not complain so much about the necessity for keeping up the roads, as about the expensive way in which the work on the roads is being carried out. In many places you find huge cuttings and embankments, and on each side of the road there are long and expensive coping stones which are not worth the expense. These are only two small items which I have taken the liberty of pointing out to the House. I think there are in every Department a large number of items in regard to which the Minister in charge can still make huge economies without any loss of efficiency.

We have to face bad times during the next few months, and it is the courageous and determined action on the part of the Government which will win the admiration and respect of those who returned us at the election last year. This is the first time a Government has been returned pledged to make extensive economies; in fact, economies took the first place in our election addresses. I would like to suggest here that for the Government to relegate vexatious and controversial problems to committees of inquiry is not calculated to impress those who, with all their willingness to accept sacrifices, returned a Government which they expected to arrive at decisions, and not one who passed on their uncertainties of mind to committees. I beg to excuse myself for having seemed to be so critical for one with such short experience, but may I say the example of some of my elders and betters has allowed me to do this without the pangs of conscience that I might have had under very different circumstances.


I am sure that I shall be voicing not merely my own congratulations but also the congratulations of hon. Members in every part of the House when I express to the Noble Lord the Member for Peckham (Viscount Borodale) our cordial appreciation of the speech which he has made, and the House hopes, and indeed rests assured, that his contributions to our Debates may be frequent, and will give expression to that devotion to public duty which belongs to him by inheritance.

The central idea and the new suggestions which emerge from this Budget is the Exchange Equalisation Account, and I ask the permission of the House to allow me to speak upon that subject alone, premising only that, in supporting the Government as I do in that respect, I find myself unable to vote for this Bill for the obvious reason, as hon. Members will understand, in view of my attitude in connection with the tariffs that various points in connection with tariffs have been introduced as a subsidiary matter. I find myself in very close agreement with what has been said by the right hon. Gentleman the Member for Billhead (Sir R. Home) with regard to the question of currency. I think there is almost unanimity in the House that the Government have done well to invent this new mechanism, because it will have the result of achieving ends which are of great importance at this time in our financial affairs. It will neutralise the effect of the short-term movement of capital, and ought to do a good deal to prevent fluctuations of the sterling exchange.

5.30 p.m.

So far as the mechanism of this arrangement is concerned, I ask leave to make one or two comments. Now that the Government have deliberately assumed responsibility for the management of our currency, they are entitled to require that the Bank of England, which is the agent they have chosen to conduct their operations, should be 100 per cent. efficient. For the purpose in view, I do not think it will be claimed that that is the case to-day. However great may be the qualifications of the management of the Bank of England in other directions, it is common knowledge that it is singularly ill-equipped to deal with matters relating to foreign exchange. In that respect, the Bank of England compares most unfavourably with the Bank of France. It is the duty of the Treasury and the Government, as far as possible, to guard the taxpayer against loss in these transactions, and I ask the Chancellor of the Exchequer whether the Government propose to take any steps to secure reform in that direction. In speaking in this House on the day following the Chancellor's opening Budget statement, I ventured to surmise that the reason why the Government had not adopted the obvious course of authorising the Bank to replace British Government securities in the Issue Department by gold, foreign securities, and foreign exchange, was in order that, by the weekly Bank return, disclosure should not be made of a fall in British Government securities and a rise in Other securities, and that it was thought that, by veiling these holdings of the Bank and the Treasury, it might be possible to achieve the very desirable object of "foxing" the speculator. I still think it is desirable that the operations of the Exchange Equalisation Account should not be reflected in any kind of detail in the Bank's weekly return; but that is a very different thing from suggesting that there should be no publication at all of the state of the Exchange Equalisation Account.

I venture the opinion that it is desirable that the state of the Exchange Equalisation Account should from time to time be made public. I can well understand that it may be undesirable and unnecessary to disclose periodically the proportions which the holdings in various foreign currencies bear to the total of the Exchange Equalisation Account, but I would suggest that there should be periodical publication of the total of the Account, and for this reason, that to conceal the total holdings of gold and foreign exchange in this country would be to set a deplorable example of mystification to other central banks, and would be likely to defeat the very object which I understand the Government to have in view, namely, that of "foxing" the speculator, because it would, on the contrary, be apt to give a stimulus to every kind of speculative rumour. It is, therefore, publication of the totals, rather than of the details, for which I ask.

A new situation has been created by the fact that this new department, whether it be technically a department or not, has been added to the activities of the Bank. The Bank now is to act as the agent of the Treasury in exchange transactions, but, at the same time, in its Banking Department it is dealing in exchange transactions on its own account. Is it not possible that there may arise a conflict of interests between the Bank as principal and the Bank as agent? I need scarcely say that I am very far from suggesting anything in the nature of bad faith, but it may very well happen—in fact, it is almost inevitable that it should happen—that the interests and the necessities of the Bank as principal may run in the reverse direction from the interests and requirements of the Treasury. I put forward the suggestion that the creation of this Exchange Equalisation Account, which I welcome, should be taken as an opportunity for bringing about a far closer liaison between the Treasury and the Bank of England, and that the Government might well take into consideration the desirability and the possibility of representation with an effective voice upon the Court of Governors of the Bank of England.

I recognise, however, that these points are in themselves of less importance than the fact that a mechanism without a mind behind it will not carry us very far. As the right hon. Gentleman the Member for Hillhead indicated in his speech this afternoon, it rather looks, from the experiences of the last few days, as if the authorities were making an effort to peg the pound at an exchange level corresponding to about 15s. We shall all agree that it is eminently desirable to smooth out short-term exchange fluctuations, but a mere smoothing out of short-term exchange fluctuations is not an adequate substitute for a well considered long-distance policy. Obviously, if gold prices go on falling as they are falling now, a mere blind adherence to a pegged exchange stability will call ultimately for deflationary measures here, and further deflation could only be infinitely disastrous for this country. I observe, on looking at the text of the Bill, that in Clause 21 the Exchange Equalisation Account is stated to be established for the purposes specified in this Part of this Act. The Bill is a little obscure as to what these purposes are, but I imagine—I shall be. corrected if I am mistaken—that the reference is to Sub-section (3), where the Treasury is given power to cause the funds of the Account to be dealt with— and I would direct special attention to these words: in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling. I venture to ask the Chancellor of the Exchequer this question: Fluctuations above or below what point? The objective is stated to be to check undue fluctuations, and I ask the Chancellor of the Exchequer, above or below what datum line? I should wish to set myself by the side of the right hon. Gentleman the Member for Hillhead in asking this second question of the Chancellor of the Exchequer: What is the Government's conception of its long-term monetary policy? If the Government have, to use the right hon. Gentleman's phrase, a clearly formulated policy in their heads now, is it not eminently desirable, in order that enterprise may be set going again and merchants and manufacturers may feel a sense of security, that what is in the Government's head should be explained to the nation and the world?

I would ask the Chancellor of the Exchequer further: What is the objective which the Government have in mind? What are the effects which they desire to produce by their policy? All that we know at the present time is that there is, to be no early return to gold; we are left entirely in the dark as to the attitude of the Government towards the price level. I think that everyone in the House will agree that, unless there is a large recovery in the level of wholesale prices, the present weight of fixed-interest indebtedness will become intolerable, and we may very well in no long time he faced with cataclysmic defaults throughout the world. If France and America, the two countries whose monetary policy predominantly affects the whole course of gold prices, can be got to recognise the danger, and if they are prepared to co-operate with us and to act in concerting measures to raise the level of all prices, both gold and sterling, so much the better; but I must confess that, at present at all events, I see very little prospect of early collaboration on the part of France in this regard, and, in those circumstances, I would ask whether the Government are concerting a policy which will contribute to a recovery of prices without reference to the gold countries?

It is, of course, obvious—and here I join issue with the right hon. Gentleman the Member for Hillhead, if I understood him aright—that we cannot, so to speak, act entirely off our own bat. To work deliberately, as the right hon. Gentleman seemed to suggest, for a higher price level in this country alone, would mean that, if we are to retain our competitive power in the export markets abroad, the exchange value of the pound would have to fall proportionately. That would be disastrous. Beyond certain very narrow limits, it would be a fresh disturbing element in the world, which might easily intensify the fall in gold prices and exacerbate the difficulties of producers in gold countries, and, indeed, go a great way towards precipitating a collapse. There, therefore, I join issue with the right hon. Gentleman. The trick cannot be worked simply by a rise in British price levels alone; our objective must be a recovery of prices for as large an area of the world as possible.

There is no reason why we should act without regard to the interests of others; there is no reason why we should act without consultation with others. I agree with the right hon. Gentleman the Member for Hillhead, and I would, indeed, press this point upon the attention of the Government, who are now represented on the Treasury Bench by the Financial Secretary, that they should declare that their determined objective is a rise of 30 per cent., as the right hon. Gentleman the Member for Hillhead suggested, or of 40 per cent., as I would rather suggest, in wholesale prices—a rise which would become operative in terms of all currencies linked to sterling. If the British Government would do that, it would be giving a lead which at least half the world would eagerly follow.


I hope the hon. and gallant Member will forgive me for interrupting him, but this is a very important matter. Surely it is the case that, if there were a rise in British sterling prices, it would be followed immediately by a similar rise in prices in all the other sterling countries?


That is why I ask His Majesty's Government to give expression to their intention and their determined objective to increase the price level by 30 or 40 per cent. That, as I have said, would be reflected in an increase over the wide area of countries linked with sterling. I know, of course, that it is much easier said than done. There is a good deal of psychological and political mistrust about. In that atmosphere enterprise languishes, and both borrowers and lenders are reluctant. But we can at least seize this opportunity, and it may be that the Exchange Equalisation Fund is an indication of the Government's intention to do so, for laying the foundations of monetary conditions favourable to recovery. If the business world were assured that the Bank Rate would be at an ultra-low level—say 2 or 2½ per cent. —for a really long and as far as possible predetermined period, and that no attempt would be made to check, up to a prescribed limit, the recovery of prices brought about by a re-expansion of enterprise, enterprise would almost immediately begin to expand. Half the battle would be won if we could secure a recovery of prices and a re-beginning of industry, as I believe the British Government are capable of doing if the vast area of the world whose Governments would be ready to associate themselves with our monetary policy knew what our monetary policy was.

I observe in the Press a statement that the Government have issued to the Governments of other nations suggestions for the agenda at Lausanne, and one of the items to be considered is stated to be currency. As far as I understand the position, there will be only a relatively small number of Governments represented at Lausanne for currency discussions, but it is necessary to bring together not merely those who were parties to the Treaties of Peace but the Governments of the nations of the world. I would ask the Financial Secretary if he can give any information as to the nations which will be invited to be represented at Lausanne when that conference is dealing with the question of currency? I believe the British Government can at this moment make the very greatest contribution to relieve the world crisis if they will only inform the world what their intentions really are.


I prefer Hill-head to Hackney. There is less obscurity, and more courage. Every Member who has addressed the House for some time past on finance has realised that in the way in which this country carries on its financial business lies the key to the only matter of any importance—recovery in trade and reduction in unemployment. They go together. Recovery in trade means less unemployment and, therefore, better wages. We in this House, in this Debate, hold the key. We are responsible, and we are all equally anxious that the Government should take hold of the right end of the key and turn it. It is for this reason that I deplore that in this Budget we have the final consummation of the death of all hope of the taxation of land values. [Interruption.] It is by no means a laughing matter. That was a hope of increased employment and of improved trade. It has been turned down. As hon. Members laugh, perhaps they will forgive me if I go back into my own grisly past and recall an incident in which I took part after that picnic in South Africa which we used to call a war before we discovered what war really was. I stopped out in that country as a resident magistrate. I had a district the size of Wales, and I ruled it with a rod of iron. I was Mussolini and Lenin rolled into one. I was faced with the same problem with which we are faced here to-day, the problem of unemployment. The men took their discharge from the Army, and went looking for jobs. There was no dole in South Africa, and no Poor Law, and if you cannot get work in South Africa you go to gaol.

Fortunately the Boers of old time were more intelligent than our ancestors were, and round all the towns in South Africa you find a large area of town lands. Round my town there were 6,000 acres of town lands, and in one field there was a coal mine. I said to the ex-service men, "As long as I rule here you can have five acres of town lands. You can get coals out of the mine, and you can make bricks in the fields, and no one shall charge you any nonsense in the way of rent or rates." They carried on. They took barbed wire from the block houses and built themselves their own houses out of 40 pound biscuit tins with corrugated iron over the top. They turned to and produced vegetables, and coal and bricks. Everyone was on rations for the first three months or more after the end of the war, so they managed to live while they were producing. Those unemployed men got for themselves the full reward of their labour. They were not robbed either by a landlord or a capitalist or by the State. But that was not all. No sooner had they done that than a deputation came to see me, from manufacturers and builders, with long faces, and they said, "How do you expect us to make this a land fit for heroes to live in? How do you expect us to reconstruct civilisation when the wages of unskilled labour are £1 a day and the rascals do not do anything for it?" What had happened? Every worker in that town could do what no worker in this country can do, look his employer between the eyes and say, "If you do not like to give me the wage I want I will work for myself on Crown lands." Free lands made free men. It meant the end of unemployment, it meant cheap labour, and it meant the fruits of labour for the man who worked.

I give that illustration because we must not wipe out from our minds the fact that, if land was all put to its best use in this country, if land that was not being used was thrown open to the unemployed miners to cultivate chickens or pigeons or anything else, there would be something done to ease the hideous pressure of unemployment. I have always advocated the taxation and rating of land values, not because I wanted revenue or taxes or rates, but because I wanted land, which is essential for production, cheaper than it is to-day. Exactly the same principles force me to-day to support the right hon. Gentleman the Member for Hillhead (Sir R. Horne) in his desire to raise prices and to reduce the value of sterling. For reducing the value of sterling is exactly the same thing. The burden of debt is to-day bankrupting the universe in detail, one firm after another going bankrupt, someone buying it up for a song, and then competing with all the other firms, free of debt and able to cut prices. The only alternative, the policy advocated by the right hon. Gentleman the Member for Hillhead, is the inflation of prices and the reduction of the value of sterling. I believe the support for that policy in the House today is almost overwhelming. When you are dealing with the users of land against the landlords you have a gigantic vested interest, and you cannot hope to succeed in the fight, but when you are asking for a reduction in the value of the pound, it is a fight between every user of money, on the one hand, and those people who have lent money in the past on the other.

The burdens of debt, fixed charges and rent are strangling industry, and when the reflationists beg that the Government should make up their minds to formulate a policy, they have behind them not only all the users of money, all those people who have been strangled by debt, but that vast body of public opinion which is being ruined, not merely the manufacturers but every small person in the middle class who is finding his income vanishing, not through the tax collector, but because the people who owe him money cannot pay any longer, and when they see that the alternative to it is a scaling down of debt all round, you will get a very large body of opinion in favour of this form of reflation. This reflation is a question upon which the Government must really make up their mind. It is no use pretending that the world will come to an end if they declare their policy. They do not need to declare their policy. What we ask them to do is to make up their minds. Do you really want to inflate wholesale prices by 30 per cent.? They know all the objections to it, and they think they know all the advantages of it, but let them make up their minds. At present they are riding off on the idea that they must see what happens at Lausanne. What happens at Lausanne does not matter in the least. Every one in the country has already given up any hope of getting any more reparations out of Germany. War debts and reparations are dead, anyway. Whatever happens at Lausanne will not affect it.

Or they say, "Wait until we have met at Ottawa. We will make up our minds there." If they go to Ottawa without having their minds made up, they will find the Colonies are there with their minds completely made up. It will be a very poor business for the section of the Cabinet if they try to make un their minds on this very abstruse problem on the spot, with only the arguments of the Colonies and the Dominions before them, instead of with the common consent of their colleagues over here, and carrying with them the unanimous support of this House. It is no use drifting in this matter. If you want to raise wholesale prices by 30 per cent., you can get it, but if you do not know whether you want it or not—and that is the position of the Government to-day—the trade of the country will continue to languish, unemployment will rise by leaps and bounds and the National Government will become a laughing-stock to the people of the country. I cannot believe it possible that they cannot make up their minds on the question, and I will assume that they have made up their minds to inflate by 30 per cent. and that they want to see the pound fall, for there is no possible means whereby the Government could inflate prices except by reducing the value of sterling. As sterling falls, prices measured in sterling must rise. No one knows of any way in which we can force a general rise of 30 per cent. in wholesale prices without reducing the value of sterling by that amount. If they get as far as that, if you asume that they are determined to make up their minds in the direction of reinflation, they must realise that that can only be brought about by the reduction in the value of sterling.

Here is the Bill before us. What do they propose to do? You can reduce the value of sterling in many ways, many of them very wasteful ways, and many of them ways which you will 6.0 p.m. find it difficult to check. For instance, it would be the easiest thing in the world to print £5 notes and let every middle-class person have one on the table every Saturday morning. That would be inflation. It would reduce the value of the pound. It would increase wholesale prices. It is one way of doing it. Another way that is suggested is that we should buy silver. Senator Borah has advocated the buying of silver, the watering of gold with silver and thereby sending up prices. That, too, is a possible way. It is possible now because we have in the Finance Bill the Exchange Equalisation Account. You have there £150,000,000. You could use the £150,000,000 to sell sterling and buy silver, in which case the sale of the sterling would send down sterling and the purchase of the silver would send up the value of silver. Instead of benefiting all the deserving people in this country by giving them £5 on a Saturday, we should be benefiting the silver merchants or the silver-mining countries. Or you can, as I believe they have been doing, sell sterling and buy dollars—buy foreign currency. When you buy a bill of exchange on New York for 1,000 dollars, what are you doing? You are giving them a bill of exchange in sterling. You are buying for this country a call upon 1,000 dollars' worth of American goods. You are stimulating imports from America. I can imagine it to be a very popular policy in America that we should sell sterling and buy dollars. It is like a bonus. As long as you hold up the bill of exchange, put it in the bank vaults, and do not use it, there will be no inflow of American goods, but a boom must come when you take it out of the vaults and use it and put it into circulation. When you do so, you get 1,000 dollars' worth of goods from America. You have a tariff on goods to stop them from coming in, and you find a bill of exchange to bring them here. It is not very rational. But I would point out that if you sell sterling and buy dollars, the result will be a boom in American exports into this country and of benefit to the American people.

In the same way, if you buy Greek exchange, I can imagine it being very popular in Greece. The Greeks may say — M. Venizelos has probably already done so—"If you sell us sterling, we can pay the interest upon the pounds we have borrowed from you in sterling, but if you do not sell us sterling we cannot pay." At present they say they cannot pay. I have no doubt that our selling of sterling and buying drachmas, or whatever they use out there, would be very popular in Greece. It would help the export trade of Greece and also help Greece to be honest. I am merely illustrating the dangers of using the £150,000,000 Equalisation Fund and the uselessness of supposing that you can use it to do that which the hon. and gallant Member for North-East Bethnal Green (Major Nathan) and the right hon. Member for Hillhead (Sir R. Horne) want to do. They both want to bring down sterling and to raise prices. But in the process you are depreciating your sterling and getting nothing from it. The other people are getting something from it. You risk vast losses. If you go into America and buy dollars and America comes off gold, the £150,000,000 will not go very far. You are risking heavy losses, and the very use of that fund is of benefit, not to the people of this country, but to people who own the silver or who own the goods which they want to sell, and can sell to us only if they get bills of exchange bought by us. I do not think that that is the best way.

This is undoubtedly the only opportunity we have of discussing the questions, and I will put before the House what I consider to be the best practical way of bringing prices up 30 per cent. and bringing the pound down 30 per cent. If you wish to do it, I want you to do it without loss to the taxpayers of the country and without the danger of inflation going too far. I want you to do it in such a way that it can most easily be regulated. First of all, of course, bring down the Bank Rate, as the right hon. Member for Hillhead suggests, and as I have been badgering the Chancellor of the Exchequer to do for the last six months. To bring down the Bank Rate is the best way of bringing down the value of the pound and sending up prices. I do not want the Financial Secretary to the Treasury to give us any hint, but I think the question ought to be considered now that the best way to inflate, and yet put a limit to the inflation, would be for the State to buy War Loan and pay for it in currency and thereby increase the amount of currency credit. By so doing you would be reducing the amount of debt, and the people who would benefit by the reduction in the value of sterling would be the taxpayers, and you would also benefit the Consolidated Fund of the country. If you are going to inflate, it is necessary not merely to send down the value of the pound, but to get something for it. I cannot think of any other way in which we shall get a useful return for the falling assets in the value of sterling which will occur throughout the country.

In the Budget, which, of course, will not balance, we may be doing something to bring about that fall, because an unbalanced Budget, as we saw last year, has the effect of sending down the price of sterling. Last year we thought that the sending down of the price of sterling was the most lamentable thing that could happen. Last year the fear of the price of sterling falling swept the country at the General Election, but at the moment sterling fell it seemed as though the trade of the country would recover. The bonus on exports, the automatic tariff against imports did something to help the trade of the country. But the Budget with which we are dealing to-day will fail to balance. When it fails to balance, the pound will fall. You can reduce the value of your pound and send up wholesale prices by unbalancing your Budget, but once you unbalance your Budget you will never balance it again. Unbalancing the Budget is the very worst preparation for the inflation of the currency which is a most difficult thing to regulate. The fear of inflation through an unbalanced Budget is one last and final argument in favour of the Government of the country to-day, if they wish to inflate, to think out their plans beforehand and see how they can inflate with the greatest possible advantage to the taxpayers of the country without throwing away sterling and getting nothing for it, without speculation in exchange which may end to the disadvantage of the taxpayers' pockets, and without unbalancing their Budget in future. It can be done. The way I propose of buying War Loan may not be the best way, but for goodness' sake I ask the experts on the Treasury bench to think out all the ways in which they can send down the value of sterling, and at the same time prevent a collapse in either the credit or in the manufacturing ability of this country.


It is with very great diffidence that I venture to break in upon this Debate, but I throw myself upon the well-known indulgence of the House and hope that hon. Members will bear with me for a short time. I feel that the speech of the right hon. and gallant Gentleman the Member for New-castle-under-Lyme (Colonel Wedgwood) has dealt with a subject with regard to which it will probably be a very long time before any settlement is reached. I wish to say a few words which may be of some use in regard to one or two of the more pressing problems of the day. The right hon. and gallant Gentleman referred to burdens upon industry. What appears to me to be most remarkable at the present time is, that in all the discussions which have been taking place of late, most of the attention has been devoted to sources of new revenue rather than to diminution of expenditure. If the right hon. and gallant Gentleman is interested in an immediate reduction of the burdens upon industry, the way nearest at hand is that of the reduction of expenditure both national and local, and it is to that to which I wish to devote a few moments' attention. The picture which has been painted is very black indeed. We hear that things are little, if any, better than they were some months ago, and consequently, if we are seeking, as undoubtedly we are, new sources of revenue, we ought to devote quite as much attention to seeking sources whereby we can reduce national expenditure in order still more to reduce the burden.

The Government, six months ago, grasped the nettle in a firm manner. They adopted a system where, at one fell swoop, they announced a series of reductions of Government grants to local authorities—an ideal method of enforcing reductions of expenditure. They simply cut it off and left it to other unfortunate people to exercise these economies, which was at the moment the correct thing to do. The local authorities of this country on educational matters, transport and so on, were suddenly deprived of millions of money that had formerly been coming to them. Unless those local authorities had immediately proceeded to reduce their own current expenditure the Government would have achieved no economy whatever, because they would have passed to the ratepayers what was formerly borne by the taxpayers. I hope that when the history of the campaign for economy comes to be written, those responsible for municipal administration in this country will receive their meed of praise from those who imposed the cuts which took place last autumn.

There are one or two things to which the Members of the Government might very usefully devote their attention during the next few months. I do not believe that local expenditure cannot be further reduced. I believe there is room both nationally and locally for considerable economies still to be effected. I would not make these remarks unless I was prepared to make one or two suggestions in that direction. I believe that this year more than any year the National Budget is not complete by a mere state- ment of the expenditure of the Imperial Parliament. We are told that the National Budget is almost £767,000,000, but there is another £150,000,000 at least to be added to that before the sum total of Government costs in this country is provided for. It would be an enormous advantage if when the Budget is presented to Parliament a statement accompanied it giving the approximate expenditure to which the local authorities are committed on rate account for the succeeding year. More especially would it be advantageous to the Exchequer if they knew the amount to which the local authorities were committed on capital account. I submit, with all due deference, that it might well be worth consideration by the Exchequer as to whether a statement of that kind could not accompany the Budget statement, so that the real financial position of the country so far as the Government are concerned might be made available.

Another point that I should like to impress upon the House is that I believe a moratorium ought to be declared in regard to legislation imposing new financial burdens on the municipalities. For a few years we could well be left alone. There is enough legislation on the Statute Book to keep us well occupied for years to come, and I would beg of those responsible for the policy of this House to see whether it would not be possible that for some time we should have a cessation of legislation imposing new financial burdens on the local authorities. If that is too much to hope for, may I suggest that when a Bill of that type is presented to the House it might well be accompanied by an estimate of what the Bill is likely to cost the people of this country when its administration is carried out. I would give as an illustration the Children Bill now before the House. That Bill, however great an advantage it may he socially, will impose on one local authority that I know an expenditure of nearly £10,000 a year. It might be valuable if Bills which impose duties and financial responsibilities on other governing bodies were accompanied with an approximate estimate of what the ratepayers will be called upon to pay.

I hesitate to recommend the setting up of a committee, but I do think that some inquiry might be made as to the overlapping in functions between Govern- ment Departments and local authorities. In education, in housing, in Mental Deficiency Acts, and in the future of town planning and so on, there is a duplication of officials which is unnecessary, and I would suggest that we might in the next few months see whether it would not be possible to eliminate some of the cross references which go from the municipality to the Department and back from the Department to the municipality the whole time, making employment for a large number of people who might much more usefully be employed in other directions. These are one or two ways whore we might look for economy in the ensuing year. I hardly dare venture to suggest that the Government might consider whether during this period of stress there might not be a limitation of the amount of municipal debt. It is extremely unwise, although it is very easy at the moment to obtain loans at a reasonable rate of interest, for the municipalities to go out into the money market with large capital issues. Consideration might be given to the suggestion that any new debt contracted by any local authority should not be more than that paid back to sinking fund in the same period. I am one of those who believe that if we are to wait for a settlement of currency problems and so on in order to weather the storm, we are going to wait a considerable time. There is an opportunity at once for the State to take into consideration things which would reduce the demands upon the people, and it is because of that fact that I advocate close co-operation between the State and the municipalities in the ensuing few months to see whether something further cannot be done to decrease the demands which are made upon the people.


We have just had the advantage of listening to a most practical and most helpful contribution to our Debates. To me, several of the points which the hon. Member made were not only new, but convincing, and I have no doubt that they will secure from the Chancellor of the Exchequer that very serious attention which is justified, not only by the speech, but by the long and ripe experience of the hon. Member. In congratulating him, I should also like to congratulate the House upon the benefit which we all derive from those who, having enjoyed long experience of local public affairs and of responsibility in the conduct of those affairs, take the step of joining us here.

I should like to turn from the hon. Member's speech, although I may come back to it a little later, to the speech of the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). It is noteworthy that the first speaker who addressed the House from the Front Bench opposite disdained to waste his breath to the extent of even a single sentence upon the Amendment which his colleagues have put forward. Instead of that, he delivered a speech with a great part of which I found myself in complete agreement. When he pointed out that the recovery of trade is the key to everything, and that that recovery will mean more employment and better wages, and that if it means more employment and better wages it will mean more revenue and less expenditure on unemployment, I think we were all in full agreement with him. When he entered upon his old favourite theme of land taxes and described the blessedness of Boer and Briton when good King Josiah reigned at Ermelo, I could not help thinking of little Ermelo and the illimitable veldt surrounding it, and of this vast city, with its suburbs extending for tens of miles, and my mind was not capable of jumping the gap of inference from the one to the other. There, however, he made a point to which I would draw the attention of the House, namely, that to him the justification of any system of land taxation is not the taxation of the individuals concerned or the revenue to be derived, but the economic effects which he hopes to create by such a system.

That brings me to the Finance Bill and to the character of what is essentially a transitional Measure. This is the first Finance Bill for nearly 90 years which embodies a comprehensive measure of Protection and practical assistance to industry. But it has, inevitably, also in a large measure been framed and evolved under an older system of finance, the system which had for its motto "Taxation for revenue only." The old idea upon which, ever since the introduction of Free Trade, our financial system has been built has been that our taxes should carefully avoid doing anything either to help or to hinder industry. To that end our taxation was divided into two main categories—the so-called indirect consumption taxes on certain articles of general public consumption like beer, tobacco and tea, and direct taxes on realised profits, the idea being that the former taxation fell in the main upon the great masses of the people and the latter upon those who were in a more or less comfortable position. It was always a matter of great importance to decide the due balancing of those two factors, and an echo of that discussion lingers in the Amendment of the Opposition, which, I think, is entirely irrelevant to the position of to-day.

6.30 p.m.

Let me remind the House that the whole conception of taxation for revenue only was based on a very big assumption, an assumption which to every Free Trader in those days was fundamental, the assumption that the sum total of our taxation, national and local, could not be large enough to exercise any indirect influence on the course of industry. In large measure, and for fully a generation after Free Trade was introduced, that assumption held good, and throughout all that period our total expenditure, according to the ideas of to-day, was derisory. Up to the end of the 'sixties our national Budget remained under £70,000,000. As late as 1889 Lord Randolph Churchill resigned rather than face a Budget of £91,000,000, and it was only in the subsequent 20 years, largely under the stimulating influence of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) that that figure, was practically doubled. In 1913–14 we had a national Budget of very little short of £200,000,000. During that same period there had begun the remarkable growth in local expenditure to which the hon. Member has just referred. Taking the two together, on the eve of the War, our total taxation expenditure, leaving aside the self-sustained revenue of the Post Office, amounted to something like £252,000,000, national and local. Even then the height of that figure was causing grave and justifiable anxiety to thoughtful students of our financial system.

Then came the War. At the end of the War we were left with a debt of nearly £8,000,000,000, and our national and local expenditure for the first year after the War, 1920–21, exceeded £1,300,000,000. That was nominally five times as large as our last pre-War expenditure. In fact, if you make allowance for the difference in wholesale and retail prices, it was something like double our pre-War expenditure. That was a very serious situation which should have demanded a careful reconsideration of our whole financial policy and system. It should have been our many object after the War to reduce that enormous burden first by economy, national and local, secondly, by making sure of doing everything to assist the efficiency of our production, and, thirdly, by avoiding all measures which were calculated to increase the burden of our debt. We adopted precisely the opposite policy in every respect. There is no doubt that after the War we were poorer; yet the only practical conclusion we drew was that so heroic a nation deserved a much larger scale of public expenditure. There is no doubt that, from the point of view of world competition, our industries, already in no too secure a position before the War, were grievously dislocated and had suffered greatly in comparative efficiency compared with our more fortunate neighbours and rivals, such as the United States of America and Japan. Yet, there again, so far from feeling that a policy of industrial security was essential, we slid back from the years of complete Protection during the War to the old system of free imports.

Lastly, nobody could doubt that we were overburdened with debt; yet straightaway the Government, following the advice of those to whom they looked for guidance, proceeded to increase that debt by what I can only stigmatise as a policy of crazy deflation. We marched to disaster under the slogan—the fatuous slogan—of making the pound look the dollar in the face. That policy hit industry in every direction. It hit it directly and also indirectly by being responsible in large measure for those social and industrial troubles which vexed some of the years of the last decade. It reduced credit, when credit was most required for reorganisation and rationalisation. It acted as a bonus to competing foreign imports and as a tax against our own exports. Last, but not least, it enormously increased the dead weight of our National, municipal and industrial indebtedness. Since 1920–21 the sum total of our national and local expenditure has nominally been reduced by over £300,000,000. But when you take into account the change in price levels, wholesale and retail, our tax burden to-day is double what it was ill 1920, which in its turn was double our burden in 1914. Truly if the War scourged us with whips our Rehoboams of finance have chastised us with scorpions since the peace. The result, as Lord Snowden pointed out last September, is that to-day one-third of the whole product of industry in this country goes into taxation.

I submit that that is an intolerable burden. It is a burden which industry cannot bear. To argue that it is not reflected in the costs of industry is to me sheer absurdity. Of course, everyone endeavours to pass on the burden. It is passed from hand to hand and it is reflected in the total costs of our pruduction. It amounts in effect to a veiled Excise duty of something like 33 per cent. on the cost of British production, an Excise duty which is an additional tariff against our exports in entering foreign markets, and which in our own home market is not balanced by any countervailing Customs duty against competing foreign manufacturers. Until the other day we were in this country living under conditions in which our foreign competitors enjoyed a 33 per cent. tariff in this country against our own manufacturers. In those conditions production was bound to diminish, the sources of revenue were bound to dry up, while at the same time the unemployment burden was bound to grow heavier and heavier. We were going steadily downwards in a vicious circle towards an inevitable break-down.

The Chancellor of the Exchequer has balanced his Budget for the coming year on lines which, whatever detailed criticism some of us may wish to submit to him, are lines which the majority of this House and of the nation regard as necessary and wise. But at the same time we cannot go on indefinitely bearing so intolerable a burden. We must shake this Old Man of the Sea of taxation from our necks. How are we to do that? I agree entirely that we must make every effort, in local and national affairs, to exercise a rigid economy. But at the same time, we must look the facts of the situation in the face. No measures of economy that are still open to us can alone achieve the desired result, or reduce the burden to a point at which it will still be tolerable. Any relatively small increase in unemployment or fall in the price level might easily wipe out economies carried out at great cost and suffering.

There are, after all, only two remedies on a really large scale adequate to meet our needs. The first is to change the character of our system of taxation so as to enable it to give our own production a fair chance. The second is to reduce the intolerable overhead of indebtedness, of working costs, national and private, by raising the price level in this country and as far as possible in the world. Let me explain what I mean by "changing the character of our system of taxation." I mean that we must get away from the whole mentality implied in the phrase "taxation for revenue only." The first thing a Chancellor of the Exchequer should think of to-day when he considers any tax, from the point of view either of its addition or its removal, is what will be the effect of the tax on production, will it increase or diminish employment, what will be its effect on the unemployment fund, what will be the indirect effect, through increased or decreased employment, upon the Income Tax, on the Death Duties, on the tobacco revenue, on the sugar revenue? And only when he has considered all these things, only then should he consider what the actual direct yield of the tax may be.

Take a tariff of 20 per cent. A duty on £100,000,000 of foreign imports, levied for revenue purposes only, and not checking their importation, would give £20,000,000 of which some, at any rate, is likely to be borne by the public of this country. On the other hand it would do nothing for employment, nothing to help our general situation. But suppose that that tariff was effective enough to transfer £100,000,000 of production to this country, then under our present scale of burdens, that production itself would contribute £30,000,000 to the revenue, and, in so far as it gave employment to fully 500,000 workers, it would relieve our unemployment expenditure, locally and nationally, of another £30,000,000 at least. It would be three times as advantageous if it acted as a help to industry as if it were merely regarded as a revenue tax. It has been said that he that would save his soul shall lose it. Certainly at the present time any Chancellor of the Exchequer who thinks of revenue only is going to bankrupt this country. From that point of view the most hopeful feature of the present Finance Bill is the new tariff scheme put forward by the Advisory Committee.


Would not that send up the value of the pound?


I am coming to that side of the matter a little later if the right hon. and gallant Member will allow me. From the point of view of assistance to industry and therefore as the basis of our revenue I doubt whether the; scheme put forward by the Advisory Committee does completely remove the protection of 33 per cent. which the foreigner has hitherto enjoyed in our market. I am afraid that it is much more likely in large measure to act as a revenue tariff than as a protective tariff. I am not blaming the Advisory Committee. The blame, if there is any, must rest upon the Government for not fixing beforehand the general level of duties which, in the broad national interest, they desired to see fixed, and then leaving the committee to deal with details.

There are one or two other features of the Finance Bill which seem to me to imply that the old point of view is still lingering rather more strongly than it should in the mind of the Chancellor of the Exchequer and of his advisers. A typical instance is that of the silk industry. I confess that it is almost incomprehensible that the Chancellor of the Exchequer should not have brought the Silk Duties into line with the general protective system that is now being established for the whole of the textile industry, more especially as it would be perfectly possible for him to do so without any loss of revenue. The other night my right hon. Friend gave an answer which might have been intelligible if it had come from his predecessor, but which I confess was unintelligible to me as coming from him. He said, in substance, that he was concerned, not with production, but with revenue. I am glad to think that the Chancellor of the Exchequer is giving serious reconsideration to that matter. I speak in all frankness when I say I regard his treatment of the Silk Duties as the acid test of his grasp of the whole financial situation. There are, of course, other instances, the Match Duties, the Beer Duty, the omission of any steps to rectify the industrial handicap to our motor industry involved in the horse-power tax, which seem to me to have been unduly influenced by immediate revenue considerations.

The whole point I wish to press for is the broad point that we shall only get out of our difficulties, as far as the framing of our Budget goes, if our whole scheme of taxation is framed, not with a narrow eye to immediate revenue interests, but from the point of view of helping forward production and employment in this country. I readily admit, however, that even after we have placed our industries in a favourable position compared with their foreign competitors in this country, we shall still have failed if those industries are bearing charges so heavy that they cannot possibly produce goods which they can sell except at a loss. It is only half a policy if we deal only with the fiscal aspect of the question. The reduction of the burden is no less essential than its fairer re-distribution. Only a change in the price level can bring that about. In that I am in entire agreement with my right hon. Friend opposite; it must be the actual level of sterling compared with the price of commodities, not merely a change relative to gold or silver.

I support him and I support my right hon. Friend the Member for Hillhead (Sir R. Home), in asking that the Government should indicate to us what is the general line and purpose of their policy regarding the price level. Practically a year has passed since the report of the Macmilldn Committee was in the hands of the Government. The late Government was pressed in July last, from our side, to state its conclusions regarding that immensely important report. We were put off, not unnaturally, by a reference to the pressure at the end of the Session, to international difficulties and to the May Committee's report. Yes, but since then a great many months have passed, and there is no subject which has demanded the attention of the Government more urgently than that.

I think that the Exchange Equalisation Account has been generally welcomed as a first step in taking control of our mone- tary situation. But of course it deals only with the relative position. It can be used very effectively, no doubt, to check fluctuations arising from speculation. It might also be used to some extent to push down sterling relatively to gold. It does not follow from that that you are necessarily pushing down sterling in terms of commodities. You may only be pushing gold up still further in terms of commodities and, without relieving yourself, adding to the embarrassments of the world. What is needed far more than the correction of the level of sterling in regard to gold is a reasonable price level for sterling itself. On that point I do not think I could do better than quote a sentence or two from the monthly review of the Midland Bank, a review inspired, as is generally known, by a former Chancellor of the Exchequer: It must become increasingly obvious that one policy and one only is logical and defensible for this country. That policy is the deliberate creation of conditions which will ensure a moderate rise in commodity prices in terms of sterling, induced, not by the deliberate lowering of the exchange value of the pound—a process which would contribute little or nothing to permanent recovery—but by a calculated and controlled expansion and cheapening of the supply of money here. I wish I could say that I saw any signs of a deliberate intention to pursue such a policy. No one can complain of the tight hold which our financial authorities held upon sterling in the first few weeks of the crisis last autumn. But after that they ought to have taken advantage of the freedom which we had secured to give us 'a price level suited to our own needs and the needs of all those who were prepared to follow us and work with us. There has been no sign, except the recent reduction of the Bank rate, of any move in that direction.

I am not sure whether I have seen much illumination in the statements made by Ministers on the Front Bench. There was a curious and rather discouraging speech from the President of the Board of Trade the other day, in which he said that he could not imagine that the Government and the Bank of England were going to reverse their policy. A policy which has led us to disaster must be reversed. Even in this Finance Bill I find a curious and symptomatic indication of the old gold mentality, of trying to stay where we were before we went off the Gold Standard. In Clause 22 it is provided that the gold held or acquired by the Issue Department of the Bank of England should not be valued at its real value, but at the now purely fictitious value of £3 17s. 10½d. per ounce troy, at which it used to be valued when we were anchored to gold. The Chancellor of the Exchequer attempted to justify that by suggesting that it was a conservative policy to have abundant cover for our gold. Why should we have that amount of 30 per cent. cover for gold and no cover for gold securities? Gold securities not only fluctuate with gold, but fluctuate for a great many other reasons. Gold securities should have much more than bar gold to cover them. The Macmillan Committee pointed out that it is useless to try to fix the value of gold with reference to the one purpose for which it is not wanted, to support your domestic currency, when the only reason for which it is wanted is for the purpose of exchange.

We may be told that the law, as it stands, has fixed that figure. But we are making law in the Finance Bill to-day. Why should not a Clause have been introduced making it quite clear that until we decide otherwise, until we fix some new level of relation between gold and sterling, gold shall be valued for what it is and not for some imaginary substance which it is not? I think such action would be most valuable psychologically as evidence of our emancipation from the old standard. The other evening my right hon. Friend the Member for Epping (Mr. Churchill) took his hearers into the House of Rimmon. I invite hon. Members to another ancient temple, the temple of Dagon. Dagon has fallen off his pedestal; he has lost his head and limbs, and only the trunk remains. What is the good of pretending that he is still what he was and is still in his old place? Let us get away from the whole of what I would call the Philistine tradition in finance, that tradition which has almost ruined us in the fatuous attempt to recreate the old financial world, centring in Lombard Street and Threadneedle Street, which existed before the War. Let us rather go ahead with a policy which will both supply sufficient bank cash and sufficient credit and a low bank rate for those who demand credit, and at the same time give that support to our industries which will justify the demand for such credit.

7.0 p.m.

There is one qualification, and a very necessary qualification, that I wish to make. I do not believe that either our fiscal policy or our monetary policy can be anything but incomplete and inadequate so long as it is on a purely insular basis. It is only on an Empire foundation that our trade can be assured of a sufficient market and sufficient sources of supply. It is only because most of the Empire went with us, and a number of other countries outside the Empire went with us, that our going off the Gold Standard has proved as easy and satisfactory a course as it has been. It is only if we make permanent the success of our sterling policy so far by maintaining and strengthening and consolidating the sterling bloc, that we shall be able to carry through a monetary policy which will save this country. We must frame our sterling policy not merely from the point of view of this country, still less from the point of view of the City, but from the point of view of our partners and associates in the sterling area. If a rise in the price level is imperative from our point of view, it is far more imperative from the point of view of the Dominions and of countries like the Argentine and the Scandinavian countries. They are almost entirely primary producers, as far as their export trade is concerned, and the fall in prices has hit primary producers even more than manufacturers. Moreover they are mostly debtor countries. They are making a most gallant struggle to pay their interest obligations, and we must not make it impossible. It is worth while remembering that of the £400,000,000 lent to the Empire in the last 10 years not one penny is in default while of the £203,000,000 lent to foreign countries £145,000,000 is in default. That is a point worth considering.

When we go to Ottawa, we have got to be prepared to meet the Dominions on this question. They are going to ask us what the price level is at which we mean to maintain sterling. We have got to answer that question. What is the answer we are going to give? This is a matter which depends not so much on mutual discussion and bargaining as on our lead. What is the lead we are going to give the Empire? Are we going to say that we are still going to maintain a policy of deflation, the policy that brought us to disaster? Or are we going to say that we have no policy, that we are going to drift, that we are going to wait and see? Will we say that some members of the Cabinet would favour a forward policy while some would favour a backward policy, and that we do not quite know whether to follow our old expert advisers or to find new ones? Are we to be at Ottawa as impotent and as negative on the financial issue owing to our divisions as the late Government were with regard to the fiscal issue in 1930?

I would make a concluding appeal to the Chancellor of the Exchequer. He has asked this nation to make a truly heroic effort and to face sacrifices which no other country has been prepared to face. He has met with a wonderful response. The spirit in which this country is facing the burdens put upon it has evoked the admiration of the world. Do not let him waste and frustrate that effort by failure of leadership on the one issue in which everything depends upon himself. We have had some terrible experiences in recent years of the futile sacrifice of heroic valour and endurance on the part of the rank and file by the blundering of uninspired generals, by stubborn adherence to lines of strategy which have again and again been proved ineffective, or by timidity and hesitation in seizing opportunities. Words like "Passchendaele" and "Suvla" ought to be branded ineffaceably upon our memories and there is in them a lesson not only in the strategy of war but in the strategy of peace. Is it necessary for us to parallel the blunders of the War with an equal lack of far-sighted strategy, of sure and swift purpose in peace? It is for the Chancellor of the Exchequer to answer that question. He commands in an unusual degree the confidence not only of this House but of the country. Let him have the same confidence in himself. Let him go to Ottawa prepared to lead. Not only the Empire but the world will follow.


It is said that fools step in where experts fear to tread and we have all been made much wiser by the speech just delivered by the right hon. Gentleman. He reminds me of an old quotation: And still they gazed, and still the wonder grew That one small head could carry all he knew. I am not prepared to follow him into the labyrinth of Imperial politics, but I do not see how we are going to make everything better by making everything dearer. Running through the speeches on the other side of the House has been the theme of economy, but we have never yet heard the meaning of economy explained to us by the hon. Members opposite. One distinguished member of a local authority said that we were spending too much on education and that we ought to arrest our educational development and call a halt in the spending of money on local purposes. If there is one kind of expenditure in this country which is well repaid, it is the money that we spend on public health, education and social services. I have noticed that, when hon. Members advocate economy, no reference is ever made to saving money in the expenditure for destroying life, and that it is always where we are trying to maintain the development of the social services that we have these lectures upon economy.

I come from one of the poorest districts in East London and, with due deference to hon. Members who have been praised for their knowledge of local administration, I have had 28 years' experience of administration in one of the poorest boroughs of Great Britain. We have all to meet the slings and arrows of misfortune, but in a big working class area, in a riverside district inhabited mainly by casual workers, the House will admit that we have our fair share of the difficulties of administration. Some speakers have suggested that we should be told that we must not spend money in the way we are doing and that, if we do spend it, we may find authority up against it. We have had that experience already because we have been told by the present Government that, if we do things they do not want us to do and do not do the things they want us to do, financial help will be denied us. We have been told what we ought to do in connection with the administration of unemployment insurance. We are told that we must keep down expenditure but, when men and women are thrown off unemployment insurance and come to the public assistance committees, we have to shoulder the burden which the State refuses to bear. Do hon. Members opposite believe that is the right policy of economy, that the poor must keep the poor?

As to assistance for the manufacturers, the State is already assisting them through the local authorities. Does the right hon. Gentleman who has just addressed the House forget that the Government of which he was a Member— though they never trusted him sufficiently far to make him fully a Member, and they would not even trust him now to go to Ottawa except to carry a bag for somebody else—passed the De-rating Act? As a result of that Act nearly all the manufacturing firms in our borough are doing comparatively well, although trade is bad, while the ratepayers, the ordinary householders and shopkeepers, who get no assistance from the De-rating Act have to make up the deficiency from the local rates. The manufacturers received substantial assistance from the last Conservative Government as did other classes of people; the only people who got no assistance were the people who gave up everything. I wish that some of the speeches we have heard today had been delivered two years ago, and then there would not have been this huge Tory majority in this Parliament. Hon. Members opposite are to-day eating everything they used to say. They have been asking us what we did, but I would ask the right hon. Member for Sparkbrook (Mr. Amery) what he did when he was in the Government? Did he talk to them when he was in the Government as frankly as he does now that he is not in the Government? Why the change? Is it because of disappointed hopes? So far as we are concerned, we always say the same thing whether in power or out, and we shall continue to say it, because it is true. When hon. Members talk to us about economy we ask what they mean by that word. We have a national expenditure of over £700,000,000 of which a large proportion represents interest on money spent on past wars and on preparations for future wars. Yet we are still preparing for war, in spite of the conferences at Geneva and elsewhere. More men are under arms and more munitions of war are in existence to-day than before 1914, and more money is spent in the aggregate on armaments to-day than before the War. Yet we never hear hon. Members who support the Government protest against this continual tax levied on our people not only in money but in blood and sinew.

We have heard a number of speeches on the value of money, but gold and silver are only mediums of exchange. The real things that matter are the commodities produced by the application of human labour to the raw material provided by God for the use of mankind. Gold and silver are things that financiers play with, and clever financiers have often found themselves in durance vile in consequence of their cleverness in playing tricks with them on the common people. When the present Government come to the end of their tether, as they must one day, will they be able to say to the people of this country, "We have brought you from bondage into freedom"? Will they be able to say that, in consequence of juggling with tariffs, they have made it more possible for the people of this country to get employment? Up to now they have not done very much in that respect. When the Labour party were in office—without a majority—we were continually gibed at on the ground that we were not able to solve the unemployment problem. [Interruption.] Yes, hon. Members opposite claim to have the ability, but they are not displaying it by interrupting me. When their turn comes, we may be able to see where the ability is, but the unemployment problem has not yet been touched by the present Government, who have the most tremendous majority that any Government has had in the last 60 years. They have all the clever people, all the financial experts, sitting on their benches, and about once a month we are addressed by those experts, but when they have finished nobody knows any more than he did before they began. I have listened to these experts and I have been as wise when they finished as I was before they started. But they can come in here, and address the House when they like, while we have to sit here and wait our chance. [Laughter.] I admit that our chances improve as our numbers grow less, and that owing to the smallness of our numbers we are getting more chances than we would otherwise get. But I would remind hon. Members that it is necessary to have a change, and when they have had all the heavy guns, perhaps a little of the machine gun will not do them any harm. They can get on with their job. They promised the people that they would solve these problems—that they would do what the Labour Government had been incapable of doing. They have the power and the opportunity, but in 12 months from now the majority of the people of the country who were blessing them at the last General Election, will be cursing them.


May I beg that kind indulgence which the House so readily gives to one addressing it for the first time? It is not very long ago since optimists were going about saying that they were hopeful of some remission of direct taxation. I was not one of them. When the taxation proposals were put forward by the Chancellor of the Exchequer in his Budget it became quite clear that we were indeed fortunate and could congratulate ourselves on balancing our Budget without any addition in that direction. The whole trade of the world to-day is lying under a stranglehold which it cannot shake off. It has become extremely difficult for industry to make those profits from which must come the sums raised by direct taxation. But I am glad to say that our industries to-day have a slightly better chance than they had in the past. Owing to the change in our fiscal policy they have a chance to-day of competing in the markets where the fiercest competition reigns, such as they never had before.

I think that in every part of the House it will be agreed that the one chance of restoring prosperity, not only to this country but to the world, is by raising the price of primary products. How can we raise those prices? The only way in which that can be done is by an expansion of currency. I know that the word "inflation" makes the financial purist shudder, but I have talked to many business men on the Continent who have been through the stages of both inflation and deflation, and they assure me that the evils of deflation are even greater than those of controlled inflation. It seems to me that the only way in which we can bring prices back to the level at which we want to see them, and that is the level of 1928 prices, is by measures of "reinflation" or "controlled inflation"—whatever term one wishes to apply to it. It is also apparent, I think, that it is a question not of national, but of international inflation.

I think we might possibly learn something on this subject from the lessons of the past, and, if I dare put an instance before the House, I would ask them to look back to the year 1873 when America in common with a number of European countries came on to the Gold Standard. What was the result? There was for the next 20 years a fall in world prices, and there was no recovery in those prices, or in the prosperity of the world, until the deep level gold mines of South Africa were discovered and came into production. If the House will bear with me I will go even further back. The reign of Queen Elizabeth was one of the most prosperous eras of our history. That prosperity was achieved to a large extent as a result of the finding of great silver mines at that period. But are we to sit waiting patiently until some new great deposits of gold are found or are we to discover ways and means of inflating our currency? I think we can hardly afford to wait.

I am not a bimetallist. I am not a great supporter of that theory, but I think that if this problem, which as I have said is not national but international, is to be faced, we can turn to a metal which has already played a very useful part in the service of industry and commerce throughout the world. I refer to silver. It has many advantages, and I think that by bringing silver into a definite ratio in the world's monetary system, or as an alternative, by an agreement with the central banks that part of their bullion reserves shall be held in that metal, we could ease the great difficulties which are causing world depression to-day. Silver is the acknowledged medum of exchange used by half the existent population of the world. It seems essential if you are going to have inflation—again I emphasise that I am talking of international as well as national inflation—you must link your note issue to some metallic base, and what better base to which to link it than silver? One of its many advantages is that it is a by-product. Two-thirds of the world production is a by-product of the base-metal mines, and, as the base-metal mines increase production, so the production of silver is increased at a time when trade wants more financing.

There is another potent argument in favour of bringing in another metal to help gold. The gold available to-day is roughly £2,600,000,000, which is the base of £80,000,000,000 worth of estimated world trade. You are building on a basis which is only 3 per cent. of the volume of world trade. Surely if we can get an international agreement to remonetise silver, we shall at once increase the price of that metal and, by doing so, open up new markets. We want buyers to-day. We want to open up new markets in the Far East. We want to see India a buyer and China a buyer. If we send up the price of silver, then where a man is now able to buy one shirt or one suit of clothes, he would me able to buy two, and that would mean a great deal to Lancashire.

In addition I believe that such a course would have a very beneficial effect on conditions in India. During the last few years the inhabitants of India have seen their currency depreciating year by year, and they have seen themselves growing poorer. If one could increase the value of the metal which they have hoarded, if one could increase their savings, and put them back on the level on which they were in 1926, it would bring back a measure of prosperity, and with prosperity would come contentment. I hate putting forward the suggestion of an international conference on this subject, but if my information is correct the time is ripe for action—in fact it is over-ripe.

7.30 p.m.

I am given to understand that the United States Government approached the late Government here to ask them whether they would call a conference to discuss the whole silver position. We were to invite the conference, but that request was turned down—a very regrettable thing. I only hope that the present Government, even though I know they are faced with Conferences at Lausanne and at Ottawa, and with the tremendous problems which face any Government today, especially at conferences of that kind, will see their way to calling a conference on the whole of the currency and silver position, as I believe that such an invitation to the United States would meet with a ready acceptance. Lastly, I appeal to the Government, if they cannot see their way to issuing invitations for such a conference, that at the Ottawa Conference they will put the question of a discussion of currency in the forefront of their programme, as I think that if we have a discussion of an Empire currency and the possibility of an expansion of credit on those lines, it will do a great deal to restore world confidence. We have always led in our financial policy. Let us once more lead the world with a policy, and a firm policy, which will raise commodity prices, as that is the only way of bringing back prosperity to this country and to the world at large.


I am very glad to have the privilege of congratulating the hon. Baronet the Member for East Walthamstow (Sir B. Beauchamp) on his most interesting maiden speech, and I am sure the House will agree with me when I say that any future contribution of his to our Debates will be warmly welcomed. I am always glad when I hear an hon. Member refer to historical precedents, and his historical precedents were illuminating and pertinent. As to his views on the silver question, I am in complete agreement, but I do not propose to follow that line of controversy. I would rather go back to a point in the speech of my right hon. Friend the Member for Sparkbrook (Mr. Amery) and the strong and sagacious speech of the hon. Member for Richmond (Sir W. Ray). We have been presented with a depressing Budget, a necessarily depressing Budget. I have no quarrel with its provisions. They are inevitable, and because they are inevitable they are right. We are not yet out of the wood—perhaps we are not yet in the darkest part of it—and it is no time to relax our vigilance. But it is very important that such a Budget should be presented in the proper perspective, as an interim measure and not as a final and considered policy.

It is no use merely telling the people of the country that taxation cannot be reduced, that it may even have to be increased, and that the great effort we have asked for must be continued indefinitely. Our greatest asset in this crisis is our national temper, and the staunchest and most resolute of national tempers requires to be carefully bandied. There is no doubt that since this time last year there has been a very real improvement in the situation. We have faced facts, and we are no longer drifting. We have a policy. We have got rid of the incubus of a Gold Standard which simply would not work, and not only has that given a modest bonus to our exports, but it has given us certain advantages which we did not expect, what, in the language of the theologians, are called "unconvenanted mercies." It is possible that it has even saved our Indian Empire. It is a fact that the export of gold from India, owing to the rise in the rupee price of gold, may have saved our Indian Empire from being, what it has been too long, an economic cloud with a depreciated silver lining. We have realised also, in a way we have never realised before, the interdependence of our prosperity with that of the whole world. All of us, I think, in recent months have learned a good deal of elementary economics. Things like currency and exchange, which formerly we regarded as the dark secrets of certain experts, and not very important secrets at that, are now debated more or less intelligently in the market place and even in political assemblies.

The fact is that we have suddenly become to a certain degree internationally minded. That is a very good thing, but it has its dangers. It is clear beyond any kind of doubt that our prosperity depends upon the prosperity of other nations. We are suffering not only for our own misfortunes, but for the misfortunes of our neighbours. Something must be done to get rid of the burden of reparations and War debts. Something must be done to lower fantastic tariff walls, and for that purpose we have armed ourselves with a weapon, an asset to bargain with, for, after all, you cannot debate with a man unless you talk his own language. Something must be done to stabilise methods of exchange which have gone violently out of gear. All that is perfectly true, but I submit that no settlement of world problems will avail us unless at the same time we can settle certain domestic questions. We must not forget a reasonable nationalism in our new internationalism. My right hon. Friend the Member for Epping (Mr. Churchill) used the happy metaphor of a convoy. We want a better convoy. Yes, but a convoy is no good unless you have something to convoy. We are forced back in the long run to questions of home trade and home production. We have rather seen a halt in our decline than any real improvement in our economic conditions. Since prices have not risen and since costs have not fallen, there has been no real correction of our internal maladjustment.

I should like to put that point in a sentence from a recent book by Sir Arthur Salter, a book which, if I may say so, seems to me one of the most acute and sagacious pieces of writing published in our time. In that book he says: There is some danger that monetary or financial policy may be regarded as an alternative to the painful process of liquidating basic disequilibria. Until these have been removed there are real dangers in stabilisation. I believe that to be very true, and it comes from a man who, if he is criticised at all, is criticised as being too much of an internationalist. The fact is that we are in danger of falling into the attitude of the friend of my right hon. Friend the Member for Epping, Naaman the Syrian, who rather jibbed, you remember, at the simple prescription of a bath in the Jordan. I am afraid we may be inclined to look for our salvation, like Naaman, to "some great thing," some complicated and subtle international thing, rather than to the homely and simple duties which lie at our door.

I should like to quote a few words from a speech made a fortnight ago by my right hon. Friend the Member for Spark-brook, because it put a point of view which we dare not forget. He said: What we are aiming at … is to create, for the world if possible, and at any rate for the sterling area, a price level sufficiently approximating to the price level of 1928–29 to enable industry and agriculture to carry their overheads, their standing and customary charges, and to enable the wheels of consumption and production to move again …. On that side of the question the remedy must be sought, not in altering the relative value of gold to sterling, but in such action for the enlargement of credit and, in so far as it may be necessary, for the enlargement of the actual currency behind that credit, as is required in order to reach the level of prices which you wish to secure. When you come to that point, it is again obvious that you are not justified in issuing credit or currency unless there is a demand for it. You must create conditions under which there is a demand for credit … and that depends upon the other aspects of your policy."—[OFFICIAL REPORT, 25th April, 1932; cols. 88–9, Vol. 265.] I believe that to be profoundly true. We want an enlargement of credit, but for credit to be of any value it must be used, and to have it used there must be a de- mand for it, and for that demand you must have confidence. It is very important that our capital again should flow into home industry; it is very important that our capital again should be lent abroad. That is a vital part of our financial health, but to get that we must have confidence, we must have the resources for people to lend or to invest. I submit that the condition precedent of any world solution, so far as Britain is concerned, the condition which alone will enable us to take advantage of any stabilising of currency or any rise in world prices, is that humble and unpopular thing, public economy at home.

We are spending, we have been told to-day, one-third of our national income in the business of Government. America is spending one-fifth, but American public finance is in many ways simpler than ours. Before the War we were spending one-eighth. Then we are squandering unreplaceable capital sums drawn from the Death Duties upon current expenses. The recent Budget statement made it perfectly clear that in many important categories we have reached the taxable limit, that any increase of the rate would mean an actual lowering of the yield. We asked from our people a great effort last January. It is more than doubtful if that effort can be repeated. Our enormous levy of taxation is draining working capital from industry and drying up the source of any new capital for development. Moreover, it is leaving us no margin to lend abroad. It is keeping up, in spite of currency deflation, our very high costs of production. I am well aware that a large item of those costs is the unyielding wage level, but I will not deal with that because any attempt to deal with it directly will meet with great difficulty. But a very large part is also due to our enormous burden of taxation, local and national. We dare not relax economies. Indeed, the need for economy to-day is more urgent than ever.

There has been a good deal of discussion in this House, which I have welcomed, about the reasons for the the fall of the Roman Empire. My right hon. Friend the Member for Hillhead (Sir R. Horne) quoted from a certain authority and put down as the chief cause the currency difficulties and the shortage of gold. My hon. Friend the Member for Mansfield (Mr. C. Brown) is inclined, perhaps with more reason, to attribute it to slavery. But there were two causes greater than either of those. One was the preposterous dole system which turned a large part of the urban population into a pauper rabble; and the other was the crushing of the middle classes and the. annihilation of productive industry by an extravgant bureaucracy and crazy taxation.

I agree that a large part of our expenditure is a fixed thing which cannot be altered, but a considerable part still remains within our power. I do not think that you can ever get real economy by merely paring down the not very extravagant salaries of public servants. The only way to effect true economy is by a root and branch reconsideration and recasting of the public service with a view not only to costs but to purpose. My right hon. Friend the Minister of Education said a very sensible thing in a recent Debate when he observed that the present time ought to be regarded as a kind of interregnum during which we could reconsider our whole expenditure and our whole system of education with a view to discovering what we really want to be at. That is true, or should be true, about every other public service. In all the forms of insurance, in education, in public health, in housing and many other things, we have a chance to set our house in order. Far too much of our public expenditure is composed of illogical accretions, and we want to reduce it into shape and purpose. The same thing is true of our method of collecting revenue. I suppose that in the next year or so we shall get the report of the Income Tax Commission, and it may be possible to have a serious, scientific remodelling of the whole system which has not been touched since Sir Robert Peel's first Act. That great tax might be made far more lucrative in its yield if we cleaned up its machinery and got rid of obvious inequities. The same is true of the Death Duties. Many points there are felt as grievances, and whenever you have a strong grievance there will always be evasion, however strictly you draw the Statute.

I believe that the Government have today a very great opportunity to recast and revise our whole governmental machinery. They have a great majority in this House which was very largely elected on economy and they have still the confidence of the country. They have a great opportunity to effect the only true economy, which comes, not from merely lopping off twigs with a blunt, indiscriminating axe, but by a careful and scientific pruning directed with a clear purpose. If they do this they will be remembered as one of the great reforming governments in our history.

I come back to the words of my right hon. Friend the Member for Sparkbrook. We need ampler credit, but we also need public confidence to make use of that credit. The national temper, the national psychology is behind everything. My right hon. Friend the Member for Hillhead told us that some day or other some nation must begin lending in order that the wheels of commerce should go round, and that the nation which by tradition, habit and skill is able to do that is this nation. I believe that to be wholly true, but it is entirely a question of confidence. It is time that money flowed again into our domestic industries. That again is a question of confidence. The greatest of all economies that we can make is a reduction of debt charges by some scheme of conversion, and that again is a question of confidence. It is largely a question of the psychology of the direct taxpayer upon whom the chief burden of any conversion scheme must fall. I submit that a strenuous and sustained policy of economy will be the most potent conceivable factor in providing and sustaining that national confidence which will enable us to take full advantage of any international or inter-Imperial settlements, which the future may hold. I am well aware of the difficulties, but to our people difficulties have always been a stimulus and not a deterrent. The best definition of an optimist, indeed the only definition, is a man who out of a difficulty makes an opportunity.


I must confess that I have not felt so happy as I do now for several years past. I would like to tell my hon. Friend the Member for Silver-town (Mr. J. Jones) before he disappears through the door that, unlike my right hon. Friend the Member for Sparkbrook (Mr. Amery), I have not been a Member of any Government and do not expect that I ever shall be; but on this subject I have been saying the same thing for many years, and that is one of the reasons I am so happy. I remember my right hon. and gallant Friend the Financial Secretary to the Treasury once, in his unregenerate days before he put on the Treasury mantle of respectability and orthodoxy, telling me that Moses was the greatest economist of any period of history. The reason he gave was a rather shocking one. It was that Moses believed in the periodic wiping out and writing off of all debts. I think that Moses was a considerable economist for another reason. The House will remember what Moses did to the Children of Israel whenever he caught them worshipping a Golden Calf. I believe that he did that because he realised that if they went on doing it they would soon find themselves in much the sort of mess in which the world finds itself at the present time. The House is now reconciled to no reduction in the Income Tax; and perhaps rather more mournfully resigned to no reduction in the Beer Duty; but, in spite of these two items, I disagree with my ton. Friend the Member for the Scottish Universities (Mr. Buchan), who said that this is a pessimistic Budget. I think, on the contrary, that it is an extremely optimistic Budget—


I said depressing, which is quite different.


I am inclined to agree when the hon. Gentleman says depressing; but I do think that it is based upon an optimism for which I am not sure that there is very much warrant. It is certainly based upon the prospect of a fairly early revival in trade. And the House is therefore entitled to ask the Chancellor of the Exchequer what steps he proposes to take, and what steps the Government propose to take, to secure that revival in trading and financial activity. The right hon. Gentleman will not deny that the commodity price level in this country now is out of proportion to the level of costs; and that so long as that situation persists our producers will be unable to make a profit. So long as our producers are unable to make a profit the right hon. Gentleman's estimates, particularly with regard to revenue from direct taxation and Stamp Duties, will not be realised. Therefore, as so many hon. Members have pointed out, it becomes a question of what methods the right hon. Gentleman proposes to adopt in order to raise the domestic price level to a point at which our producers and manufacturers can once again make a profit. If prices rise, business will expand, profits will re-appear, and the Budget will balance. But not otherwise. This is not really a matter that is outwith our control. As we have heard this afternoon from all sides, what is known as the quantity theory of money is now generally accepted by economists of all shades of thought. It was stated very well by my right hon. Friend the Member for Hillhead (Sir R. Home). The theory is that the commodity price level is determined by the amount of money which is available at any given moment, and its velocity of circulation. That depends in turn upon monetary policy.

8.0 p.m.

What is our monetary policy? It is a question which has re-echoed through the House to-day. We do not know. All we know for certain is that, whatever my right hon. Friend the Member for Hill-head may say about ultimate responsibility, the monetary policy of this country, as he and the House well know, has for the last 10 years been directed and controlled by the Bank of England. And I submit that it has been directed with most disastrous results. This brings me to a consideration of what the President of the Board of Trade has described as by far the most important item in the Budget, namely, the Exchange Equalisation Account. The Government are asking for £150,000,000 by way of a loan in order the better to manage the currency. It is to be operated by the Bank of England; but the responsibility is not only upon the Government, but upon this House. It is a large sum of money, as the Chancellor will admit; and I submit that it can be made a most powerful instrument either for inflation or deflation, and that we ought to have clearer knowledge than we have got at present as to what the intentions of the Government are in this matter. We are not to be given any information from time to time, as far as I can make out, even of the aggregate holdings of foreign balances by this fund. I would point out to the right hon. Gentleman that the Macmillan Committee laid great stress upon the desirability of information as to the amount of foreign balances held abroad by this country being given to the trading community. If no information at all about the fund is given, it must mean that the weekly Bank Returns will be meaningless. They will convey nothing, for one of the principal items will be left out. And this House will now have no knowledge whatever as to whether the balance of payments is adverse to, or in favour of, this country at any given moment. If the fund is to be used by the Treasury and the Bank of England for dealing in foreign exchanges against skilled exchange operators all over the world for the purpose of maintaining the exchange value of the pound sterling, the losses may be very considerable indeed. Is the House to have no information whatever as to what those losses are? No; we are told we cannot possibly know; we must leave it all to the sublime wisdom of the Treasury and the Bank of England. Has that wisdom been so sublime in the past? We must, I suppose, wait and see what the results will be. But if we are not to know what the position of the fund is, if we are not even to be allowed to know our aggregate holdings in foreign balances, at least, I think, we might be vouchsafed some information as to how the Exchange Equalisation Fund is to be raised. Here I must submit to my right hon. Friend that the answer given to an Amendment on this matter put down by myself and my hon. Friend the Member for North Paddington (Mr. Bracken) the other night by the President of the Board of Trade was very disquieting. The Financial Secretary to the Treasury had been very cautious not to drop any bricks in this connection. He said there were a great many ways in which the Treasury might raise this money, but that he did not propose to say at the moment how it would do so. But the right hon. Gentleman the President of the Board of Trade was much more explicit He said: I cannot say definitely what line would be taken, but, speaking as one who is not a member of the Treasury Board, I can only say, as an outsider, I should guess they would be much more likely to borrow by way of Treasury Bills than in any other way. Borrowing by Treasury Bills is not inflation when you use the proceeds of those Bills to purchase foreign exchanges which have a definite value. That is undoubtedly a different thing from the Government going to the Bank of England and borrowing on Ways and Means, which simply means that the Government are increasing their overdraft, with all the disastrous results which flow from that."— [OFFICIAL REPORT, 27th April. 1932: col. 607, Vol. 265.] What disastrous result? The disastrous result of inflation, for which every hon. Member has been pleading this afternoon. Everybody knows that one of the classical methods of inducing inflation is to borrow on Ways and Means. The President of the Board of Trade now comes down and says that not only do the Government not propose to raise this money by borrowing on Ways and Means but actually propose to raise it by Treasury Bills, which, as every hon. Member knows, will have a definitely deflationary effect. Therefore, I would point out to the right hon. Gentleman that if he cannot relieve our minds, the minds of the inflationists—because I am prepared to class myself as an inflationist now—as to the state of the fund, he might at least tell us how it is to be raised.

I now want to follow my right hon. Friend the Member for Sparkbrook and one or two other hon. Members into the past for a little in considering our future monetary policy. It was know immediately after the War, and it is even better known to-day, that under normal circumstances world production ought to expand at the rate of about 3 per cent. per annum. That was an estimate given by Professor Cassel as long ago as 1922. It was also known perfectly well that the output of gold was likely to decrease; and it is estimated to-day that the supply of new gold which will be available for monetary purposes in the future will have fallen by £10,000,000 a year in the course of the next 10 years.


What is the date of that Estimate?


1932. It is an estimate which I think he ought to know, as it is in the last report of the Federation of British Industries, and I understand he was a member of the committee that drew up that report; at any rate, his name is on the first page. Bearing in mind these two facts—that there was likely to be a diminution in the amount of gold available for monetary purposes, and that the world expansion of goods ought to increase by 3 per cent. per annum—the Genoa Conference was perfectly right in laying down that it would be impossible to go back to a gold standard unless there was international cooperation to stabilise the value of gold in terms of commodities, and to economise its use. It was obvious that a return to an uncontrolled gold standard must result in an international scramble for gold, which would force up the value of the metal in terms of goods, and force down commodity prices. And that is precisely what happened. That act of insanity, going back to an uncontrolled international gold standard, was committed by the Bank of England and the Treasury, and was accompanied by violent deflation, and an investment policy which poured a steady stream of money into Europe to help the European countries to go back to gold, at the expense of British industry, and at the expense of the British Empire. If the House will forgive me for a moment I would like to point out that I have one or two credentials to speak upon this matter. On 30th April, 1925, I asked the then Financial Secretary to the Treasury whether the Government would take immediate steps to summon an international financial conference to carry out the proposals of the Genoa Conference; and at a little later stage, in the Debate on the Second Reading of the Gold Standard Bill on 4th May, 1925, I said: The point I am endeavouring to make is that the world value of gold, now that we have got back to parity, must not be allowed to be driven up. And we must so regulate the demand for gold that the value in commodities of the currency units of the world based on gold does not in the future vary substantially. For this there must be some control over the absorption of gold, and this can be attained by means of what has become known as the gold exchange standard."—[OFFICIAL REPORT, 4th May, 1925; col. 696, Vol. 183.] As we know to our cost, the Government and the Bank of England were at that time unable to achieve the international co-operation which was deemed indispensable by the Genoa Conference. And in this connection I am tempted to quote from a letter which came into my hands only last week which was sent to a correspondent of mine by the late Lord Milner. It was written on the 23rd May, 1920, and in it Lord Milner said: Did I not say months ago, when there was all that rotten talk about ruin and bankruptcy, the burden of the debt, etc., etc., that 'the only thing which terrified me in looking ahead was the possibility of a restriction of credit'? I always knew this mad nonsense would come. But I hope the protests of the business community will check it before it goes too far. Hitherto, perhaps, not much mischief has resulted, for somehow or other the mania for speculation had, to be checked, though there certainly ought to be better ways of checking it than by measures which hit legitimate business at the same time. My difficulty about all these questions is that I am not supposed to be an authority about them, nor do I claim to be an expert, except in so far as common sense and long experience may make one. But I am up against theories, strongly entrenched in the Treasury, the Bank and certainly the greater part of the whole banking world, and supported by tons of literature from the abstract school of political economists who have held this country in their baneful grip for nearly a century. I think that is a very remarkable letter to have been written by so great a statesman as Lord Milner so long ago as 1920. We all know what happened. My right hon. Friend the Member for Hillhead spoke about this country suffering from anaemia. I think we can say we have been suffering for 10 years past from pernicious anaemia; and the only remedy that the Treasury and the Bank of England between them could devise was to give us the purge of deflation rather than the stimulus of inflation, until now the patient is very nearly exhausted by their treatment. If this deflation is allowed to continue then I believe, and believe passionately, that this country will be reduced to a state of complete collapse.

As I have pointed out, huge sums were invested by the financiers of the City of London, who were responsible for this policy, in European countries on long-term credit, during this period. Every European country had only to appeal to the City of London to get money; it got it in ample measure. But British industries which were anxious to reconstruct, to reorganise and re-equip themselves, our agriculturists and our own Dominions, appealed to the City of London in vain. Every debtor was ruined, because his debts were incurred—a point which has not been sufficiently emphasised—at a time when money was cheaper, and therefore more of it was required to carry out his obligations than at a later date. In 1931—and I rather wish my hon. Friend the Member for the Scottish Universities was here, because it meets a point he made in his speech—debt charges alon9 absorbed about half the national income of this country; and the dead weight of the National Debt, as hon. Members on both sides of the House know, has been increased by about £1,500,000,000 sterling during the last 10 years. Agriculture and the basic industries such as coal, cotton, iron and steel—for which so many Members have a measure of direct responsibility, and in which they must take a great personal interest—were gradually but remorselessly reduced by this policy to bankruptcy. And the really alarming thing is that the policy of deflation did not stop when we were driven off the Gold Standard. As my right hon. Friend the Member for Hillhead has pointed out, the Bank Rate was maintained at 6 per cent. from September, when we came off gold, right up to 6th February this year. Why? As a result bank deposits of the joint stock banks, which are the basis for credit expansion, fell during that period by £160,000,000; and there has been no rise in domestic prices in this country since we came off the Gold Standard.

I ask the Government, and I ask hon. Members of this House. Do they approve of this policy, or do they not? If they do not approve of it, then it is their responsibility to see that it is altered: and altered it must be. The control of money for the last few years has been in the hands of lenders, and it has been used undoubtedly to favour lenders as against borrowers. Lenders are in a minority; and on the whole they are an inactive class of the community; borrowers are a vast majority, and they are the actual people who produce the goods which we must use, and the food by which we live. I think it is not without significance that the Court of the Bank of England is manned by lenders and not by industrialists. But I am much more concerned with policy than with personnel at the present time. And we come back to the question which has been posed so often in the House this afternoon. What is the monetary policy of this country?

It has been suggested in the Debates on tariffs, that this problem of falling prices—the monetary problem—is temporary and superficial, and that the vital question is the planned reconstruction of industry under a scientific tariff. I believe that to be profoundly untrue. Unless and until we get a solution of this question, which is the fundamental issue of our time, all else, including tariffs, must be in vain. Of what use is economy; of what use is a tariff of any height, against a fall in the commodity price level of 40 per cent. in 18 months? No producer, and no manufacturer can possibly stand up to that; and if further proof is required of the truth of what I have been endeavouring to say to the House, let me quote from the now famous paragraph 204 of the Macmillan Committee's Report: We feel that the significance of what has been taking place in recent months is not always fully grasped. A study of history would, we believe, confirm the opinion that it is in the changes in the level of prices, and in the consequential alteration in the position of debtors and creditors, entrepreneurs and workers, peasants and the tax gatherer, that the main secret of social trouble is to be found. Looked at from this point of view the events of the last decade are of the most extraordinary kind. A very violent depreciation of money was sufficient in the immediate, post-War period to destroy over a large part of the Continent of Europe all rational economic calculation and all orderly social and economic development. This violent movement was followed in turn by a period of relative stability, in which material well being progressed markedly. This phase has now been followed by a violent down-turn of prices, the effects of which upon political and social stability have already been very great. The problems thus raised transcend in importance any others of our time and generation, and we have regarded it as our main task to expound their significance and to bring forward suggestions for their solution. I would like to ask the Financial Secretary: Do the Government agree on the whole with the recommendations of that report? Do they accept its conclusions? For they have not shown any great desire or anxiety to translate any of these recommendations into action.

What I want to do this evening is to make a plea in this House for expansion generally. The whole tendency psychologically and actually at the moment is towards contraction, which is death. And all this persistent talk about dire sacrifices—even the talk of the hon. Member for the Scottish Universities about economy—has a bad psychological effect, not because public economy is not in itself a desirable thing, but because it brings added terror and alarm to the masses of the people; and the capitalist world today is frozen with fear. The right hon. Gentleman the Member for Hillhead has well said that a civilisation which rests on a complicated system of credit cannot survive so long as the spirit of hoarding prevails. And it is that spirit which we want to exorcise. If this country is to be habitable in the future we must restore agriculture and not ruin it; we must enable industry to reorganise and re-equip; we must re-house our clum-dwellers, develop our transport system and develop our Empire. You can do none of this without credit expansion; with it you can do it all, for we are not suffering from a present or a potential lack of real wealth. There has been no pestilence, no earthquake. We are suffering from a lack of the means of payment, due to a breakdown of the machinery of exchange.

No doubt at this juncture the Minister will ask: "What do you advocate? What proposals do you suggest as to what the Government ought to do?" On this point, I will quote again from the Macmillan report: We have reached the stage when an era of conscious and deliberate management must succeed the era of natural evolution. The machinery has seized up owing to the lack of lubricating oil; and the first thing the Government ought to do, by hook or by crook, is to oil the machine; and that can only be done by expanding credit. I would inflate until I had restored domestic prices to the level of 1928. Can the Chancellor deny that this is feasible? Then I would regulate credit to keep the value of sterling stable in terms not of foreign exchanges but of commodities. I would also take steps to direct the flow of investments into British industry, and into the British Empire. That is a recommendation of the Macmillan Committee which has been not only warmly welcomed but strongly advocated by the Federation of British Industries, which one might have thought would not have been well disposed towards such a policy.

Lastly, I hope the right hon. Gentleman will not lead the country to suppose that any solution is going to be found at the Lausanne Conference. Everyone knows that the chances of success at the Lausanne Conference are so thin as to be almost negligible. Anyone who has any knowledge of the position of Germany knows that that is the case. So do not mislead the people of the country by trying to make them believe that they can get a solution there, because the psychological effect of failure will only be worse afterwards. I would concentrate, not on Lausanne, but on Ottawa; and on the establishment, within the Empire, of stable exchanges and stable prices at a remunerative level. It can be done, and so far as exchanges are concerned it has already been done in the case of certain Crown Colonies—East Africa, West Africa, the Malay States, and the West Indies. There is no inherent difficulty in the creation of a common Empire currency basis, or indeed of an Imperial central bank. At any rate, I most earnestly hope that all these things will be discussed; and that we may build upon the basis of an Imperial currency, a sterling group consisting of all those countries which have been forced off the Gold Standard. If that could be done, the influence of sterling prices upon world prices would be enormous. I myself believe that it would be decisive.

After all, somebody has got to do something, and somebody has to make a start. If my right hon. Friend says it is no good raising British domestic prices and then creating an Imperial currency, and a sterling group, then I say that the only hope is an immediate international conference. Does not the Chancellor of the Exchequer realise that the civilised world is crashing to destruction? Let the right hon. Gentleman say, "I propose to call an international conference at the earliest possible moment." These are the only two policies by which we can hope to get through our difficulties. Either we must raise sterling prices and create an Empire currency; or we must go straight out for the larger understanding, and the larger international currency. But the Government do not seem to be pursuing any policy at all. If we wait on Europe, we shall go down when Europe goes down. For these reasons, I implore the Government to give a lead to the world. I believe that they have a tremendous opportunity. I believe that, as my right hon. Friend the Member for Hillhead pointed out earlier, we have a real opportunity for leading the world in this matter of monetary policy, and that the world is looking to us at the present moment for a lead. I believe that whatever policy we pursue, if it is definitely declared and resolutely carried through, will quite possibly save the whole fabric of civilisation as we know it at the present time. Therefore, I beg the Chancellor of the Exchequer to take action of some kind before it is too late.


Those who have been Members of the House during the last few years will whole-heartedly congratulate the hon. Member for East Aberdeen (Mr. Boothby) on the speech that he has just delivered. It is but rarely that he intervenes in Debate in these days, and on this occasion he has done so with the happiest effect. While we may not always agree with him, we can warmly congratulate him on the consistency with which he has advocated the measures on which to-night he has made such an admirable speech.

With regard to the Exchange Equalisation Account, I feel very much concerned as to the attitude that Parliament ought to take towards this sum of £150,000,000 which it is proposed to place very largely under the control of the Bank of England. This House, traditionally, is the custodian of the public funds, and I think my hon. Friend the Member for East Aberdeen was right when he suggested that we might reasonably ask for more information in regard to it. At the same time, I recognise the difficulties of the Government, because, if they were asked to declare in specific terms their definite policy with regard to this fund, it is obvious that one of the main purposes for which the fund is to be formed would be destroyed. Therefore, one has mixed views as to whether we ought to ask, in accordance with our responsibilities, for more information with regard to the fund, or, in view of the present emergency—and, after all, this is an emergency Measure to deal with an emergency situation—whether it is not reasonable that the Government should ask, particularly during the present grave state of affairs, not only in this country but throughout the world, that they should have discretionary powers at any rate for a period of 12 months or so. Suggestions have been made that from time to time statements should be published in regard to this fund, but there again I can appreciate that the very publication of such statements would have the reverse effect to that which is desired by every Member in the House.

8.30 p.m.

We meet to-night, as we met six or seven months ago, to review the general finances of this country. We meet at a time when the country is in a very grave condition. The gravity of the situation is not confined to these shores. Even when we ask the Government to state their policy with regard to currency, or with regard to the Exchange Equalisation Account, it must be obvious to anyone with any practical experience of these matters that, great as is the position of this country, and great as is the confidence of other countries in the leadership of this country, there are so many difficulties in foreign countries that the Government are justified in asking for the patience of this House before a specific policy is formulated. Seven or eight months ago we had a second Budget introduced by the present Lord Privy Seal. This Budget has been referred to by hon. Members to-night as a depressing Budget, a pessimistic Budget, but I think the real truth is that, to those of us who were in the House when the second Budget of last year was published and discussed, it was a review which took into account, not the circumstances of six months, but the circumstances of 18 months; and that in general, if not in precise, terms, the Budget which we are now discussing is very much the kind of Measure that we were led to expect last autumn. Of course, it is disappointing. It is true that the then Chancellor of the Exchequer said that we should have to bear those burdens for a period of 18 months, but "hope springs eternal in the human breast," and I have no doubt that a good many people in this country have been rather led to hope that, when the new Budget was brought in, there would be at any rate some little remission of the burdens that had been imposed, or some little easement from the sacrifices which they had been asked to make.

Those hopes have, perhaps, been created in all good faith by some sections of our national Press, because new taxes had been imposed which were estimated to bring in a very large sum, and so, before the final figures of the Budget were filled in, it was assumed, I think in all good faith, that there might be a surplus at the disposal of the Chancellor of the Exchequer, and that some remissions could be made. We know now that, unfortunately, those hopes have not been realised, and that once again the continued patience and confidence of the people of our country have to be asked for. In these circumstances, I think it is incumbent upon us to realise that we owe a duty to the people of this country to explain to them so far as we can the real position in which our country still is. It is a mistake to assume, as my hon. Friend the Member for East Aberdeen did, that we should be merely optimistic. In fact, I think he rather contradicted his argument at a later stage, when he suggested that we should not build too much upon the prospects of the results of the Lausanne Conference, and said that, if we did, the disappointment that would follow from the failure of that conference would be greater than if the people were told now exactly what the prospects of success were.

While it is true to say that, from a cursory examination of the Budget, we are £9,000,000 better off than we were according to the estimate of the Lord Privy Seal in September, it would be quite inaccurate just to leave the; matter there, because the House will remember that in the last Budget there was included a capital sum of £23,000,000, which was transferred from the Dollar Exchange Account, and while in fact we have only used £12,750,000 of that sum, it is nevertheless the case that there has been a definite drainage of £12,750,000 of national capital to meet current expenditure. Furthermore, I think we cannot divorce from a consideration of our national Budget the personal accounts of our people. While the national Budget has been balanced, I think it is not unfair to suggest that it has been balanced at the cose of the unbalancing, or, at any rate, the great disturbance, of almost every individual budget in the land, and I think it is useful that we should consider for how long we can balance our national accounts at such a high price. How long is it physically possible? The. present basis of taxation, and the existing rates of taxation, must cause very grave concern to those who desire that the standard of life as we know it in this country should be maintained, and it must also cause profound concern from another point of view. It is the duty of statesmen so to administer our national finances that any diminishing national revenue must be replenished or countered by diminishing national obligations. Strictly speaking, if you refer to the Budget itself, with an expenditure of something like £766,000,000—a colossal figure—capital expenditure is to be found to the extent of only £32,500,000, a sum which has been allocated to the reduction of debt. Let us disregard for the moment the question of Income Tax and Surtax, much of which has been paid at the cost of the savings of our people—call it savings or capital. Much of the Income Tax and Surtax included in the last revenue returns really represents the capital of our people. Take one item. Some reference was made by a speaker on the Front Opposition Bench to Estate Duty.

It is obviously an essential element of taxation that it must be borne by those best able to bear it. I am not speaking in any partisan way. I am putting it from the point of view as to whether we are using the best methods of raising revenue at a rate which is nearly equivalent to legislating in a war period. Last year they realised £65,000,000— £25,000,000 less than was anticipated when the Budget was introduced 12 months ago—and £18,000,000 less than was estimated only six months ago. Disregarding capital payment by Income and Surtax payers, there has been at least £45,250,000 of the capital of the nation applied to the current year's revenue account, £32,500,000 from Death Duties and £12,750,000 from the Dollar Exchange Account. This year we are expecting to realise from the Estate Duties £76,000,000. One perhaps would not labour this matter if that £76,000,000 had been applied to capital, but in the same year we are only allocating to capital £32,500,000.

I am sure the House will be interested in some figures that I have got out for the last 11 years to March, 1932. The total amount during that period that has been received by way of Estate Duties is £740,000,000. The actual cash applied in that period to debt redemption is only £500,000,000. In other words there has been a drainage of capital to the extent of £240,000,000 over 11 years. I think those figures immediately raise two considerations. We ought to be considering the best way of providing the necessary revenue that the country needs. This charge definitely represents a drainage of capital and, once it has been collected, you cannot get it a. second time. What is more, I think any Chancellor of the Exchequer, or any Treasury official, must be very much concerned with the question whether or not by the present calls that are being made there is not bound to be in future years a greatly reduced sum to be available from this source.

Let me turn to another matter. Sometimes a private Member may say something that may be helpful which a Minister might not think it discreet that he himself should say. The Chancellor of the Exchequer in his financial statement referred to the question of War Debts and Reparations and said he thought, in view of the present state of affairs, the best thing to do was to keep it in suspense and not include anything by way of expectation of revenue or income or by way of outgoing. Perhaps, as a private Member, without the responsibility of those whose duty it is to deal directly with these matters, I may express a personal opinion which I think is largely held and which, perhaps, needs saying, and saying in the most emphatic terms. This country has long ago agreed to demand no more in respect of War Debts and Reparation payments than we have to pay to the United States. For this country to do more than that is definitely impossible and, whatever our wishes may be, the effort is beyond our strength. I think these things need to be said and emphasised in order that the United States should precisely know and clearly understand our financial position. I think the generosity of our concessions to other nations should be the best evidence of our good faith in regard to international obligations. When people say "What is your reply to America if you continue to pay internal indebtedness and our existing social services?" The answer, surely, to the £903,000,000 lent us by America is the £1,115,000,000 due to this country from France, Italy, Rumania, Portugal, Jugoslavia and Greece, and that £1,066,000,000 which we find noted in a very obscure corner of our financial statement as due from Russia. The loss from the cancellation of all War Debts and Reparations would fall heaviest upon this country, and this country has shown itself prepared, by its generosity to its debtor countries, to fully maintain the highest possible appreciation of international obligations. I would merely add that it may well be that the general cancellation of Debts may be not least advantageous to America and France.

We have had to-day some discussion as to how new revenue should be raised, and we have had some suggestions from Members of the Opposition Bench. These suggestions reminded me of a review of a book by Sir Josiah Stamp which I read over the week-end, a book entitled "Taxation during the War." The critic refers to several points of view regarding the imposition of taxation, and those points of view appeared to me to be illuminating. There was that of the taxing official who is concerned to raise the maximum sum with the minimum of friction and the lowest cost of collecting; that of the economist who wishes to diminish as little as possible the permanent sources of the nation's wealth; that of justice which aims at the fairest apportionment of burdens between man and man; and that of the statesman, in the broadest sense, who is alive to the problems of communal psychology and knows how dangerous are mass temptations.

We are all agreed that taxes should be imposed justly and as fairly as possible between man and man, and I am certain that the great majority of the Members of this House are exceedingly anxious that, even although it is necessary to raise very heavy sums in these days, those sums should be raised as far as possible having regard to the permanent sources of the wealth of the country, and to the need that in days to come the country will still have to call upon those sources for contributions to taxation. Reference has been made to the necessity for economy. I shall be very much obliged if I can be told how much reduction of expenditure in 1932 is due to the actual reduction in the unemployment figures as compared with the estimated reduction. If the Financial Secretary to the Treasury would kindly give me those figures I should be. very glad, because we cannot assume that that is a reduction representing real reduction. It is really a reduction arising from over-estimating. I suggest that it may not be an unwise thing for the Chancellor of the Exchequer to consider the issue of a White Paper giving in very simple terms the actual economies which have been made during the last six months, and also the additional taxes which have been collected in that period.

We have Supply days very often in the House of Commons, but more often than not those Supply days are occupied by very interesting discussions upon some topical event or some current matter of importance, and I suggest that in these days, when it is important that we should devote more time to the question of the finances of the country, we might be more fruitfully occupied if we were to consider the Estimates themselves rather than some topic arising out of the Estimates. I do not intend to say very much upon the subject of economy. May I rather quote a saying of the author of those duties, Sir William Harcourt, in 1895: It is idle to preach homilies on the subject of expenditure. No one will listen to them. There is a universal demand for more and more expenditure every year for every conceivable object, all of them excellent objects, but all of them pursued without any regard to their cost. Economy has become a lost art at the close of the century. Now we have made up our minds to spend this unexampled sum. The unexampled sum was £95,981,000, and now we are spending eight times that sum. I have no doubt that most hon. Members have seen in the Guildhall of the City of London the statue of William Pitt. On the base of that statue are inscribed these words: He repaired the exhaustive revenue, he revived and invigorated the commerce and prosperity of the country, he re-established the public credit on deep and sure foundations. I believe that in those words are summed up the main tasks of the Government, and I believe too, that if those tasks are tackled courageously and confidently by His Majesty's Government, they can rely upon the loyal and unflinching support of those of us who have been sent here to support the National Government in bringing back prosperity to our land.


My opposition to the Bill is that the alterations in taxation which it proposes are alterations which endeavour to place an additional burden upon the people least able to bear it. The hon. Gentleman the Member for Faversham (Mr. Maitland) emphasised the fact that he believed in national taxation being placed upon the broadest backs, but we find that in the Finance Bill the additional taxation is called for in a direction which obviously means placing the biggest burden upon the poorest people. There was no indication in the speech of the Chancellor of the Exchequer, nor is there in the Bill, recognising the general distress of the country forced upon industry by the policy which is now being pursued by the National Government in closing their eyes to the general world conditions. The Government would have been much better occupied if they had given consideration to the general conditions with which the world is now faced. Reparations and War debts, and the conditions under which they were first placed, have largely helped to bring about the economic conditions with which we are now confronted.

The Reparations proposals arranged after the War not only called upon the defeated nations to provide cash but commodities, and no industry has suffered more as the result of that mad policy than the coal industry of the country. Reparations immediately had an effect upon the mining industry, an industry which the country cannot yet afford to ignore. The real wealth of the country still lies in its mineral resources, and the Government will have to give serious consideration to a revival of the industry in one form or another. There are no proposals whatever in the Finance Bill, nor were there in the speech of the Chancellor of the Exchequer, to deal with any other form of monetary system except that which is in operation at the present moment. We are beginning to find a large number of influential men in the country agreeing with the policy which has been put forward by the party sitting on this side of the House for years, namely, that the time has come when, as far as the monetary system is concerned, we ought to aim at fixing a world monetary standard in place of a Gold Standard. A large number of nations as well as ourselves have had to leave the Gold Standard owing to the fact that there is not sufficient gold to deal with the world's currency and to allow of the flow of goods from country to country.

The only thing that this Finance Bill endeavours to do is to place further burdens on the backs of the poor, and we have no proof that there is any justification in the Government's suggestion that any further revenue that the nation may want for its services must come from the pockets of the working people in the form of indirect taxation. There is plenty of wealth yet in this country which might be taxed and that, surely, gives no justification for the taxation and duties proposed in this Bill. Whatever the Lausanne Conference may offer, we on this side of the House say that there can be no hope for the world conditions to-day until an international understanding is reached by means of which we can get some form of monetary system under which we can have an inflation of currency. Surely, there are sufficient brains in the statesmen of this and other countries to find some form of exchange whereby the goods of the world can go from country to country.

I often wonder why in a world of plenty we should be looking upon our own country where there are millions of people unemployed, thousands of people depending upon public assistance, industrial depression and people on the verge of starvation. When it has been admitted by all the leading economists of our time that we have at least solved the problem of production, surely we are not going to stand here any longer without calling to the world to find some international way of allowing the productions of the world to flow from land to land, thereby giving the workers a reasonable status of living. If nature decreed that poverty was a necessity, one could understand it, but that is not so. It is admitted that we have solved the problem of production. Therefore, monetary systems ought not to stand in the way. If capitalism has failed to handle the position, then in some international form a new monetary system ought to be evolved whereby the workers of the world may have the privilege of exchanging their goods, both manufactured and raw materials, in such a way that a livelihood can be guaranteed, and distress and poverty can be avoided. There is nothing in this Finance Bill that aims in that direction.

In the face of industrial depression, in face of the fact that the workers have lost wages to the tune of £160,000,000 per annum, the only alteration that the Bill proposes in taxation is to remove some small burden from the backs of the rich and to put heavy burdens on the backs of the poor. Taxation is proposed in this Bill on the food of the people which will inevitably increase the burden of the poorest people. We oppose the Bill because there is nothing in it, and there was nothing in the Chancellor of the Exchequer's speech in introducing it, which gives any hope of prosperity in the near future. We trust that we may appeal even now to the Government to transform their policy and not to fence themselves in any national border, merely for the well being of this country. That is impossible to-day, without taking the wider view and looking forward to the world in the hope of getting an agreed policy, whereby the workers may transfer from one country to another the commodities of life, which are best produced or grown in the different countries, without the hindrance of a monetary system which is long out of date.

9.0 p.m.


In rising to address the House for the first time may I ask for that indulgence which the House is so ready to give to new Members? When the Chancellor of the Exchequer opened his Budget 10 days ago I must confess that I was definitely depressed by his failure to forecast any economies in the coming year. I was not very favourably impressed by his statement that during the past year he had been able to save £34,500,000 on a Budget expenditure of nearly £800,000,000. To put it in the most favourable figures, on the Supply Services which last September amounted to an estimated expenditure of £473,000,000 he had been able to save £34,500,000, or something slightly less than 7 per cent. When giving us these figures and opening his Budget for 1932 he presented the House with a Budget calling for an expenditure of £755,000,000. Of that sum £308,000,000 represented the Debt Services. As to that, I cannot express any opinion whether any great savings can be effected by debt conversion schemes. Apart from the Debt Services we are budgetting this year for Supply Services of £447,000,000.

I know that economy is most unpopular. Most speakers to-day have dealt with the question of monetary policy, leaving, economy for a future discussion. I should, however, like to call the attention of the House to the question of economy. The vast majority of Members of this House were elected to support the National Gov- ernment on what we call the "Doctor's mandate," or the mandate of the free hand, and it is my submission that that free hand implies something more than the authority of the electorate of the country to change our fiscal system and to introduce a system of scientific protection. In that statement I think I shall probably have the support of my right hon. Friend the Home Secretary, if he were present, and his followers. Surely, the mandate of the free hand implies that we may take any and all steps to restore prosperity to this country. The next of those steps which must be taken is to make a drastic reduction in Government expenditure. If this were not the first occasion that I was addressing the House I should probably be open to the question where I would recommend that that reduction should take place.

Hon. and right hon. Members on the Opposition benches may ask me where I would recommend such economy, and I would reply that the economies should be enforced in the whole of the field of Supply Services. I do not believe in that school of political economy which was introduced two or three years ago by the right hon. Member for Wakefield (Mr. Greenwood), when he suggested that what a nation wants it can afford. I suggest that a large part of our troubles to-day are due to the effect of that policy, which last August was shipwrecked on the hard rocks of economic facts and which, curiously enough, did not prove of any great electoral value to the right hon. Gentleman and his Friends in the election last autumn.

Of the £447,000,000 to be raised for the Supply Services about £104,000,000 are for the Defence Services. I would not for a moment suggest any further reduction in our armaments pending some agreement at Geneva, but I do suggest that there is room for departmental economy and I ask why we cannot have one Minister of Defence to combine the three Departments which at present administer our Defence Services? It has been done most successfully in some other countries. That is one economy in the Defence Services which we might introduce. As for the rest of the Supply Services, there is a sum of £330,000,000 for what we call the Social Services. Undoubtedly they are the best in the world and we can rightly pride ourselves upon their efficiency, but they can be bought at too high a price and I submit that a continuance of Social Services at their present level will entail a continuation of the present intolerable burden of taxation, which will in the end destroy the productive capacity of the State. If the burden of taxation is not reduced then the last state of the beneficiaries of our Social Services will be far worse than their present state. Economies of that sort I know are unpopular, and are a drastic change in our accepted policy.

In the present Budget we are offered two commissions, one to deal with the question of the taxation of co-operative societies, and the other to deal with the question of sugar. If the Government is not willing to adopt the recommendation of the May Committee, whose report indicated a means by which £96,000,000 could be saved this year, I suggest that they might at least offer us a third commission on the lines of the Geddes Commission just after the War. With national expenditure in the neighbourhood of £800,000,000 it is useless to indulge in cheeseparing. It requires an axe, and an axe swung in the same way that the Geddes axe was swung some 10 years ago. I hope that this House will stop paying lip-service to economy, and that before the next Budget is introduced will take some practical steps to carry it out.

May I refer to the question of the Death Duties? In the present Budget they are estimated to yield no less than £76,000,000. The Chancellor of the Exchequer told us quite frankly that during last year there had been a drop of £18,000,000 in the receipts from this source. That is the writing on the wall which is clear for all to read. It shows that the amount of capital passing on the death of one individual to his successor has already been seriously dissipated by the continuance of the Death Duties at their present level. While the Chancellor of the Exchequer estimates for an increase of only £11,000,000 next year, he hopes to obtain £76,000,000 from these duties. The most serious part of that position is that in his Budget he set out a payment of £32,500,000 for the National Debt services, and if you take that from the £76,000,000 he is prepared to spend £43,500,000 of capital for revenue purposes. Is it not possible in the Finance Bill, or by some amending Measure after- wards, if we are to maintain the Death Duties at their present scale to prevent the wholesale destruction of capital, and such evils as follow from it as the destruction of estates and continuity of family businesses by providing for the payment of Death Duties by insurance?

At present it is possible to take out a life insurance policy in order to pay Death Duties when the assured person dies, but the value of that policy is taken into the total amount of the estate and pays Death Duty. Is it not possible, in cases where a policy is taken out and made payable to the Commissioners of Inland Revenue, for the policy to be excluded from the estate of the; deceased? The result of that concession would be that the Exchequer would still receive the same sum in Death Duties but the estate would pass undiminished and the exchequer would benefit by an increase in Income Tax and Surtax in the next generation.

Lastly, I ask the Chancellor of the Exchequer to give some answer to the silk industry, which owing to the fact that a 33i per cent. duty imposed by the 1925 Act has prevented their case being considered by the Advisory Committee. The present duty under the 1925 Act, if you take into account the excise duty on home-produced artificial silk, affords practically no protection to the industry, and now that the duty under the Abnormal Importations Act has gone the users of silk, particularly in the hosiery trade and those engaged in artificial and real silk manufacture, are not receiving any protection. If last November there was a case for a 50 per cent. duty I submit that there is still a case to-day for some protection for this industry, and I hope the Chancellor of the Exchequer will consider the position and make it possible, by some amendment of the Finance Bill, for silk users to state their case to the Advisory Committee. I ask for that and nothing more. I shall support the Second Reading of the Finance Bill, but I hope that before we come to consider the Finance Bill of 1933–34, the House will have found it possible to take into serious consideration the question of curtailing Government expenditure.


From half-past three to a quarter-past six this evening we heard no word of economy whatever. From the time the Debate started until the hon. Member for Loughborough (Mr. Kimball) spoke we heard very little mention of the Budget, but a great deal about inflation. The House owes a debt to the hon. Member for Loughborough in his maiden speech for bringing us back to the subject under discussion. Many of us have known him as a bonny fighter outside the House, and we are glad that he is now inside the House to give us the help of his views on future occasions. One of the curious things in listening to what I may call the temper of the House this evening has been the unanimity with which almost every speaker has turned anti-gold and become pro-inflation, or, at any rate, pro-credit expansion. With the one honourable exception of the hon. Member for East Aberdeen (Mr. Boothby) six months ago gold was the idol. I was perhaps too small to be noticed, but I am as innocent as the hon. Member for East Aberdeen. But, after all, things always go with too great a reaction. We should turn to the Budget in relation to the facts of the day as they are, and turn less to the belief that the mere word "inflation" or the mere action of inflation can achieve all our objects. Had we been budgeting on the lines of 1921 commodity prices, our Budget should really stand at about £500,000,000. Commodity prices are now very nearly half what they then were. That refers almost entirely to primary products. Go back only to 1929. If we to-day had been able to show a saving in the last three years of some £200,000,000, we should be congratulating ourselves very fairly, but yet by merely keeping expenditure practically stable our Budget to-day is the equivalent of £1,000,000,000 at 1929 prices.

That is what we have to face. It sometimes is rather curious that hon. Members opposite hesitate to accept the fact that they want prices to rise and yet to keep the cost of living down. The desire to eat our cake and have it has on the whole really been responsible for more lack of leadership on both Front Benches, and for more of the difficulties in which we are now, than anything else. Not only have we failed to keep pace by economy with the fall in the price of commodities, but at the same time our Budget has not even balanced. It is nice to pretend that we are the only country to balance our Budget to-day, but two speakers have already mentioned that we are really some £40,000,000 "out" by Death Duties. Moreover, no one has yet stated that private Income Tax payers have anticipated their incomes in paying their tax. They have borrowed from banks or have sold securities. That is not a sound or healthy position.

That all goes to show that in our present position we have to face not merely the hard necessity of taxation, but equally the hard necessity of reducing it. There are two ways in which real economies might be effected. The first is the reduction of debt. In regard to that we have the people who are now at last converted to the belief that you can have too great an adherence to the old-fashioned international system of finance sometimes loosely called the Gold Standard. Almost everyone who has spoken in the Debate has said in effect, "Yes, you can reduce your debt if you inflate prices," that is, reduce in terms of the value of commodity prices, that is to reduce the total which has been added to by £2,000,000,000 in the last few years by the opposite process. But even so, that does not take away the dead weight from which we still suffer. Many are willing to try that remedy because they are facing only half the question—the difference between dead and live capital. The burden of War debt is capital that has been destroyed. The burden of new debt, so long as it is put into productive industry, is not the burden of capital destroyed, but the burden of new production, and the interest which comes from it is payable out of profit. The interest payable on the dead weight debt, the dead capital, is only payable out of the profits of other things that is production. That is the first thing in which we must find the courage to rise above the ordinary standard which we have so far attained.

The other possible economy lies in administration. Here it is far and away harder to get anything really drastic done. It is easy to talk about hordes of officials in Whitehall, and they do multiply of themselves, but at the same time the cutting down of their number would do very little. The hon. Member for Richmond (Sir W. Ray) made a notable contribution to the Debate on the question of economies in local government and overlapping. I suggest that the first method of economy that really matters is to scrap all the typewriters. If you have continual compiling of archives, the continual duplicating of copies backwards and forwards, you will never get economy in administration.

There are other economies which might be attempted. Put off the luxuries that we do not need. To face economy in things like education is very difficult, and there is a great deal of trouble to overcome, but you can face economy on such things as expenditure on roads. The motoring industry claims that it is very much overtaxed and that it has a grievance, but since the War far more money has been put into the making and maintenance of public highways than has been provided by the motoring industry in taxation. One of the reasons why the motoring industry does not do all the business it wishes to do abroad is not so much that the tax in this country is a horse-power tax, as that our roads are far too luxurious and far too easy on springs. If we had roads which would serve to take the traffic just as well, but at the same time would test our chassis a bit more, we should be able to export the kind of car that is wanted abroad.

If one goes back to the question of a balanced Budget, it is not only the balancing of the Government's housekeeping, but the balancing of the nation's housekeeping that matters. I think it was my right hon. Friend the Member for Sparkbrook (Mr. Amery) who said that we must get away from the old system of taxation for revenue and revenue alone. If our Budgets are going to mean anything more than a dead weight on us, surely we must look to the most fruitful way we can find of getting our revenue. In recent times the tendency has been more and more to tax along the lines of least resistance, and at the same time not to care who or what you may destroy. Whatever you tax you are bound to hurt. If you tax on the lines of least resistance, the tax goes on to the just and the unjust alike. If you could go back to the days of Moses and get some measure of taxation such as would let the plagues fall upon Egypt and not upon the land of Goshen, then you might be helping the finances of the country.

Death Duties, which have been mentioned this evening, involve a taxation on capital, but what is far worse than that, they are a tax on the national character. Is there any idea of responsibility left in wealth when you know it is going to be destroyed by taxation? The only basis of responsible administration you can get in the world, unless you have Communism, which must fail is that property should be looked upon as a trust with far more duties than rights. If you are going to have wholesale taxation and confiscation by Death Duties, the very basis of continuity and of looking upon the thing as a trust is destroyed. Take the single instance of land. The wicked landlord has been taxed out of existence. Has the farm labourer benefited and is there a better spirit in the countryside or any feeling that we are to have a better future in which there is to be more than a mere recognition of rights; or is it going to sink into the idea of property being something which you hold and with which you can do exactly as you like?

I cannot help feeling that there is something more to be said upon the disputed subject of beer. We in our party were told we must accept the position loyally, that however sore we might feel about it, the times were difficult and we must have the tax for revenue. What has been the result? The tax is supposed to bring in £10,000,000 in the current year. I have not been able, in the short time at my disposal, to look up the amounts by which the Treasury has been out through over-estimates of receipts from the Beer Duty in the last few years, but it comes to over £2,000,000 a year. Is that the case in this estimate? On the other hand, there is a very handsome subsidy given to the beet-sugar industry which might have been avoided by an adjustment of the Sugar Duty. The only reason for giving sugar a subsidy is on account of the beet which is grown for better agriculture in general. If you look upon it from the point of view of the crop which is grown afterwards, the one sure crop is malting barley. Thus you destroy with one hand what you give with the other. The two great assistances which are being given to agriculture to-day are the wheat quota and the beet-sugar subsidy. Both deal with a very small area. What will Scotland, which grows barley, say about the Beer Duty when the beet-sugar subsidy is granted and the wheat quota, too? There is the other side of the problem. In the brewing industry at this moment unemployment is something like 16,000. How much of that is due to the Beer Duty it is hard to say, but it must be due to it to a large extent, and it will now be increased. Brewers all over the country kept on in what seemed to be the almost certain hope that the tax would be removed. The maltsters, who have survived for many years, must now go under, and you will have destroyed an industry which you cannot recover.

9.30 p.m.

Then we are told, a loss of Income Tax will result, not in this year but next year. It is true you may have your Income Tax from the farms and the malting and brewing trades this year, but what of next year? Taxation, by a windfall of the very worst sort. The destruction of an industry in order to get the present revenue, is a form of finance one would expect to have found on the icy slopes of Snowdon and the sunny glades of Epping, but not among the busy factories and offices of Birmingham. I cannot help feeling that we are destroying something that is of use for the future, and not only to the brewing industry. I have no feeling for the brewers at all, and I have never owned a brewery share, but it is no good trying to deal with the farming aspect of the brewing industry or the malting industry unless you do something fairly soon to relieve them from destruction.

There is the human side also. Nobody has ever thought it wise to govern, as one generally does in a democracy, for the sake of votes. Personally, I have never hesitated to say unpopular things in my constituency, but it is another thing in the temper of the times to destroy a certain warm, human feeling —for that is what you are destroying. It is not a question of whether anybody will vote for you to-day or to-morrow. It will be a long time before there is any voting done but, whether that be so or not, a very difficult position lies ahead of us. It may call for much more taxation and much more sacrifice. I do not believe that it is any good keeping economies, as you should keep extra taxation, up your sleeve. The sooner you get your economies done the better for your popularity and the future of the country. If we are to have more difficult times and Europe crashes, as it may very easily, what are we to do with our own people? We are going to leave them sullen, because there is very much more feeling than some think among the working men, whose only beverage is beer. Many people say that the working man can go to the cinema, but are the movies and the jungle and Hebrew taste from Los Angeles the sort of recreation for an Englishman, or is it to be the English public house? There is a warm human side which does matter in days when we are getting more and more sceptic, cold and unsympathetic in every way.

Much has been said, in general, about giving a lead in regard to inflation and knowing where we stand and of going to conferences. Conferences have not done us any good in the past, and it is most unlikely they will in future, but there is one thing which will make for success, conference or no conference, and that is having people who know their own minds and who have the knowledge and courage to deal with the situation. The right hon. Gentleman the Member for Darwen (Sir H. Samuel) seems to be the one man on the Front Bench who knows exactly what he wants and says it. It is going to be of little use trying to make two or three negatives into an affirmative. Instead of being a National Government in matters of policy, it is better to govern for the nation. To go back once again to the Bible may I remind hon. Members that there is a very useful parable in Samuel, in which that great prophet when he found that Saul had not slaughtered the sheep and oxen of the Amalekites but had divided up the spoil, said, "To obey is better than sacrifice." It is much better to obey and to do what one believes must be done, than to sacrifice for the sake of delay and apparent unity of action. It is better to govern in haste now, to adjust at leisure.


If I intervene for a few minutes between hon. Members and the Chancellor of the Exchequer who is, I understand, to speak after me, I do so with the kindly intention of relieving the right hon. Gentleman from the constant strain of having to listen to criticisms from his own supporters. Both the hon. Members who have last spoken have uttered words, fair in themselves, and embellished with Scriptural allusions for better effect, but none the less words of criticism which, in cold print, will not look so smooth or so kindly as they sounded. The right hon. Gentleman has been unfortunate this afternoon in receiving no support at all from any part of the House. Indeed we on these benches might well have been content to retain our seats during this Debate, because the work of Opposition has been done most effectively by Members of the Conservative and Liberal parties.

The hon. Member for Loughborough (Mr. Kimball) made a very effective maiden speech in which he went into figures and detailed criticisms of the Budget. What was unusual in that maiden speech was that it gave evidence of a capacity for dealing with a subject of this kind. But the hon. Member did what those who make maiden speeches usually refrain from doing. He raised controversial matters and criticised the party which he supports. He sought, however, to place the responsibility on the late Labour Government for the difficulties in which the present Government finds itself. But if the hon. Member had been in his place during the speeches of the right hon. Gentleman the Member for Billhead (Sir R. Horne) and the right hon. Gentleman the Member for Spark-brook (Mr. Amery) I think he would have found from those authorities that the Labour party has at last been discovered to be innocent of any responsibility for all these difficulties. If the hon. Member refers to the arguments which have been put forward in this House I think he will find that the Labour party has been on the right lines in this controversy ever since the beginning of the monetary troubles which have beset us during the last 10 or 12 years.

I remember listening with some surprise to the late Mr. Bonar Law nine or 10 years ago saying that he had been against the policy of deflation from the time it was commenced. He referred almost to the exact date of the initiation of that policy. The country and the House had never been told that a policy of that kind had been consciously and deliberately initiated by the then Government but the late Mr. Bonar Law, a Member of the Coalition Government, told us that he had been opposed to the policy from its initiation and gave the country and the House of Commons, which had previously been in the dark a glimpse into the means by which deflation had been brought about. The Labour party has been opposed to deflation all through. Perhaps it was in the simplicity of our ignorance, perhaps it was in the freedom of our minds from the complicated theories of modern high finance, but we realised from the beginning that the further deflation went, the heavier, proportionately, was the burden of standing charges of all kinds especially in relation to the National Debt and those huge burdens of international debt which are a feature of post-War finance.

The Noble Lord the Member for Basingstoke (Viscount Lymington) referred to one or two minor points in this controversy, and as he usually shows a keen and accurate judgment he surprised me by referring to a trivial economy on typewriters in the offices of Whitehall. That suggestion was matched by his other suggestion that even in these days of economy means should be found for relieving the beer-drinker from the additional charge which has been placed upon it. I do not know whether the Noble Lord's proposal is that we should refrain from buying typewriters in order to buy more beer. The right hon. Gentleman the Member for Hillhead took a gloomy view of the situation. With a wealth of language and quasi-scientific terms he displayed to us the gloomy prospects which face this country. He almost made us tremble when he said that we were perilously near the collapse of the world system of civilisation—a most unusual statement to hear from that side of the House. I have heard such a statement at street corners. I have heard it from extremists who do not count for very much in this country, but I do not believe, even now, that we are so perilously near the breakdown of the capitalist system. It it does break down, it will be due to the stubborn refusal of hon. Members of this House who wield such influence in industrial and commercial circles, to see the simple truth of economic life, and the simple relation of economic factors one to another.

The right hon. Gentleman made a disquisition on prices but did not pursue the subject far enough to cause himself any embarrassment. He left it without attempting to develop that theory which we have heard from him once or twice in recent weeks. He left the House puzzled. Certainly he left me in doubt as to how far this remedy of inflation is to be applied and how it is to work. He referred to the need for increasing purchasing power. Hon. Members will notice how badly that fits in with the plea of the Noble Lord opposite for more economy. In one speech from the opposite side we hear advocated the cutting down of expenditure and purchasing power, and we are told that we are spending too much. On the other hand, the right hon. Gentleman the Member for Hillhead says that what we need is more purchasing power; that we ought to buy more and that we ought to pay more for the commodities which we buy. The right hon. Gentleman said that salvation can only be secured by raising the prices of commodities to a very much higher level, and I was surprised because he neglected the implications of his premises. He suggested that things could not be put right until we had raised prices by 30 per cent. I gather that that is the intention of the two right hon. Members—for Sparkbrook and Hillhead —who sit in the same seat, though not together. One comes in, makes a speech, and goes out; then the other comes in, sits in the same place, makes a speech, and goes out: and then the right hon. and gallant Member for Ripon (Major Hills), who now occupies that seat, maintains their place while they are both away.

What prices does the right hon. Member for Hillhead mean, and what commodities does he mean? Does he suggest that by any sort of action which the Government and the Bank of England can take in this country you can raise world prices of commodities by 30 per cent.? Is he prepared to recommend that we in this country should pay an additional 30 per cent. on the value of all imports into this country? We expect to buy this year from abroad, say, £800,000,000 or £750,000,000 worth of commodities, and the right hon. Gentleman thinks it would be to our advantage to put 30 per cent. on the value of those imports. Side by side with that, he must recommend an addition of at least 30 per cent. on the prices of our domestic commodities.

He has not attempted to give figures to prove his case, but I would like this House to consider whether we can now afford to pay 30 per cent. additional, if you like, on £800,000,000—that is £240,000,000—for the imports we require of food and raw materials for the next year. The right hon. Gentleman missed another implication, and that is that when we add 30 per cent. to the price of the imported commodities, while we have a system of tariffs averaging 15, 18 or 20 per cent. ad valorem, we have to add that to the 30 per cent. additional prices, thus adding considerably to the total annual import duty which the tariffs will have to cover on the enhanced value of the imported products.

Where the right hon. Gentleman failed to satisfy me was his utter failure to realise the domestic implications of his theory. He wants 30 per cent. addition to the prices of imported products and home-produced commodities, but not a word did he say about more wages. He spoke of additional purchasing power by inflation, by a reduction of the Bank rate, a larger volume of currency in circulation, and an expansion of credit, but he did not confide in the House as to the details of his scheme or say where the additional purchasing power was to be placed, and he certainly failed to make any reference to additions to wages or salaries. I do not know whether the right hon. Gentleman had in his mind an allocation to wages of a portion of the increased purchasing power, but I was convinced, as I listened to him, that he had left out of his thesis very much more than he had said, and I was very dissatisfied that he had not attempted to work out the implications of his theory.

The other point is that if the foreigner is to be paid more for products sent into this country, the raw material for industry in this country will be very much dearer. Is there a possibility of our maintaining our export trade? He must realise that while we may be able to manage currency in this country with the cooperation of the Treasury and the Bank of England, and creat a new basis for currency which would help those industries here which are suffering from depressed prices, he did not show us how production at higher prices here would be able to find a market in countries not so happily situated.

I am satisfied that the right hon. Gentleman has not half thought out his theory. When one listens to the right hon. Gentleman standing there with such assurance, one is almost convinced that he does know what he is talking about, but as he goes on one is disappointed, and I thought we were listening to a comedy of finance when he was trying to accommodate two entirely opposite theories. He has not yet declared against the imposition of tariffs, but he said, "I am in favour of all measures, especially financial measures, for the stabilisation of prices at a higher level and for the conferment of a higher purchasing power upon our people, but I am still prepared to support a tariff policy." He must think again, and I feel quite sure that when he has done that, in the light of what I have told him, he will think differently. The right hon. Member for Sparkbrook condemned previous Governments of which both he and the right hon. Member for Hillhead were Members, and compared the political and economic disasters which we have gone through in recent years with those disasters on the battlefield which are now said to be due to bad generalship rather than to failure on the part of the rank and file. That parallel needs to be reiterated here.

I belong to a party which has been abused, and I represent industrial workers who have been constantly charged with responsibility for all the economic difficulties of our country. We have been told that trade disputes, lock-outs, strikes, and the refusal of workmen to be reasonable and to accept reductions in wages are responsible for our economic evils, but now the two right hon. Gentlemen to whom I have been referring agree in saying that the rank and file are guiltless and that those who are responsible are those who have led them badly, namely, the right hon. Gentlemen themselves. I notice now that they have given us a certificate of discharge from all those allegations made against us in the past. The right hon. Member for Sparkbrook, in a quotation from Burke, referred to what he described as "perseverance in absurdity." I am glad to find that there are signs to-day that influential Members of the House are not persevering in the absurdities to which this House and this country have been committed in recent years. I am only afraid that the same people are still guilty of persevering in futility.

I would like to believe that the House is now going to grapple with this problem and is determined to face the real nature of the problem, and I suggest to the right hon. Member for Hillhead and to the Chancellor of the Exchequer that, rather than raise prices by artificial action in order that the burden of debts and standing charges should not be too high, we might have a definite statement on the part of the Government, to be made at Lausanne.

Why not declare for a cancellation of foreign debts or a reduction of the burden of internal debt? The right hon. Gentleman referred to the need for a lower Bank Rate. If it is right to encourage a lower Bank Rate, why not encourage the acceptance of a lower rate of interest all round on invested capital of all kinds? Rather than attempt this futile effort to raise prices by action in this country, Government should go to Lausanne, as I understand is their intention, to bring about a settlement of the vexed question of international debts in order that the real burden which has been weighing so heavily upon all countries, and which is itself the cause of the depressed prices to-day may be relieved. I would rather they tackled the question at the root and tried to bring about, not an agreement between a small circle and a financial control limited to the British Empire, but a currency and financial control embracing all parts of the world in order that there might be a universal stabilisation of prices and of money values which would enable the world to start trading again.

10.0 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The course of the Debate so far as it has gone has, I think, fully justified those hon. Members who made a request that we should depart from what has been the common practice in recent years and give two days instead of one to the discussion of the Second Reading of the Finance Bill. There have been a succession of speeches of exceptional interest and value, and I notice that there are still a great number of hon. Members who have something to contribute, and I am glad to think that they will have an opportunity of doing so to-morrow. In ordinary circumstances, I should have preferred to make the observations that I desire to offer at the end of the Debate and to have wound up for this side to-morrow evening, but hon. Members are probably aware that I have a very long-standing engagement in the City to-morrow night which has made that impossible. I therefore ask for their indulgence if I intervene at this stage and am not able to make so complete a commentary on the Debate as I should have liked to do. I have noticed that the speeches have been of a much more general character than is usual in a discussion of this kind. The great majority of those to whom I have had the pleasure of listening have devoted themselves not so much to the detailed proposals in the Finance Bill as to considerations of what I may call the long-term policy of the Government. I propose to make some remarks upon those general observations, but before I do so I should like to clear out of the way one or two items of a more particular interest. I may perhaps first refer to the proposals contained in Clause 24 relating to the suspension of the Land Value Tax. I have been chided by the Opposition because that Clause provides for what they term the indefinite suspension of the Land Tax and the valuation. Some of my hon. Friends are equally distressed because the Clause does not go further and provide for the repeal of the Land Tax. The simple truth is that the Clause as it is drafted carries out the course which I explained to the House when I first made a statement upon what, the Government proposed to do in this connection. Those who were present on that occasion and recollect what I said will know that I explained that the proposals with regard to the Land Tax had been considered by the Government not upon the merits of the tax, but upon its appropriateness in the present financial situation of the country. We had to bear in mind that in any case the tax could not have come into operation for some considerable time; moreover, that when it did come into operation it would be productive of a comparatively trifling amount of revenue; and that in those circumstances, while we were imposing sacrifices and additional tax burdens upon a section of the community, it seemed entirely inconsistent and, in fact, undesirable that we should proceed with the expenses of the valuation. The arguments which were addressed to us earlier in the day by an hon. Member who spoke from the Opposition were not at all addressed to the actual proposals in the original Land Tax, but went back, as hon. Members did at the time that the tax was under discussion, to arguments in favour of an entirely different tax, namely, a tax on the increased value of land. Whatever may be the force in the arguments of the hon. Member, he must agree that they were entirely inapplicable to the tax as it was originally proposed.

There is another matter upon which further appeals have been made to me to-day; that is, in respect of the silk industry. A little while ago a number of questions were put to me on that subject, and I intimated that I was giving the whole matter my careful consideration. It is clear that the case of the silk industry is in some respects unique. By the fact that certain silk articles are already subject to duties of Customs and Excise, the whole subject is taken out of the purview of the Tariff Advisory Committee. They have no statutory powers to make any recommendations in respect of it. On the other hand, this industry, which under the Abnormal Importations Act, was receiving a substantial amount of protection, has now lost that protection, and it was represented to me with, I think, a certain reasonableness, that it was hard for this industry to be deprived of the protection given to other textile industries. But the fact is that, whatever may be the unfortunate consequences for the industry in this particular case, it has been made the subject of revenue duties, and what is actually desired now by those who made these representations is that the revenue duties should be converted into protective duties.

The silk industry is one of very considerable intricacy and complexity. No one who has made even a superficial examination into the conditions will deny that statement, and it seems perfectly clear to me, from the amount of consideration I have been able to give to the subject, that it would be impossible to promote anything like a permanent effective tariff for the silk industry without a much greater amount of investigation than it would be possible for me to give in the time that is open to me. As I have already said, the silk industry is outside the purview of the Advisory Committee, but that does not in any way prevent me asking the Advisory Com- mittee to undertake the necessary investigation into the circumstances of the industry, and to make, in due course, recommendations to me, even if those recommendations cannot be implemented by a Treasury Order, in the same way as those duties which come under the statutory powers of the committee. I think that for the permanent settlement of this question that is really the only way in which it can be satisfactorily dealt with. On the one hand, it is obviously necessary that I should safeguard the revenue position, and on the other hand it is clear that the relations between the different branches of the industry, between the side which deals with real silk and that which deals with artificial silk, should be thoroughly sifted and investigated. Accordingly I propose to ask the Advisory Committee to make that investigation for me, and in due course I hope to have their recommendations.


May I ask—


I hope my hon. Friend will allow me to finish my statement on the subject. It is obvious that any recommendation which can be made by this Committee cannot be implemented by a Treasury Order, but can only be inserted in a Finance Bill, and I sympathise with the feeling of those interested in this industry that that is a long time to wait. I have, therefore, attempted to see whether there was anything I could do in order to give some temporary assistance to the industry pending the final settlement of the question on the lines I have indicated. I must ask the House to believe that any such temporary assistance cannot be described by any possibility as completely satisfactory. The duties as they stand at present have, as I said, been devised rather for their revenue-producing qualities than to give scientific Protection to the industry. Looked at from that point of view, there are already serious discrepancies, that is to say, all branches of the industry are not treated alike, and anything I can do to assist the industry in the meantime must be stereotyping if not magnifying those discrepancies. What I can do must be accepted, therefore, as merely a rough-and-ready attempt to give some assistance to the industry pending the final settlement, and in that light I hope it will be accepted as an earnest endeavour to go as far as I can to meet what I think is the reasonable claim of those interested. In order to carry out this new proposal of mine it will of course, be necessary to have a Clause in the Finance Bill, which must be preceded by a Financial Resolution, and that Resolution will be handed in at the Table to-night and will appear upon the Order Paper to-morrow. Hon. Members will understand that it is very desirable that the least possible amount of time should elapse between the public knowledge of what the proposal is and its actually coming into operation, and for that reason I do not propose to disclose further at this moment what the proposal is. But if hon. Members will kindly have patience until to-morrow morning they will then see exactly what it is that I am suggesting.

I pass to somewhat more general considerations. Listening to the speeches and watching the House during the Debate to-day, it did not seem to me that very much interest or excitement was felt about the Amendment or the speeches which came from the Opposition Front Bench. The fact is, the official Amendment indicates that hon. and right hon. Gentlemen opposite are just as far as ever from the realities of the present situation, and so obsessed by their old prejudices against capitalism that they still think that labour can be made to flourish by the destruction of capital. They tried to put those theories into practice, and the result has been that while they certainly have made the rich of this country poorer yet we find the poor are no richer. The Amendment entirely ignores the great gap in the revenue which has been filled by the tariff proposals of the Government, but the alternative programme which was put forward by the hon. Member for Rothwell (Mr. Lunn), and which I think had some support from the hon. Member who last addressed the House, is not one which will commend itself to this House.

I might, perhaps, repeat for the benefit of those who did not hear the hon. Gentleman what his proposals were. In the first place, repudiation of debts; in the second place, the abolition of de-rating, which, whatever it may have failed to do, has certainly kept a great many industries from going out of existence; thirdly, the destruction of the remaining Defence Forces we have by a cut of 25 per cent. in the amount allocated to them; and, lastly, the raising of the Death Duties, which, as we know, already show that they have approached the limit of which can be raised from them. I think everybody will agree that the adoption of a programme of that kind would bring down with a crash the whole of the confidence which we have, with so much labour, restored in the feelings of this country and the world, and it is really no constructive contribution to meet the situation. The hon. Member who spoke last suggested that it would be a relief to me to listen to Members of the Opposition rather than to the criticisms of the supporters on my own side, but my feelings in listening to the Debate were very different. They were that the only helpful speeches came from Members who support the Government. The only constructive suggestions made came from this side of the House.

My right hon. Friend the Member for Hillhead (Sir R. Home), in an extremely interesting and impressive speech, offered his own diagnosis of the troubles with which we are beset, and he proposed his remedy, to which he invited my assent. He did, indeed, state his views, and they were supported elsewhere, that the proposals in the Budget were largely based upon a confidence that there would be some trade recovery in the course of the year. He himself expressed some doubts and anxieties as to whether those anticipations would be realised, and both he and the hon. Member for East Aberdeen (Mr. Boothby) asked what steps the Government proposed to take in order to bring about that recovery of trade. But before answering that question I might, perhaps, ask another. Have no steps been taken already to bring about a recovery of trade? Are we to suppose that the whole policy which has been carried out by the Government, first in the Abnormal Importations Act and afterwards in the Import Duties, will have no effect whatever upon the recovery of trade? That seems to be an extraordinarily pessimistic view, and while it is perfectly true that you cannot expect to get the full benefit from the new tariff duty until there is sufficient recovery in the world trade for us to see that we get the share to which I believe we shall find ourselves entitled, yet at the same time the reduction of costs, which I think is bound to take place as a result of the reservation of so much larger a portion of home market trade to the home manufacturers, must strengthen our export trade as well as increase the trade that we do at home. A distinguished American senator pointed to this country as being the only one that appeared to be on the road to recovery, and that is a very different verdict from that which was being passed on this country only a few months ago after our experience of the late Labour Government.

But the diagnosis of the right hon. Gentleman the Member for Hillhead went further than that. He said that the crux of the situation was not only that there was insufficient trade, but that the trade there was was being carried on at a loss. I quite agree that as long as prices are so low that they will not cover even overhead costs we are bound to have losses in trade which must reflect themselves in declining revenue. The hon. Member for Gower (Mr. D. Grenfell), in an interesting and thoughtful speech, seemed to question the view of my right hon. Friend that a rise in prices was a necessity before we could get any considerable recovery in the trade of the world. I cannot help thinking that, in the view which he took, he was confusing wholesale prices with retail prices. I am not quite so sure that my right hon. Friend the Member for Hillhead did not also err in that respect, because I did not catch that emphasis in his speech on the difference between wholesale and retail prices, which I know the right hon. Gentleman had in his mind.


I referred to it in the speech which I made a fortnight ago.


The memories of hon. Members opposite are often short. The Macmillan Committee appointed by the Labour Government, in a very important report, pointed to the level of prices as the crucial point which had to be passed before we could expect a reversal of the present distressing position of the world. Of course, that report was made before we went off the Gold Standard. In speaking of prices, the Macmillan Committee were referring, not to sterling prices, but to the prevailing world prices which at that time were in terms of gold. My right hon. Friend admitted it. He said that he was concerned rather with the effect of the sterling prices at home. I will come to that point in a moment, but I would like to say, in passing, that I do not think we can ignore the course of world prices as expressed in terms of gold. We have to consider what is the effect of the movements of gold prices, and what is the impact of those movements upon what otherwise might be the effects of the movements of sterling prices at home. With the pound at $3.65, the depreciation is to about three-fourths of its par value. If wholesale prices in this country moved in proportion to the reduction in the value of the pound, they should have risen in the proportion of four to three, that is to say, they should have risen by 33⅓ per cent. As a matter of fact, we know that they have not risen by anything like that amount; they have only risen by about four to five per cent. Retail prices, of course, we should not expect to rise to the same extent as wholesale prices; perhaps they might have been expected to rise by something like eight or 10 per cent.; but they have not only not risen, but have actually fallen since last September.

Why is it, then, that wholesale prices in this country have failed to respond to the movements of the value of sterling? It is partly, of course, because we do not buy all our imports from countries which are on the Gold Standard. A considerable proportion of them comes from countries which are either on sterling or, at any rate, are not linked to gold. It is also very largely because the gold prices themselves have fallen, and because the dollar of to-day, with which we now compare our pound, is worth, perhaps, 10 per cent. more than was the dollar with which we compared our pound last September. The conclusion that I draw from these facts is that we are not here in a watertight compartment—that we cannot expect that by manipulation of sterling we can be certain of guilding the prices of commodities exactly as we wish, but that a larger aspect must be considered and, if possible, regulated, namely, the movements of gold prices themselves.

One hon. Member—I think it was the hon. Member for East Walthamstow (Sir B. Beauchamp)—had the temerity to suggest another conference to deal with this question. I think, however, it must be recognised that it would be quite impossible for the representatives of this country to engage themselves in another conference at the present time. We have enough conferences to last for a considerable period. But I do not think that a conference is necessarily the only way of dealing with this subject. After all, the tendency of events in the United States appears to indicate that over there they are endeavouring to do exactly what my right hon. Friend desires, namely, to increase the currency and to raise prices in America. While we do not yet know how far they are likely to be successful, nevertheless the very fact that they are working in the same direction as my right hon. Friend suggests we should work, shows that we may be moving along parallel lines, and may achieve a common object, if we do not actually meet round a table. At the same time, even if we cannot control gold prices, we may nevertheless help ourselves if we can exercise some control over sterling prices; and, of course, if we can help ourselves in that direction, we may also expect to help other countries which are linked to sterling, including some of our own Dominions.

My right hon. Friend asked me to name the objective of the Government in the matter of monetary policy, and I think he was following an article in the "Economist" which suggested that in this matter a declaration of policy was just as important as its formulation. I was certainly under the impression that I had already stated, at any rate in general terms, what the objective of the Government was in this respect. Indeed, I think my right hon. Friend quoted some words of mine used not very long ago. But, in any case, in order that there may be no mistake about it, I will repeat that the Government do desire to see a rise in wholesale prices in this country and, although not to the same extent, a rise in retail prices, because it is clear that, if industries in this country, by a rise in wholesale prices, can once more make profits, then we are getting back to the condition which we all desire to see when confidence will be restored, when business will be ready to take advantage of cheap and abundant money, and when we may expect to see our businesses expand and employment once more increase.

There are several factors that may affect wholesale prices. First of all, there is the tariff itself which, however, must be subject, as I have pointed out, to what happens to gold prices elsewhere. Then there is the exchange value of the pound, which has now been fairly steady for some considerable time and which the Government certainly do not desire to see rise higher than it is now. Thirdly, there is the provision of cheap and abundant supplies of money. My right hon. Friend was disposed to complain that some time ago the Bank rate had been kept at too high a level. I do not want to enter into any discussion of what has happened in the past, but, at any rate, for some time now the Bank rate has been at a comparatively low level, and, although my right hon. Friend desires to see it go even lower still, I doubt myself whether that would bring about any lowering of the bill rate or of the rate charged on overdrafts by the banks. I do not see any reason why, in the absence of any serious disturbances in other countries with which we have close commercial relations, there should not be for some time to come a continuance of the present situation, in which money is both cheap and plentiful, and, that being so, I do not take a pessimistic view of the future. But I think, even though I cannot be as sanguine as my right hon. Friend as to the immediate effect of these various factors, nevertheless, by degrees, and with the aid of the tariff, which is only now coming into effect, we shall see confidence come back and a return to prosperity at least on the way.

10.30 p.m.

If I am not more precise in my statements than I have been, if I do not express in more specific terms the objective to which I have referred, it is because there is always the possibility of unforeseen factors arising, and I do not think anything could be more dangerous or more injurious than that business and commercial men should see a statement of a specific objective by the Government, and make their plans upon that, and then afterwards, perhaps, find that, owing to circumstances which had not been fully foreseen, it had not been possible to attain that objective in the time that had been anticipated. Perhaps I might just remind the House of a few words in the report of the Macmillan Committee which seem to me to be very apposite to the subject: Beyond 6aying that a large rise towards the price level of 1928 is greatly to be de-sired, it is difficult for us at the present date to be very precise because the exact answer will depend on the course of events in the meantime… A point may come when the encouragement of a further rise, though desirable in itself, may be difficult or impossible without running the risk of setting loose uncontrollable forces which will generate an undesired inflation carrying the price level much beyond the equilibrium point, with the prospect of an injurious reaction, equally uncontrollable, at a subsequent stage. Thus the decision in detail will have to be left to the exercise of practical judgment at a later date. Those words seem to me to be just as applicable to-day as they were when the Macmillan Committee reported, and, therefore, for that reason, while I have to-day stated generally the objective at which the Government are aiming, I do not think it is advisable to be more detailed than that. I was somewhat struck with the speech of my hon. Friend the Member for the Scottish Universities (Mr. Buchan) in which he suggested that we were in danger of attaching too much importance to the question of monetary reform, and that we ought not to consider that that was the panacea which alone was going to carry us out of the range of difficulty and danger. I agree with him that without confidence no reforms in the monetary policy will bring us where we want to go.

I agree, too, with my hon. Friend that one of the factors—one, perhaps, of the most important factors—which must be taken into account in endeavouring fully to restore the confidence of people in the future of this country should be the conviction that the Government still consider the question of economy to "be paramount. My hon. Friend indicated that, in his view, the sort of economy which was required was not to be obtained by the paring here and there of the salary of this or that official in the various Departments. I agree with him again, but, at the same time, I do not think that we ought to neglect economies, however small and wherever they may be obtained. Yet it would be misleading hon. Members if I were to agree, for instance, with the view expressed by my Noble Friend the Member for Peckham (Viscount Borodale) in a very interesting and helpful speech in which he ap- peared to think that you can find small economies in the Departments sufficient to make a large one when they are put together. Let it be remembered that we have a national expenditure amounting to £766,000,000. An economy of £5,000,000 or £6,000,000 can hardly be described as a huge economy. An hon Member says, "Oh, yes." I disagree with him. I do not consider that that is a huge sum; it will not be sufficient to enable any Chancellor of the Exchequer to make any serious reduction of taxation. If we are to get anything large in the nature of economies it will run, not into £2,000,000 or £3,000,000, but into tens of millions of pounds.

You have to do something far more drastic than merely cutting down the expenses of officials. You cannot bring about economies by merely talking of them. Economies have to be made by day-to-day work and continuous attention to details. If you are to go further than the parings to which I have referred and enter into anything like that of which my hon. Friend spoke, namely, the reconstruction, of Departments, then you will have not only to do hard work but some hard thinking. It is not very easy for Ministers to find time for hard work and hard thinking on subjects like that on such months as those through which we have been recently passing.

I would beg the House to have a little patience in this matter. The Government have been criticised, not once or twice, because they have not moved at as fast a pace as some more enthusiastic Members, who have not our responsibilities, would like to see adopted; yet, looking back, one can say that no Government in our recollection has brought about such vast changes in so short a time. Let the House give Ministers an opportunity when, perhaps, they are not obliged to spend So much of their time in this Chamber, when the conferences to which they must give such thought as they can spare are over; then let them wait until the Ministers have an opportunity of doing a little hard thinking on this subject, and I think I can promise them that, in the end, they will not be disappointed.


One has been struck with the note of depression in the speeches that have been delivered from the other side, and I cannot think that the right hon. Gentleman has done very much to brighten things up. We have had from men of great eminence in this House demands for a full statement of policy by the right hon. Gentleman. That is something we have been waiting for ever since the National Government have been in office. We want something more than the kind of reply we get at the end of a. Debate from the President of the Board of Trade, or the minor business details that we get from the Chancellor of the Exchequer, or the charming quips of the Financial Secretary to the Treasury. In a crisis like this, and there has certainly been the burden of crisis in all the speeches, we could have expected from the Chancellor of the Exchequer something, to use his own words, "more constructive and more helpful" than that which we have had from him. The only thing that he has given us to cheer us is a testimonial from an unknown American Senator. I find statements by American Senators in the papers; statements of all kinds. No doubt 6he right hon. Member for Epping (Mr. Churchill) could tell us still more about the opinions of American Senators, and their value.


It was Senator Borah.


I thought he was unnamed.


He is named now.


Even so, even if it was a testimonial from Senator Borah I doubt whether his support can help the Chancellor of the Exchequer very much after the jeremiads of hon. Members and the closely reasoned speech of the right hon. and learned Member for Hillhead (Sir It. Horne). The Chancellor of the Exchequer said that he would deal with one or two points before giving the long-term policy of the Government. I do not think he gave us the long-term policy. If he had done so it would have been a disappointment to many of his supporters, because they are demanding an immediate policy. What is the good of a long-term policy in view of the attitude of the right hon. Gentleman the Member for Hillhead who said that we were very close to ruin, that it is going to be a near thing, a damned near thing.

Let me deal with one or two minor points before returning to the question of a long-term policy. There is the ques- tion, of the suspension of land valuation— Lord Snowden's contribution to national unity. The Chancellor of the Exchequer's explanation was a little unconvincing. Some of us remember the torrent of questions and appeals from the Conservative party that the land tax should be stopped, a little matter of economy. The right hon. Gentleman says that a matter of five or six million pounds is nothing; yet a saving of £70,000,000 was quite sufficient to injure his dear colleague Lord Snowden. Take the Silk Duties. I was surprised at the right hon. Gentleman's statement. We have had hon. and right hon. Members week after week assuring us that there could be nothing worse than to bring tariff questions into the political atmosphere of this House, The Lord President of the Council told us how the Government had avoided corruption and improper pressure by setting up a committee to deal with all tariff matters, but quite suddenly in this Finance Bill an Amendment has been introduced by the Chancellor of the Exchequer to give a special benefit to the silk industry. There is no time to wait for the impartial and careful investigation by the trinity. The right hon. Gentleman has rushed in and given them something at once.

Where is this going to stop? Are we going to have this kind of thing very often? Are there going to be irruptions by the right hon. Gentleman in order to give something to the more clamorous of his followers? If this is not political pressure I do not know what it is. We have had an interesting speech from the right hon. Member for Hillhead. It was interesting to follow the course of the right hon. Gentleman, because whatever he does he does not stand still. You find a certain progression in his speeches. I have compared his speech on the 20th of April with his speech to-night and I have observed his progress in gloom and disaster. His first fine raptures have quite worn out over tariffs. Last September referring to the President of the Board of Trade he said: The President of the Board of Trade seemed to me to justify all the claims we have made for years in regard to the benefits of a protectionist policy. Later on he said: Our export trade while it has not gone up to any appreciable extent has nevertheless maintained a higher ratio than those of other nations. What a different note to-night. Protection is brushed aside. The right hon. Gentleman is on a new tack. He now says that Protection is not going to do very much, and he has come to the more important question of the exchange. As to our export trade he confessed that it had gone. He must have had some intelligent anticipation of papers which will be published soon showing the latest returns of our export trade. The right hon. Member for Sparkbrook (Mr. Amery) was not quite so gloomy. It is true that he was full of complaints, but then he still believes in full-blooded Protection. The only thing is that we have not got quite enough. He is the great homoeopathist. The hon. Member for East Aberdeen (Mr. Boothby) offered the Chancellor of the Exchequer some alternatives, but none were accepted. But there is one thing that united all these right hon. and hon. Gentlemen and that was a demand for a declaration of policy. I do not know whether they thought they got it. It certainly was not very direct.

Almost everyone has been quoting the Midland Bank Review. That review said quite bluntly that the Government had no policy, or at any rate that it had declared no policy. That was after the last time that the right hon. Gentleman tried to explain it. I do not know whether in their next number they will be any happier about what has been said. The burden of all the speeches has been that we were near the break-up of our present civilisation. Very few speeches have dealt with the Bill specifically. Is there not a wonderful contrast between the crisis speeches now compared with the crisis speeches of a short time ago? There were formerly the speeches about the Gold Standard and the vital need of preserving the Gold Standard. We were told that it was necessary to turn out the Labour Government because they could not support the Gold Standard. I am credibly informed that the Chancellor of the Exchequer is already making use of those millions that have been placed at his disposal in a hard struggle to prevent the pound floating back to parity.

The contrast between the comments of all the experts emboldens me to speak on this subject. At one time they say that you must do this, and at another time that you must do exactly the opposite. We have heard not only the dirge of the capitalist twilight, but of the bankers also. We have still to find out what the Bank of England really is. The right hon. Member for Hillhead told us that the Bank of England was nothing more than the servant of the Government I expect he knows all about it. The Midland Bank also know all about it. They say: As the cost of borrowing money is mainly determined by the Bank rate and fixed by the central institution, the monetary policy of the Bank of England, except to a somewhat nebulous and indeterminate extent, controls the quantity and rate of money. That is another view. A third view is that of Lord Beaverbrook, and what he says to-day the Conservative party says to-morrow. Lord Beaverbrook says: The powers of the bankers must be wiped out. They are not safe custodians of the money and credit of the country. It is pleasant to think that all these respectable gentlemen whose portraits are now in the Academy are in the places that were occupied by the Labour Government only a short time ago. We were not then the safe custodians of the money and credit of the country. I particularly, as Postmaster-General, was not. Now I am happily in the same position as the senior Member for the City of London (Mr. E. C. Grenfell). Neither of us is fit to be a custodian of the money and credit of the country. Lord Beaverbrook demands that we should give back to the people those powers which have been stripped from them by the City financiers.

I would like to know what is the policy advocated to-day. Is it inflation? I have listened to a large number of speeches on this question. I have heard many able speeches by the hon. Member for East Aberdeen. I have also heard many from the hon. Member for Stockport (Mr. Hammersley). We used to have the same speeches from Sir Oswald Mosley. They were all for inflation, and very little attention was paid to them in those days; but now you get a crowded House that cheers when precisely the same points are put forward by the right hon. Member for Hillhead and by the right hon. and repentant Member for Epping. They are echoed now by the Federation of British Industries and the Midland Bank and by the economists of the country. What is really envisaged by this? The real thing is a reduction in real wages, make no mistake about that. The idea is that a heavy rise in prices is going to bring about a reduction in real wages. The Chancellor of the Exchequer says, "Oh, no, it is only to be wholesale prices and not retail prices that are going to rise." He did not argue that point. I know there is a large gap between wholesale and retail prices, and we have urged constantly that steps should be taken to close up that gap. The right hon. Gentleman does not propose to do anything of the sort, and there is no idea of a consumers council or anything of that kind. I do not understand him when he says retail prices are not to rise, but one can see what is at the back of it all if one reads the "Economist"; they put these things so nicely and do not talk crudely about making the workers go without the necessities of life through a reduction of wages. Talking of the 30 per cent. increase that was being advocated, they said: It is not completely certain that the introduction of fresh banking credit in the economic system can be so directed as to affect exclusively or predominantly the price of primary produce which it is desired to raise without inconvenient repercussions in other elements such as a wages rise which would produce renewed disequilibrium. I have never heard a reduction of wages put more neatly. We were told by the Chancellor of the Exchequer that we must be realists in this matter. A fortnight ago we were told by the Financial Secretary that what we wanted was just a little plain arithmetic, addition, and subtraction. There are one or two simple prepositions which might be considered in connection with this Finance Bill. The first one I lay down is that you cannot sell without a buyer. That sounds very simple, but it is not at all obvious to the right hon. Member for Sparkbrook (Mr. Amery) who hoped to keep out almost everything under the tariffs. He rated the right hon. Gentleman very severely because he talked about revenue in connection with these horrible foreign goods which were coming in, and he wanted them kept out.

The right hon. Member for Hillhead was very much upset about our export trade, although he was very pleased with the results of Protection. He also spoke with very great sympathy for some of the unfortunate people who owed us money, and he thought it was a very sad thing that Chile and certain other countries should not be able to pay us. Yet he does not want their goods. He is really little better than the hon. Member for South Kensington (Sir W. Davison), who alternately demands that you should keep out Russian goods, and the next day demands that Russia should pay her debts. That shows a wonderful unity among the Conservative back benchers. They seem to have a sort of idea that you can have increased production without increasing purchasing power. You have an enormous production of goods in the world, and you cannot get them bought, but they propose to do it by reducing wages either directly or indirectly by raising prices. At the same time, people are expected to buy an immense amount of goods, and those goods are not to be allowed to come in here; you are to have severe restrictions against other countries. Two things to be borne in mind are that you cannot sell without buyers, and that the buyers must be able to purchase. If hon. Members will keep those two things in mind, we shall get on.

A further point made by the right hon. Member for Hillhead was a medical matter, which he brought forward for the consideration of the doctors who were studying our malady. The question was whether the patient was suffering from anaemia or apoplexy and whether deflation or inflation was necessary. If he had been here, I should have suggested to him that while anaemia and apoplexy are both very unpleasant, what is really needed in a healthy body is a free circulation of the blood to every part. If the blood—in this case currency—does not reach the extremities, you get cold feet and cold hands and the people who are in the chilliest part of the body politic to-day are the poorest people, because currency does not circulate freely to them. I suggest that there is another danger besides that of anaemia or apoplexy. There might be a clot on the brain or the heart. I suggest that the concentration of wealth in a small part of the nation affects both the brain and the heart of the nation. The essential point is that purchasing power is not equal to world production.

Then I come to the curious, speech made by the hon. Member for the Scottish Universities (Mr. Buchan). I was surprised to hear such a speech from him because, although he is a great romancer, I thought he was also a great realist. He demanded economies and he talked about the burden of expenditure. He seemed to think that the national expenditure which we could cut down included part of that £300,000,000 which we are paying on the debt. That might be cut down but not as the hon. Member suggested. He wanted also to effect other economies, not small economies but economies by way of an attack on all the various communal services provided for the people. That shows a very curious sense of values. I can think of a number of people who might be dispensed with before we begin to dispense with civil servants. I think, for instance, that we might take a burden off industry by sacking superfluous directors. Lest I might be accused of attacking captains of industry I will give the bankers a show. I read a speech made by the senior Member for the City of London, a well-known banker about four years ago, in which he spoke of 10 large undertakings which were run by directors whose average age was 72 years, and he rather animadverted on these old gentlemen and suggested that they might be replaced. That shows that I am again in good company in suggesting that there are other ways of economising besides sacking civil servants.

The broad fact about this Finance Bill, as we have put it in our Amendment, is that there is an enormous increase of indirect taxation. The great point in the crisis last year was, who should pay. I want to give a few figures to show who did pay. Let us compare the increases that are being suffered to-day as compared with 1931. The increase in Customs and Excise is £62,000,000; the reduction in unemployment benefit is £12,000,000; the means test represents £10,000,000; the increase in insurance contributions is £5,500,000; the cuts on pay of teachers, police, Army and Navy are £12,000,000, and the wheat subsidy is £6,000,000, a total of £107,000,000, the larger part of it coming upon the workers. But it does not stop there because the right hon. Gentleman is taking power in this Bill to get rid of that inconvenient free list. When we are told how hard pressed, the Government are to get through their work before June, and how every moment is of importance, we must think of the time we wasted here when one Conservative Member after another got up to beg and pray of the Government that his particular raw material should go on to the free list. All that goes for nothing now. The right hon. Gentleman is going to wipe out the free list and we are to have all that wretched uncertainty which is so harmful to business men and nobody knows what is going to be taxed or what is not going to be taxed. I was running through the list recently of what various people wanted on the free list. We had the hon. Members who wanted goatskins on the free list and we had the celebrated case of hat material.

11.0 p.m.

That is one big thing in the Budget. The other is the deadweight of the Debt, which stood at £7,435,000,000 in 1919, which after terrific exertions we reduced by £13,000,000 nominal in 13 years, although the cost of it is about double. As a matter of fact, this Budget shows the utter bankruptcy of the capitalist system. If the right hon. Gentleman is not going to pull off anything at Lausanne, how will he balance the Budget, because he has left out of account the American debt? I do not know whether we shall hear from the right hon. Member for Epping, who has been promoting Anglo-American friendship so assiduously on the other side of the water, that he has come with an olive branch from America and that they are going to let us off the debt. If they are not, how can the Chancellor balance the Budget? If he cannot pull off anything at Lausanne, his Budget is unbalanced, and he is no better than the wretched Labour Government. The Government have no policy, no collective mind; they are staggering along towards chaos. I would rather have a wrong policy than no policy at all. It is clear that the right hon. Gentleman, if anyone tried to hear any cheers during his speech, has disappointed his followers, because everyone has asked that he should give a lead to the world, that he should be the pilot of this great convoy of ships going to safety, but his light is out, there seems to be nobody steering, and I doubt whether there is any flag at the masthead.

Motion made, and Question, "That the Debate be now adjourned," put, and agreed to.— [Captain Margesson.]

Debate to be resumed To-morrow.