FINANCE BILL.

HC Deb 10 May 1932 vol 265 cc1739-861

Order read for resuming Adjourned Debate on Amendment to Question [9th May], "That the Bill be now read a Second time."

Which Amendment was, 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 an 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."— [Mr. Charles Brown.]

Question again proposed, "That the words proposed to be left out stand part of the Question."

Mr. CHURCHILL

After the solemn speeches, so faultless in tone and so compulsive in their appeals to our feelings, to which we have just listened, it will not, perhaps, be without an effort that the House will recall itself to the ordinary business of the day. We have to carry on as our brave French comrades have also carried on in times of trouble, and the first remark I wish to make as one of thanks and gratitude to His Majesty's Government and to my right hon. Friend the Lord President of the Council for having given us two days' Debate for the Second Reading of the Finance Bill. I am afraid that I was not right in my epithet "usual," and I should be still more wrong if I had used the word "invariable," which, I am afraid, was on the tip of my tongue; but, at any rate, we may agree together on the epithet "desirable."

I listened yesterday in the Debate, which certainly showed that time was not wasted, to many speeches, and I was particularly glad to notice the speech of my Noble Friend the Member for Peck-ham (Viscount Borodale) and the speech of the hon. Member for the Scottish Universities (Mr. Buchan), which raised again the unfashionable subject of economy. Economy has now its chance, and never was there more need for it. Taxation has already reached, in many of its features, levels which are not merely burdensome but destructive not only of the revenue but of trade and employment. Income Tax, beer, whisky, however you may feel about the desirability of raising money from those sources, have all now reached points where the mere maintenance at the present level will gradually wear out the source from which the revenue is derived. It would be an enormous boon if £50,000,000 could be saved from our expenditure. It is no good saying to me, "Why did you not do it?" I never had the opportunity which Has Majesty's Government have. We had to fight in a party atmosphere. Every Measure we proposed was stigmatised in the most wounding manner possible. But the National Government have a chance which was denied to their predecessors, and will probably also be withheld from those who come after them.

I was glad, indeed, to hear the Chancellor of the Exchequer say that later on in the year, when other and more pressing matters would be disposed of, he was going to do a bit of hard thinking on the subject of economy. I can assure my right hon. Friend that not very much hard thinking is required. All that he has got to do is to ask the officials of the Treasury to provide him with a cut of £10,000,000, £20,000,000, £30,000,000, £40,000,000 or £50,000,000. There will be no difficulty at that point. The difficulties will begin when those proposals reach the Cabinet, and the difficulties will accentuate themselves when, having passed through the Cabinet, they reach the House of Commons, and they will reach a climax when, having passed through the House of Commons, they finally reach the nation at large. However, surely now is the time, because what is the use of a National Government if it cannot do salutary, unpopular things? A National Government differs from a party Government in that it has, I will not say no soul to be damned, but it has no hope of posterity, and its body is so large that it is scarcely worth kicking. But now is the time, and I do hope that my right hon. Friend will take full advantage of his opportunities of doing things which an ordinary party Government cannot do. It will be easier to do them this year than it will be next, and it will be easier to do them next year than the year after, and, therefore, no time is to be lost.

I should like to speak more about economy, and I should like to speak about debts, internal and external, and about beer, but we shall have our opportunity in due course for discussing them. The speech which was made yesterday by my right hon. Friend the Member for Hillhead (Sir E. Home) raised topics, not for the first time, which overshadow and overlay almost all other questions that can engage our attention. He spoke of what is called the monetary problem or the currency problem, or, as I prefer to call it for short, as we are going to hear so much about it, and it would save trouble if we chose a label— the money problem. That is the great problem. Mr. John Bright, when he was President of the Board of Trade, found it sufficient to say that he did not understand the currency problem, and that he did not believe there was anyone who did. We have got to try to understand it. Those easy and complacent gestures and attitudes, so suited to the calm Victorian times, will not suffice to meet our perplexities and embarrassments to-day.

Therefore, with every consciousness of my own infirmities in the subject, and praying for all possible indulgence, not only for my present shortcomings, but for any past record I may have, I shall endeavour to address my remarks, which I trust will not be lengthy, entirely and exclusively to this one all-pervading and all-commanding topic. Sir, what is money? It is the medium—I am not trying to give a schoolman's definition—by which we try to bridge the mysterious gulf between production and consumption. When money is scarce, that gulf is wide, and production and consumption are at a minimum. When money is plentiful, that gulf is narrowed, and production and consumption rise to their full pitch. When more money is offered than is required by production and consumption, that is inflation. When there is enough money for current requirements and none for expansion, and industry wishes to expand, then there is restriction. And when there is not enough money for expansion, and not even enough money to carry on the ordinary transactions and maintain the old and existing levels, that is deflation; and that is what we have been suffering from for the last three or four years with increasing severity.

The amount of money that can be rightly offered at any given time depends upon the conditions of credit and of confidence and upon the realities of trade throughout the world. If money is manufactured without regard to confidence or credit and without regard to the realities of the trade position, then money quickly loses its virtue, and, after various convulsions, which we have often seen exhibited in other countries, society reverts to the primitive condition of barter as the only means of relating consumption and production.

Gold is the constable who has hitherto been employed to avoid mistakes and disasters of that kind. For a great many years gold was a trustworthy and faithful servant, but in the great War he went to the front, and he got so knocked about there that in the present state of our affairs you can only say that the constable has gone mad. He has been used so much, doing all sorts of jobs for which he was never suited, and he has been so affected by his ill-usage, that he has ceased to be a currency warden and has become a commodity himself. He is now actually stopping the supply of money, not only for expansion, but for the actual carrying on of the world's business. As for further expansion, he has vetoed it altogether. The constable is no longer regulating the traffic and checking dangerous traffic here and there; he is bringing the whole of traffic to a standstill, and bringing it to a standstill just at the very moment when we all want to get on and, but for this obstruction, I believe, when we all could get on. That is the way in which I personally try to interpret these frightfully difficult and technical topics in my own mind, and I believe that they will bear some careful examination event from the high and learned authorities to whom the discussion of these matters is customarily relegated.

In the year 1919, as my right hon. Friend the Member for Hillhead told us yesterday, after the Cunliffe Committee had reported, the Bank of England was instructed by the Government of that day to work towards the re-establishment of the Gold Standard. In 1925 the Bank, after six years of labour, six years of influencing the money policy, and under, I think, three separate Governments of different complexions and parties, declared—and the Treasury agreed with them—that the moment had come to resume the Gold Standard. Until 1929, although there were murmurings, and no murmurings more audible than those which were uttered, I must in justice say, by my hon. Friend the Member for East Aberdeen (Mr. Boothby), in the main it could never be said that the attempt to lift the world back to the Gold Standard would not succeed, and, while that condition prevailed, of course, there was no real support—support is so often born of necessity—for the carrying forward of the work of the Genoa Conference, which certainly needed—and I take any blame which may rest on me—to engage the continuous attention of all the Powers that were on the Gold Standard or were interested in maintaining it. But there was nothing that really excited the entire thought of great peoples or of their leaders during that period.

It was not until the United States of America, after the market crash of October, 1929, ceased to re-lend to Europe that we saw the monstrous spectacle of gold being used, not as the balancing force or measure of human effort, but actually to pay off these enormous war debts and reparations across tariff frontiers which would not receive goods. Then, when this happened, at once the fire which had been smouldering unseen for at least two years burst forth in a destructive flame. Up till that moment, the end of 1929, the only sign that things were going wrong had been this steady fall in prices. I was always brought up, by the able men with whom I came in contact at the Treasury and elsewhere, to believe that a reduction in the cost of living was one of the safest and surest things that you could possibly aim at, that a reduction in the cost of living, diminishing, be it only by a tiny fraction, the pressure of life upon the cottage homes, would immediately find its reward in the contentment of the masses of the people and would immediately be a stimulus to business, to enterprise, and to competitive power.

Well, up to a certain point that is true, but it is clear—we know now—that beyond a certain point the fall in prices and the fall in the cost of living is attended by other reactions, which confront the masses of the people with problems and with misfortunes which are just, or almost, as trying to them as are those attendant upon a high range of the prices of the necessaries of life. It is like the suction pump, which for very many years was believed to work because nature abhorred a vacuum. That was the theory, but when they went a little deeper—I forget how many feet—than they had previously done, it worked no more, and they had to have an entirely new explanation; and new laws were discovered which were not foreseen at that time, just as there are new laws to discover now, in trade and in finance, which previously, in Victorian times, when all seemed to work within those narrow margins satisfactorily, we had not discovered or foreseen. Cheapness of living, it is perfectly clear, cannot be regarded any more as a final objective. It cannot be considered apart from the general condition of enterprise, of industry, and of employment throughout the country and throughout the world.

I say, therefore, that this money problem dominates all, and let us hope that it will not devour all, like Aaron's rod, turned into a serpent which devoured all the other serpents. Nearly all the other factors and all the other symptoms of our economic life will be found to be either comprised in the money problem or are now arising out of it. Nothing can stand against a 70 per cent. enhancement of the measure of value. It is not the slightest use pretending that that is not the dominant fact in the life of the modern world to-day—the foot-rule extended, as I said, to 20 inches, and all production to proceed upon that exaggerated, aggravated test. What a vast annihilation of wealth, other than scrip, what a vast, withering disparagement of all new effort is involved in that extension of the foot-rule from 12 to 20 inches, or of a gold price increased by nearly 70 per cent. No contracts, no exertions, no savings, no sacrifices, no loyalties, no good will are proof or can avail against such a wrongful distortion of the fundamental measure.

It is vain for us to try to shirk this question, much though we should like to do it, and it is no use for the House of Commons to allow it to be thought that it is incompetent to probe it and to dis- cuss it. Of all men, my right hon. Friend the Chancellor of the Exchequer must face it. It has invaded us all, and we must all face it, but of all men he must face it. It will not only wreck his Budget—his Death Duties, his stamps, his Income Tax—it will not only wreck that, if these tendencies continue, but it will wreck his life work, his tariffs, his father's cause, which he has brought into actual operation with great smoothness and with great decision. But that too is prejudiced and jeopardised, or will be, by a continuance of these deflationary tendencies. I see in the papers to-day an increase of 85,000 in unemployment, not due to tariffs. You may say it is in spite of the tariffs; at least, you may argue that, but it is due—

Sir PERCY HARRIS

It is caused by foreign coal quotas retaliating to our Import Duties.

Mr. CHURCHILL

You have no right to say that, you have no reason or justification to say that, when you have this enormous deflationary undertow at work, which, far more than your tariffs, is affecting the entire conditions under which business is conducted.

Mr. CHARLES DUNCAN

Anyway, it is not the Labour Government.

4.30 p.m.

Mr. CHURCHILL

Well, no one was ever treated more generously than the Labour Government. Any other Government would have been lynched. I do feel that, although we are happily no longer publishing these figures every week, but only every month, a continuance of an increase in unemployment—at Whitsuntide it. will very likely increase, and then there is the seasonal increase; for a good many months—does affect and prejudice the successful launching of the immense fiscal scheme to which my right hon. Friend has devoted himself and for which he bears so direct but distinguished a responsibility. One can never tell at what moment the four satellites of Jupiter may not quit their orbit and leave the sun, joining in the music of the spheres with the well-known dirge, "I told you so!" No, Sir. This is a matter which affects everyone, but no one more than the Chancellor of the Exchequer himself. I was struck very much by an expression used by my right hon. Friend the Home Secretary in a speech the other day when he referred to the escalator. I think it was a very just and lively similitude. Suppose we had to do again what we did six months ago. Suppose we had to force down wages, to cut salaries, to cut the rentier interest, to bear more crushing taxes, to scale down debts, to make further hard economies. Suppose we put our tariffs into operation, and the next morning we wake up and find that the escalator has wound us down to the old level? It would be a most heartbreaking experience for our people. A friend of mine was reminding me of the passage in "Alice in Wonderland" describing a country in which you had to keep on running very hard merely to stand still. I have a feeling that that is the sort of position that we are in, or getting into, in regard to this money problem.

I agree with the Chancellor of the Exchequer in his general view that though we are on sterling, and though we must do all we can to make it the widest possible, the most serviceable and most convenient measure of human effort, although we must marshal the sterling countries in the sterling convoy, and steam at a pace which enables all the vessels to keep in company and keep station—although we must do all that, I agree with the Chancellor in his view that sterling is not free from the domination of gold. Sterling has a strong separate life from gold, and it has at this moment a more fertile and an easier price level, yet, nevertheless, the right hon. Gentleman is, I believe, perfectly correct and very timely in reminding us that gold rules and dictates the main level of world prices. And I agree with him that no monetary reform or good management which was confined only to sterling could liberate us entirely from the thraldom from which we are suffering; and that is the reason why, apart altogether from anything we may do for ourselves, our ceaseless endeavour must be to promote international action.

No country can tackle this money question alone. Capitalist civilisation, the sole means by which freedom and prosperity for the masses can be achieved, is adrift. There is no single Power strong enough to take the helm. No one Government has authority to lay out the course, to give the guidance. The strength of three or four of the greatest Powers in the world will be required for that. Moreover, the remedy which we have to apply can only be applied by combined action. I do not believe that individual, unrelated inflation or individual, unrelated credit expansion by various countries will solve the difficulties in which we all lie. It is not merely local credit expansion that we require, but world credit expansion. Separate simultaneous action by several countries, even in the right direction, even if they are moving on what are called parallel lines, will not suffice to arrest the evil, and it might in some circumstances, unless great precautions are taken, degenerate into even greater and more disastrous forms of economic confusion than those we are suffering from now.

Let me take an instance, purely hypothetical, supposititious. Let us suppose that the United States inflate, as some say they are doing. At the present time, in what is called balancing their budget, I believe they provide no sinking fund, I believe they credit themselves with the full payments from Europe on account of war debts and reparations; but even on this basis suppose they fail to balance their budget, and suppose they are forced to make a great internal borrowing, perhaps 1,000,000,000 dollars. Suppose confidence there is shaken, and that hoarding there is aggravated. Suppose then that France, shall we say, "bears" the dollar, and the exchange has a tendency to fall. Then my right hon. Friend the Chancellor of the Exchequer, with his fund, advances to sustain the dollar. But he may not be strong enough to do it. That fund of £150,000,000, compared to a great, unfortunate development of that kind, would be little more than Mrs. Partington's broom against the Atlantic ocean. My right hon. Friend may try to warn off panic money from this country, but the more he warns the more it will want to come here. Capital in flight does not seek interest or profit; it seeks security. It shuns all suitors, and forces itself upon those who claim that they do not require it in any way. Suppose, finally, the pound rises in price and the dollar falls, and the pound rises not, be it observed, because of any intrinsic merit in our own trading system but through the demerits of the situation of other peoples, then we shall be left with great quantities of depreciating dollars which we have paid for with great quantities of appreciating pounds. In the end we shall have a high exchange, and further depression of trading, with other evils. All this may happen, I do not say it will happen, but it may happen, and I use it as an illustration of the inadequacy of the individual action of a particular country to expand credit while other countries are waiting and watching to take any advantage which they may secure for themselves in the process.

My right hon. Friend the Member for Hillhead, in what I thought was a singularly impressive and attractive part of his courageous speech, said that a patient might be suffering from apoplexy or from anaemia. He likened our condition to that of a patient suffering from anaemia. I wish anaemia were the only disease. Now we have an aggravation, a complication; neurasthenia has been added to anaemia. After two or three years of anaemia a mind state has supervened in the patient which makes it particularly difficult to apply remedies, and which make many of the remedies which work under normal conditions no longer produce their proper reaction. Therefore, it seems to me the remedy which we apply must not only be practical and physical, but must be psychological. Even worldwide monetary reform could only be applied if there was simultaneously a restoration of confidence. It could only be applied in these circumstances: You must not merely aim at policy, but you have got to have power behind the policy.

There must be the international co-operation if there is to be a cessation of this hideous process from which we are suffering. We cannot wait until every country is persuaded. We cannot go round arguing with one country after another until every one of all the numerous countries represented at the international conferences has been persuaded to join. But if the United States and Great Britain were to be of one mind in approaching this topic—I leave out details and all methods—I am quite sure that France would have to associate herself with our action the very next day, with all her power and all the great contribution which she can make, and other powerful countries would have no choice whatever but to join in the movement. I regard international action to arrest the fall of prices as the sole hope of averting a world crash to which everything we have suffered up to the present will be a mere prelude. I begged for it in October last. I begged the Government of that day, the first National Government, to summon such a conference in October last. I beg for it now, and that is why I was so much grieved and shocked to hear my right hon. Friend the Chancellor of the Exchequer say last night: 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."—[OFFICIAL REPORT, 9th May, 1932; col. 1672, Vol. 265.] He went on to say, "We have enough conferences already to keep us occupied till the end of the year. All the halls are full: all the performers are already engaged. We are stocked up with conferences."—of course in saying that I am not quoting him any more. I think that was a terrible declaration. What, Sir, even if the United States were willing to come to a conference on the fall in prices are we really to refuse and to tell them, "Oh, we are too busy to attend to you"? My right hon. Friend, who is so cool a judge of things, is surely on this occasion falling short of his usual just sense of proportion. Why, Sir, this conference which I plead for is of all other conferences the one most worth having. It is the one which will give the other conferences their best chance of success. It is the one which may be an indispensable preliminary to the success of these other conferences. It is the only conference we could call where all the parties who sat around the table would have the same objective and would gain the same advantages if the objectives were attained.

We all have high hopes of Ottawa; fine aspirations are centred upon Lausanne. In happier circumstances, what a noble opportunity would be offered to us at Ottawa to unite our Empire and make our trade flow in fertile inter-Imperial channels—if only that conference could meet in happier circumstances in an atmosphere of hope, an atmosphere of confidence and enterprise, with the upturn of the world behind it, and our Empire uniting itself, marching forward in the van. If only that could be achieved! But, now, I fear if these remorseless tides of deflation continue to ebb, ebb and ebb, and if world prices continue to sag, sag and sag, when they get to Ottawa we may find a grim gathering, and have little to do but to share miseries and face them bravely, as, no doubt, they will be bravely and loyally faced.

As for Lausanne, what good can result from holding that conference before the United States election has taken place? Any agreement which is come to between the debtors in Europe will become a platform counter in a most fierce and confused contest in the United States. We could not choose a worse moment for launching proposals for the mitigation of the present debts and the reparations position than at this juncture. Reason and knowledge are silent at election time to a large extent, and Democrats and Republicans will vie with each other in denouncing any proposals which may emanate from a foreign or European source, and in boasting which party will be the one that will exact the uttermost farthing. You may easily destroy by precipitate action the powerful movement in favour of debt revision which is spreading more widely all through the United States, and particularly British debt revision, which has enormous backing of its own. I trust that on no account will an agreement be reached at Lausanne in June. And poor Geneva! The conference at Geneva is proceeding while other conferences are absorbing our efforts, and at a time when the whole world is under this sinister deflationary pressure, and when no one knows where it is going to end, when trade is at a standstill, when a war of economic attrition is proceeding between all nations, when unrest and fear rule in so many lands, when communications are slowing down and when great steamships no longer cross the ocean except with a mere handful of passengers, do hon. Members think that that is a time when nations are likely to disarm, to destroy the weapons already paid for, or to reduce military forces and institutions which they feel may play a part in protecting themselves against external enemies and which may add to their internal security?

Yet we are told, and the world was told last night by the Chancellor of the Exchequer, that we shall be too busy at Lausanne and Geneva to attend a conference even if the United States were willing to come to a conference upon what is agreed on all sides is the prime cause of our misfortunes and peril. I beg the Chancellor of the Exchequer to reconsider those fateful words. A conference on stopping deflation could not interfere with any party interest, and no party would have any interest in preventing the deliberations of such an inquiry. No report of such a conference could be expected for some time, and of course it would be a conference which would primarily have to be composed of experts acting under the broad guidance of politicians, and it would not require the daily presence of our leading statesmen.

We are agreed upon the evil, we are agreed upon its gravity, and we are largely agreed upon the causes from which the evil has sprung, and we are now asked to agree to let it take its course. I have heard it said that there have always been from time to time these differences, and that there were other crises in 1848 and 1873, and they tell us that we got through them all. But those crises occurred in a far less complex world. You have never had a world like this before. It is more vast and more complex than we have ever seen at any other time. It is a time when enormous populations have been lifted by science to high economic levels, and where scores of numbers of persons have a long way to fall. We live in an island which is the heart of seaborne commerce, and we have 10,000,000 people for whom, unless and until national and Imperial arrangements are made, there would be no food apart from world commerce and world credit. I do not dissent from the specific financial proposals which have been made by His Majesty's Government, and I agree with the emphasis which the right hon. Gentleman the Member for Hillhead has imparted to those measures. I voted for the tariff, and I am sure that it is necessary, but I do not believe that all the measures and all the tariffs taken together will solve or save the situation in which we find ourselves. Only world action can cure a world evil, and no such action will be taken except through the co-operation of Great Britain and the United States, with other strong Powers hastening to rally to our joint appeal. Therefore, I counsel and I urge that we lay aside every impediment, postpone every obstructive obstacle, and that we concentrate upon the one vital, prior, paramount objective, namely, international action to arrest a fall in prices, to restore and re-open the possibilities of world trade, and to unite again the civilisation and prosperity of mankind.

Mr. NEIL MACLEAN

In the Debate as far as it has gone, I never heard during the time I have been a Member of this House so many prophecies of disaster, and so many attractive pictures painted as to what this country is likely to be if we will only listen to the advice of those who have been prophesying disaster. The picture which has been painted by the supporters of the Government has been one representing the Government as having no policy. The burden of their criticisms has been to urge the Government to declare its policy. The right hon. Gentleman the Member for Hillhead (Sir R. Horne) and all the speakers who have addressed the House on the Government side, including the right hon. Gentleman the Member for Epping (Mr. Churchill) have demanded that the Government should state its policy and go ahead with it. According to the remarks of the right hon. Gentleman the Member for Epping it is absolutely necessary to have an international conference, and, if not an international conference, at all events a conference with the United States upon the question of gold, and whether we should have deflation or inflation.

I would like to place before the House another point of view. We have heard a good deal about the monetary policy of the Government, and that adopted in other parts of the world, and we have heard a good deal about world prices, but no speaker on monetary policy has made a single reference to something which, in my opinion, is of greater importance than the monetary policy, and that is the actual commodities which constitute the world's wealth, and which are lying in abundance in every market of the world. That is the true cause of the decrease in world prices. In every part of the world we have had over-production, and in every market place and every shop and warehouse in every country you find the products of labour being treated co-operatively, with the assistance of machinery, and they are stocking the shops and the markets to such an extent that it is impossible, with the low purchasing power of the people, with such a large army of unemployed and the low wages of those who are fortunate enough to remain in employment, for those who possess this abundance of goods to find buyers. The result is that prices fall because those who possess the goods cannot hold them over for a period, and they must get rid of their goods as quickly as possible at the lowest possible price. The consequence is that they have to sell at a loss, and they do this to prevent themselves going into the bankruptcy court. All those conditions have a greater influence on the world price than all the talk we have heard yesterday and this afternoon of how gold is affecting the world prices, and the necessity for this country getting into touch with other nations by means of an international conference to determine world prices.

5.0 p.m.

But there is something more than that. We are now hearing requests for conferences to be held. The right hon. Member for Epping found fault with the Chancellor of the Exchequer for having stated, in reply to a question yesterday, that he could not find time to have a meeting with the United States, even if the United States invited Britain to attend that meeting, because of the conferences at Ottawa and Lausanne and Geneva. As far as I understood it, the whole argument of the right hon. Member for Epping was that the representatives of Great Britain, the Government of Great Britain, ought to abandon the Ottawa Conference, the Lausanne Conference and the Geneva Conference until after the United States election or until after the Government could have some conference with representatives of the United States. If this is to be the new policy, first the demand for a conference upon international monetary relations, and at the same time the abandonment of the conferences which have been fixed for months and the arrangements for which have been practically completed, merely to satisfy the right hon. Member for Epping and his wonderful change of view from the time when he put us back on the Gold Standard and for which we have been suffering during the years that passed— if we have to satisfy the right hon. Member for Epping on this ground, then he ought to be a Member of the Government instead of sitting below the Gangway and criticising the Government. He would be a force in the Government, even though he pushed the Government in a way that would lead to that disaster which the right hon. Gentleman has been foretelling for this country and the rest of the world.

The Chancellor of the Exchequer last night made a wonderful statement to the House, and we see the result of it on the Order Paper to-day in the shape of a Resolution. Numbers of us have been complaining that the introduction of tariffs would lead to corruption or logrolling or political pressure, and in order to remove tariffs from the scope of political log-rolling or political pressure, or even corruption, the Government set up this remarkable Advisory Committee. All articles that are likely, in the opinion of the Government, to be made the subject of a tariff, have to be examined by that committee, and recommendations come from that committee to the Treasury, which then acts as it thinks fit on the recommendations. I have here a statement made by the Chancellor of the Exchequer on 4th May, scarcely a week ago. The right hon. Gentleman then said, with reference to the Advisory Committee: The House has set up an independent and impartial body in order that the question of the rates of duties should be free from political pressure, and that the body which should be responsible for the recommendation should not be subject to the dictation of Ministers. Lobbying has been the curse of tariffs in other places, and we do not want, and we do not intend, that we shall suffer in that way. We believe that we have ensured that result by the body which we have constituted with its independent function."—(OFFICIAL REPORT, 4th May, 1932; col. 1134, Vol. 265.] I am glad that the Financial Secretary to the Treasury agrees with that statement, because then he must disagree with the statement made by the Chancellor of the Exchequer last night.

The FINANCIAL SECRETARY to the TREASURY (Major Elliot)

No.

Mr. MACLEAN

I know that the right hon. Gentleman can square arguments that seem to be most contradictory, and I have no doubt that with his eloquent tongue and his ability he will be able to do the same thing here this afternoon. But the statements are upon record, and therefore cannot be misrepresented by any distortion of sentences. After the Chancellor's speech of last Wednesday the Finance Bill was prepared. When it was prepared it was seen that nothing was being done for silk. So political pressure, political influence was brought to bear on the Chancellor of the Exchequer. Representatives saw him and influenced him by their statements as to the condition of the silk industry, and although there was no mention in a Ways and Means Resolution that permits the Government to put a tariff on silk, although silk is not in the list of articles submitted to the Advisory Committee for their consideration, the influences which were brought to bear on the Treasury were evidently sufficiently powerful to make the Chancellor of the Exchequer come to the House last night and tell us: 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 Committee 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."— [OFFICIAL REPORT, 9th May, 1932; cols. 1666 and 1667, Vol. 265.] When the Advisory Committee was being set up and we were discussing the powers of that Advisory Committee, we were given to understand that there could be nothing done except in the case of articles in a list passed on to that committee by this House. Those were the articles which were to be considered and upon which recommendations had to be made. This House gave the Advisory Committee those statutory powers. But the Chancellor of the Exchequer adds silk to the list.

Major ELLIOT

No.

Mr. MACLEAN

The addition to the list is on the Order Paper to-day.

Major ELLIOT

If the hon. Member will consult Clause 1 of the Bill he will see that goods which are subject to duties of Customs were not in any way under the purview of the Advisory Committee. Silk is subject to a Customs duty. It is, therefore, not under the purview of the Advisory Committee. It will, therefore, not be dealt with by the Advisory Committee. But it is perfectly competent for the Chancellor of the Exchequer to deal with it by Ways and Means Reso- lution, and that is the procedure which we are now following.

Mr. MACLEAN

The right hon. Gentleman has not stated the whole position. The Chancellor of the Exchequer is not dealing with silk. He is remitting consideration of the Silk Duty to the Advisory Committee. I have already quoted the Chancellor's speech of last night: As I have already said, the Silk Duty is outside the purview of the Advisory Committee, but that does not in any way prevent me asking the Advisory Committee to undertake the necessary investigation into the circumstances of the industry, and to make, in due course, recommendations to me. He is remitting it to the Advisory Committee.

Major ELLIOT

I am sure the hon. Member does not wish to misrepresent the question. The Chancellor of the Exchequer is to-day bringing forward a Ways and Means Resolution. In virtue of that Resolution and not in virtue of any Treasury Order a duty, when the House approves, will be placed upon silk. It is open to the Chancellor of the Exchequer to ask any Committee for an advisory opinion upon anything, but in this case the Chancellor of the Exchequer is acting in the familiar constitutional way which Chancellors of the Exchequer have followed for 'hundreds of years in this House.

Mr. MACLEAN

That does not make it any clearer. Here are the Chancellor's words: Accordingly I propose to ask the Advisory Committee to make that investigation for me, and in due course I hope to have their recommendation. It is obvious that any recommendation which can be made by this Committee cannot be implemented by a Treasury Order."—[OFFICIAL REPORT, 9th May, 1932; col. 1667, Vol. 265.]

Major ELLIOT

That is the point.

Mr. MACLEAN

The duty can only be inserted in a Finance Bill, but the Advisory Committee is the body which is to inquire and to advise the Treasury about putting a tariff upon silk. You have had to bring this special Resolution before the House to-day, separate and apart from the ordinary Money Resolutions which are brought in. The Resolution is brought up because of yielding to pressure, and it is to be put through its various stages to-night in order to bring it into law, or to make it constitutional for the Chancellor of the Exchequer to add another Clause to the Finance Bill.

Major ELLIOT

The hon. Member must agree that all the taxing Clauses of the Finance Bill are based upon Money Resolutions of one kind or another. This is one of a group of Money Resolutions. No Finance Bill would be in order unless it was founded upon Money Resolutions. This is simply one of the Money Resolutions upon which this Finance Bill will be founded, when passed.

Mr. MACLEAN

It is one of the Resolutions, but it is no use the right hon. Gentleman trying to mislead the House in that way. He is well aware that all the Money Resolutions which were considered to be necessary as a foundation for the finance Bill were already passed by the House, and that the Money Resolution which is before the House to-night is something which has been brought in because of the pressure of representatives of the silk industry. The Chancellor of the Exchequer last night intimated his willingness to yield to that pressure. That is my point. All the explanations of the right hon. Gentleman do not in any way controvert anything I have said as to the change which has taken place, and as to the facts. It is not due to a recommendation of the Advisory Committee that the other taxation which the Finance Bill is to impose will be imposed. The Money Resolutions which have already been agreed to by the House came from the Treasury without any consultation with the Advisory Committee. The taxation that is being imposed in the Finance Bill is being imposed without having been recommended by the Advisory Committee. But anything which is done with the Silk Duties will be recommended by the Advisory Committee.

Mr. DAVID MASON

Not necessarily.

Mr. MACLEAN

That is the statement of the Chancellor of the Exchequer. I am taking the statement of the Chancellor of the Exchequer, and I am taking the abbreviated explanation of the right hon. Gentleman opposite that this is something additional to the Money Resolutions, and that there is a Clause yet to be brought before the House which does not appear in the Finance Bill. The right hon. Gentleman cannot deny that.

Major ELLIOT

I do not want to deny it; I am stressing it; I am bringing it to the hon. Member's notice. I am saying that we are proceeding according to the ordinary constitutional practice. The hon. Gentleman and his friends, only a few days ago, were inveighing against us for departing from that practice in the case of the Import Duties procedure. We arc not here dealing with Import Duties procedure, but with ordinary Budget procedure. Does the hon. Gentleman want us to follow the Import Duties procedure, or does he want us to follow the Budget procedure? He cannot have it both ways; he must agree either to the one or to the other.

Mr. MACLEAN

The right hon. Gentleman cannot have it both ways either. I am stating that the Government have yielded to pressure from representatives of the silk industry, and all the right hon. Gentleman's explanations cannot get the House away from that fact. There was the speech of the Chancellor of the Exchequer last Wednesday, in which he denounced political influence, log-rolling, and the possibility of corruption, and spoke of the necessity of removing any taxation of that character from this House to an independent Committee; and there was his statement in the House last night that he intended to put before that Committee the consideration of this particular industry, and to accept, or at any rate consider, their recommendations, and that, if their recommendations were in favour of imposing a tariff, he would have the Money Resolution passed by this House, and a Clause—I shall be glad to give way to the right hon. Gentleman—

Major ELLIOT

I am grateful to the hon. Member for giving way, and I promise that this shall be the last time that I interrupt him, for I know how difficult it is to carry on a Debate by question and answer. The object of the Resolution is not to allow the Chancellor of the Exchequer to impose any duty sanctioned by the Advisory Committee, or recommended by the Advisory Committee; it is to enable this House, if it so wills, to include a Clause in the Finance Bill, by which taxation will be laid upon silk articles, on the authority, and only on the authority, of this House.

Mr. MACLEAN

I did not say that it was not to be laid by the authority of this House. What I was pointing out was that the Government have yielded to pressure. That is my whole point, and I was illustrating the means whereby they had yielded to pressure—the methods that they were adopting to give to that industry, to which the Treasury had yielded, the opportunity of having its particular articles taxed, because they were not already in the Finance Bill that was before the House. I submit that I have made my point perfectly clearly and correctly that the Treasury has yielded to political pressure, has yielded to pressure from outside, and that the Resolution which is now on the Order Paper, and will be laid before the House to-night, shows how they have yielded to an industry whose representatives were sufficiently powerful to force the Government to yield to them, and to concede their demand to allow taxation to be imposed upon their commodities. Last night the Chancellor of the Exchequer was very distressed about silk, and was very willing that something should be done about it. He made no mention then of his previous speech; all that he said was that the Money Resolution was to be brought in upon which the Clause was to be based. I do not consider that it is necessary to labour that point any further. I have made it perfectly clear that, so far as the Chancellor of the Exchequer is concerned, he has yielded to political pressure.

With regard to the Exchange Equalisation Account, it is stated that the Government wish to raise £150,000,000. I take it that the money to be raised is limited to this sum, and not to the sum stated in the Section of the Act of 1919 to which we are referred in Sub-section (5) of Clause 21 of the Bill. I would ask the right hon. Gentleman this question: Will the deposits in the Post Office Savings Bank, and the money accumulated through the purchase by the public of National Savings Certificates, be used to build up this fund of £150,000,000? Is there any possibility of this money at any time being lost, and, if so, will the Government guarantee the deposits in the Post Office and the purchasers of Savings Certificates against any loss which may ensue through the manner in which this fund may be operated? I would like the Financial Secretary to the Treasury to deal with that point when he replies to the Debate to-night. I take it that the Financial Secretary will agree that this £150,000,000, if it is not taken wholly from the Consolidated Fund, but is built up by borrowing, will be borrowed at rates of interest according to the Section of the Act of 1919 which I have just mentioned, and which is referred to in the Bill. I should like to know whether the Financial Secretary to the Treasury can inform the House of the rates of interest he believes he will require to pay for the £150,000,000 which the Clause in question gives power to borrow, if it is necessary to go to the market to borrow it instead of getting it from the Consolidated Fund.

There is also a point in connection with Income Tax that I want the Chancellor of the Exchequer to consider. Some of us have been putting down questions with regard to certain hardships that certain people are suffering at the present time. There is in operation in the Employment Exchanges what is called a means test, and many people who have made sacrifices in order to educate their sons or daughters now find themselves unemployed and upon transitional benefit. The sons or daughters whom they have educated occupy fairly decent professional positions. Some are civil servants, some are in public offices or in corporations, some are school teachers, and so on. When the parent goes before the public assistance committee to have his means assessed, he is told that the son or daughter, as the case may be, has a sufficient income to maintain the parent without the parent receiving any transitional unemployment benefit, the parent is refused any benefit at all, and the son or daughter has to support the parent. It seems peculiar that when, in filling up their Income Tax returns, they put down the fact that they are maintaining their father and mother, and claim a rebate on their Income Tax because they are maintaining dependent relatives, according to the public assistance committee, the Income Tax officials return the form and state that they can make no allowance in respect of the claim that has been made by these young men or young women that they are wholly maintaining their parents. I put it to the Financial Secretary to the Treasury that, if these people are considered by the public assistance committees, through an Act of Parliament passed by this House and operated by a Government Department, namely, the Ministry of Labour, to be wholly maintaining their relatives, justice ought to be done to them, and they ought to get a rebate on their Income Tax covering the amount that they are asked to pay every week to their parents, who are looked upon by the public assistance committees as being wholly or partly dependent upon them.

With regard to the continuation of the Land Value Tax, I would remind hon. Members that we had in the House of Commons one who used to be called by the landlord classes of this century a Jack Cade, who in the eighties of last century went about the country preaching land reform and "the land for the people." I refer to the late Joseph Chamberlain. There was a Land Tax Clause in the 1909–10 Budget, and it was a son of the Jack Cade of the eighties who scrapped that Land Tax. Then Mr. Philip Snowden—now Viscount Snowden —brought in a Land Tax Clause in his Budget last year, and again we have another son of the Birmingham Jack Cade scrapping the Snowden Land Tax Clause, or, at all events, continuing it for an indefinite period. It is rather a peculiar coincidence that the one-time land raider, as one might almost have called him—a man who stirred the Highlands of Scotland with a speech that he delivered at Inverness, in which he spoke of "the lone sheiling on the misty island"—should have had two sons who were instrumental in practically destroying what many people in this country have looked forward to as a means of cheapening land, as well as a method of bringing to the Government revenue which might in some way enable them to reduce taxation upon other people. I submit to the Financial Secretary to the Treasury that he might convey to his chief, the Chancellor of the Exchequer, the fact that considerable resentment is felt that this is the second occasion since the War when a Land Tax Clause has been scrapped without giving it on either occasion an opportunity of showing whether it could be workable or not. Since this Clause has not been definitely abandoned, but is merely being continued, I trust that at some future date, when the present Financial Secretary to the Treasury and his chief and those who support him will not occupy the benches opposite, but will be on these benches, and we shall be on those benches, a Labour Chancellor of the Exchequer will restore the Land Tax Clauses to his Budget in a manner that will in some degree make up for the losses of revenue involved by the non-operation of the present Land Tax Clause by the present Chancellor of the Exchequer.

5.30 p.m.

The whole situation that was put before us yesterday and in the speech that has been made to-day makes it evident that Members of this House are not too well pleased with the progress that has been made by the National Government. They have passed a number of Acts of Parliament with a view to correcting what has been looked upon as. a crisis. Most of the speakers who have addressed the House during the past two or three weeks upon Money Resolutions, upon the tariff proposals and now upon the Finance Bill, have made it perfectly clear that they are not satisfied with the manner in which the financial affairs of the country are conducted, particularly by the banks, and especially by the Bank of England. When the Labour Government made it clear what was their opinion of the bankers in the past, when during the election we were fighting with our backs to the wall, hon. Members opposite used arguments against us to the effect that we desired to take possession of the Bank of England and to control the financial affairs of the country. That was described as Bolshevism run mad.

No one outside the House did more to obtain success for the National Government than the owner of the "Daily Express." On Sunday, 1st May, Lord Beaverbrook had a significant statement in his newspaper. He demanded that the nation should take over and control the Bank of England. He stated definitely and without equivocation what he wanted and what he advised. He said that those who were controlling the Bank of England were responsible for the condition of the country and were ruining the country, and that, unless the country itself controlled financial matters by the power of the people as represented in this House and by its representatives at the Treasury, the country would continue in its course towards further distress and probably ruin. The article has been the subject of speeches in the House, and it has formed the argument of a large number of Members. I want to ask the Government whether, in considering the monetary policy which they have been asked for so often by their supporters to consider, they have any intention of considering that point of view and whether it would not be well to exercise that Section of the Act of 1844 and notify the Bank of England that it intends to withdraw the Charter at the end of 12 months. I think that would bring some of the directors of the Bank of England to their senses and would let them know that the House of Commons, at all events, was becoming tired of the way in which they were conducting financial matters only in the interest of the Bank of England and not in the interest of industry or of the common people of the country.

The question of the internal debt was also touched upon last night, and the Chancellor of the Exchequer went out of his way—I do not say intentionally—to read into the statement made by the hon. Member who spoke of it that he was advocating repudiation. I have read the speech and I cannot read it as being in any way a matter of repudiation, or even the intention of repudiation. My hon. Friend lumped the internal debt with external debts. I want to ask something that I have been asking ever since 1920. I have been asking that there should be a scaling down of the interest upon War Loan. Time and time again I have moved Amendments to Finance Bills and Money Resolutions asking that that should be done. We are still faced with £300,000,000 of interest every year. All other taxation is fluctuating. You put 6d. on Income Tax and take 6d. off. You put 4d. on tea and take 2d. off, and so you go on. You juggle—I do not use that in any offensive way but merely as describing the manner in which the figures are operating on the different articles upon which you impose taxation. Those figures are juggled and altered with regard to all other commodities, but with regard to the internal War Debt they remain fixed, and we are still paying £300,000,000 every year in interest upon the money advanced during the War. What are the Government going to do to reduce that heavy burden? It is practically a half of the total annual burden upon the country. To pay it, you have to impose taxation. It means, therefore, that almost half of the taxation that the people have to pay is paid over to those who own the stock in the different War Loans, which is receiving interest at various rates from 5 per cent. downwards.

We have heard a lot of talk in the House and outside about the remarkable response that was made by the people when they were invited to pay their Income Tax practically in advance. The Chancellor of the Exchequer paid them a tribute for their patriotism. Cannot another appeal be made to their patriotism? You have hundreds of thousands of ex-service men whose pensions have been reduced, and thousands of ex-service men's widows who have no pensions because their husbands died seven years after they had been discharged from the Army. That is what you do for the people who fought and suffered in the War, but those who mostly remained at home and lent their money still continue to receive rates of interest which are very little, if any, lower than the rates they were receiving during the period of the War. That is not justice nor equity. I am asking that certain precedents which have taken place in the past, as shown by enactments in our volumes of law, should be operated again and that interest should be scaled down. If something of that kind were done, a very large saving would be made to the burden of debt and the country would find itself better able to advance, as it once was, to be the greatest nation in the world.

Sir ALFRED BEIT

I am anxious to state my views on what the right hon. Gentleman the Member for Epping (Mr. Churchill) called the money problem. I am tempted to intervene in the Debate by the speech of the hon. Member for Mansfield (Mr. C. Brown) yesterday. He elaborated the well-worn Socialist theory of the maldistribution of wealth, a theory which has had support in the writings of that eminent and prosperous author, Bernard Shaw. I thought it might be of some interest to make a rough and ready calculation to show how such a theory as this would appear if carried to its mathematical, indeed its logical conclusion. On the figures he gave us of the national income for 1929, a quick estimate will show that, if the present income of the country were divided out equally among all the inhabitants, there would be about £40 a year per head to be distributed, that is, assuming—and that is a broad assumption—that the necessary Socialist system of finance which would have to supersede the capitalist regime could maintain the national income at its present level, which seems to me a proposition doubtful in the extreme. Consequently, although there are some who are living at the lowest level who would benefit by any such distribution, assuming that the Government were the operator of all industry and were the hands that doled out the wealth, it is not very clear how such a drastic step, which I suppose is required by what I call the distributionists, would be of any permanent benefit to the community.

May I turn to another point before entering into the obscure channels of the money problem? The Noble Lord the Member for Peckham (Viscount Borodale) yesterday said that only by a recovery in trade and industry will the Chancellor of the Exchequer's estimate for Death Duties be realised. There is clearly a connection between a prosperous trade and industry and the yield of the Death Duties. The connection may not be a rapid one. It would be heartless to hope that it should be, but I go a step further and say that nothing short of a visitation of plague will realise the estimates which have been given in this year's Budget for the yield of the Death Duties. The longevity of millionaires may or may not be a suitable subject for levity, but such a statement is to assume that they are alive to-day, and it is very difficult to point with any certain finger to those who are likely in the near future to be the ones who will help to yield to the Exchequer the large total which has been anticipated by him in his Estimates.

The right hon. Member for Hillhead (Sir It. Horne) challenged us to face risks, and I for one am perfectly prepared to face such as he outlined in his speech yesterday. I do not say this because I speak with the voice of irresponsibility, but because I think that at the present crisis no stone should be left unturned. The risk which he asks us to take is to embark upon a policy of controlled inflation and to reduce the Bank Bate far lower than has been the case since the War. Nevertheless, I cannot help asking whether commodity prices would respond so readily to such a purely monetary manipulation? It is true that I am one of those who believe that the downward swing in world affairs has been largely brought about by monetary conditions, and I am a supporter of the theory of Sir Henry Strakosch which was first printed in the "Economist" and has been often repeated in this House, that the maldistribution of gold was at the bottom of it. Will it be so easy for a money policy to bring about an upward swing? The downward swing has been the cause of destruction, and it will take far more than a reversal of our money policy to bring about the improvement for which we all hope.

There are indications that the policy outlined by the right hon. Member for Hillhead will not perhaps in itself be sufficient. Since 1929 at many times the Bank Rate has been very low, but commodity prices have not responded. A better example would be the failure of commodity prices in the United States to respond to the very large credit expansion which took place there recently. The new credit corporation which was formed largely at the instigation, I believe, of the President, and with a very big capital, did not have the effect, as had been hoped, of improving industry. It therefore comes to a question of drawing some moral as to what might happen to the Exchange Equalisation Fund. As I said, the credit expansion in the United States did not bring about the desired effect, but it seems now as if some improvement may be expected from the balancing of the American Budget. In an inverse sense, though the Exchange Equalisation Fund as now proposed may very conceivably be of the greatest service in steadying our exchange operations while our credit is on a sound basis, supposing that for another reason the estimates for the year's income were not to be realised and we were to face a deficit in the future, then, as the right hon. Member for Epping said, what effect could the £150,000,000 have in stemming the flight from capital of which indeed nobody could see the end?

Therefore we must prepare ourselves to face the disagreeable alternatives which were outlined yesterday by the ex-Chancellor of the Exchequer, especially regarding fixed obligations. It is well known that both Germany and Italy have in the not very distant past decreed rent reductions at the time that cuts were made in their Budgets or by emergency legislation. Default is an ugly word. Countries and corporations make contracts which, alas! must be repaid irrespective of the cost-of-living index or the level of commodity prices. But did not a certain amount of default take place in this country when we left the Gold Standard last August? Would not a measure of inflation very conceivably mean the same thing? There is, fortunately, at the present time an opportunity for the Government- an opportunity which is earnestly requested by hon. Members in the House—to effect saving without any technical default. I refer obviously to Debt conversion. It happens that to-day the principal long-dated securities of the British Government are on a 4 per cent. level. I, therefore, suggest to hon. Members who are particularly anxious to press the Government for a statement on conversion, that perhaps a little patience may see their reward, for I hope that it will be possible for a still better conversion, namely, on a 3½ per cent. basis. I suggest that because of the way in which the gilt-edged market is moving at the present time.

I would fortify my observations that a money policy alone cannot produce the upswing necessary to rescue our industries, by the reflection that we have to face political restrictions in neighbouring countries. The exchange restrictions which confront us throughout Central Europe make it impossible, it would seem to me, for any action that we may take to put new life into trade between ourselves and those European countries. It is seriously to be hoped that commodity prices can be made to rise without resort to those disagreeable measures, but I feel that the House ought to prepare itself to face the possibility of some reduction in fixed interest-bearing obligations. The attempt has been made, as I pointed out, in America and in many other countries to do something which will raise those levels, but if prices persistently refuse to follow such cajolery, there remains only one alternative, and that is to take the drastic steps which I have outlined. One attempt has been made in the present Session to do what we all aim at, namely, to enable the producer to make a profit. I was, unfortunately, away ill at the time. I refer to an attempt made to make farming profitable by the introduction of a wheat quota, a Measure that I would have supported if I had been here. But I regret very much to say that my agricultural friends tell me that they have not found the. Measure received with joy in their constituencies. I only hope that the cause of this is nothing more or less than agricultural temperament.

We have been asked to show the world a lead in the question of raising prices. The other day the Home Secretary said in a different context that it would not do much good to any one country to raise its prices if such a movement were not followed in other parts of the world. Similarly, I think that Britain would hesitate to take any drastic action if it felt that it could not carry a big section of the world with it. When I say "a big section of the world," I refer to what is commonly known as the sterling area. The sterling area cannot, and must not, cut itself off from the rest of the world, and even were it possible to take some concerted action in the sterling area, I would much rather see the United States and the principal gold countries taking similar action with us at the same time. The feeling must be universal throughout the House—it has been expressed by nearly every hon. Member to-day, and it was expressed yesterday—that something has to be done to raise prices, and I know that even Ministers who have had the pleasure lately in quoting a fall in the cost-of-living index would not hesitate to do something to bring about this desirable result.

I should like to associate myself with the request made by the right hon. Member for Epping that the Government should consider the possibility of setting up a conference, not only for the sterling area, but for the whole world, in which the United States would be bound to play a very large part, with the object of finally bringing back prices to a level at which it will once more be profitable for the producer to manufacture the goods which he hopes to sell.

Lieut-Colonel Sir VIVIAN HENDERSON

May I, in the first place, be allowed to congratulate the hon. Member for South-East St. Pancras (Sir A. Beit) upon the very excellent maiden speech which he has just delivered to the House. I feel sure that all of us will hope that he will frequently participate in future Debates upon financial questions.

During to-day's Debate, and also during the Debate yesterday, several hon. Members, and the right hon. Gentleman the Chancellor of the Exchequer himself, referred to the subject of economy. As I happen to have the honour to be the Chairman of the Estimates Committee in this House, I should like for a few moments to make some observations upon that subject. The House will have observed that in Clause 25 of the Finance Bill power is to be taken to make advances to the Road Fund for meeting expenditure in connection with schemes. The Road Fund is one of far too many funds over which the House has no immediate control, and it is an excellent example of the way in which this House has, I do not say deliberately, but definitely and gradually abdicated its control over the details of finance.

6.0 p.m.

I have taken the trouble to analyse the last accounts presented to his House— the Civil Appropriation Accounts for 1930–31. Many hon. Members will be astounded to learn that of a total of £335,000,000 voted, only £51,000,000 was expenditure over which this House has detailed control. The rest is voted either in block grants, or in subsidies, or in lump sum contributions to pensions, or in grants-in-aid. That means that we are only controlling in detail something like one-sixth or one-seventh of our total Civil expenditure. When I use the words "controlling in detail" I means this House having opportunities for approving or disapproving a particular expenditure as opposed to accepting or rejecting the whole sum. That position has arisen from two causes. It has arisen in part owing to the enormous increase in expenditure that has taken place since the War, an increase which has made it practically impossible for this House to retain its pre-war control. It has also arisen in part because of the haphazard way in which this House and former Parliaments have established grants-in-aid and grants of one kind or another as a means of helping this particular cause or that. The Estimates Committee in their report which they presented to the House as Easter drew attention to special aspects of this subject, and I hope that they will receive the attention of the Government.

The hon. Member for the Scottish Universities (Mr. Buchan), in the very interesting speech which he made yesterday, said that economy was not to be achieved by paring Civil Service salaries. In a sense that is quite right, and in another sense I think it is wrong. It is wrong in the sense that anyone who has served for any length of time either on the Public Accounts Committee or on the Estimates Committee comes to realise that there are continually small savings in accounts to be made throughout the Estimates and in the public accounts. Because these savings are not in themselves sensational and because in any one part of the Session they perhaps do not aggregate to any large amount, and therefore do not appear in the public eye, that is no reason for saying that they are not important and that it is not essential that they should be searched out and achieved. I think the hon. Member was right in what he said in the sense that there are no vast savings to be made in the paring of Civil Service salaries. The Administrative Branch of the Civil Service costs rather less than we pay every year for messengers and cleaners for looking after the Government offices in Whitehall. I do not think that many people realise that fact. The cost of the Administrative Branch of the Civil Service amounts to £1,750,000, and if anyone will consider for a moment that that Administrative staff is really the controlling brain of the Civil Service and responsible for the vast machinery of administering not only all the Government Departments in this country but Government Departments which touch activities all over the face of the globe, I think we may rest assured that we are getting that staff very cheaply when we are only paying for it rather less than we pay for the staff of cleaners and messengers who look after the Government offices.

On the other hand, I do think that there is still scope for economy in public expenditure, despite the vast economy that was made by the Government last autumn. That field for economy lies in local expenditure, and I hope that the Government will consider definitely the possibility of rationing our expenditure on police, housing, roads and education. I hope that instructions will he given that the big spending departments shall stop deliberately encouraging local authorities to spend money. Last of all, I hope that the Government will consider the substitution of block grants for percentage grants wherever possible. I have a particular reason for saying that. I have been looking into the expenditure of local authorities by means of borrowing during the past few years. I looked at the figures which are published in what is known as the "Local Government Chronicle," and I was astounded to find that last year, on the average, local authorities were borrowing for the purpose or another money to the tune of £2,000,000 a week. That means £100,000,000 a year. When we realise that a large part of that money is used for activities which are subsequently reflected in increased grants made by different Government Departments for education, roads, police or other purposes, and that neither this House nor the Treasury has the slightest control over that borrowing, I think everyone will realise that the position is highly unsatisfactory and one which demands the attention of every thinking man who is really interested in economy.

Mr. MORGAN JONES

Is the hon. and gallant Member strictly accurate in asserting that Government Departments have no authority and no control over borrowing? Is it not true that the Minister of Health can withhold his sanction to loans for local authorities?

Sir V. HENDERSON

If I said Government Departments, I did not mean that. What I intended to say was that neither this House nor the Treasury have control. The Treasury, except in respect to loans for the London County Council, has no control over the sanction to loans given by the Minister of Health. It is true that the Minister of Health and the Minister of Transport have the power to sanction loans to local authorities, but those particular Government Departments are themselves spending Departments, and in many cases they are primarily to blame for the large local expenditure of the past two or three years. Neither the Treasury nor this House have any control whatever over that expenditure, except over the expenditure by the London County Council. I do not want to say more on that subject, because it is being examined by the Estimates Committee who, in due course, will report to the House, but I want to draw attention to the seriousness of the position and to the fact that so long as we in this House take no steps to exercise control over local borrowings we must not complain if we find that our grants in respect of education, police, housing and roads automatically increase every year in our Estimates.

The Chancellor of the Exchequer last night asked for time in which to consider the question of economy. He said, quite rightly, that when this House is sitting and working at the pressure at which it is working at the present time, and when Members of the Cabinet are asked to attend Conferences at Lausanne, Geneva or Ottawa, it is very difficult for him or for other Members of the Cabinet to sit down and to consider seriously the problems of economy. We are all aware of that fact, and I hope that during the Recess, after July, the Government will have time to consider this question. If they are going to do that, I would ask them to set up—if they have not already set up, and if they have we have heard nothing about it— a Finance Committee of the Cabinet who will continuously study this question. During the crisis last Autumn many of us were impressed by the fact that the Cabinet which was formed at that time was a small one; a Cabinet which to a large extent excluded the head of any spending Department. I have always believed that if we are really going to achieve economy the Cabinet which will achieve it must be a small one.

There may be administrative reasons against retaining a small Cabinet for ordinary workaday purposes, and if that is the case I see no reason why within that larger Cabinet there should not be a small Finance Committee which should be responsible for threshing out economies and should have the power to enforce those economies on all their colleagues and on the Government. Unless that is done, I see no likelihood of the drastic economies which are necessary being carried out. I agree with what the right hon. Member for Epping (Mr. Churchill) said in one part of his speech, but not with the rest of his speech, when he said that this Government being a National Government has an opportunity of dealing with this question such as will probably never arise again in our lifetime, and unless they take that opportunity we shall have definitely forfeited our claim to be the protectors of the taxpayers of this country.

Mr. TINKER

The last speaker has great knowledge of finance, and it is very interesting to hear him. I like his candour. He tells us how he would be prepared to save money. He would save money on police grants, education grants, road grants, and on another item which I cannot recall. From his knowledge he must have a good idea of how the money is expended. I did not hear him say anything about cutting down pensions. When we are dealing with the finances of the country hon. Members never seem to suggest that we might cut down some of the perpetual pensions that exist. In the Estimates we find an item of £5,000 to the descendants of Lord Nelson. I believe the sum now is £500 less. Hon. Members never say anything about cutting down a pension of that sort. If there is to be economy one would think that they would be prepared to deal with those cases. If the country is on the verge of bankruptcy, attempts ought to be made to deal with those cases before dealing with the money of the poorer people. On these occasions we always get lectures from the high priests of finance. The right hon. Member for Hillhead (Sir R. Horne) last night touched the question upon which he always dwells every time he speaks—the stabilisation of prices, or the raising of prices. I can never follow him in his argument, but last night he told us that if we do not adopt this policy many other things will have to be done. He said: 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."—[OFFICIAL REPORT, 9th May, 1932; col. 1572, Vol. 265.] I agree with the right hon. Gentleman, but not with cutting down wages, and I do not think any hon. Member would suggest it. If you cut down wages it means that you are lowering the purchasing power of the people.

Mr. HOWARD

If you cut down the interest on securities, you are at the same time cutting down the purchasing power of the people.

Mr. TINKER

Probably you do, but in a lesser way, and I am dealing with the argument that if we have to economise it is better to start economising where there is a little upon which to economise rather than cut down the wages of the people. I agree that the people who receive interest from securities probably spend it on luxuries rather than on actual necessities. We advocated the capital levy many years ago, and were beaten. Now we are told that it is one of the ways which will have to be considered if we do not raise the price of commodities. The right hon. Gentleman the Member for Epping (Mr. Churchill) was more unhappy to-night than ever before. He is not quite sure of his own position. He is not quite sure whether the policy he is advocating is any real solution for our difficulties. The whole theme of the speeches from the other side of the House is not what we should have expected from supporters of a National Government, that now that they have the power to deal with these matters everything will be quite all right. The right hon. Member for Epping argued that we ought to call a great international conference to deal with the monetary question. He was in favour of the tariff policy of the Government. In my view it is utterly fallacious to put up tariff walls and economic barriers between countries, to stop trade between one nation and another, and then suggest that the nations should meet together to see what can be done. Advances of that kind should be made before economic barriers are put up. It is no good to threaten them first and then say that we are prepared to enter into a conference. The policy of the Government is entirely opposed to the idea of securing confidence with other nations. The Amendment deals with what the Government have done. It says: this House regrets the reversion to the long-discarded and unjust policy of raising an increasing proportion of the national revenue by indirect taxation. That is our theme. We object to what the Government have done in the Finance Bill. They are raising revenue by indirect taxation, and putting a greater burden on the poorer people. An hon. Member last night pointed out that the policy of the Government is putting £40,000,000 more indirect taxation on the poorer people of the country than any previous Budget. When the time comes for us to have to face a reversal of the present policy, there is going to be a great deal of trouble. The Chancellor of the Exchequer gave us an idea of what it will mean. He said: You can give a fresh opportunity to trade and industry to put its house in order under the shelter of a tariff such as is proposed in the Order that I am now submitting. Then, at any rate, you have produced one of the conditions which will greatly facilitate the raising of the unnecessary capital."—[OFFICIAL REPORT, 4th May, 1932; col. 1133, Vol. 265.] If by tariffs you induce people to put capital into certain industries, because they are protected, then I say that you are doing wrong, because when these tariffs come to be reviewed it may be necessary to reduce them, and you will have therefore misled people to put capital into these industries on the understanding that they were to be permanently protected. If these tariffs are taken away or reviewed after the next election, they will have been deceived. They have been given to understand that tariffs would be of a permanent character, and that would be a very strong argument whenever it is sought to remove these tariffs. That is why I feel anxious on this matter. We shall not know what to do with people who advance that argument when these tariffs are reviewed. Last week the hon. Member for West Bromwich (Mr. A. Ramsay) told us that they were not sufficiently high; that 20 per cent. is not enough, that it should be higher, and he also told us that the burden would have to be paid by the consumer.

That is our argument in opposing this Bill. We say that this policy is putting on the backs of poor people a burden which they cannot stand much longer. They are in greater difficulties to-day than ever, and if the Government attempt to save the Budget by this method of indirect taxation, it is a wrong policy altogether. I do not know how long the country will stand it. I am wondering how long millions of people who are daily bearing this added burden will be kept in subjection. There is no hope in the policy of the Government, no relief at all; and I warn hon. Members as to how far they go in this direction. Anyone who goes among the masses of the people and sees the poverty which exists, and the continual growth of unemployment, must wonder how long it can go on. As one who loves his country I desire to impress upon the Government the fact that the step they are taking is entirely wrong. I hope we shall see a reversal of this policy. Really, I cannot tell what the end will be, but I hope that the Government, with their enormous majority, will give the country a much better lead.

Sir REGINALD BLAKER

In rising to address this House for the first time, I feel acutely conscious of my need for that indulgence which is always so readily given. We are discussing to-day, as we discussed yesterday, a measure of finance for which, in my humble submission, the Chancellor of the Exchequer deserves our gratitude. The right hon. Gentleman will no doubt realise that gratitude is always some indication of expectation of favours to come. I know that in making a maiden speech it is sometimes considered an ungracious act for the hon. Member to offer any criticism, but if I offend in that respect, I assure the House that my offence is one of enthusiasm, and I hope of constructive criticism, rather than any attempt to engage in the sniping which sometimes takes place in this House.

May I recall to the attention of hon. Members a class of taxpayer who receives little if any consideration either on these benches, and least of all on the other side of the House? I refer to the small taxpayer. The Chancellor of the Exchequer has paid what I consider a well-deserved tribute to that long-suffering class. It is a class which is unable to bring its grievances before this House by mass agitation in open spaces or by the immoderate use of the halfpenny postcard. Hon. Members talk in this House about poverty, as though poverty, and the distress which goes with it, is confined to those in receipt of a weekly wage. I can assure them that I know of cases of small taxpayers who are living on the bare line of subsistence, and only pride of race keeps them from making the agitation which would be made if they belonged to another class. I know that the present situation of our finances does not allow of any remission of taxation, but I would ask the Financial Secretary whether he could not consider some small relief to this particular class. They are in many instances paying Income Tax at an increased rate, assessed on a fixed income, a large portion of which they do not receive. In many cases they are entitled to a rebate, and I ask in all earnestness whether the Treasury could not say the appropriate word to the appropriate officials to ensure that these repayments are made with the same speed at which the taxpayer is asked to make his payment.

6.30 p.m.

I do not wish to be guilty of introducing matters which may call down upon me the stricture of the hon. Member for Gower (Mr. D. Grenfell). But there is one matter in these financial proposals or rather its absence from these financial proposals which does, in my opinion, cast a grave cloud over a large number of small traders in this country. I refer to the curious position of the taxation of co-operative societies. I will not venture into that thorny subject or raise anything which might appear to be of a controversial nature, but, speaking as one with out experience, I cannot understand why it is necessary for this matter to be referred to a Commission. The Royal Commission in 1919 produced a Report, and we were told that because the Report was not unanimous, it could not be acted upon, when from the very nature of its composition it was impossible to get a unanimous report. I have not noticed that in grave fiscal issues a lack of unanimity has been a bar to their adoption. Whether it is just to impose this taxation or not, I have always understood from my study of Parliamentary traditions, that this House, after fighting for it very strenuously, has always zealously guarded its right to control taxation, and I cannot understand why, in reference to this particular taxation, we should seek to shelter ourselves behind the report of a commission. However, I pass from that subject. I make those observations in good faith because I know that grave disappointment has been occasioned by the course adopted on this question, and in some quarters there is a slight feeling that this House is, perhaps, rather too much inclined to shelter itself behind the opinions of those who are not answerable in the general ballot of an election. Before leaving this refer- ence to taxation of which I am not in favour, may I refer to a tax which will remain in force under these proposals, namely, the Beer Duty? I realise that it is impossible to-day in the state of our finances to reduce or alter that tax. I realise that it must remain, but it is placing a severe strain upon those who had hoped for some adjustment under these financial proposals. I believe, however, that if we could be told definitely that this is a tax primarily imposed for revenue purposes and not for any covert prohibitive ends, the sacrifice would be more cheerfully faced and endured with greater fortitude.

I come to the question of economy. I have read and listened to the observations of the Chancellor of the Exchequer on this subject and I welcome those observations because I am not one to spurn a slice of bread because I am denied the loaf. But I hope that the Chancellor of the Exchequer, as a result of his hard thinking, will produce some concrete proposals on this matter. It may be that I am wrong, or it may be that time will show me to be right, but I take the view that whether we have conferences at Lausanne or Ottawa, or anywhere else in the world, it is impossible for this country to succeed while it is carrying the dead-weight load of an annual expenditure of £796,000,000. It is often said that we in this House are keen on speaking of economy, but that we are a little slack in carrying out measures of economy. I suggest, with all humility and respect, that hon. Members of this House can help in achieving economy by refraining from legislation which will increase the numbers upon the pay-roll of the State and by refraining, even for a short period, from pressing for particular pet forms of social service for which each Member of this House has some corner in his heart.

I may have transgressed the rules of modesty in what I have said in addressing this House for the first time, but the points which I have endeavoured to make, with very halting voice, are points upon which I feel sincerely and, what is of more importance, are points upon which those whom I represent feel even more seriously than I do. If measures of economy are produced, I feel sure that the vast majority in this House will be prepared to go out and champion those measures however unpopular they may appear to be. I am satisfied that the present rate of taxation, compelling us in many cases to live out of capital, and a condition of things in which sums required to meet current expenses and even Income Tax consist very largely of realised capital, cannot continue indefinitely. I ask the Government, with all respect, to consider this problem not merely as a hardy annual raised in these Debates, but as one upon which many Members and especially young Members feel very strongly, and which they mean to see brought to some form of solution.

Mr. WALLHEAD

I am glad to have the pleasure of congratulating the hon. Member for Spelthorne (Sir R. Blaker) upon a very successful maiden speech. Whether one agrees entirely with his conclusions or not, at any rate it will be agreed that he put his points with extreme moderation and clarity, with a good deal of courage and also with modesty, though I suggest to him that modesty is not a quality which goes too far here. That difficulty however he will probably overcome. In any case, I join with Members upon all sides in hoping that we shall have the pleasure of listening to the hon. Member again in the near future, and we feel sure that his intervention in our Debates will not indicate any loss of debating power. I have listened to a good many speeches in the course of the Debates on the Budget and the Finance Bill, and it seems clear that interest is now moving from the actual Budget proposals themselves to a new set of proposals recently introduced. We now hear a great deal about the, question of currency. The right hon. Gentleman the Member for Epping (Mr. Churchill) speaking from the depths of that gloom which seems to have become habitual with him in recent speeches, has told us of the parlous condition of the whole economic system. We are told that the capitalist system is drifting, that we are in a bad way and that nothing but an immediate conference for the reconsideration of currency problems will be of the slightest value.

This question of a managed currency is not by any means new. I have a book in my possession written by a man named Michael Flurscheim, a banker in New Zealand, in the year 1900, called "The Clue to the Economic Labyrinth." That book contains practically all that can be said about the question of a managed currency. The right hon. Gentleman the Member for Epping must not imagine that he has discovered something new, because the author of the book to which I refer, worked out the case with remarkable clarity. He was a Socialist in addition to being a banker, and he appealed to the Socialists of his time to accept his theories as not being contradictory in any way of the theories which they held, but on the contrary as being a necessary part of the ultimate development of those theories. I confess that the conclusions reached in that book influenced me to a large extent in my views on the control of currency and monetary policy generally. I mentioned the matter some years ago in this House and the right hon. Gentleman the Lord President of the Council, then did me the honour of recognising that there might be something in the question which I raised.

I do not profess to be a currency expert. I am not a banker, and it would be very difficult for me to argue a case pro or con against financial experts. But it seems to be a mere commonsense statement of fact that, if currency is maintained at a certain level, with an expanding production of commodities, there is bound to be a block sooner or later. If our production is, let us say, £2,000,000,000 worth per annum; if we have a currency issue of £250,000,000 and if the production increases by £500,000,000 or £1,000,000,000 worth per annum, with no increase in the currency, there is bound to be a lag. The number of counters or units necessary for dealing with that production will not be present and the whole system will become blocked up with an excess of production which is not being effectively consumed or circulated owing to the narrow issue of currency available with which to do the work.

Therefore I am in favour of a managed currency. I am glad to see that reference is now being made to it. I hope that its consideration may have some effect and I think it will be for the good if it has. I am afraid however that conditions have gone too far for any quick recovery in present circumstances and I would warn hon. Members that we have always had a block of the kind which I have described. There have been times when there has been no question as to the sufficiency of the currency. Trade has been prosperous in this country on many occasions; profits have been high and prices have been good, but the condition of the mass of the people was not necessarily improved because there was a free flow of currency. It is possible to get a free flow of currency again and yet leave the mass of the people largely where they are at present. There can be an increased flow of currency, there can be a managed currency and still the mass of the people can remain very poor indeed.

Many suggested solutions of our difficulties have been put before us in the last 10 or 12 years. Immediately after the War the hoardings blossomed forth with calls for increased production. Members of the then Government and prominent Members of the Labour party—they "grew in beauty side by side"—and appeals on the hoardings, urging people to produce more. It was said that all that was required was that we should, as it were, make two blades of grass grow where one had grown before, and all would then be well for the body politic. A response was made and production was increased, but that did not do the trick. It became clear that what we wanted was a reduction of costs. Then we had a call for decreased wages, and wages were reduced. Prices and the currency began to be manipulated, and prominent persons began to say that it was utterly impossible to get lower prices unless there were lower wages or more unemployment. That was induced by a process of inflation, and we rapidly moved to a point when we had from 1,500,000 to 2,000,000 unemployed. Consequent upon that there was a reduction of wages equal, we have been told, to from £600,000,000 to £700,000,000 per annum, and still trade got worse.

The next thing I remember was that there was to be a reduction in the Income Tax; if only Income Tax came down all would be well. While I have been in this House I have witnessed three reductions of the Income Tax, but I did not notice that there was any sign of the wheels of industry revolving as a result. Things still continued to go back, and went from bad to worse. The number of unemployed increased. Then it appeared that rates were too high: if only the burden of rates were lifted from the backs of the manufacturers, all would be well. The Conservative Government introduced the De-rating Act, rates were taken off local manufacturers and the State took over the burden. Still the problem remained obdurate and the position began to get worse. The hon. Member for South Croydon (Mr. H. Williams) shakes his head, but the problem is worse than it has been in my time and since he first entered the House. To-day there is a further increase in unemployment of 85,000. That is distinctly bad. Last August the National Government came in, and we were told that all that was wanted was that they should have a big enough majority to put their ideas into force, and that if once we got protective tariffs they would do the trick. Most hon. Members are agreed now that tarfffs will not do the trick. The right hon. Member for Epping says that they will be no use at all; we must handle the currency problem. That is the thing that matters now—not tariffs, but money. That is the thing that must be controlled now.

I suppose, therefore, that we shall now have long Debates and a gradual development of this idea of the control of currency. I do not know how we are going to do it. We do not have very much control over the banks. I remember once asking the right hon. Member for Epping, when he was Chancellor of the Exchequer, whether the Treasury ever had any discussion with the Bank of England before the rate of interest was changed, and he said that they had no consultation whatever. So the Government have no control over even so trifling a thing as that. Now he tells us that in 1919 the Government were giving the Bank of England instructions and orders that they were to prepare for the restoration of the Gold Standard. By 1925 the Bank had got the whole thing in order, and we had the restoration of the Gold Standard. That was another thing that was to do the marvellous trick of getting the wheels of industry moving once more. Speech after speech was made in this House to point out the fallacy of that argument and to point out that it would do nothing but damage. But the experts were quite sure that it was all right. We had only to get back to the dear old Gold Standard and all would be well. The right hon. Member for Epping told us this afternoon that in the early part of the War gold was in the forefront of the battle and got badly banged about. My impression was that it was the rearguard and was the first thing that bolted. The War had not been going on three days before that went and we had to substitute gold by a paper currency with Government backing. Gold did not count, and from that day to this it has had very little effect except in the hands of America and France. It has not concerned us much; we have not had very much of it.

Where are we getting with this policy of tariffs into which we are entering now? I take the view that the present effort that we are making with tariffs will have little effect upon the prime question that confronts the people of this country. The ship of State is drifting, says the late Chancellor of the Exchequer, the right hon. Member for Epping, and tariffs cannot anchor it. There is not much doubt about that. If tariffs could have anchored a commercial system in any country it would have anchored it in many countries before now. The conditions of the mass of the people in tariff countries have been practically what they have been in our own Free Trade country. The reason is not very far to seek. The problems that concern society to-day are not problems that tariffs have brought into being, and they are not problems that tariffs can solve. They are problems of improved scientific knowledge, of increased mechanical power, and of increased powers of natural resources. Science has solved the problem of the fertilisation of the land for us upon an extensive scale, but we find ourselves to-day doing our level best to cheat the prolific quality of nature. We are trying to establish scarcity; we are doing our best deliberately to establish scarcity, because we do not know what to do effectively with the plenty that we have at our disposal. All over the world we are trying to establish scarcity. We have tried it with rubber, with tea, with cotton and with corn. It does not matter how prolific production becomes, it does not matter what powers science places in the hands of mankind, we try to cheat it because our system compels us to do so; otherwise, the system would go to smash and ruin.

All the talk in the House now is that we must increase prices in order to estab- lish prosperity. Surely if we cannot sell goods when they are cheap, we are not going to sell them when they are dear. The world is full of cheap goods that cannot be consumed. How are we going to dispose of our goods if we make them dearer? [An HON. MEMBER: "Give the people money to buy them!"] Exactly, but how do you propose to do that? We can only give the people power to purchase by increasing their consuming power. If we can by some process double the purchasing power of the mass of the people, we will have a chance, but we cannot do it by increasing the purchasing power of the purchasers of luxuries, because nations cannot live on luxury trades. Nations in the main live upon the ordinary needs of the common people. It is the need for universal clothing, universal food, universal housing and universal methods of transport that maintains a nation, no matter how wealthy it may be. Neither this nation nor any other nation is maintained on silks and velvets. It is maintained on the ordinary commodities that the great mass of people consume, and if we take from them their consuming power, how can we dispose of our commodities?

It has been said that the luxury trades are improving and that the tariff is disposed to help them, but we cannot maintain the people of this nation or make a prosperous nation by introducing tariffs to enable it to produce parts of wireless sets, or gramophones or goods of that description. If we can produce means whereby the mills of Lancashire can be put into operation, and the steel goods that the ordinary people desire can be made; if we can put into operation the coal pits that fill the fire places of the people whose fireplaces are now starved, we shall be on the way to prosperity and success for the mass of the people and the nation as a whole. Prosperity will not come by means of the luxury trades. We ought to be attempting to discover means whereby we can set the wheels of industry moving to the fullest extent and give the people access to the things that they demand. It is a curious fact that there is only one country in the world—I know that this is not a very popular thing to say—where cheapness is being welcomed by the governing class. That is in Russia, because the cheaper goods become there the more they are distributed. In this country the cheaper goods become the greater becomes our unemployment problem and the deeper grows our poverty.

I belong to a small group, but we shall continue to put the point of view that this House by some means or other must begin to adopt a different outlook and a different social philosophy. It must get over the idea that by pettifogging, mean economies the problem will be solved. We cannot do it by 1s. a week off the civil servants' salary or by 2s. a week off the typists. That is not the way in which it will have to be done. It will have to be done by increasing the power of consumption. [An HON. MEMBER: "Where?"] I will tell the hon. Member. For one thing, there will have to go far less in rents, profits and interest than there goes in wages to the mass of the people. Not until that principle is adopted and we begin to produce, not because it pays to produce from the point of view of £ s. d., but because what we are producing adds to the comfort and well-being of the great masses of the people will our problems be solved. That is the essential factor, and from that point of view we shall continue to press the views we hold and believe. Only by a more rapid application of the principles held by Socialists, and only by the great mass of the people being given access to the means of production and an increased power of consumption will the problems that confront modern society be solved on a satisfactory basis.

7.0 p.m.

Mr. HAMMERSLEY

It is only natural that in a Second Reading Debate upon the Finance Bill a great deal of our time should have been taken by considerations of monetary policy. As the hon. Member who spoke last night from the Front Opposition Bench reminded the House, on similar occasions in previous years I have addressed myself rather particularly to questions of monetary policy. I make no excuse for confining my remarks to that aspect of our financial problems, which has been dealt with to-day by the right hon. Member for Epping (Mr. Churchill). It appears to me that we can simplify an admittedly complex problem by trying to separate it into a consideration of those policies which are theoretically desirable and those which are practically attainable. In the sphere of the theoretically desirable, I include the plan for international action. Everybody will agree that, if one could take international action to bring about a rise in the world price level, it would be a very good thing to do. Every economist, every nation, every party realises that the continuance of the fall in the price of wholesale commodities is a world catastrophe and, in putting forward the suggestion that there should be a grand international conference to consider the matter, the right hon. Member for Epping is saying nothing new. It was a matter which was proposed and discussed many years ago, which was put forward when he was Chancellor of the Exchequer, and which he turned down.

To pursue the examination of that line of policy at a time like this, when the country is in the difficulties which confront it, would be a pure waste of time. It must be realised that many of the arguments, which the right hon. Gentleman brought forward to show that a conference on disarmament was unlikely to have any fruitful results, could equally be brought forward to show that a world conference on the price level would be similarly barren in achievements. There are the great difficulties of political questions, there is economic nationalism rampant, and there is the great problem of debt payments. What would happen if we had an international conference to decide on a new world price level when we have not decided what is to happen to the payment of War Debts and Reparations? Obviously, France would not agree to a scheme to fix a new world price level prior to dealing with the question of international debts and reparation payments.

Therefore, I would like to turn from the theoretical sphere of what is desirable, those very desirable subjects on which we all talk so much and on which so little practical action can be taken, to the more restricted sphere of the practically attainable. In that category I put action which can be described as raising the internal price level, action, which is under the control of this Government, by which the price level of the sterling area can be raised. There, obviously, we have to consider the policy put forward by the right hon. Member for Hillhead (Sir R. Home) and we must realise, first of all, that we are taking a definite risk. In my view, it is a risk which is less than the risk of doing nothing. Last night the Chancellor of the Exchequer said that the Government did desire to see a rise in wholesale prices in this country. Compared with earlier statements of Governments in respect to monetary policy, that seems a very mild way of expressing the views of the Government. There was no indication that the Government were going to put into force a policy to carry out that desire, and there was no declaration, as there was when the Government of the day decided to carry out the recommendations of the Cunliffe Committee, that this Government would accept the recommendations of the Macmillan Committee and that their definite policy was to restore the internal price level to some particular level.

It is true that there is some explanation for the hesitancy of my right hon. Friend the Chancellor of the Exchequer to make any definite pronouncement. We are still living under the old bogy of the fear of sterling depreciation. When we went off gold, it was to the interests of everybody in this country to see that there was no uncontrolled depreciation in the value of our currency. We had then a straightforward policy, a policy of making sterling safe. Everybody understood it and it was a desirable national aim. We have done that and, in a world that is unsafe, a world in which many of the popular idols have been found to have feet of clay, a world in which very few countries have escaped bankruptcy and in which most capitalists are haunted by fear, it is only natural that, now that we have achieved that safety of sterling, all the capital in flight, all the floating loose money, all the panic money, as it has been described, has flown to this country. What has been the result? The exchange value of our currency has gone up higher than the value which was justified by the profit-earning capacity of the country. That unnaturally high value of our currency has been followed very quickly by a drop in trade, which has been realised by the figures published to-day, and which I fear will show further increases in unemployment in the weeks to come.

The Government, realising this state of affairs, are naturally now considering an alternative policy, a policy by which their financial arrangements would not be directed quite so much to the safety of sterling but to a revival of trade. As a result, we have had this rather half hearted statement, which leaves the business world quite confused as to what is the policy of the Government. If we follow up the first policy of making sterling safe, then a fundamental condition for the revival of British industry will be lacking. That fundamental condition is a condition of confidence. The Chancellor of the Exchequer said earlier in the Debate that without confidence no reforms in our monetary policy would bring us where we wanted to go. I would like to invert that statement and to say that there can be no confidence in the business community unless we have a reform of monetary policy. When we went off the Gold Standard, we levied ourselves with increased taxation in order to maintain the pound. That was a policy which was a correct policy, the policy of the emergency Budget. This second policy is a similar policy imposed at a time when the necessity no longer remains. For my part, I would like the Chancellor of the Exchequer to change that policy and to realise that the ultimate value of the pound depends upon our ability to import raw materials and foodstuffs and to pay for them by the export of manufactured goods, and to do that at a profit. Unless that can take place, our trade wall continue to decline. I would compare the country to-day with a company, the profits of which are continuously declining, and the holders of sterling with the debenture holders in that company. As these profits decline the debenture holders become restive, and they are satisfied for the time toy being given a further charge on the assets. That is what happened in our last Budget, but, if the profits still continue to decline, even if they get a charge on all the assets of the country and even if they take possession of those assets, they will find, when they seize them, that they are assets which are not realisable.

The only financial policy which we ought to carry out at the present time is a policy designed to one end, to help industry. It is no use being half convinced about it, it is no use our going to help industry and then looking backward with a reluctant glance and finding that the dollar exchange is not what we thought it was. We must face those risks. It is no use considering the price of British Government securities. If we go for the main objective of helping British trade, then the dollar exchange, the price of the pound sterling, and the price of British Government securities will look after themselves. If we concentrate our policy on considering these mere monetary difficulties, then indeed the last state will be worse than the first.

There remains for me to consider this: Will a purely industrial policy put up the price level? It will. The volume of credit must affect the level of prices. Up to now credit has not been expanding; in fact, it has been contracting. The Chancellor of the Exchequer mentioned that the conditions of going off the Gold Standard ought to have caused a rise in the internal price level of 33⅓ per cent. That same argument can be used to show that, if we have not increased the volume of currency in circulation by 33⅓ per cent., we have in fact deflated to that extent. We have deflated by not increasing our currency, as is shown by the decrease in the amount of the deposits of the joint stock banks. It must be clear that, if we alter that policy and give abundant cheap money and expanding credit, then we shall give to the world a warning that we are not making every effort merely to support sterling. They will not push their balances over here unnecessarily, they will take away their loose money, and the pound will sink in value from its artificially high figure and will fall to a point at which it can be supported naturally by the volume of trade which is being carried on.

I contend that the practical problem before us is to face the necessity of raising prices within the sterling area. Sterling prices can be raised by Government policy. They have provided themselves with the machinery to do it, and the commercial world outside, on whom rests the responsibility of providing employment for millions of our workpeople, is anxious that this policy should be carried out and looks to this House of Commons to see that it is enforced

Mr. HARTLAND

In rising to achieve the ambition of a lifetime by addressing this historic Assembly for the first time, I do so with much more diffidence than I ever thought would be the case, and I therefore trust that the House will be, if anything, over-indulgent in the consideration which it will give me during this ordeal. A careful study of the Budget proposals and of the Finance Bill itself, and a very long and patient hearing of the Debates on Budget Day, yesterday, and to-day, indicate very clearly that in a huge national balance-sheet such as ours, running into so many hundreds of millions, two important points, and two only, emerge for really first-class consideration. The first is this question of currency, and that has been dealt with by so many eminent economists or students of finance that I would like to be as modest as the hon. Member for Silvertown (Mr. J. Jones) was yesterday, and hesitate to go into any place where the angels would hesitate to accompany me.

The second point was the omission from the Budget, which was mentioned by the Chancellor at the time, of war debts and reparations on one side or the other, and I, and presumably the House generally, will be hoping that this is a clear indication that the Government themselves have great hopes that those international considerations of this question which are shortly to be held are likely to bear valuable and early fruit. Should that be so, there is no doubt that a very different complexion would be put, not only upon the national Budget of this country, but upon the national Budgets of all the other countries in the civilised world.

If I may come down from the realms of big figures and high finance, and give a little attention to the Finance Bill itself, and more particularly to the Amendment of our friends above the Gangway on this side, our inattention to which their representative has recently been lamenting, I find myself compelled to say that it has struck me and other newcomers to this House, from the time we entered it and listened to the Debates, how much hon. and right hon. Members above the Gangway arrogate to themselves the sole right and claim to be the protectors and protagonists of the working classes. No doubt they do represent a certain proportion of the working classes, but their numbers are few and our numbers are many, and the franchise is wide and the working classes have elected this House. When they consider things from that standpoint, I think it will befit hon. Members above the Gangway sometimes to give a little consideration to hon. Members on other benches, who have at least as much consideration for the working classes as ever they had.

This Amendment of theirs, apart from its reference to the land taxes, which we presume are dead, resolves itself into an attack on indirect taxation, and in that respect, and having regard to the interest which the framers of the Amendment have for the working classes, I am rather surprised that they have not said anything in the Amendment about the working man's beer. Again I know that this matter of beer is finished. There can be no doubt about the attitude of the Chancellor, and none of us has any doubt whatever as to the rectitude of what he is doing, but coming as I do from the City of Norwich, representing the heart of the county of Norfolk, I feel that this House should know that my constituents, and those of hon. Members representing neighbouring constituencies, are going to feel the effects of the non-reduction of the Beer Duty very severely. I do not care much about those who drink beer, although I do it myself, and I am not much concerned for the brewers, because, with the greatest possible respect for my right hon. and gallant Friend the Member for Burton (Colonel Gretton), I think the brewers are very well able to take care of themselves.

I look upon this Beer Duty, and my constituents in Norwich look upon it, from the point of view of unemployment, in the first place, and ineffectiveness for Treasury purposes in the second place. I know for a fact that the non-reduction of the Beer Duty is going to cause a certain amount of direct, immediate unemployment in Norwich, and it must be the same in other great brewing centres. Again, I know for a fact that it is going to create havoc among the agricultural community who grow barley In that county, and it seems rather a pity that when this House has helped wheat with a £6,000,000 bounty, it is helping at the same time, by its inability to remove this tax, to cut the throat of its good friend, barley. Further to the fact that it will create unemployment, I hesitate to believe that the Chancellor will get anything like the revenue from the tax that he expects. I can see licensees going out of business and their employés going on the dole; I can see the bottling business and other ancillary trades, a hundred and one of them, dependent on the brewing trade, seeing their people out of work, their employés all going on the dole at Government expense, and the employers themselves failing to be able to pay Income Tax, Surtax, or any other tax.

I know there is no hope of doing anything to alter the Chancellor's decision as regards the Beer Duty, and having stated what I believe to be the case in brief for Norfolk in that respect, I will again confirm that we all of us, however much we object to this tax being continued, realise that the Chancellor himself knows far better than we do all the ramifications and all the circumstances of this tax, and that we are quite content to abide by his decision, provided we have some reason to hope that he will bear all these facts in mind and that, at the earliest possible moment, there will be some consideration given to those who either grow barley in the fields or by other means make their livelihood from trades dependent on beer.

The rest of the Labour party's Amendment is more or less directed to an attack on tariffs. It has always been a marvel to me that the Labour party in this country should be so hostile to tariff principles. They are not so in any other country, and when we remember that the capitalist is in a position to transfer his money and his interests to any part of the world where it will pay him to make his goods, their protégés, the working classes, cannot transfer themselves to any part of the world. Steps must be taken to see that work and wages are provided for them in this country, and we cannot provide work and wages for our people in this country as long as we are content, in a time of world over-production, to pay wages to the foreigner. We cannot pay both, and I cannot understand why hon. and right hon. Members above the Gangway here do not give that much consideration to help our own people to got employment in their own country. The only feasible way of doing that is to do what every other Socialist and Labour Government in the world have done, and that is to protect the labour of their own working classes.

As regards the country's mandate for tariffs, whatever may have been said by those who led the National Government into the last General Election, there is no doubt about what was said on the other side. I do not suppose that any hon. or right hon. Member in this House had any different experience from mine, and I was told on every poster in our city that if you voted for the Tory candidate or for the National candidate you were voting for a tax on food. "Vote for no food taxes. Vote Labour." Those are the gentlemen, sitting above the Gangway here, who gave the National Government a clear and distinct mandate for Protection.

Listening to speeches which have been delivered to-day and yesterday, I could not help thinking that there has been a little too much of that pessimism which is arousing joy in the hearts of our friends above the Gangway. I believe there is a great deal too much pessimism. I believe that this country at the last General Election took the advice which was given to it and returned the Government with a very definite mandate, in the first place, to protect the industries of this country. We hear about overproduction, and how impossible it is to employ our people while there is overproduction. How can there be overproduction in a country which still spends over £200,000 a year on buying manufactured goods from abroad? If the National Government will take up the very hefty weapon which was handed them so whole-heartedly by the electors at the last General Election, and will wield that weapon powerfully, immediately, and effectively, without any hesitancy, I believe confidently that this country can not only restore its own trade, but can pave the way to a profitable conference at Ottawa, repair the fortunes of the whole Empire and unify it for trade and business purposes, and that our unified Empire, in close co-operation with the United States, may yet very easily lead back the whole world to something like prosperity.

7.30 p.m.

Lieut-Colonel MOORE-BRABAZON

I do not know why the hon. Member for Norwich (Mr. Hartland), who has just sat down, was so diffident about his maiden speech, for he seemed to approach it with great confidence, and I am sure that we enjoyed every word of it. Frankly, I have always looked upon the City of Norwich as something rather apart, and in future I shall look upon its representative also from the same point of view. I only hope that we shall hear him very frequently in our Debates. We are now discussing the Finance Bill, and although, with the exception of a very short time when I was out of this House, I have been a Member since 1918, I have never before had the temerity to talk on the Finance Bill with all its complications. This year, when any speaker sits down, one almost gets the impression that the National Anthem is going to be sung, so many people spring to their feet. It seems to me that is because everybody realises that the great experts of the world in finance have failed, and that it is time for the ordinary man in the street to realise that he has to pull the country out of the mess it is in, and not the great experts on finance and currency to whom we have listened so often and who are now contradicting each other.

I think this Debate will live in history as being the inflation Debate. For the first time we have heard pleas for bimetallism advanced from very respectable quarters. We heard pleas to-day from right hon. Gentleman for inflation. The right hon. Member for Hillhead (Sir R. Home) seems to think we can get inflation by a reduction of the Bank Bate. I do not know whether that is true or not. Frankly, however low the Bank Rate goes, I never get better terms than 5 per cent., so it does not affect me, and I am sure it does not affect a lot of other people. I do not know whether inflation along that line can take place, or whether it will affect prices—it is something we do not know—but I think the ordinary Member of Parliament would like an assurance from the Government, because, frankly, the House of Commons is going to impose this inflation upon the Government. No longer are we going to sit down under the cruel tyranny of the City and go on with a policy of deflation. At last the House of Commons is going to kick, and I think it will be very interesting to see the result of this Debate.

I am only an ordinary Member of Parliament. At the last election I did my best to win votes by saying that unless they elected me the pound would undoubtedly slump. I waved bundles of mark notes worth nothing to show what would happen if the pound went to nothing. Many people did the same thing, and I am not ashamed of it. It is surprising, however, that when we come to our first Budget we find there a special fund to keep sterling down. That is a very remarkable thing, and I cannot help saying that just as in the law of physics the law of indeterminacy has upset all rules so, in the law of economics, we cannot say that one thing is necessarily going to follow another. To keep a fund to stabilise currency is a very dangerous thing. When war broke out a firm in France started sending telegrams all over the country buying and selling exchange. The French Government thought it was very wrong of private firms to make profit out of the distresses of war, but instead of stopping the telegrams they altered them. When the firm sent a telegram saying "Buy" they changed it to "Sell." The firm said "It is intolerable to alter our wires in this way, and we are going to bring a case against you." The French Government knew they were in a bad hole, and tried to make the best they could out of a bad job. But this case never came on, and the French Government eventually asked why, and the firm then confessed that the month during which the Government altered their wires was the only month in which they made a profit. That, I think, shows the danger of meddling with exchange.

We have already seen the great financial experts of the country push us into this mess, and I can see this fund of £150,000,000 evaporating very shortly, if the Government play about with exchange. The policy followed by the City has been one of the reasons why we are in the present mess. The City are obsessed by the thought of the £50,000,000 they derive from what is called the Money Market—the bills of exchange which come from all over the world. For that market they are desirous of having a perfectly stable currency which does not vary. It is that obsession of the City's which put us on to the Gold Standard, from the effects of which we are suffering at the present time. The right hon. Member for Epping (Mr. Churchill) made a very good point to-day when he said, what is so true, that sterling should be related to commodities and not to gold. It is a most depressing thing that the whole value of sterling should vary because two or three banks in America have failed. Their failure has nothing to do with us, but it has had a repercussion upon our sterling. We have talked a lot about conferences, and that sort of thing, but I would like to see some better solidarity among sterling currencies than at present exists.

I would like to ask the Treasury Bench what is the logical sequence to the train of thought connected with what they term the balance of trade. We are told, and I think quite rightly, that there can be no real improvement in world trade except by all improving together. No one country can be prosperous without another. We are told, also, that for us to be prosperous we must have a balance of trade in our favour. I suppose the same thing must occur in Germany; they must have a balance of trade in their favour; and so with every country. In that case I would very much like to know, Who carries the baby? If every country wants a balance of trade in its favour how can such a thing exist? It seems to me quite preposterous. It has already been pointed out that two separate policies exist on the Government Bench in the matter of exchange—I am not talking about tariffs. We have had the President of the Board of Trade, in very powerful speeches, saying how we must stop the importation of goods in order to keep the pound up, and now the Exchequer, taking the other view, start this fund to do exactly the opposite thing. Really, it becomes impossible for a poor Member of Parliament to try to explain these intricacies to his constituents. To show the difficulty in which I find myself, I cannot do anything else than give the House a quotation, slightly altered. I recall that those two Departments are presided over by gentlemen with the Christian name of Walter, and I say, "By the Walters of Babylon I sat down and wept, when I remembered the stony city."

Mr. LENN0X-B0YD

Mine coming so late in the long line of maiden speeches, I think it rather incumbent upon me to ask the special indulgence of this House. I hope that, though I am addressing the House for the first time, I may congratulate the Chancellor of the Exchequer on the Finance Bill which he has introduced. There are Clauses in it which have been greeted in the country with the most lively satisfaction. The country as a whole welcomes the sugar and the tea preferences, the final death of the Land Value Tax, the establishment of the Exchange Equalisation Fund, and, above all, the cessation of State borrowing to meet current expenditure. We may regret that a Government which has shown notable courage in other fields has not been able, without further inquiry, to put co-operative societies on a fair trading basis; but this and other considerations are as nothing compared with the fact that this Finance Bill represents a definite breakaway from the old practice of mass bribing, vote catching, and political Finance Bills which we were in grave danger of establishing as a permanent part of our national activities. As to the Import Duties, I am confident that the House and the country are determined to give them a fair trial, conscious that the best answer to the Home Secretary or anyone else is that the abuse of anything in foreign countries is no argument against its proper use here.

It is a matter of peculiar satisfaction to many new Members that this salutary Finance Bill has been introduced by the present Chancellor. Many of us feel that the country would have been spared some, at least, of its difficulties if the policy put forward by his father had been endorsed by the people of Great Britain. I am equally certain that if the lesson of this Finance Bill is taken to heart in the country we shall be in a comparatively strong position in which to meet the grave difficulties of the future. At a time when we have regained our moral leadership in the world, when the world is looking to us for a lead on the vexed question of currency and prices, it must be a matter of peculiar satisfaction to the present Chancellor to reflect on the changed conditions which prevail since the Finance Bill of April last was introduced in this House. The House will no doubt remember the publication in April of last year of a book which was much commented on in the European and American Press. They will remember what Professor Siegfried said, and many other foreign observers believed, that the foundations of our former greatness were passing away—naval, commercial, imperial, financial; that the character of the British people had been undermined; that the people cared for nothing but bread and circuses; and that any party that dared to tell the people the truth would inevitably be beaten. Only a few months afterwards the main argument of this book was put to the test and was proved to be completely false.

The purpose of the very few observations I wish to make is to urge the Government to profit by the lesson they learned last October. I am quite confident that if the case is properly put, with all the weight of a National Government behind it, the British people will recognise two things. First, that we can have no recovery of world trade without world agreement, and that it is no use having world agreement if we retain in Great Britain a Budget of £900,000,000. Secondly, I am confident the public will recognise the fact that direct taxation has reached a point where the benefit to the nation as a whole is far outweighed by increased costs of production. I believe the people of Great Britain, if properly taught, will recognise that no country can enjoy a standard of living which it does not earn, and that until we are in a stronger commercial position it is idle to pretend that we can possibly carry our present burden of expenditure.

I have heard it said by Ministers outside this House that the private Member is very eloquent on the subject of economy in general, but that no one is more forward in opposition to it when any particular economy is suggested. I can assure the Chancellor that he will have very little difficulty in this respect from the benches now occupied by new Members returned as Conservative supporters of the National Government. We shall be behind him, a solid and approving phalanx, when he begins his process of educating public opinion. He can begin on the official Opposition, whose policy it is to make everybody temporarily happy out of a public purse which industry has, up to now, conveniently filled, conscious that in matters of taxation its attitude was recently summed up in this House by the hon. Member for Limehouse (Mr. Attlee) when he said: "In matters of taxation it is not what is taken but what remains that counts." Then he can turn to the Lord Privy Seal who, when he was asked to form the May Economy Committee, said that they had already appointed 72 committees—a number that now wants bringing up to date—and that one more would probably not make much difference, and he added: I frankly tell this House that I do not hope for much from this committee. Indeed, I believe that I could write its report myself to-morrow. The Noble Viscount was then heading for a £1,000,000,000 Budget, fortified by the warm approval of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), who dubbed this valiant enterprise, not the last voyage of Liberalism, which it really was, but "carrying a great cargo for the re-equipment of the nation." Then be can turn to the Liberal party whose attitude on economy is extraordinarily difficult for a layman to understand. All sorts of speculations and suggestions have been made as a result of the report of the Liberal Conference at Clacton, and I think we are entitled to ask: do the Liberal Ministers want the tariff proposals to succeed or do they believe that if you go on painting the devil on. the wall long enough it will end by the devil appearing in person? If the tariffs do succeed, will the Liberals who have opposed them take their share of the credit in a Government which has successfully accomplished for the nation's benefit a fiscal revolution? If, on the other hand, tariffs fail, we know what the Liberal Ministers will do. If world prices rise, will the Liberal Ministers allow their supporters to say that the rise in the cost of living, is due to tariffs? On the other hand, if world prices do not rise and the depression remains, will they say: "Here you have your tariffs, and you see what they have done for you."

Where do the Liberal Ministers stand on the question of economy and taxation? At Buxton last year there was enthusiastic endorsement of a policy of collaboration with a spendthrift Government, and at Clacton there was anger and displeasure at members of the Liberal party collaborating with a Government pledged to economy. We want to know exactly where the Liberal Members stand. It was said at Clacton that there was a great battle and the Labour Ministers were attacked by the Liberal delegates. I think all those proceedings were rather in the nature of a sham fight, and that the Home Secretary though he may have thought some of the blows meted out were rather severe, none the less substantially approved of the Clacton resolution. Perhaps he may have remembered the old couplet when walking home after the mass meeting with Professor Ramsay Muir, Perhaps you were right to dissemble our love, But—why did you kick me downstairs? But I can assure the Chancellor that economy has a large number of friends in this House, and, if he rigorously pursues that policy, he will find very substantial support. Some of us have definitely made up our minds about two things at least. The first is that direct taxation has reached a point where the harm done to the trading capacity of the nation far outweighs any benefit which the nation may receive by increased social amenities.

In the official Amendment moved by the Labour party, reference is made to the growing burden of indirect taxation, but the truth is quite the opposite. Since the War direct taxation has increased by 460 per cent. and indirect taxation by 220 per cent. Income Tax, which in 1913 yielded £44,000,000, last year yielded £287,000,000; the Super-tax in 1913 yielded £3,000,000 and last year it yielded £77,000,000. The yield from Death Duties has trebled. The right hon. Gentleman the vicar—I mean the victor—of Wakefield described this process as "bludgeoning the poor." If his cry succeeds, but I do not think that it will succeed, then future generations reading the history of our time and the changing face of England and the tragedy of it will be lost in wonder at the credulity of our people. Is it altogether Tight annually to extract £60,000,000 from productive industry for compulsory national insurance? Is it right to take in 10 years £600,000,000 in Death Duties, and to spend the bulk of it as income? I hope the suggestion which has been made will be. carried out and that the annual yield from Death Duties will be regarded as the minimum sum to be put on one side for the redemption of debt.

I think future generations will be surprised when they see the treatment which we are according to company reserves. In 1912 those companies had a balance of undistributed income of £102,000,000; Income Tax at 1s. 2d. in the pound re- duced this by £6,000,000 to £96,000,000. The balance of undistributed income in 1931 will be about £240,000,000, and with an Income Tax of 5s. in the pound that sum will be reduced by £60,000,000 to £180,000,000. The Chancellor of the Exchequer has spoken of the diminishing yield; he knows as well as anyone the appalling psychological effect of continuously penal taxation, and he knows that it is draining the lifeblood out of industry. I hope that the Government will make it perfectly clear at the earliest possible opportunity that there will be a reduction in the standard rates of direct taxation. This can only be done by substantial economies.

Many of us have the most profound misgivings despite our admiration for the work that the National Government has done, as to whether the Government realises the overwhelming nature of the mandate which it received at the last election in favour of the most searching and rigorous economy. The Civil Service Estimates are very illuminating. In 1929 they amounted to £238,000,000, and in 1930 the amount was £295,000,000. This year they amount to £330,000,000. Those who think as I do have no desire whatever to depress the life of the poorest of our people, and we emphatically protest against the suggestion that the enormous expenditure we are incurring on social services is necessarily synonymous with social progress. Why should the Government not put into practice the recommendations of the Geddes Committee? Why send children to school at five years of age or even at six? Why spend £100,000,000 a year on education? Why imagine that if we continue to spend £100,000,000 a year on education and keep the parents out of work that the children in the future will be more grateful to us or the country better off than if we spend a little less and give their fathers employment. The London County Council will, we hope, show how to reduce expenditure and at the same time retain efficiency. The hon. and gallant Member for Houghton (Colonel Chapman) has drawn attention to the gross disparity that exists between elementary education costs in different parts of the country.

Why retain those ministries which the Geddes Report suggested should be abolished? I am sure that the Minister of Mines, the Minister of Transport, and the Secretary of the Department of Overseas Trade would agree that their Departments if abolished would be dying in a good cause. The truth is that expenditure should be rationed and every Department should be rationed. I also believe that the burden of local responsibility for expenditure should be ruthlessly increased. Hon. Members on the Labour benches have often suggested that the high budget is due to the fact that we are paying for past and future wars. I think everybody hopes for a speedy conversion of the 5 per cent. War Loan, but it cannot be over-emphasissd that it is no substitute for departmental economy. As regards future wars, it is well to remember that while in the last eight years since 1924 our expenditure on Defence Services has gone down by £10,000,000 the cost of the Social Services has gone up by £100,000,000.

I must apologise to the House for having taken such a long time. I hope that the Second Reading of this Bill will be carried by a large majority and that those events on whose happy determination the next Finance Bill depends will work out to the national advantage. And though I was not one of those who received the Prime Minister's blessing last October, I hope that the national character of his administration will be preserved. It will take the efforts of all parties to do this. The Liberal party contains many scholars, and I am sure that they will remember that in Athenian times the election of public officers took place by balloting with beans. And they will remember that from this a maxim was evolved to warn people against participating in elections. And so I am sure that they will not think that I am endeavouring to dissuade them from further sprightly exhibitions in this House, but rather giving them good advice for their conduct in the Dulwich by-election, when I say to the Liberal party, "Abstain from beans." If they do so, then the faith of our people in the National Government will not be betrayed; the overwhelming national impulse that we are assured flared up in England last October will not have been in vain, and we can look forward to four more Finance Bills which will reflect the growing national strength which we believe this Government can achieve.

Sir JOHN GANZONI

I think the House will wish me to offer its congratulations to the hon. Member for Mid Bedford (Mr. Lennox-Boyd) for a speech so admirable in its matter and so eloquently delivered. The House is always generous in recognising merit, and the supporters of the National Government, and especially the Conservative supporters, will welcome the accession to their ranks of a recruit who, I am sure, will prove so valuable to their cause in the future. I make no secret of the fact that I believe that if anything happened to bring an end to the National Government, with its work only partly accomplished, it would be a deplorable calamity. After all, this Government has given us that protection which is one of the things which is absolutely necessary to enable us to retain our place in a competitive world. It has given us a firm government in India, and I think that is the only form of government which is likely to succeed there.

8.0 p.m.

With regard to the Amendment on the Paper, it is a marvel to me that right hon. Gentlemen and hon. Members opposite who, ever since the end of the War, have done everything they could to handicap and strangle British industry on several notorious occasions should be associated with an Amendment of this kind. I do not think that in view of the policy of the Opposition they have a right to accuse the National Government of anything. I do not sympathise with the view of hon. Members opposite that there ought to be an increased proportion of direct taxation. But it may be inconvenient for them to remember that direct taxation already rises to 11s. 4d. in the pound on every pound of some people's income, and goes up to a maximum of 13s. 6d. in the last pound on some large incomes. Of course that is only Income Tax and Surtax. It takes no account of other forms of direct taxation.

The expenditure side of the Budget today is £766,000,000. That cannot possibly be supported by the country next year, with the shrinkage in values, which will necessarily mean a shrinkage in Income Tax and Surtax returns, and still more in the Death Duties and Stamp Duties, and in fact in all the main sources of direct taxation. Before the War there was an expenditure side on the Budget of £197,000,000, and yet to-day, as the last speaker said, the Civil Service Vote alone for 1932-33 is £330,000,000. The Education Vote, too, has risen enormously. Turning to local taxation, which was £79,000,000 in 1913, it was £165,000,000 in 1931-32. Then there is the appalling burden of capital commitments for local and municipal borrowings. These have risen from £562,000,000 in 1913 to £1,121,000,000 two years ago. I have not got the latest figure. If, therefore, it is seriously believed by the official Opposition that more can be easily raised, and raised without damage, by direct taxation, all I can say is that that is another reason why their return to office and independent power should be delayed to the latest moment possible.

The Amendment also deplores that the Finance Bill suspends for an indefinite period the Land Values Duty. I feel sure that the vast majority of people will agree that the only regret is not that it is suspended, but that it is not suspended by the neck until it is dead. There seems to be no excuse for its life being prolonged or for the possibility of its return being allowed in any circumstances. I know that there are people who approve of it on account of a muddled line of thinking, which leads them to think that it is a tax upon increased land value. If it were that, no doubt a larger number of people might approve of it, though it is entirely opposed to the Conservative view. But the Land Tax as imposed by Lord Snowden last year is certainly dormant, and I hope moribund, and I think we shall be much easier in our minds when we know that it is dead and buried. [An HON. MEMBER: "You will be easier in your pockets!"] Those who will be easier in their pockets are the people who supply practically the whole of the vast amount raised in direct taxation, and I should imagine that no Chancellor of the Exchequer would object to these people feeling easier in their pockets, for that reason.

The Amendment also objects to the re-imposition of the Tea Duty. We are very glad, as far as the preference for Empire tea is concerned. I can understand that the smaller duty on Empire tea, instead of allowing Empire tea to come in free, was put in for revenue purposes, and no doubt very necessarily. The proof of that is the tiny size of the surplus that the Chancellor of the Exchequer was able to reveal to us, even after making use of this duty. One of the things in the Bill that I do rather deplore is that with the alteration of the Sugar Duty a preference has been obtained by a method which imposes a charge on the Treasury at a time when we require every source of revenue. I cannot help feeling that that was an error in tactics. Nevertheless I greatly welcome the preference that has been given to these old Crown Colonies of ours, which are in such very grave need to keep them solvent at all.

The part of the Budget proposals and of the Finance Bill which worries us most in the Eastern Counties is the failure to remit the increased Beer Duty. I sometimes wonder whether people who are not barley growers, not farmers, not brewers, and not interested in the allied trades, remember that the excessively high barrelage duty on beer is only one of the many charges on that trade. There are the licence duties and other burdens which, piled one on the top of the other, make it almost impossible to carry on at the present time, as is evidenced by the fact that in a town only about 12 miles from me in Suffolk, a brewery that has been open for 50 years is now closed down. I, like the hon. Member for Norwich (Mr. Hartland), do not wish to add anything to this Debate from the point of view of the brewer. I am not a brewer myself, and incidentally not a beer drinker, but representing a borough situated in the middle of a purely agricultural area in the Eastern Counties, where it is extraordinarily difficult for the farmer to keep afloat at all, I do regret that the advantage of what has been done by de-rating and by the Wheat Bill has been in a great many cases almost taken away by the failure to do anything for the barley grower. In Suffolk and Norfolk are large areas of bountiful barley. It is good malting barley, but it cannot be sold this year, and I do not suppose that there is the slightest prospect of selling it next year. If only the Chancellor of the Exchequer had been able to give something tangible, or even some definite ray of hope in the direction of remitting part of the increase of 31s. duty put on by Lord Snowden last year, that would have gone a long way. It would have done a great deal to help the farmers of the Eastern Counties to keep going at a time when every single thing seems to be against them.

Looking at that part of the Budget, I remember that the Chancellor of the Exchequer is well known to be a famous fisherman, but I cannot help thinking that it must be a dry fly he uses. At the same time all of us who have taken an active part in endeavouring to persuade the Chancellor of the Exchequer to alter this duty, do realise that now it is impossible for him to do so. I feel that, had the matter been taken in hand earlier, when the Budget was being framed, it would have been quite possible. Furthermore, I agree with the hon. Member for Norwich, who gave us such an. admirable maiden speech, that the estimates of the direct losses in the revenue from the beer barrelage duty which the Chancellor of the Exchequer has made—the direct losses that he would incur if he lowered the duty—seemed to be excessive, having regard to the amount of increased consumption which might reasonably be expected. The right hon. Gentleman does not seem, to our satisfaction at any rate, to take into consideration the contingent losses that must accrue if he keeps the Beer Duty up to the high level of last year. I refer to the losses in assessment, in Income Tax, and of the allied trades, and particularly the extra costs that will be caused by the increase of unemployment.

As I have said, the Chancellor of the Exchequer is well known to all of his friends as a fisherman. Of course, he belongs to one of the higher branches of the profession, but I do not think he has quite mastered the art of throwing a sprat to catch a mackerel. It would probably be an advantage to him and to the Exchequer if he had been a little more amenable upon this subject of the Beer Duty. I had hoped that it might be possible to persuade him, if he could not remit the increased duty, to do something which would be a great help to the Eastern Counties and the barley growers, by helping to increase the brewing of beer entirely from British malt and hops. He did say at one time that he would be willing to consider any concrete proposals, but I fear that it is too late now to hope that anything will be done in this Bill.

I have only risen to try to make it perfectly clear that we are very disappointed in the Eastern Counties. We do believe that the consequences to ourselves in that part of the country will be far more serious than the Chancellor of the Exchequer and his Cabinet colleagues realise. At the same time we feel bound to shoulder our share of the burden. We realise that times are extremely difficult, that the balance between expenditure and the income that can reasonably be expected is exceeding small, even if the yields of all the taxes come up to the Chancellor's expectation. Therefore, in spite of our fears and misgivings, I shall most certainly vote for the Second Reading of the Finance Bill.

Mr. COCKS

I would like to congratulate the hon. Member for Ipswich (Sir J. Ganzoni) in the first place for being one of the few speakers who have dealt rather closely with the Finance Bill. Although the discussions of the last few days have been on the Budget, and now on the Second Reading of the Finance Bill, very few strangers coming into this place and listening to our Debates would have known it. That is not to say, of course, that the speeches have been in any way irrelevant. They have been just the other way. They have been dealing with very important matters which should engage the attention of thinking people. It is not the speeches that have been irrelevant, but the Finance Bill which is irrelevant. It has very little relation to the problems that confront the State and the world. In some ways I am very sorry for the Chancellor of the Exchequer personally. He has succeeded in the ambition of his life; he has brought to a successful conclusion the great campaign of the statesman who was his father. One would have thought, therefore, that a Budget which changed the fiscal system under which this country has been governed for the last 60 or 70 years, would be a great historical event. But that does not seem to be the case from the appearance of the House to-day. It has not appeared to me all through the discussions on this Budget and on the previous Import Duties Bill, that there was any realisation that it was a great historic occasion. If Mr. Joseph Chamberlain's campaign had been successful in 1906, if this country had been turned from a Free Trade country to a Protectionist country in 1906, or even in 1910, that would have been a great event, but success, as so often happens in life, has come too late. Any benefits that tariffs might have given have been swallowed up by the great inrush of deflation. All is now weary, stale, flat and unprofitable from the Protectionist point of view, and the Budget, which might have been an historic event, has degenerated into an irrelevance.

I have noticed a variety of military metaphors in these Debates. We were reminded yesterday, for example, by the right hon. Gentleman the Member for Hillhead (Sir R. Home), of Wellington's statement that the Battle of Waterloo was a near-run thing—I omit the adjective. We know perfectly well that, if Grouchy had arrived instead of Blücher, the result would have been very different. What happened to Grouchy was that he was rather led away by irrelevancies, such as the rearguard action at Wavre. He forgot the great military maxim of marching to the sound of the guns. I do not intend to follow that weak example; I intend to march to the sound of the guns; in other words, I am not going to waste my time on the irrelevancies of the discussions between Members of the Cabinet on the question of Protection and Free Trade, nor am I going to take part in that astronomical warfare between the satellites of Jupiter, the comet of Epping, and what I might call the variable star of St. Ives. I intend, as I say, to march to the sound of the guns, and to take my poor armament, such as it is, to the side of those who are fighting the main battle against the entrenched forces of the Treasury and the Bank of England.

We have also heard during these Debates a good many very interesting views on currency as applied to history. We have been told that the downfall of the Roman Empire was due to lack of currency. I have been told also—I do not think it has been suggested in this Debate—that the revival of trade and commerce during the 12th century was very largely due to the fact that during the Crusades Western Europe obtained a great deal of gold from the East. It was afterwards helped by gold from Africa, obtained in the wars which went on with the Moors in Spain. It is very interesting, regarding history in that way as a series of waves of inflation and de- flation, to notice the great inflation which followed the Black Death—an inflation caused by the fact that, while half the people were killed, the same amount of money remained. We have been told about the great revival of trade which came in the time of the Tudors, owing to the discovery of the silver mines of South America. As business developed and made use of the currency, there came a period of deflation, and trade sagged again. Then, after a period of inflation, we bad the great deflation which followed the Napoleonic Wars, remedied by the discovery of gold in California and Australia. Industry developed as the result of the additional gold, and used up the extra currency, and, as industry developed on the one side and currency did not keep up with it, we had deflation again, with industrial distress and unemployment, remedied about 40 years ago by the discovery of gold in South Africa. After the Great War, inflation again took place, and then came the great deflation of the right hon. Gentleman the Member for Epping (Mr. Churchill).

The right hon. Gentleman the Member for Epping has very characteristically made a speech in the House this afternoon denouncing deflation; that is to say, denouncing, as he has done more than once in his career, the cause of which he was at one time the chief promoter. The period of deflation when the right hon. Gentleman the Member for Epping was Chancellor of the Exchequer had very disastrous consequences. It is all very well for him to say that no one could have known, but he was told at the time. Members of the party to which I have the honour to belong opposed that policy all along. Also, an economist who is not without fame, namely, Professor Keynes, wrote a pamphlet, not after the results, but before, prophesying exactly what would happen if that policy were carried out. I happened to find it on my bookshelves the other day, and, looking through it again, I was astonished to see how word for word everything that Mr. Keynes said in it had happened. The pamphlet is entitled, "The Economic Consequences of Mr. Churchill." Here is one of Mr. Keynes's statements: This alteration in the external value of sterling money has been the deliberate act of the Government and the Chancellor of the Exchequer, and the present troubles of our export industries are the inevitable and predictable consequence of it. Then, referring to an industry in which I am very much interested, namely, the coal mining industry, he said that the direct result of going back to the Gold Standard would be an attack upon the wages of the coalminers, and he continued: On grounds of social justice no case can be made out for reducing the wages of the miners …. They represent in the flesh the 'fundamental adjustments' engineered by the Treasury and the Bank of England to satisfy the impatience of the City fathers to bridge the 'moderate gap ' between $4.40 and $4.86. They (and others to follow) are the ' moderate sacrifice ' still necessary to ensure the stability of the Gold Standard. The plight of the coal miners is the first, but not—unless we are very lucky —the last, of the Economic Consequences of Mr. Churchill. Indeed, we are still suffering from those economic consequences. It may be said, therefore, that the action of the right hon. Gentleman the Member for Epping in 1925 was a direct cause of the lock-out in the coal industry in 1926, and he himself is the illegitimate father of the General Strike of that year of which he talks so much.

That policy of deflation, which was the policy of the Bank of England and of the Treasury, was continued under the right hon. Gentleman's successor; it was continued under the present Lord Privy Seal, who was then Chancellor of the Exchequer in the Labour Government. The Lord Privy Seal came into politics with a very inflated reputation as ft financier, because he once looked after the petty cash of the Independent Labour party; but it is certain that, under his regime, the policy of the Treasury and of the Bank of England—the policy of deflation—was still continued, and it was criticised from these benches at that time. It has been said in this Debate, and it is continually repeated, that the crisis of last summer was due to the inefficiency of the Labour Government, or rather, to loss of confidence by various nations in that Labour Government. I think the facts which have been brought out during this Debate are sufficient to disprove that assertion. The Financial Secretary to the Treasury laughs at that. But he himself has talked about the great masses of liquid capital that are floating about the world, and were floating about the world at that time, and I re- member one of his supporters in this House stating that there were people in the world, manoeuvring those great masses of capital, who were prepared to ruin, a nation for one-half of 1 per cent. Such evil people as these helped to bring about the crisis, which the right hon. Gentleman the Member for Epping said was partly manipulated.

The mistaken policy of the Bank of England, in locking up gold in Germany which it could not withdraw, was the first cause of the crisis. But another cause was this. It has always been my view that the reason why foreign investors lost confidence in this country was that this Government went on its hands and knees to foreign financiers to borrow credits from them and, in order to get those credits, altered at their demand the policy of the country. That was the most humiliating position that this country has been in since the days of Charles II, when our foreign policy was subordinated to that of France because of a subsidy from Louis XIV. That, more than anything else, lost the confidence of foreigners in this country. Further, the formation in itself of the National Government, the cuts and the incident at Invergardon, which was exaggerated all over the world, brought us off the Gold Standard. I have always felt that those credits, which have cost I do not know how many millions, ought never to have been asked for. We ought there and then to have gone off the Gold Standard. It was only because we pursued the Bank of England's policy that the crisis came. But, apart from all those reasons, this crisis would not have occurred if it had not been for the continuation of the policy of deflation which has been carried on ever since we went back to the Gold Standard under the direction of the Court of the Bank of England and the Treasury under successive Governments.

Mr. HOWARD

Was not the cause of all those things that the hon. Member has just adumbrated the continually increasing adverse trade balance?

Mr. COCKS

That may be the hon. Member's opinion. Mine is as I have said. I fear that this policy is still being continued and has not yet been definitely reversed in spite of the speeches that have been made during the Debate in all parts of the House and from Members of great authority in finance, in the City, in business, and in political life. It is admitted that this policy of deflation, however, has brought about a very terrible position, not only here, but in other countries. It is admitted that it has trebled since 1920 the burden of the National Debt and, similarly, all fixed interest bearing securities, mortgages and the like. In the last seven years, according to Sir Josiah Stamp, the real burden of the National Debt has been increased by £4,000,000,000. That is as if we had spent another £4,000,000,000—as if we had had another war. The interest upon that additional value amounts to £200,000,000 a year, and that is the additional real cost that we have to find in taxation to pay the interest on that inflated value of the National Debt. It falls ultimately on the workers of the country. This has been done not out of the blue. It has been done at the expense of someone— at the expense chiefly of the primary producers, the producers of food, coal and so on, who have not a sufficient return for what they produce. It has brought Australia to the verge of bankruptcy. It is all very well to say that Australia became bankrupt through extravagance. The position was brought about because the value of her exports dropped by a half in a year—from £80,000,000, I think, to £40,000,000—which is a sufficient cause for any country to be placed in an awkward position.

8.30 p.m.

This policy pursued in other countries has bankrupted not only whole nations but whole Continents. South America, for instance, is a producer of primary goods. She is bankrupt. Moreover the commerce which should flow between one country and another in a broad refreshing stream is dwindling rapidly to a small rivulet meandering between great expanses of marsh and desert. Our ships are laid up because there are no cargoes, and unemployment is enormously increased. This process of deflation is wiping out any beneficial effect that tariffs may have. That has been admitted over and over again by supporters of the Government. It has been admitted that a certain change in the value of sterling wipes out a tariff of 10 per cent. and to-day you find that, in spite of tariffs having been set up, unemployment is increasing. Here is an ex- tract from a leading article in to-day's "Times," which is not as yet a Socialist organ. It has not been nationalised: World trade does not revive. New obstacles are placed in its way…. The whole world is sick. There is probably a larger percentage of unemployment in the United States than here; and there is certainly more in Germany, Belgium and other of the smaller European countries…. The policy of economic isolation must be a sentence of disaster to the nations that attempt it and a peril to all. The Chancellor of the Exchequer cannot be very hopeful that tariffs are going to cure unemployment, because we find unemployment increasing in every country in the world, many of which have higher protective tariffs than have been imposed in this country. In spite of those tariffs, unemployment is increasing as the result of deflation. When your ship is sinking as the result of deflation, it is no good putting two or three inches on the bulwarks. That is all a tariff does. My great fear is that the Government is not yet convinced that this is a thing that must be tackled. I am saying this because this idea of deflation has been a fixed idea of their advisers, the Bank of England, ever since its existence. Not merely in the lifetime of the present Governor of the Bank but all through its history we find exactly the same desire to deflate. Last summer, just before the crisis, Mr. Montagu Norman and his American adviser, Dr. Sprague, were going about at different meetings stating that it was their object to bring down the prices of manufactured goods to the agricultural level. It was their idea, too, that wages would have to come down, as a result, to the pre-War level. The whole idea was to bring all prices down to pre-War level. Apart from that being the settled policy of the Bank of England, I think that the people of the age of Mr. Norman and Dr. Sprague like to go back to the prices they knew so well in their youth and which for that reason have acquired a sort of sanctity. It is a kind of Freudian impulse. Their idea was to come back to the price level that existed then, before the War blew it and so many other things away.

I was alarmed at the speech made by the President of the Board of Trade. I have always been rather suspicious of the President of the Board of Trade, and I am not sure that I am alone in that suspicion. I have noticed from the beginning of this controversy he has seemed to take what I might call the City point of view. For example, in the beginning he supported tariffs, not because he thought that they would be protective, but because they would check imports and bring about a better balance in trade and thus improve sterling. He may have moved from that position since. Certainly in the speech which he made the other night he gave utterance to a sentiment which I consider to be very suspicious. He said, talking about the Exchange Equalisation Account, of which we have heard so much but have been informed about so little: If the Government were to go in for borrowing heavily on Ways and Means that might quite easily mean a great deal of inflation, but I cannot imagine that the Government and the Bank of England are going to reverse their policy. The Chancellor of the Exchequer on 19th April used a phrase which I also consider, as an inflationist, very suspicious. He said: we must be very careful to keep full cover again6t the Note issue."—[OFFICIAL REPORT, 19th April, 1932; col. 1427, Vol. 264.] Professor Cassel has said that there was no need for that and that it is a mere superstition. It is a sign of the Bank of England deflationary policy. The House knows that the Exchange Equalisation Account, although it may be used for the purposes of inflation—and I hope that it will—may also be used as a very powerful and potent instrument for deflation. We do not know the policy of the Government, and we have very grave reasons to fear on that point.

It is true that we on these benches believe that Socialism is the only solution of our difficulties at the present time. Socialism is the only cause which can ultimately save the nation. At the same time, I do not wish to see the capitalist system, and civilisation with it, sink into the deep ocean. I am certain, as are many other hon. Members and as we have been told to-night and as we were told yesterday, that if the policy of deflation is continued that not only must the capitalist system crash, but perhaps civilisation itself. I want to save the ship, and when the ship has been saved, we can decide whither shall be its destination.

Mr. RANKIN

I desire to make a few remarks, my first in this House, upon the financial proposals now before the House. I regret that I cannot speak from the point of view of finance; I can only represent a view of the overburdened taxpayer. His feeling with regard to the Budget is one of disappointment that there as no mention of any further economies in expenditure. The taxpayer, already heavily burdened, has somehow managed to pay up in advance a whole quarter's Income Tax, a pre-payment which cannot be set square until each payer dies, and then only if the executors remember about it. The strain has been terrific, and the taxpayers have answered the call because they believe that the Government also is straining every nerve to minimise the burden. But the taxpayers cannot answer another call of the same kind, however urgent it may be. In fact, they have only succeeded in meeting this call through hope for the future. But in this hope they are going to be disappointed so far as can be seen at the moment, because the Government are apparently making no economy such as the seriousness of the situation warrants. In fact the Government appear to be as far behind the requirements of the May Report as the May Report is behind the necessities of 1933. As long as that is the case, it is vain for the Government to wait upon the expectation of a revival in trade to send up the yield of the taxes. It is true that Customs may for a time mask the falling yield of other taxes, but that can only be for a time. As things stand the inevitable conclusion of this process is a series of perfectly balanced Budgets imposed upon a community which is steadily approaching bankruptcy. How then can we get economy at the present time? I do not see how it can come from the Departmental Ministers. The task for Departmental Ministers would probably be too difficult.

I would remind the House that some years ago there was a famous triumvirate, the Esher Committee, which did in its day, about 1903, what a great Department of State and what a Government could not do. Is it not believable that to-day another triumvirate could be found which could control and reduce the expenditure of the Departments and so save the country many millions of pounds? After the duties were finished, could not the fruits of such a Committee be kept alive by the creation within this House of a Finance Committee with really live powers to whom all Departmental Estimates could be submitted? It is true that at the beginning of each Session a committee is set up which chooses which of the Estimates shall be examined in detail, but before it has presented its report, as likely as not, the Estimates will already have been passed. There is also the Public Accounts Committee, but any error or faults which the Public Accounts Committee discover are very often two years old before they are published. Would it not be possible for a really representative committee, such as exists in other countries, to be formed, powers to examine Ministers and officials and to hold their sittings, if they choose, in private I Thus would the Members of this House regain some control of expenditure which they have so largely lost. There is a crying need if we are not to become insolvent, and that is a redistribution of the Empire's population. Ministers know, for it needs no telling, that the present distribution within the Empire of the British race is all wrong. Some 44,000,000 persons in this country, 10,000,000 in Canada, 6,000,000 in Australia and 1,500,000 in New Zealand are an absurdity, yet because it is difficult to change it, it is by successive Governments ignored. Why should our statesmen seek to perpetuate that system by tariffs, by quotas, by doles and a hundred other devices which are designed to remove the inconvenience of carrying out the duty of serving beet the Empire? They know that this cannot be done in six months or even 12 months, but unless and until they make this redistribution of the Empire's population a cardinal factor of British Empire politics and statesmanship, they are doctors playing with medicine in the face of a diagnosed disease and professing that they know no better. I do ask that the Government will lead us and the Empire to a goal which all can understand.

Mr. BARCLAY-HARVEY

The hon. Member who has just spoken said that he was addressing the House for the first time. I have to perform a duty for the first time, and that is to follow an hon. Member who has made his maiden speech, and to do what I am sure the House will wish me to do, and that is to tender to him our congratulations on his speech. I do so with the greater pleasure in that he has been voicing so many things which I feel myself and with which, in my own modest way, I propose to deal now that I have the opportunity. I hope that we shall hear the hon. Member many times in our Debates in the future and that he will add, as I am sure he will, greatly to the knowledge and interest of the Debates in this House.

I have listened with as much attention as I could to the speeches which have been made during the last two days. I heard the Debate described by the hon. Member for Wallasey (Lieut.-Colonel Moore-Brabazon) as an inflationist Debate. I do not propose to deal with that matter to any extent, but I could not help being struck by one thing, and that was that whenever an inflationist speech has been made on this side of the House it has been greeted by cheers from the Opposition. That strikes me as rather curious, for the reason that, surely, the whole abject of inflation is to raise prices in order that the primary producer may get sufficient to make a living and that the manufacturer may also get sufficient for his manufactured goods in order to sell them at a profit. If we had suggested that the object af our tariffs was to raise prices for exactly the same purpose we should have been howled at by hon. Members opposite, yet they appear to support a policy which can only have as its object the raising of the prices of everything in this country. I am not saying that this is a wrong thing to do, but I do say that to raise prices must either be right or wrong. It cannot be both. Therefore, I have been astounded to see Free Traders so ardently supporting the policy of inflation.

The matter with which I wish to deal chiefly is the question of economy. Advocates of economy cannot regard a Finance Bill which not only does not limit taxation but actually has to impose fresh taxation, with any great degree of enthusiasm, but I was very glad to hear the Chancellor of the Exchequer say last night that he proposes during the next few months to do some very hard thinking with a view to producing some economies next year. We all realise the difficulties with which the Government have been faced. We all know that at the time they had to prepare their Estimates they were busy with the General Election and with the immensely important subjects that they had to tackle immediately afterwards, and they bad not the opportunity to review expenditure in the way that they will have in the coming autumn. Therefore, I think we may look forward with pleasure or at least with hope to the economies which they will effect when they really turn their mind to them.

I am glad that the Chancellor of the Exchequer has made this Budget and that he has produced a Finance Bill as unpleasant as this one. We may make some wry faces in the swallowing of this large and ill-tasting pill, but I welcome it because the fact that it leaves an evil taste in the mouth is part of the necessary cure. It will encourage hon. Members to take every step to see that they do not have to swallow a pill like this next year. I do not think I need labour the desire for economy or the necessity for it, but I should like to deal with certain figures which have been quoted several times but which cannot be overstressed at the present time. We cannot say that we are genuinely balancing our National Budget so long as we are expending capital on current income. We are doing that in two different ways, directly by the levying of heavy Death Duties which are used for ordinary revenue purposes, and also by the fact that the present very heavy rate of Income Tax and Surtax by the burden which it has placed upon the direct taxpayers has compelled them to dip into their own capital in order to meet the requirements of the Treasury. Therefore in two different ways we are trading on the capital of the country in order to tide over our current expenditure.

But the story is not complete. Most people look to our national expenditure as that which is shown in the total Budget Estimate of £767,000,000, but I observed in a little corner in the Blue Paper that was handed to us at the time of the opening of the Budget a little note which added the total expenditure by local authorities as well. I hope that the Financial Secretary to the Treasury will take that little note out of the rather obscure corner in which it was put and put it into the most obvious place in any future statement which he produces. I hope that whenever he produces an Estimate to the House showing the expenditure of any Service that he will also give us an estimate of how much the local authorities are spending on that particular Service, so that we may get an idea of what the total cost of the country is, not only through the central Government but through the local authorities also. It is only in that way that we can see what the country really is spending and how far the expenditure is justified. We are raising in national and local expenditure a sum equal to one-third of our total national income. That is a question which we must tackle. That brings me to the last point, as to how we are going to do it. The hon. Member 'who has just spoken urged that a new committee such as the Esher Committee should go into all these questions.

The Government should take some such step. They should examine carefully each item which appears on the Civil List during the next few months to see where they can effect the necessary economies. The right hon. Member for Epping (Mr. Churchill) said that there would be no difficulty; that you have only to go to the Treasury and they can produce any cut you ask, but that the difficulty arises when you put the cut before the Cabinet and still more so when it comes before the House of Commons. I hope that if cuts are suggested that they will get through the Cabinet, and in that case I am certain that the House of Commons will give the Government every support when the Estimates are presented.

In the meantime let us help the Government in every practical way we can, and above all by taking the opportunities afforded us in the discussion of the various Estimates, which we shall have presented during the course of the next few weeks, to concentrate on the figures in those Estimates, take them item by item and criticise them, not because they are too little but because they are too much. We must urge upon the Government that they are spending too much. We must criticise the Estimates and find where they can be reduced, even if it is only a small amount. In this way we shall strengthen the hands of the Government in dealing with the spending Departments. There is no more reasonable way in which to bring the spending Departments to a sane point of view than by pressing upon them that the House of Commons is determined to criticise every item of expenditure brought before it. We shall not only be strengthening the hand of the Government but also doing what we can to strengthen the hands of the House of Commons, by restoring to it some control over finance which has been so grievously lost during the course of the last few years.

Mr. ATKINSON

The first thing which strikes me about this Finance Bill is that it continues the high scale of taxation which has now got beyond bearable limits. It is continuing the scale of taxation imposed last autumn, and already we see the work of disintegration going on and how it is destroying our sources of revenue. We are all saying, and we all know it, that industry and commerce depend for their revival upon people having money to spend. There is hardly an industry which can flourish if people are only able to buy the bare necessities of life. The bulk of our industries can only flourish if people have money to spend on things which they can do without at a pinch. The Finance Bill is taking all the money that people have to spend, for a great part of the Income Tax and Super-tax has had to come out of the capital of the people. You have only to look at the condition of some industries to see where this is going to lead. Take the case of the cotton industry. Many of the shops in London and large provincial centres selling its products are either closing down or being reduced. An hotel company in which I am interested paid £45,000 in Income Tax last year. Next year they will not pay a penny because they have made no profits. Since last summer there has been stagnation in that business. That is merely typical of what is going on and it entitles us to say that the present scale of taxation is drying up the sources of revenue. I shall be much surprised if next year the Income Tax produces anything like the sum which the Chancellor of the Exchequer expects. Of course, people like musicians and artists are starving; nobody has any money to spend on them.

9.0 p.m.

The Beer Duty brings it still nearer home. It is a subject of taxation which the Chancellor of the Exchequer admits is already overtaxed. He admits every argument brought against the tax, that it is ruining a great many thousands of licence holders. It is a tax which it is admitted is doing nothing but harm. What is the justification for the tax? The Chancellor of the Exchequer says that he cannot do without the money. When you cannot do without the money, notwithstanding the injury a tax is inflicting, it is a clear proof that you have got beyond the limits of bearable taxation and that it is necessary to deal with it in some big way. The first way is indicated by the last two speakers; and that is tremendous national economy. I think that we should spend £100,000,000 less, because we cannot afford to spend more. It is idle to say, where would you begin. That is not our business; that is the business of the Government.

I was very surprised to hear the Chancellor of the Exchequer say that they had not had time to consider economy. I should have thought that that was where to begin. There are many people in the Cabinet and although some of them are no doubt very busy surely there must be some Members of the Government who could have given part of the last few months to tackling the question of economy. For the country to be told that there is no economising because there has not been time to attend to it seems to me, with the greatest respect, to be a very unsatisfying excuse. At any rate, unless we spend £100,000,000 less I cannot see what is going to save the country from bankruptcy. There is another necessity which this over-taxation indicates, and that is the importance of a real financial policy on the part of the Government, one which is fairly clear-cut and which can be announced to the country so that the country can take a part in achieving it.

Let me indicate three or four directions in which we seem to be sitting on the fence. Take the question of tariffs. What is the policy of the Government in regard to tariffs? Are they imposed for revenue purposes or for the assistance of industry? They were started last autumn, obviously, with the idea of assisting industry. The duties were aimed at keeping things out. But there has been a complete change, and we nave had a series of lower duties which will not keep things out. There may be a reason for this change in policy, but I should like to know what is the guiding policy of the Government in this matter. I suppose the Govern- ment does lay down a policy for the guidance of the Advisory Committee. Are they to be told, "You must have revenue primarily in view," or are they to be told, "You must have industry primarily in view"? It is important that there should be a clear, definite answer on that point.

My next question relates to the subject of currency. We have heard it said that, ultimately, we must come back to a metallic basis for our currency. What is the view of the Government upon that subject? It may be difficult to form an opinion at the moment, but, in so far as one can form an opinion, one would think that it would be impossible to get back to certainty in exchange values, without some metallic basis for currency. If it is the opinion of the Government that at some time it will be necessary to come back to a metallic basis, then it is obvious that gold itself will not serve the purpose and the only way is to bring in silver to help. But we cannot do that "on our own." If it is the view of the Government that at some time they will come back to a metallic basis, and that gold will not be sufficient, and that it will be necessary to utilise silver, then it is a matter which ought to be tackled promptly. It will be necessary to have, at least, several of the important countries in the world at one with us in doing so and it might take months and perhaps years to achieve such a change. That is a problem which ought to be taken in hand at once and some definite opinion ought to be formed as to whether or not the Government look to utilising silver at all in the future as a metallic basis of our currency.

There is another point on which I should like to see more clarity of thought. We are creating an Exchange Equalisation Account. I do not know who is going to control it, but the important thing is that we should know what is the end in view. I do not think that the Chancellor of the Exchequer went further last night than to say that, at any rate, we did not want to see any increase in the value of sterling. Is the end in view to maintain sterling where it is or to inflate it? Again, unless there is a clear and definite policy about this matter, there may well be a good deal of muddle in the use of that fund. For my part I should like a clear definition of the aim which those who are going to control this fund are to have in view.

We have been told again and again that cheap money is wanted for industry and we have been told that the Government can, to some extent, control the banks in this respect. I never could see the use of talking about the advantages of a low Bank Rate unless industry was going to benefit by it, and I have never yet been able to find anybody who could get money from the bank at less than 5 per cent. however low the Bank Rate might be. Industry does not benefit. No doubt people who are dealing with bills of exchange which they are able to discount very cheaply may benefit, but in the matter of granting overdrafts to industrialists, there does not appear to be any advantage in a low Bank Rate. I do not know whether the Government can do anything in regard to that matter. I want to say this about the banks in Lancashire and the North. They admit responsibility for the tremendous inflation of capital in the cotton industry when we had so many flotations and when cotton mills were purchased at absurd prices. It is admitted that if the banks had not found the money then, which they did find in the most reckless way, the ghastly state of affairs which existed afterwards would never have come about.

A manager to whom I have talked on this subject admits that the banks were to blame in that case, but to-day they are going to the other extreme and I do not believe that there is a man in Lancashire to-day who could borrow a penny from his banker without providing security. I hear stories of businesses having to close down because they cannot get money from the banks unless they are able to provide security. If the Government have any influence with the joint stock banks, here is a very fruitful field of work—to do something to induce the banks to provide cheaper money for industry and to take a more generous view of the way in which they ought to make advances, instead of limiting those advances to people who can provide security. Apart from the points which I have mentioned, I say nothing as to the details of this Finance Bill, but I would end on the note on which I began. We must all feel that the taxation which is being imposed is more than the country can bear and it is the duty of every Mem- ber of this House, by every means at his disposal, to try to bring about a real outstanding reduction in the expenditure of the country before we have another Budget.

Mr. GEOFFREY ELLIS

Having spent a considerable term of years behind a banker's counter, perhaps I may intervene in this Debate, especially in view of the fact that on leaving the bank I went into productive industry. I desire to put the point of view of productive industry with perhaps a certain subconscious knowledge of banking behind it. During the Debates of the last two days I have been struck by the fact that nothing is easier to produce than a monetary theory, and, if you only put it forward with sufficient assurance and a certain measure of solemnity, you can take in quite a number of people. Speaking as a banker, I feel that, having built up a monetary theory, nothing is easier than to knock it down again, and I am convinced that the great majority of monetary theories, if put in practice, would be most dangerous things to let loose on the industry of this country. For my part, I regard the action of the Government as far as the Exchange Equalisation Account is concerned as inevitable. It is merely giving legal form and substance to a position which has existed over a long period, during and since the War. It was necessary to give it legal effect, to give it definite form and to bring it to public notice, chiefly because it was imperative that foreign nations should realise that the country and the Government were behind certain action which the Government had come to regard as inevitable.

The right hon. Gentleman the Member for Hillhead (Sir R. Horne), in his speech of a fortnight ago and in his speech of yesterday, if he will forgive me for saying so, indulged in something which was rather in the nature of what the Scots call "spiering," and I am bound to say that I was interested and amused to note the very able way in which the Chancellor of the Exchequer "spoke him fair and passed him by." It is inevitable that any industrialist, any economist, any banker should say to-day that he hopes that wholesale prices will rise. Of course, he does, because the first rise in wholesale prices is evidence that accumulated stocks are clearing off and normal business is beginning again, and that is what we all want and all look forward to. From the trader's point of view, this Equalisation Account had become absolutely necessary for this reason. When a trader is dealing with business which necessitates foreign currency, he has to be able, before he can take his business, to count his costs and see what his profit is going to be. That is an extremely hazardous operation unless there is some stability in the currency.

What is the position in the exchange market to-day? The old normal Gold Standard has disappeared altogether, and with it a great many other things never again to return. What concerns industrialists is that the exchange market is being upset by that mass of very fluid credit which is running about almost on the wings of rumour from one financial centre to another, and really to-day has come to find a temporary resting place, not so much on the amount of interest that may be paid it, but on the imaginary belief that some security has been attained for the time being.

In credits brought so easily and so fitfully lies the greatest possible danger to the exchange market, and the danger is that just as they come so easily, so easily may they go away. If it concerned only those who have brought the credits and who are taking them away, we should not mind so much, but their existence and movement operates on the exchange market in such a way that their repercussions have a serious effect on the man who is trying to do his trade in a legitimate and old-fashioned way.

Then again we cannot escape, in fact I do not think we want to escape, from the fact that the new processes of trade which must result from the change in our fiscal policy is itself bound to have a very serious effect on the exchange market. It is bound to restrict that market because a great deal of manufacture—at least we hope so—is going to take place at home which hitherto has taken place abroad. Consequently, the imports which will come in will fall in number, with the result that there will be a smaller number of exchange bills on the exchange market. That is a condition of things that has to be allowed for and which in itself restricts the available number of bills in the exchange market.

Last of all, the most serious from the nation's point of view is the steady drain on the exchange market of the dollars that are due to America. These dollars must be met in future unless a very great change takes place, and in meeting them the Government are bound to do their level best to procure them at a rate which is most useful and most beneficial to this country. Therefore, instead of having your own market where your rates of exchange are stabilised because most of the exchange represents the actual movement of goods and services, you have to-day an exchange market in which the movements of goods and services and, therefore of bills, is essentially restricted. You have these two deciding factors operating individually, as far as these individual factors are concerned, but with repercussions on the normal business of exchange which is having a very serious effect. I do not see how in that position it was possible for the Government to take any other step than they have taken, and to that extent industry is bound to be thankful that the step has been taken and the position regularised.

I do not think that the banking system and industry can expect the position to be left quite as it is. The banking system, quite rightly, when it is making a bargain with a man who is borrowing from it, considers not only the rate of interest, but the risk which may accrue to it from the overdraft which it grants. It measures that as a rule in the rate of interest which it charges. If it is 6 per cent. the bank has a reason, and if it is 5 per cent. it has another reason. I can assure hon. Members that there are quite a number of people borrowing at 4 per cent. and 4¼ per cent. to-day. Is it wrong to ask the banking system to consider the following point of view? It is admitted that this large mass of credit which is brought over to this country, as I said on the wings of chance very often, is not only of no use to the system as it exists to-day and will exist for some little time, but is an actual menace. When a system meets with a menace, surely it might consider whether it would not be advisable to refuse to take that money from day to day and demand a long-term deposit or not take it at all. I may be told that that practically is impossible. I have discussed it with my banking friends, and many of them do not agree that it is impossible. They say that there may be some difficulty in getting all the banks to agree together. All I can say is that unless in the future the banks do agree together more than they have agreed in the past, and come a little more to the aid of industry and consider banking more from the point of view of industry, they may find themselves taken in hand by a still higher power. If time deposits were made, a great deal of the menace that I have mentioned would be removed. People would hesitate to bring money here which they could not remove at pleasure, and the speculator would hesitate to embark upon exchange ventures, first because he knows the Government is behind any action which might be necessary for the Bank of England to take as a result of such speculation, and, secondly, because when a large amount of this day-to-day credit is removed speculation to be successful will be much more difficult.

There must be a recovery of trade generally throughout the world, and I am one of those old-fashioned people who believe that currency policy may affect very dangerously the whole future existence of the country of it is prostituted, but, if it is only employed a little one way or a little the other, I do not believe that in the long run it is anything more than a passing call on the way of trade and industry, which in the end is simply the exchange of goods and services. What matters more than anything is that the world should be able to get back in the long run to a much freer exchange of commodities than it has ever had in the recent past. I know that some of my hon. Friends will ask me why we have gone in for Protection. My answer to that is obvious. It is that all around us for years we have seen the grip closing on us, and as the grip has closed on us we have never had any opportunity nor any weapon to prevent it. At long last we have provided ourselves with a weapon that will give us an opportunity for negotiation. My view is that as a result of the bargaining that will go on trade will be a great deal freer in the long run, and I do not think that it should interfere with the arrangements that may have to be made, and I hope will be made, at Ottawa.

I come to the question of inflation. I listened throughout the speech of the right hon. Member for Hillhead (Sir R. Horne) for some practical finish, but the conclusion escaped me every time. Knowing his reputation and his ability, I began to think there was some fault in the arguments which I myself had always employed. Finally, I came to the conclusion that he was not really intending to put anything tangible before the House, and that he wanted to find out what the Government intended to do. He was followed by the right hon. Member for Sparkbrook (Mr. Amery), who went a little further and talked about a silver lining to the clouds, while the hon. Member who spoke last regretfully referred to silver. The one question you have to ask yourselves when these theories are produced is, how are they going to work out in practice? How is it proposed to benefit industry by inflation at the present time? It was said that industry would benefit if you increased the amount of credit at the disposal of industry.

At the present moment, from the point of view of borrowing, there are practically three kinds of accounts. The first is the account of the business which, through indifferent trade and a falling off in production as a result of bad trade, is leaving its credit with its bank, or turning that credit into a deposit, or buying an investment with it. That would be one of the first businesses to improve, but that business would need no credit expansion from the bank. The second kind of account is the marginal account, one which borrows at certain times of the year and then repays at the end of the year, but which is not on the average a big borrower. The last account is the one which is the most serious from the point of view of industry. It is the account which is spoken of as one which has a frozen credit. In many cases that means that the credit will never dissolve. These accounts have to be looked at from the point of view of the banks and industry in a very different way from the way they were looked at in the past, and for this reason. No outside credit will he given to a concern in which there exists already a prior lien holder who will not let go, Therefore, the banks have to face this proposition, that it may be to their interest, as it certainly would be to the interests of industry, if they can see their way to surrender some parts of their prior lien, take the ultimate benefit in the way of ordinary shares, and allow some more money to go in from other sources, and so restore the account. Where, in these three cases, is there going to be any benefit to-day from an inflation of currency? Surely, these are most of the cases the banks have to consider.

9.30 p.m.

There is another question I should like to put as to inflation. Can it be said that you benefit an industry by injecting a credit into it when industry to-day is mainly engaged in looking for markets it cannot find? Take the result of injecting this credit from one small practical example, a business which has not found itself able to expand because it cannot get a market. What good is injection of credit in a business of that kind? If credit is injected into it, and it is exhorted to go out into the world and find new customers, it looks round its range of customers, and what does it find? The only customers to whom it can give a new credit are those who owe it so much money that they want to borrow more. I cannot see, therefore, that this system which is suggested is going to cure industry to-day, or that a system of inflation is one which we should be justified in following. What I do say is that in the future—when our tariff system has given us what, I hope, will be a new lease to industry and which will leave us with better conditions after the Ottawa Conference, and when there is a full appreciation of the position of debts and reparation, which will some day have to be cancelled or very much scaled down —this world, finding the position different in the sense that it can see ahead, is bound, as it always has been in the past, to come together and find the easiest way of trading, each nation with the other.

When that happens, you may have an improvement in business which has come from no stimulus from any inflation but is a perfectly natural one, and then quite probably you will have to consider the basis of your currency arrangements in this country. You may have to go back to some modified system of the Gold Standard, which you may call sterling, the sterling area or anything you like, but I wish to utter a note of warning. There is a little too much tendency to get the idea of a sterling area into our heads, and to forget that no part of this world can do without the rest of the world as far as trade is concerned. It may be that an attempt to create a sterling area might lead to jealousies with other areas whose trade we very much want. When we have arrived at that position, the question of reasonable inflation—and I use the word here in another sense—is bound to be considered, and you will then have to think of the nature of the backing which you will give to the increased currency, which the natural increase in business will want and will demand; but I do suggest, unpopular though it may be, that until that time arrives—and that time will arrive slowly as a result of the settling down of the world—it is useless for us to play with theories and imagine that they can create trade and industry.

Lord BURGHLEY

After hearing the interesting speech to which we have just listened, I am afraid any item I can add to the Debate will be small beer indeed. I would like, first of all, to say how interested we were to hear the hon. Member for Leigh (Mr. Tinker) display such unwonted solicitude for the capitalist who may put his money into some industry which is sheltered by tariffs. We look forward in the future to his further conversion, but there is one thing on which I should like to assure him, and that is the old canard of the pension which is paid to the descendants of Lord Nelson. We are continually having this brought up and yet it must be easy for any of us to cast our minds back to that time and imagine the feelings of the people of those days who wished to pay a tribute to a great man who had done his country probably greater service than any man had ever done it before. They wondered whether they should give his descendants £5,000 a year or whether at 5 per cent. they should give him £100,000 down and have done with it. Probably they decided, after some thought, that they could use the money to produce 6 per cent., and they would pay the £5,000 a year to his family. If one admits the principle that that pension should now be cut, you must also admit the principle that if they had paid the £100,000 down you should now go to them and say that they have to give it all back.

It is improbable that a Chancellor of the Exchequer has ever had to bring in his first Budget in such distressing circumstances. Sympathising, as we know he does, with the cuts, and knowing that nothing could do more for industry than a reduction of direct taxation, yet he is unable to do this because he has not got the wherewithal. As far as the condition of the world goes, the Opposition delight in telling us that the capitalist system is crumbling, but I think the wish is father to the thought. This assertion bears no examination. It seems to me that the present system is like a bicycle which went along very well up to 1914. Then came the War, with its upheavals, earthquakes, and shocks for the economic system of the world, but in spite of this the bicycle went on fairly well for another 10 years. Then America and France decided that they would take off the chain, and the bicycle is now gradually slowing down to a standstill.

If the United States will not disgorge their gold, we must find another chain to take the place of the old one, and by far the best chain which has yet been suggested appears to be the sterling group. The policy of the Opposition is that, because the chain has gone, therefore you must smash up the whole bicycle, but anybody who has taken part in any cycling and has suffered from a disordered chain would not for a moment consider smashing up the bicycle as the remedy, particularly when the only alternative you can build is one which it is generally agreed will only go backwards and over the nearest precipice.

To return to the sterling area, we seem to have general agreement that it must raise the prices of primary products. There appear to be only two alternatives facing the world—wholesale defaults and bankruptcy, or an increase in the price of raw materials, so that the primary producers can produce at a profit again and that the countries can pay their ordinary debts. Could the Financial Secretary give us any idea what is the suggested metal backing for this sterling area? It seems to me that, apart from any other reason, it is needed to stop fluctuation. Indeed, I wonder what would have happened to the pound in 1926 if we had not been linked to some metal, but it may well be that gold is not the best metal backing, for it is probable that during our lifetime we may see the yearly output of gold becoming less and less, and as the horticulturally minded Member for Silvertown (Mr. J. Jones) would say, "We shall find ourselves up the garden again."

As none of the thinkers who foretold this crash some years ago dared predict that when this apparently irresistible force met an immovable mass, the result would be that we should go off gold, might it not be possible that, unlikely as it may seem, at the present moment we are going through a transitional period and will find, in some 10 years' time, that gold has been de-monetized? On matters like this, youth must bow to experience, and although it may well be that it is unwise or indiscreet for the Financial Secretary to tell us very much that is definite at present, particularly as things are changing with such kaleidoscopic rapidity, and before Ottawa, I feel sure that any information that he can give us on this subject will be gratefully received.

There are two or three other matters in the Budget on which I should like to say a few words, and the first is the extra allowance for wear and tear. Would the Financial Secretary tell us if this also applies to the agricultural industry? The farmer has got his heavy wear and tear on his tractors, binders, and other agricultural implements, and if it should apply to him, it would be a great help, not only in enabling him to keep his implements up to date, but also to the engineering firms who supply these implements and who are in such a sorry way at the present time. The constituency which I have the honour to represent will welcome the decision of the Government to continue the beet-sugar subsidy. This subsidy has been a lifebuoy to the farmers in many districts. Not only is sugar beet a good cleaning crop for the land, but it has meant the continued employment of men on the land who otherwise might have lost their jobs through the land becoming derelict, and it has also meant considerable employment to the workers in the beet-sugar factories. Naturally we had hoped to see this put on a permanent basis, but in the meanwhile the recognition by the Government of the difficulties of those who produce sugar in this country in competing with the price of sugar where it is now is greatly appreciated.

It is a very great disappointment to many of us to find that the Chancellor of the Exchequer cannot see his way to reducing the duty on beer, but in a Budget like this, when the Chancellor of the Exchequer has found it not only impossible to remit any taxation or to restore any of the cuts, but has even had to increase taxation, and with all his sources of revenue exploited to the full, he has to look at this matter from only one direction. He has had to blind himself to any grievance, however just it may be, and look at it purely and simply as a matter of revenue. On the one side, he has the Treasury figure of £10,000,000, which his advisers tell him he will lose if the tax is removed. On the other side, he has the loss from Surtax and Death Duties, and also the cost of the unemployment which is likely to follow, and the injury he will do to barley growers, hop growers, tenants of licensed houses, and other trades that go with the brewing industry. But although many of us may-think these figures should easily outweigh the figure of £10,000,000, still, if the Chancellor, with all the information that ho has in his hands is still certain that the balance is on the other side, I feel that we have, to use a vulgarism, to lump it for the greater good of our country. We all welcome his statement that beer is overtaxed, that he is forced to maintain the tax for economic reasons entirely outside his control, and that he will bring about a reduction at the earliest possible moment.

Having dealt with one of the most important items in life, I would like to finish by saying a word as to the other end of the picture. I do not propose to go into the general principle of Death Duties at any length, but it must be obvious to any thinkers that it is unsound to spend capital as income and can only result in the poor having to pay more and more in taxes, as the taxable income of those who are paying it now is reduced by these enormous inroads into their capital. Obviously, the Chancellor of the Exchequer is not now in a position to deal with this situation, and therefore I ask if he will give consideration to another, smaller item, and that is the desirability of not aggregating insurance policies in an estate for Death Duties. If we imagine a line depicting the views of hon. Members on taxation, at the one end you will find some who think that there should be no taxes, and at the other end you will have those who consider that the higher the taxes the better, and who have not yet realised, in spite of two years' experience, that although it is easy to make a rich man poor, that does not make the poor man rich; but in the middle of this line there will be many who would like to see taxes at such a height that you could go on getting the maximum revenue, that the goose should go on laying regularly the largest golden —or should I say sterling?—eggs year after year.

Therefore, I want to approach this matter on what must always be to the Chancellor of the Exchequer his Achilles' heel, and that is increased revenue. If we take the case of an estate of £500,000, and take the taxes—Death Duties, Income Tax and Super-tax—as remaining constant—and take it over two lives, extending over a period of 60 years, with a death at the beginning and a death in the middle, and if it is impossible that a man can take up a policy on the value not only of his estate but of his policy as well—I think Lord Snow-den explained why—if he takes out a policy on the value of his estate alone, it will be found, over a period of 60 years, taking into account the Income Tax, Surtax and Death Duties, that if the policy is aggregated in the estate the Chancellor will have lost some £82,000, and in addition to that, the estate is becoming smaller and smaller, whereas if it is not included in the estate the taxable value of the estate remains constant. I feel sure that in the past this point has not been dealt with because Chancellors of the Exchequer have been continually living from hand to mouth, but now that we are getting a more permanent financial policy I hope the Financial Secretary to the Treasury may be able favourably to consider this matter, and by doing so he will undoubtedly cure a great grievance. Further, he will get more revenue, because he will receive his revenue at once from the insurance company instead of having to wait for it, and he will receive it with a minimum of disorganisation to the markets, whether stock markets or the market for land in any particular district and will be curing a very genuine grievance.

Finally, unpleasant as the Budget may be, it is undoubtedly the only possible one. It follows the principle of paying our way without borrowing and, more important still, there has been no vote-catching bait thrown in; and if the Chancellor of the Exchequer continues, as we know he will, in doing what he knows is best for the country, without thinking or caring what other people may say about him, he will surely catch an even bigger fish than that with which we saw him depicted in a periodical the other day, a greater fish than all—the greater prosperity of this country.

Mr. MORGAN JONES

It is quite obvious that the Noble Lord who has just sat down can cover the territory covered by this Budget in almost as short a time as he can cover a furlong in another place, and I congratulate him upon the achievement which stands to his credit to-night. For two days this House has been occupied in discussing the Finance Bill. It is only six months since this Parliament assembled, and I am sure that anyone who might have strayed into the Gallery either last night or to-night and listened to these discussions would, if he had had no previous knowledge, have had very great difficulty in believing that this Parliament is only six months old. Speaker after speaker who is nominally a supporter of the Government has expressed with almost unrelieved iteration his disappointment with this Finance Bill. I hesitate to believe that much of the discussion has been largely a means of seeking refuge from that disappointment by raising other issues. I will not say the discussions which others have raised not specially arising from this Finance Bill are unrelated to the subject of finance, indeed, I would rather agree that they are fundamental to our present situation, and I should further be in complete accord with one of my hon. Friends who spoke earlier in the Debate when he said that what is irrelevant to the present situation is not the discussion raised on other issues but the Budget itself. I do not think I shall be far wrong if I say that this Finance Bill is almost as irrelevant to our present situation as would be the twittering of a sparrow in a thunderstorm.

I would like to say a word or two on the general issue raised in the course of the last two days. The first to raise the fundamental issue, as I prefer to call it, was the right hon. Member for Hillhead (Sir E. Horne). I ventured some week or two ago to make a comment upon the Budget statement of the Chancellor of the Exchequer when he outlined the financial provisions for the year. I said it was somewhat singular that the Chancellor of the Exchequer had not devoted any time, except in a very cursory way, to a discussion of the very grave problem of international debts and reparation. I admit that a reference was made to it, but I submit it was only a cursory one, and hardly adequate to the situation. I do not know whether the Chancellor bad a sort of feeling of shyness about the matter, but, anyhow, whoever may have a sense of shyness about it, I can say quite boldly that the party with which I am associated has not the slightest need to appear in a white sheet of repentance this evening. It cannot be controverted that ever since the War, that is, 14 years ago, the Labour party has constantly called attention to what it regarded as the rational way of approaching this problem of debts and reparations. When we first propounded our proposals we were, as is usual with us, laughed out of court. We were pooh-poohed. What did the Labour party know about these matters? But we have only had to wait until this year not only to hear the right hon. Gentleman the Member for Hillhead, who himself was then a Cabinet Minister, but the right hon. Member for Epping (Mr. Churchill) and the right hon. Member for Sparkbrook (Mr. Amery), and hon. Member after hon. Member giving authority to the point of view which we put forward 14 years ago—that if Europe was to be saved from something approaching economic disaster the policy of economic bitterness and spite must be abandoned at the earliest possible date.

Big business is supposed to be a great leader in these financial problems, and yet the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) told us in a book he recently published that Lord Cunliffe, a leading financial authority, presiding over a committee, actually advised him, as Prime Minister of the coun- try, at the end of the War, that it was possible to screw out of the German people £24,000,000,000. Not only that, but we all recall the famous statement of the right hon. Gentleman the Member for Carnarvon Boroughs about squeezing the Germans so much like an orange that you could hear the pips squeak. I wonder the Members of the Opposition refer now so contemptuously to the penguins of the city. This country has made the gravest possible economic blunders on account of that mistaken national policy.

We are now face to face with another element in our affairs which has created for us to-night another form of perplexity. There has arisen since the end of the War a certain type of economic nationalism, and it is a singular thing that in the last 14 years the world has seen a remarkable development in new forms of international transport and communication with every independent state in Europe which is making in the opposite direction not towards a growing internationalism but towards essential nationalism. Tariff barriers are being erected on every hand, the ways of trade are being clogged, and difficulties are being imposed and superimposed upon industry in this way and that. I have already said that the Labour party has no need to be ashamed of its record in the matter of reparations, neither need it be ashamed of its record in regard to attempting to remove international barriers. Those who were Members of the last Parliament will remember that the labours of the late Mr. William Graham were barracked week after week by supporters of the present Government then sitting on this side of the House, who sneered at him because he was struggling with might and main with a view to removing those artificial barriers on trade and industry.

10.0 p.m.

The President of the Board of Trade was in accord with Mr. William Graham, but to-night the right hon. Gentleman is a lost soul because he has joined the Protectionists, and his story now is this: "I can deal with those barriers so much better now for I have a lever to bargain with. I can go to the various international representatives and tell them that unless so and so is done, I will myself be responsible for a form of retaliation." The President of the Board of Trade hopes by that threat to exercise some sort of bargaining power. I have no great faith in that power, but, if the right hon. Gentleman can ultimately succeed—I do not think it will—good luck to him! But whether the right hon. Gentleman does in fact ultimately secure some sort of protection by the removal of tariff barriers or not, one fact remains, and it is this: Whether we are able to secure some sort of agreement at Ottawa or elsewhere we cannot be oblivious of the fact that the retention of our foreign trade is a matter of vital importance to this country. I do not think I can do better than remind the House of a quotation from the speech of the President of the Board of Trade. It is a simple one, and it states the position very precisely. The right hon. Gentleman said:

It is very difficult to say how many people are dependent upon our foreign trade, but I should think it is not unfair to say that it is somewhere between 16,000,000 and 20,000,000. You can take the small figure if you like; 15,000,000 would be the population of a very considerable country anyway. It is a great deal more than the population of Australia. If that foreign trade disappears, is it likely that we can maintain the whole of that immense mass of our population. The point of that is that, whatever may be the ultimate tendency, or whatever measure of success attends this new trade policy, the fact remains that we must maintain our grip upon our foreign trade with foreign customers. I still think that the late Mr. William Graham was quite right in his efforts to secure a reduction of those heavy barriers by agreement. I would like to make this point. Fortunately, there seems to be a new orientation taking place on the Continent, and the recent French elections would seem to give us hope in that direction. I hope that the Government will not miss the chance which has suddenly and almost providentially come their way of securing a larger measure of agreement in international co-operation in certain directions. I was very glad to hear the right hon. Gentleman the Member for Epping (Mr. Churchill) speak of the necessity for international co-operation in certain directions, and so far so good. I say to the right hon. Gentleman and his associates who support the present Government: what right have they to expect, shall I say, an agreeable reply to their approaches for international co-operation when they themselves are driving their own Government to it in the direction of a new orientation of trade policy?

We are not moving towards a larger measure of co-operation with all States, but we are moving towards a new economic Imperialism. I can understand that it is possible for people to make a case for that; I am not saying that there is no case at all. What I do say is that you cannot, on the one hand, be asking for complete international concord and co-operation, and on the other hand be drawing a ring-fence around a certain number of States in the world, and saying that those inside are our friends and those outside are our economic enemies. It is an experiment, but it is a very hazardous experiment too. It is quite true that you are hoping to arrive at some sort of economic arrangement, with a view to developing the resources of 13,250,000 square miles of the earth's surface; but most of those square miles are entirely uninhabited so far. Secondly, it is quite true, as a document of the Federation of British Industries said this morning, that there are 450,000,000 inhabitants in that area. But the vast majority of those inhabitants are people whose standards of life are not at all comparable to ours, and therefore they cannot offer us a market of substantial value.

In any case let me grant that there is a certain market in that area. I will not understate it. I ask this question: Is there in that market anything that can give a guarantee of renewed work to those who are now unemployed in our depressed export trades? We were told in our newspapers this morning that the increase in the number of unemployed is about 84,000, and that figure does not take into account people struck off the register long ago. Of those 84,000 over 60,000 are in the coal trade. What part of the Colonies or the Empire will give us the guarantee of a market for British coal? [An HON. MEMBER: "Canada!"] An hon. Member says "Canada," but he must know full well that the market for our coal in Canada is exceedingly limited. It may be that there is a market near the seaboard or along the St. Lawrence Basin, but the moment we go further inland the cost of the transport of coal to the inland towns is prohibitive. For the sake of a small concession like that, what consolation is it to us to take upon ourselves a hazardous experiment such as this economic Imperialism to which I have referred?

I invite hon. Members to take their minds back to a discussion upon this very point during the late Parliament, when the present Dominions Secretary held the same office and was replying to a. Vote of Censure moved by the Lord President of the Council, who was then leader of the Opposition. The late Government was censured for having failed to make use of the Imperial Conference, and the then Dominions Secretary said: Any appeal made by Mr. Speaker I must accept, and I shall proceed at once to examine the proposals and let the House draw their own conclusions. In exchange for a tax on foodstuffs, British soft coal, which is now taxed 1s. 7½d. per ton into Canada, would get a benefit of 5 cents per ton. Germany, the Argentine, the United States and Netherlands all admit our coal free now. Railway rails …. have a duty in Australia of 2s. 4d. per cwt.; the Netherlands and Argentine admit them free. The rate on foreign imports into these Dominions is, of course, much higher. Let us see what that means. Suppose that a tariff rate is fixed that precludes the possibility of our competing, of what value is any preference? The whole thing becomes absurd. I could go through a long list, cotton goods, woollen goods …. I could show that sewing-machines, not an unimportant manufacture in this country, have a preferential rate into Australia of l5 per cent. against us, while Germany only imposes 9 against us. Cranes and hoists: 55 per cent. in Australia, Canada 15 per cent., Germany 6, France 10, Netherlands and Argentine free."—[OFFICIAL REPORT, 27th November, 1930; col. 1554, Vol. 245.] You may argue that you can alter that at Ottawa. Very good; but the question which you must answer before you invite us to embark finally upon this hazardous experiment is, can you promise us that the people who are now in depressed industries and are unemployed, will be employed, and can you promise that their goods will be so in demand after the Ottawa Conference that there need be no apprehension whatever concerning the future of those depressed industries? The right hon. Gentleman will not be able to say that, because every one of these Dominions, naturally, wants behind certain Tariff barriers to build up its own nascent industries, because the Dominions feel that they have a market at home for the very goods for which we are seeking to secure an export market. It seems to me that hon. Gentlemen opposite are already feeling some apprehension about this matter. [Interruption.] The hon. Gentleman is confident. Let me read a passage from the speech of the right hon. Gentleman the Member for Hillhead (Sir R. Horne) yesterday. He said this: 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."—[OFFICIAL REPORT, 9th May, 1932; col. 1571, Vol. 265.] Even the right hon. Gentleman the Member for Hillhead is beginning to halt in his faith concerning this new orientation of our commercial policy. Further, I have before me a quotation from a speech delivered by a leading advocate of tariffs in this country, Sir Herbert Austin, in which, only yesterday, he indicated that he has become so alarmed lest this new tariff policy may become a cloak for inefficiency that he warns the country deliberately and of set purpose against those dire consequences which he apprehends in that direction. [An HON. MEMBER: "He is a Protectionist himself!"] I know, but, in spite of that fact, he gives that warning, and he speaks as one having authority.

Yesterday, and to-day again, hon. and right hon. Gentlemen have directed our attention—I do not complain of it—to another side of our financial problem, and one after another has begged the Government to pay attention to our monetary policy. The banks now have become subject to some suspicion, not among Socialists, but even among leading representatives of industry in this House. The Federation of British Industries itself has sent out a pamphlet within the last two or three days, in which it lays down what seems to it to be a revolutionary proposition, namely, that finance should be a servant, and not the master, of industry. Yesterday the right hon. Gentleman the Member for Hillhead referred to that theory as though it were the veriest revolution in economic and financial thought, but, in point of fact, the demand which the right hon. Gentleman was making yesterday was just a repetition of the demand which this party was making in the crisis last August. We were laughed out of court; we were told that we wanted to nationalise the banks, and what not; we were told that it was Bolshevism run mad. But speaker after speaker of authority has addressed this House during the last two days, challenging the Government to declare how soon they propose to embark on the policy of controlling this vile thing called the Bank of England. The cry came from Macedonia, "Save us from our friends"; or rather, perhaps, I should say, not a cry from. Macedonia, but a squeak from Penguin Island.

It is not without its interest to us, for every one on. these benches knows that one of the results of our analysis of the development of history in the last century is to show that capitalism was proved to be so disastrous an instrument that from time to time it was necessary to call in, to mobilise if you like, the public will and the public conscience, in order to restrict the operations of capitalism in this way or in that. Now, in this 20th century, we notice the development of a similar theory, although it has not been applied so much to industry, but is now being applied to finance. I venture to say here and now that this House will not be able to see a way out of our present financial difficulties except in so far as it accentuates the control of Parliament and of the Government over our financial operations both in the City and elsewhere.

Indeed, if there is one thing that has been more apparent than another in the last two days, it is that the supporters of the Government have been like so many country bumpkins at a fair—passing from one 3tall to another, trying this and trying that, having a shot here and a little shy there, pointing to this and to that—sometimes to reparations and indemnities, sometimes to the Gold Standard, sometimes to de-rating, sometimes to economy; but always the biggest crowd has been round the booth where the poor working man has had to undergo the operation of the thumbscrew. We have tabled an Amendment in which we call attention to the tendency to reverse the process of the division of taxation in the direction of adding more on to the indirect side and removing more from the direct side, and that after we recognise that in the last 10 years we have exacted from the working-classes in depressed wages between £5,000,000,000 and £6,000,000,000. We are going to have, I hope, at least four new supporters with us to-night, for there are four just men— perhaps I should say just four men—who have also declared that this Finance Bill is not acceptable. But their declaration arises from their disappointment that the proposal for land taxation and valuation is not entirely removed from the ken of the Chancellor of the Exchequer. Hon. Members opposite must not complain if we draw attention to the fact that, after the nation has spent hundreds of millions of pounds in improving the road services of the country, thereby adding substantially to the value of the land adjacent to those roads, the land still remains unvalued from a social point of view. In days when we are looking right and left for new sources of revenue and taxation, it is nothing short of a scandal that this obvious source should be so carefully and deliberately overlooked by those who are in charge of our national finances.

We do not accept the proposition that direct taxation is as yet bearing its proper relative share of the taxation of the country. If you insist that our Debt services must be amply and fully discharged—I do not question the proposition—if you insist that you must maintain your armed forces at their present strength—I accept the proposition for the purposes of the argument—if you insist that Parliament has the right to impose certain responsibilities on local authorities in the discharge of certain social functions through the medium of social services, the natural corollary is that the money must be found, and, if the money has to be found, I challenge hon. Members opposite to dispute the rightness of this proposition, that it can only be found from those sources where, broadly, the wealth still lies. We were threatened last night by the Chancellor with all sorts of dire endeavours on his part to cut down certain services still more. The whole of the tariff proposals are an attempt to impose indirect taxation upon those least able to bear it. But if, in addition to the monstrous impositions of loss of wages which the workers have suffered during the last decade, the new indirect taxation in the present Budget, and the threatened new impositions through cuts in the social services come about, hon. and right hon. Gentlemen opposite must not complain if, sooner or later, resentment rises into bitterness, and that bitterness finds expression in ways which Members of this House, and indeed people generally in the country, may live to deplore.

Major ELLIOT

I am sure that hon. and right hon. Members in all parts of the House have been impressed by the way in which the House has addressed itself to this long Debate which is now drawing to a close. I could have wished that, perhaps, our friends of the Opposition had devoted a little more attention to the Amendment which they put upon the Order Paper. I was astonished to find that the hon. Gentleman the Member for Caerphilly (Mr. Morgan Jones), finding that there was a certain thinness in the argument which he was presenting in support of his own Amendment, roped in the Amendment of four hon. Members on our side of the House, as he seemed to think that the Amendments as a whole were getting less attention than they deserved. He went so far as to say that the relation of direct taxation to indirect taxation was that direct taxation was insufficiently high just now, that it ought to be raised yet higher, and that the movement towards taxation of imports of this country was an attack upon the standards of living of the very poor. [An HON. MEMBER: "Hear, hear!"] That, I see. draws one cheer, but only one cheer.

Mr. THORNE

It was a sound one, too.

Major ELLIOT

Have hon. and right hon. Gentlemen opposite considered the relation of direct and indirect taxation as we have seen it in this country for the past few years? It was an old maxim of taxation that direct and indirect taxation should roughly balance each other. [An HON. MEMBER: "Whose maxim?"] It was a maxim of taxation which hon. and right hon. Members opposite, if they had studied the records of Treasury speeches in this century, would certainly have repeatedly come across. Taking it merely from the period of 1911 until 1914, when the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) had just introduced his People's Budget, when the social services were already launched upon that upward course which they afterwards followed so swiftly, even in that period the ratio of indirect taxation to direct taxation was 42.5 per cent. for indirect taxation and 57.4 per cent. for direct taxation. What is the change to-day? All those new burdens about which hon. and right hon. Gentlemen complain have been brought into action. The revenue tariff, the new duties—all the duties now are before the House and are allowed for in the present Budget.

10.30 p.m.

From the days of the 1911 and 1914 Budgets, how much do hon. Members think we altered taxation to the detriment of the indirect taxpayers? Would the House be surprised to hear that even in the present Budget the direct taxpayer is bearing a larger percentage and the indirect taxpayer a smaller percentage of the revenue of this country than was carried in three successive Budgets in the Liberal period after the Lloyd George Budget of 1910? This year the direct taxpayer is still bearing 61 per cent. and the indirect taxpayer 39 per cent. of the tax burden of this country. The average amount of direct taxation in those days was £90,471,000. What is the burden of direct taxation this year? It is £460,000,000, and still hon. and right hon. Members opposite say that it is not high enough. "Pile up a greater burden," they say. "The direct taxpayer is not paying enough. Go to the place where money is and get money from them." Do they really think that the bearing of a burden of £460,000,000 in the present year means that there is still a very fruitful revenue to be obtained from that source? If so, the writing on the wall, as shown in the decline of the yield of direct taxation, has failed to carry any message of conviction to them. Then they pretend, as they do pretend, that the country is now coming round to their policy, that the Debates of these two days have shown that they get the support not merely of hon. and right hon. Gentlemen, but of Noble Lords, for whom they apparently have a peculiar predilection. Any attempt on their part to go back to that suicidal policy which is already bearing fruit in the revenue statistics of this country would be the final seal of their doom. Hon. and right hon. Members opposite will have to learn the position of a twentieth century State.

I listened with great interest to the speech of the hon. Member for Caerphilly. It was a series of echoes from the past. He brought up and used as an argument in favour of his contention the heroic, self-sacrificing but fruitless efforts of the late Mr. William Graham. I have as much respect for the late Mr. William Graham, a colleague from Scotland, as any man can have in any part of the House. Have the party opposite a better negotiator to send to Geneva than Mr. William Graham? Where he failed, will they succeed? Which of them is going to Geneva to carry on the policy of lowering tariffs by negotiation, which the late Mr. William Graham broke and killed himself in an effort to carry through. They say that Mr. Graham was barracked from the Opposition side of the House. All I can say is that he never made such complaint. Continually and repeatedly people asked him what fruits were coming from his policy of the lowering of tariffs by negotiation and what chance there was for the achievement of the policy on which he had pinned his faith, and time after time I heard him say, sorrowfully, that he was not getting the fruits that he expected, that the results he expected were not coming about, and that the policy to which he had pinned his faith was failing and breaking before his eyes. [HON. MEMBERS: "No!"] If they think that they have a better man to carry through the policy of approaching the Continent with greater success than did Mr. Graham, let them say so.

The hon. Member for Caerphilly also brought up a quotation from a speech by the present Dominions Secretary about the coal trade, and he asked, "what chance have we of selling coal in Canada? Germany," he said, "admits our coal free." Will he stand up to the implications of that? Is the admission of coal into Germany so very free to-day?

Mr. MORGAN JONES

The right hon. and gallant Member knows very well that when I made that quotation I took care to point out that I was referring to November, 1930. He asks me what I have to say in regard to the present position. I say: How can you expect to go on with your present policy, without retaliation?

Major ELLIOT

The hon. Member cannot have listened to the eloquent and well-informed speech of the Secretary for Mines a few days ago on the Vote for the Mines Department, and nobody will accuse him of being a bitter Tariff Re- former seeking every opportunity to push forward the glories of the policy of Protection. My hon. Friend the (Secretary for Mines said repeatedly that it was the internal situation in these countries, the internal glut in the coal markets of these countries, which led to quota systems coming into operation long before we brought tariffs into effect in this country. I appeal with confidence from the hon. Member for Caerphilly in opposition to the Secretary for Mines, who sits in the seat of power and who has access to all the facts and figures of this question.

The hon. Member for Caerphilly does not seem to grasp the fact that it is because the whole system of the nineteenth century was breaking up under our feet that we have had to seek other and newer systems. The nineteenth century system of Free Trade was based on the supremacy of half-a-dozen great exporting districts, but it began to crack and crumble and collapse, and those people who have the least right to complain in this matter are those who advocate the doctrine of nationalisation. The organisation of the industries of the world upon a national basis is not merely their doctrine; it is the actively pursued policy of Socialist States, and inevitably so; and the great example of that is the highly self-contained organised state of the Soviet Union. Everyone knows that they have organised themselves on a national basis, upon the basis upon which one would expect them to organise.

Not only did hon. Members opposite push forward fiercely their policy of the national organisation of the coal trade, but they desired to start an aggressive economic warfare in other markets to which coal could be sent. [Interruption.] I am within the recollection of the House. We all remember not merely that they proposed to organise the coal trade, but that they also proposed to provide it with a fighting fund, an export levy, to be raised from the coal industry, to be used as a fighting fund for the purpose of forcing coal into those markets where it was not wished by other countries that it should go. I do not wish to embark on the question of nationalisation and the new economic policies of the twentieth century. All I say is that hon. Members cannot have it both ways. The break-up of the international Free Trade system is due as much as anything to the rising sense of nationalism which is reflected in the socialist and nationalist policies throughout the world, and which time and again has led countries, under theories from the Left, to organise un-economically and nationally an industry which they said they did not wish to have at the dictation of international finance and industry.

Mr. COCKS

International Socialism.

Major ELLIOT

That is a phrase. National Socialism is a reality. It is undoubtedly a reality to those who are discussing twentieth century problems. We are discussing real things, and that is where the right hon. Member for Epping (Mr. Churchill) inevitably obtains the attention of the House when he touches on the new proposals which are being laid before us to-day. He has sensed the reality of these things, and that sense of reality has led him with great, I might almost say agility, to part from theories and practices which he formerly held which did not meet the situation of to-day. I am saying no more than the right hon. Gentleman has already said himself. The right hon. Gentleman the Member for Epping delivered a speech which was worthy of the great occasion upon which it was delivered. It was a speech which might at any rate have received the heartiest assent from hon. and right hon. Gentlemen opposite. It was a speech which called for co-operation with the great and friendly nation of the United' States. Those of us who find it impossible to envisage again in the immediate future, that homogeneous area of trade covering the whole planet, which was one of the features of the economic life of the 19th century, naturally desire to co-operate, so far as possible, with those who are willing to co-operate with us.

The right hon. Gentleman spoke with a little disappointment of the fact that my right hon. Friend the Chancellor of the Exchequer had found it impossible to promise yet another conference, in addition to the many conferences which we are embarked upon at present. But let me say at once that any attempt at friendly collaboration, any attempt to work more and more along parallel lines, and to bring us more and more into relation with men of good will, pursuing a policy similar to ours, will be welcome and doubly welcome by those in command in this country, and anything that we can do in that connection, with friendly nations, both inside and outside the circle of the British Empire, will always be one of the most keenly sought-after ends of the present Administration.

Mr. CHURCHILL

Would my right hon. and gallant Friend see that that statement—that important statement—which he has made, is made known officially to the United States Government?

Major ELLIOT

I am a very humble person, but, worthy or unworthy, I am the Financial Secretary to the Treasury, and I cannot conceive that a statement made at the close of the Second Reading Debate on the Finance Bill, by the Financial Secretary to the Treasury speaking for the Government of the day, will go entirely without attention either from this side or the other side of the Atlantic. It is not for me to bring it officially to the notice of any great and friendly Government. I am too humble for that, but, even so, I do hope that they may find it possible to read these Debates and to cast their eyes over any declarations which are made on behalf of the Government.

The difficulties before this country just now are difficulties which cannot be solved by arguments across the Floor of this House or by scoring points against each other in Debate. We are undoubtedly met here in a period of crisis, a crisis which still continues, a crisis leading to that uneasiness which has certainly manifested itself throughout this House in the last few days and indeed in the last few weeks. We have, undoubtedly, thrown a tremendous main with fortune in these new departures upon which we have embarked. This country, traditionally a Free Trade country, has moved at a bound into a system of Protection. This country, accustomed to the rule, the government, the sway of the Gold Standard has moved almost at a bound from the Gold Standard into the uncharted seas where we are now voyaging.

Naturally, we feel apprehensions. Naturally, we feel uneasiness. Naturally, we desire to meet and debate and take counsel one with another. But these are not the tremors of fear. These indicate the girding up of the loins of a nation determined to go ahead on new paths. When right hon. and hon. Gentlemen opposite taunt us with considering and reconsidering the steps which we are taking, I ask: would they not have been well-advised so to have considered and reconsidered some of the steps which they themselves took? The hon. Member for Broxtowe (Mr. Cocks) said that he could not understand why the country had turned the late Labour Government out of power. He went on to say that that Government by going cap in hand to foreign countries, had thrown on this country the greatest humiliation since the days of Charles II. Then he wonders why the country threw them out. As the right hon. Member for Epping said, any other Government would have been lynched.

Mr. COCKS

What I said was that your Government did that, not ours.

Major ELLIOT

The hon. Member has got mixed in his dates. The Government that ran out of cash, the Government that funked the balancing of the Budget, and which sent its representatives cap in hand round the capitals of Europe and to America, was the Government which the hon. Gentleman supported. Memories are short in this country, but not so short as not to remember that. Members from various parts of the House, as I say, have felt apprehension, but it is a legitimate apprehension, for if this country did not feel apprehension when it embarked on these great steps, it would not be the nation we have known in the past.

I wish to speak for a moment or two on the actual Finance Bill, and, in doing that, I will be almost unique among the speakers in this Debate. The essential fact of this Finance Bill is that we are meeting the Estimates which have been laid and are being laid before the House of Commons. This Bill is not the Budget. These formidable documents which I hold in my hand, the Civil Estimates, the Army, Navy and Air Force Estimates, are the Budget. This Measure is merely the Bill for that Budget. These Estimates are what we have to find the money for in this House; these formidable volumes represent the bills which have to be met. In this Bill we are merely finding the ways and means for meeting them, and the relative importance of them is not less than the relative weights of the two masses of paper which I hold in my hand.

What is the essential point of the Estimates which we had laid before the House? It is that we have brought unemployment insurance and the provision for unemployment into the current Budget of the year. That is the strain which is being placed upon this Budget, and which this Budget is meeting. There is an increase of 84,000 in the unemployed this morning. How can I tell whether the provision which we have made in this Finance Bill is enough to meet that great expenditure which has fallen and which may yet fall upon us? Here is the attempt to meet it without borrowing, to meet it by bringing the expenditure of the year into relation with the revenue of the year. For that reason, we claim from the House a certain indulgence in the enormous effort that we are making.

Let us consider the strain which has been put upon the Budget of the year in these efforts. The expansion of unemployment in this country, as in all countries, has been a nightmare. The Blanesburgh Committee, of which the Eight Hon. Margaret Bondfield was a member, and whose report she signed, made an estimate of 600,000 to 700,000 persons as the total unemployment in this country. Later, she was Minister of Labour and they were all in the Government, responsible for the Estimates made, and for budgetary policy and for the finding of the money. There was then fixed a balancing point of 1,250,000 unemployed persons on the fund. To-day we have a figure of 2,650,000 unemployed. In 1925, we had to find £13,500,000 for unemployment insurance; in 1927, £12,000,000; in 1929, £22,400,000; in 1930, £71,500,000, and in 1931, £98,400,000, of which only £58,800,000 was found from the revenue of the year, and £39,600,000 was found out of borrowing expenditure. This year we have to find out of current revenue £65,000,000 for unemployment insurance, carrying the whole of the transitional payments on current revenue, and none of them being laid, as in Germany, on the shoulders of the municipalities. Of that, £40,000,000 is being found by the direct taxpayer for the relief of the ratepayer and the solvency of the State and of the insurance scheme.

Those are the efforts which this country is making, and making successfully, and it is right that we should remember them, when, as now, we are in a period of pessimism in this House and of misgivings and doubts as to whether the great experiment we have made will turn out satisfactorily. We have to keep our sense of proportion. The years 1924, 1925, 1927, 1928 and 1929 were, relatively speaking, prosperous years in our history, and the present year is a year of depression. How does the present year compare with that quinquennium in regard to the number of people who are working? Of the average number then employed there is an average of 97 per cent. still employed in this year of depression—a figure worth remembering, and one with which to cheer ourselves. The great marching army of 9,500,000 people who knocked off work to-night have completed their day's job and paid their insurances—9,500,000 of an insured population. Those are some of the great staple figures we have to remember in this country. There are 9,500,000 of insured population and 13,500,000 who are within the ambit of the health insurance. All these 9,500,000 at the end of their day's work know where they will get their jobs to-morrow and for weeks to come. [HON. MEMBERS: "No."] Do not let hon. Members scoff either at the position of this country or the provision we have made. All sections of this country have done great things, and it is right they should remember them and nerve themselves with the remembrance when we are going forward through difficult and dangerous times and perils which none of us can foresee.

Can it be said that we have done nothing and that no improvement has come about in this country? It is not so. A great improvement has come. Take for example the new policy which, as hon. Members in every part of the House will admit, filled with the greatest apprehension even those who were desirous of embarking upon it. The departure from the Gold Standard filled hon. Members and experts outside with fears lest the dragging of the anchor by which we have held for so long might be such as we could not control. Nobody will deny that hon. and right hon. Gentlemen opposite feared the dragging of that anchor so much that they abandoned and broke up the Government rather than—[Interruption.] The Leader of the Opposition does me an injustice in that, as I think, on reflection, he will agree. The fear of departure from the Gold Standard on the part not merely of the Conservative and Liberal Opposition, but of the Labour Government, was a very real fear indeed.

Mr. LANSBURY

You said it broke up the Government. I said it did not, and I know as much about it as you do.

Major ELLIOT

The right hon. Gentleman is the custodian of the Cabinet secrets of his Government. I will say, at any rate—and I hope to have his agreement in this—that they had grave apprehensions as to what might happen to the country after a departure from the Gold Standard, and that those grave apprehensions they continued to express both while in power and subsequently while in opposition. I will say no more than that it was a fear which was felt in all parts of the House. I am not trying to score a debating point off the right hon. Gentleman, but I am trying to point out that in all parts of the House fear and apprehension were felt, and rightly felt, when we dragged the anchor which had steadied the ship for so long.

What has been the course of our securities since that time? The 4 per cent. Consols, which were 95½ in June, 1931, stand at 95⅞ths to-day; the 3½ Conversion stock, which stood at 84¼ in June, 1931, stands at 86⅞ths to-day, and that at a period when the securities of other great countries have shown a downward, not an upward, trend, at a time when the premier securities both of France and America have shown a very considerable decline from what they were at those dates—in the case of France a decline in one security, the 3 per cent. Rentes, from 88.25 in June, 1931, to 73.47 to-day. That seems to me to show that at any rate one bogy, the fear that this country might not be able to hold in control this power in the new courses upon which we were embarking, has been dissipated; and the fear now is rather, as the right hon. Member for Hillhead (Sir R. Horne) pointed out, that we may be swept altogether from our mooring by a great tide of money pouring in even from those countries upon the Gold Standard, because they consider that this country is still by far the safest place to put their money.

We have embarked on two great policies, both of which are enshrined in this Finance Bill. The commercial policy of this country, the essential part of which is the Advisory Committee, will be found in Clauses 6, 7, 8, and 9 of this Bill; the exchange and currency policy, also an essential part of the policy of this Government, will be found in Clauses 21, 22, and 23 of this Bill. We are not merely talking at large, we are not merely making vague theories about these things. We have enshrined our proposals in the Clauses of the Bill to which the House is asked to give a Second Reading this evening, and on the basis of the Clauses of this Bill these discussions will proceed. I am asked what is our policy with regard to currency. The Chancellor of the Exchequer last night gave a clear and definite answer upon two points upon which he was asked. He was asked if he desired or did not desire to see a rise in wholesale prices, and he said that he did. He was asked whether he desired to raise the value of the pound, and he said that he did not. He was asked with regard to the Exchange Equalisation Account, as to the way in which it is to be used. As I have said, and as the Clauses of the Financial Resolution indicated, that Account was to be used to deal with fluctuations of our currency. I do not say it was to be used to inflate or deflate currency, or to enter into an economic war with other countries. Even this vast sum of £150,000,000 is utterly inadequate to embark upon operations of that scope. It is to be used, as I deliberately said, to check fluctuations. You can spread a thin film of oil upon the waters, and it will check the waves from breaking, but it will not check the tides from coming in or going out. That will be the effect of this fund—to smooth out the fluctuations. When the great tides begin to flow such a sum as that would be utterly inadequate to control or move them one way or the other, and we should not desire to use it for operations of that kind.

Further, we desire to work not in opposition to but in harmony with the great commercial houses of this country, who have the expert knowledge, and who have handled these matters for years with the confidence of the whole world. We desire, as we did in the case of the Customs, to work with the trade and industry of the country. We desire, in the case of the Exchange Equalisation Account, to work in harmony with the great houses of the City who have made this their life's work and who understand it in a way which it would be totally wrong of us to disregard. On all these things we have the assured knowledge that we have been able to handle these new situations by the good will of our people and the competency of the great civil servants who have had these things to put through. Which of us in this House, even the most ardent Protectionist, would have believed that we could turn this country from Free Trade to Protection so smoothly and so easily that scarcely a man or woman in the streets or in the shops could give the date of the day when those great Orders came into force?

The Customs service has worked devotedly and continuously, and has worked in a practical sense which has been the admiration, certainly, of those who have had their immediate supervision; and I believe that service has won the trust and the good will of the great commercial community of this country. We hope and trust that we shall be able to repeat that success. We hope for cooperation with the other great commercial communities into contact with which the State has been thrown. Unless we can succeed in retaining the good will which three times now has manifested itself since the General Election—manifested itself in the payment of Income Tax, in the change over from Free Trade to Protection, and again to-day in the willing co-operation in exchange operations of great houses in the City—we shall be dissipating one of the most valuable assets which this great country holds.

The improvement in our conditions has shown itself not merely in our own country but in other countries. It has shown itself in the great and striking improvement which has taken place in the credit of India. That credit was in a difficult position, but it is now as firmly based as that of any other great commercial community. That is a thing which we should not forget when we are dealing with the question of making groups of great trading communities which shall work with us and shall exchange not merely their goods but their good will, upon which the whole thing is founded. Unless we can exchange good will the exchange of goods will certainly break down at no very distant date.

The solvency of the great schemes for the benefit of the people, the solvency of the Unemployment Insurance scheme, of the Health Insurance scheme and of the war pensions scheme, to which we have paid £1,000,000,000 since the War, and are still paying nearly £1,000,000 a week—payment fixed when the cost-of-living figure was 125 above pre-War whereas the cost-of-living figure is now only 44 per cent. above pre-War—are great achievements for which not one but all sections of the country are responsible.

We must hope that in the new experiments we shall be equally successful. I say without hesitation that we are in difficult times, that we are moving forward to conferences both in our own country and with other countries whose outcome it is impossible to see. The peril around us, the peril even of the crash of western civilisation, has been by no means yet conjured or averted. Dangers such as we have not known may still lie before us. We have to get out of our heads the conception that the War was more than an episode in the twentieth century, and that it is responsible for the difficulties in which we are to-day. There are new conditions—the new machines, the new fertilisers, the new self-contained nations—and those are problems which are not the aftermath of the War. We have passed away from that. We are going forward with this new experiment; let us go forward together and in good heart. Let us remember that England, Scotland, Wales and Ireland have each of them great things to contribute. England has its tradition of long continued success, but we in the outlying countries have other things to contribute. We have the history of our great failures. Failure and success are both important strands in a nation's history. There are nations such as Scotland, Ireland and Wales, which have known defeat, which have been crushed, and which have afterwards come through it. All parts of the Kingdom have their contribution to give and their part to take, but that we are going to get through, I am perfectly sure. The Second Reading of this Bill is an episode in the history of the development of a great nation. Let us see to it that in that development it is not the least worthy episode of which our history bears a record.

Question put, "That the words proposed to be left out stand part of the Question."

The House divided: Ayes, 465; Noes, 47.

Division No. 171.]	AYES.	[11.8 p.m.
Acland-Troyte, Lieut.-Colonel	Cayzer, Sir Charles (Chester, City)	Fermoy, Lord
Adams, Samuel Vyvyan T. (Leeds, W.)	Cazaiet, Thelma (Islington, E.)	Fleming, Edward Lascelles
Agnew. Lieut.-Com. P. G.	Cecil, Rt. Hon. Lord Hugh	Flint, Abraham John
Altchison, Rt. Hon. Cralgie M.	Chalmers, John Rutherford	Foot, Isaac (Cornwall, Bodmin)
Albery, Irving James	Chamberlain, Rt. Hn. Sir J. A.(Birm., W)	Fox, Sir Gifford
Alexander, Sir William	Chamberlain, Rt. Hn. N. (Edgbaston)	Fraser, Captain Ian
Allen, Sir J. Sandeman (Liverp'l, W.)	Chapman, Col. R.(Houghton-le-Spring)	Fremantle, Lieut.-Colonel Francis E.
Allen, Lt.-Col. J. Sandeman (B'k'nh'd.)	Chapman, Sir Samuel (Edinburgh, S.)	Fuller, Captain A. G.
Amery, Rt. Hon. Leopold C. M. S.	Chorlton, Alan Ernest Leofric	Galbraith, James Francis Wallace
Anstruther-Gray, W. J.	Christie, James Archibald	Ganzoni, Sir John
Applin, Lieut.-Col. Reginald V. K.	Churchill, Rt. Hon. Winston Spencer	Gauit, Lieut.-Col. A. Hamilton
Apsley, Lord	Clarke, Frank	Gillett, Sir George Masterman
Aske, Sir Robert William	Clarry, Reginald George	Gilmour, Lt.-Col. Rt. Hon. Sir John
Astbury, Lieut.-Com. Frederick Wolfe	Clayton, Dr. George C.	Gledhill, Gilbert
Astor, Maj. Hn. John J. (Kent, Dover)	Clydesdale, Marquess of	Glossop, C. W. H.
Astor, Viscountess (Plymouth, Sutton)	Cobb, Sir Cyril	Gluckstein, Louis Halle
Atholl, Duchess of	Cochrane, Commander Hon. A. D.	Glyn, Major Ralph G. C.
Atkinson, Cyril	Colfox, Major William Philip	Goff, Sir Park
Bailey, Eric Alfred George	Colman, N. C. D.	Goldie, Noel B.
Baillie, Sir Adrian W. M.	Colville, John	Goodman, Colonel Albert W.
Baldwin, Rt. Hon. Stanley	Conant, R. J. E.	Gower, Sir Robert
Balfour, George (Hampstead)	Cook, Thomas A.	Graham, Fergus (Cumberland, N.)
Balfour, Capt. Harold (I. of Thanet)	Cooke, Douglas	Granville, Edgar
Balniel, Lord	Cooper, A. Duff	Grattan-Doyle, Sir Nicholas
Banks, Sir Reglnatd Mitchell	Copeland, Ida	Graves, Marjorie
Barclay-Harvey, C. M.	Courtauld, Major John Sewell	Greaves-Lord, Sir Walter
Barton, Capt. Basil Kelsey	Courthope, Colonel Sir George L.	Greene, William P. C.
Bateman, A. L.	Cowan, D. M.	Grenfell, E. C (City of London)
Beauchamp, Sir Brograve Campbell	Craddock, Sir Reginald Henry	Gretton, Colonel Rt. Hon. John
Beaumont, M. W. (Bucks., Aylesbury)	Craven-Ellis, William	Griffith, F. Kingsley (Middlesbro', W).
Beaumont, Hon. R. E. B. (Portsm'th, C.)	Croft, Brigadier-General Sir H.	Grimston, R. V.
Belt, Sir Alfred L.	Crooke, J. Smedley	Gritten, W. G. Howard
Benn, Sir Arthur Shirley	Crookshank, Col. C. de Windt (Bootle)	Guest, Capt. Rt. Hon. F. E.
Bornays, Robert	Crookshank, Capt. H. C, (Gainsb'ro)	Guinness, Thomas L. E. B.
Betterton, Rt. Hon. Sir Henry B.	Croom-Johnson, R. P.	Gunston, Captain D. W.
Bevan, Stuart James (Holborn)	Crossley, A. C.	Guy, J. C. Morrison
Birchall, Major Sir John Dearman	Cruddas, Lieut.-Colonel Bernard	Hall, Capt. W. D'Arcy (Brecon)
Bird, Ernest Roy (Yorks., Skipton)	Culverwell, Cyril Tom	Hamilton, Sir George (Ilford)
Bird, Sir Robert B. (Wolverh'pton W.)	Curry, A. C.	Hamilton, Sir R. W.(Orkney & Zetl'nd)
Blaker, Sir Reginald	Dalkeith, Earl of	Hammersley, Samuel S.
Blindell, James	Davies, Edward C. (Montgomery)	Hanley, Dennis A.
Boothby, Robert John Graham	Davies, Maj. Geo. F.(Somerset, Yeovil)	Hannon, Patrick Joseph Henry
Borodale, Viscount.	Davison, Sir William Henry	Hartington, Marquess of
Bossom, A. C.	Dawson, Sir Philip	Hartland, George A.
Boulton, W. W.	Denman, Hon. R. D.	Harvey, George (Lambeth, Kenningt'n)
Bowater, Col. Sir T. Vansittart	Denville, Alfred	Harvey, Major S. E. (Devon, Totnes)
Bower, Lieut.-Com. Robert Tatton	Despencer-Robertson, Major J. A. F.	Haslam, Sir John (Bolton)
Bowyer, Capt. Sir George E. W.	Dickie, John P.	Headlam, Lieut.-Col. Cuthbert M.
Boyce, H. Leslie	Dixey, Arthur C. N.	Hellgers, Captain F. F. A.
Boyd-Carpenter, Sir Archibald	Donner, P. W.	Henderson, Sir Vivian L. (Chelmsford)
Bracken, Brendan	Doran, Edward	Heneage, Lieut.-Colonel Arthur P.
Braithwaite, Maj. A. N. (Yorks, E. R.)	Dower, Captain A. V. G.	Hills, Major Rt. Hon. John Waller
Braithwaite, J. G. (Hillsborough)	Drewe, Cedric	Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.
Briscoe, Capt. Richard George	Duckworth, George A. V.	Holdsworth, Herbert
Brocklebank, C. E. R.	Dugdale, Captain Thomas Lionel	Hope, Capt. Arthur O. J. (Aston)
Brown, Col. D. C. (N'th'I'd., Hexham)	Duggan, Hubert John	Hopkinson, Austin
Brown, Ernest (Leith)	Duncan, James A. L. (Kensington, N.)	Hore-Belisha, Leslie
Brown, Brig.-Gen. H. C.(Berks., Newb'y)	Dunglass, Lord	Hornby, Frank
Browne, Captain A. C.	Eastwood, John Francis	Horne, Rt. Hon. Sir Robert S.
Buchan, John	Edge, Sir William	Horobin, Ian M.
Buchan-Hepburn, P. G. T.	Edmondson, Major A. J.	Horsbrugh, Florence
Bullock, Captain Malcolm	Ednam, Viscount	Howard, Tom Forrest
Burghley, Lord	Elliot, Major Rt. Hon. Walter E.	Hudson, Capt. A. U. M. (Hackney, N.)
Burgin, Dr. Edward Leslie	Ellis, Robert Geoffrey	Hume, Sir George Hopwood
Burnett, John George	Elliston, Captain George Sampson	Hunter, Dr. Joseph (Dumfries)
Butt, Sir Alfred	Elmiey, Viscount	Hunter, Capt. M. J. (Brigg)
Cadogan, Hon. Edward	Emmott, Charles E. G. C.	Hurst, Sir Gerald B.
Cains, G. R. Hall-	Emrys-Evans, P. V.	Hutchison, W. D. (Essex, Romford)
Campbell, Edward Taswell (Bromley)	Entwistle, Cyril Fullard	Inskip, Rt. Hon. Sir Thomas W. H.
Campbell, Rear-Admiral G. (Burnley)	Erskine, Lord (Weston-super-Mare)	Jackson, Sir Henry (Wandsworth, C.)
Caporn, Arthur Cecil	Essenhigh, Reginald Clare	Jackson, J. C. (Heywood & Radcliffe)
Carver, Major William H.	Evans, Capt. Arthur (Cardiff, S.)	Jamieson, Douglas
Cassels, James Dale	Evans, Capt. Ernest (Welsh Univ.)	Janner, Barnett
Castlereagh, Viscount	Evans, R. T. (Carmarthen)	Jennings, Roland
Castle Stewart, Earl	Everard, W. Lindsay	Jesson, Major Thomas E.
Cautley, Sir Henry S.	Falls, Sir Bertram G.	Joel, Dudley J. Barnato
Johnston, J. W (Clackmannan)	Moss, Captain H. J.	Shepperson, Sir Ernest W.
Johnstone, Harcourt (S. shields)	Muirhead, Major A. J.	Simmonds, Oliver Edwin
Jones, Sir G. W. H. (Stoke New'gton)	Munro, Patrick	Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Jones, Henry Haydn (Merioneth)	Nail, Sir Joseph	Sinclair, Col. T. (Queen's Unv., Belfast)
Jones, Lewis (Swansea, West)	Nation, Brigadier-General J. J. H.	Skelton, Archibald Noel
Kerr, Hamilton W.	Newton, Sir Douglas George C.	Slater, John
Kimball, Lawrence	Nicholson, Godfrey (Morpeth)	Smiles, Lieut.-Col. Sir Walter D.
Kirkpatrick, William M.	Nicholson, Rt. Hn. W. G. (Peters'fld)	Smith, Sir Jonah W. (Barrow-in-F.)
Knatchbull, Captain Hon. M. H. R.	Normand, Wilfrid Guild	Smith, Louis W. (Sheffield, Hallam)
Knebworth, Viscount	North, Captain Edward T.	Smith, R. W. (Ab'rd'n & Kinc'dine, C.)
Knight, Holford	Nunn, William	Smith-Carington, Neville W.
Knox, Sir Alfred	O'Connor, Terence James	Smithers, Waldron
Lamb, Sir Joseph Quinton	O'Donovan, Dr. William James	Somervell, Donald Bradley
Lambert, Rt. Hon. George	Oman, Sir Charles William C.	Somerville, Annesley A. (Windsor)
Latham, Sir Herbert Paul	O'Neill, Rt. Hon. Sir Hugh	Somerville, D. G. (Willesden, East)
Law, Sir Alfred	Ormiston, Thomas	Soper, Richard
Law, Richard K. (Hull, S. W.)	Ormsby-Gore, Rt. Hon. William G. A.	Sotheron-Estcourt, Captain T. E.
Leckie, J. A.	Palmer, Francis Noel	Southby, Commander Archibald R. J.
Leech, Dr. J. W.	Pearson, William G.	Spears, Brigadier-General Edward L
Lees-Jones, John	Peat, Charles U.	Spencer, Captain Richard A.
Leighton, Major B. E. P.	Penny, Sir George	Spender-Clay, Rt. Hon. Herbert H.
Lennox-Boyd, A. T.	Percy, Lord Eustace	Stanley Hon. O. F. G. (Westmorland)
Levy, Thomas	Peters, Dr. Sidney John	Stevenson, James
Lewis, Oswald	Petherick, M.	Stewart, William J.
Liddall, Walter S.	Peto, Sir Basil E. (Devon, Barnstaple)	Stones, James
Lindsay, Noel Ker	Peto, Geoffrey K.(W'verh'pt'n, Bilston)	Storey, Samuel
Lister, Rt. Hon. Sir Philip Cunliffe-	Pickering, Ernest H.	Stourton, Hon. John J.
Little, Graham-, Sir Ernest	Pike, Cecil F.	Strauss, Edward A.
Llewellin, Major John J.	Potter, John	Strickland, Captain W. F.
Llewellyn-Jones, Frederick	Powell, Lieut.-Col. Evelyn G. H.	Stuart, Hon. J. (Moray and Nairn)
Lloyd, Geoffrey	Pewer, Sir John Cecil	Stuart, Lord C. Crichton-
Locker-Lampson, Rt. Hn. G.(Wd. G'n)	Preston, Sir Walter Rueben	Sueter, Rear-Admiral Murray F.
Lockwood, John C. (Hackney, C.)	Procter, Major Henry Adam	Sugden, Sir Wilfrid Hart
Lockwood, Capt. J. H. (Shipley)	Purbrick, R.	Summersby, Charles H.
Loder, Captain J. de Vere	Pybus, Percy John	Sutcliffe, Harold
Lovat-Fraser, James Alexander	Ralkes, Henry V. A. M.	Tate, Mavis Constance
Lumley, Captain Lawrence R.	Ramsay, Alexander (W. Bromwich)	Taylor, Vice-Admiral E. A.(Pd'gt'n, S.)
Lyons, Abraham Montagu	Ramsay, Capt. A. H. M. (Midlothian)	Templeton, William P.
Mabane, William	Ramsay, T. B. W. (Western Isles)	Thomas, James P. L. (Hereford)
MacAndrew, Lieut.-Col. C. G.(Partick)	Ramsden, E.	Thomas, Major L. B. (King's Norton)
MacAndrew, Capt. J. O. (Ayr)	Rankin, Robert	Thompson, Luke
McConnell, Sir Joseph	Ratcliffe, Arthur	Thomson, Sir Frederick Charles
McCorquodale, M. S.	Rathbone, Eleanor	Thorp, Linton Theodore
MacDonald, Malcolm (Bassetlaw)	Ray, Sir William	Titchfield, Major the Marquess of
Macdonald, Sir Murdoch (Inverness)	Rea, Walter Russell	Todd, Capt. A. J. K. (B'wick-on-T.)
Macdonald, Capt. P. D. (I. of W.)	Reed, Arthur C. (Exeter)	Todd, A. L. S. (Kingswinford)
McEwen, Captain J. H. F.	Reid, Capt. A. Cunningham-	Touche, Gordon Cosmo
McKie, John Hamilton	Reid, David D. (County Down)	Train, John
Maclay, Hon. Joseph Paton	Reid, William Allan (Derby)	Tryon, Rt. Hon. George Clement
McLean, Major Alan	Remer, John R.	Vaughan-Morgan, Sir Kenyon
Maclean, Rt. Hon. Sir D. (Corn'll N.)	Rentoul, Sir Gervals S.	Wallace, Captain D. E. (Hornsey)
McLean, Dr. W. H. (Tradeston)	Renwick, Major Gustav A.	Wallace, John (Dunfermline)
Macmillan, Maurice Harold	Reynolds, Col. Sir James Philip	Ward, Lt.-Col. Sir A. L. (Hull)
Macpherson, Rt. Hon. James I.	Rhys, Hon. Charles Arthur U.	Ward, Irene Mary Bewick (Wallsend)
Macquisten, Frederick Alexander	Roberts, Aled (Wrexham)	Ward, Sarah Adelaide (Cannock)
Magnay, Thomas	Roberts, Sir Samuel (Ecclesall)	Waterhouse, Captain Charles
Maitland, Adam	Robinson, John Roland	Watt, Captain George Steven H.
Mallalieu, Edward Lancelot	Rosbotham, S. T.	Wayland, Sir William A.
Manningham-Buller, Lt.-Col. Sir M.	Ross, Ronald D.	Wedderburn, Henry James Scrymgeour-
Marsden, Commander Arthur	Ross Taylor, Walter (Woodbridge)	Wells, Sydney Richard
Martin, Thomas B.	Rothschild, James A. de	Weymouth, Viscount
Mason, Col. Glyn K. (Croydon, N.)	Ruggles-Brise, Colonel E. A.	White, Henry Graham
Mayhew, Lieut.-Colonel John	Runge, Norah Cecil	Whiteside, Borras Noel H.
Meller, Richard James	Russell, Albert (Kirkcaldy)	Williams, Herbert G. (Croydon, S.)
Millar, Sir James Duncan	Russell, Alexander West (Tynemouth)	Wills, Wilfrid D.
Mills, Sir Frederick (Leyton, E.)	Russell, Hamer Field (Sheffield, B'tside)	Wilson, Clyde T. (West Toxteth)
Mills, Major J. D. (New Forest)	Russell, Richard John (Eddisbury)	Wilson, G. H. A. (Cambridge U.)
Milne, Charles	Rutherford, Sir John Hugo	Windsor-Clive, Lieut.-Colonel George
Milne, John Sydney Wardlaw-	Salmon, Major Isidore	Winterton, Rt. Hon. Earl
Mitchell, Harold P.(Br'tf'd & Chisw'k)	Salt, Edward W.	Wise, Alfred R.
Mitchell, Sir W. Lane (Streatham)	Samuel, Sir Arthur Michael (F'nham)	Withers, Sir John James
Mitcheson, G. G.	Samuel, Rt. Hon. Sir H. (Darwen)	Womersley, Walter James
Molson, A. Hugh Eisdale	Samuel, Samuel (W'dsworth, Putney)	Wood, Sir Murdoch McKenzie (Banff)
Moore, Lt.-Col. Thomas C. R. (Ayr)	Sanderson, Sir Frank Barnard	Worthington, Dr. John V.
Moore-Brabazon, Lieut.-Col. J. T. C.	Sassoon, Rt. Hon. Sir Philip A. G. D.	Wragg, Herbert
Moreing, Adrian C.	Savery, Samuel Servington	Young, Rt. Hon. Sir Hilton (S'v'noaks)
Morris, John Patrick (Salford, N.)	Scone, Lord	Young, Ernest J. (Middlesbrough, E.)
Morris, Owen Temple (Cardiff, E.)	Selley, Harry R.
Morris, Rhys Hopkin (Cardigan)	Shaw, Helen B. (Lanark, Bothwell)	TELLERS FOR THE AYES.—
Morrison, William Shephard	Shaw, Captain William T. (Forfar)	Captain Margesson and Mr. Shakespeare.
NOES.
Adams, D. M. (Poplar, South)	Batey, Joseph	Brown, C. W. E. (Notts., Mansfield)
Attlee, Clement Richard	Bevan, Aneurin (Ebbw Vale)	Buchanan, George

Cape, Thomas	Hicks, Ernest George	Maxton, James
Cocks, Frederick Seymour	Hirst, George Henry	Parkinson, John Allen
Cove, William G.	Jenkins, Sir William	Price, Gabriel
Cripps, Sir Stafford	Jones, J. J. (West Ham, Silvertown)	Salter, Dr. Alfred
Daggar, George	Jones, Morgan (Caerphilly)	Thorne, William James
Davies, Rhys John (Westhoughton)	Kirkwood, David	Tinker, John Joseph
Edwards, Charles	Lansbury, Rt. Hon. George	Watts-Morgan, Lieut.-Col. David
George, Major G. Lloyd (Pembroke)	Lawson, John James	Williams, David (Swansea, East)
Graham, D. M. (Lanark, Hamilton)	Leonard, William	Williams, Edward John (Ogmore)
Greenwood, Rt. Hon. Arthur	Logan, David Gilbert	Williams, Dr. John H. (Llanelly)
Grenfell, David Rees (Glamorgan)	Lunn, William	Williams, Thomas (York, Don Valley)
Griffiths, T. (Monmouth, Pontypool)	McEntee, Valentine L.
Grundy, Thomas W.	McGovern, John	TELLERS FOR THE NOES.—
Hall, F. (York, W. R, Normanton)	Maclean, Neil (Glasgow, Govan)	Mr. Cordon Macdonald and Mr.
Hall, George H. (Merthyr Tydvil)	Mason, David M. (Edinburgh, E.)	Groves.

Bill read a Second time, and committed to a Committee of the Whole House for To-morrow.