AMENDMENT OF LAW.

HC Deb 26 April 1933 vol 277 cc107-238

Question again proposed, That it is expedient to amend the law relating to National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with finance."—[Mr. Chamberlain.]

3.8 p.m.

Mr. ATTLEE

The Budget statement to which we listened yesterday has had to run the usual course of being criticised in the Press and being described with various adjectives. Mostly it is described as unimaginative, humdrum, and so forth. I do not intend to repeat any of these adjectives. I think that the point that struck us on these benches with regard to the Chancellor's statement was that it was a very candid statement and a very honest statement, and that it made no attempt to conceal a very serious state of affairs. These annual Budget statements might be compared to a kind of feeling of the economic pulse of the nation, and the Chancellor of the Exchequer, one of the doctors who received the mandate at the General Election, does not object to concealing the gravity of the state of the patient whom he has in charge. He does not pretend that his treatment is setting the patient on his legs again, but he proposes to continue it. I must say for the Chancellor of the Exchequer that he is easily satisfied, and perhaps it shows how bad conditions are that he was on the whole fairly well satisfied to have got through with a deficit of £32,000,000. It gave him, he said, more solid satisfaction than other Chancellors of the Exchequer have had in a moderate surplus.

I want to examine for a few moments that deficit, which is the result, in fact, of the Chancellor's first Budget. We have a deficit of £32,000,000. When I spoke at this Box after his first Budget, I ventured to say that I considered that it was not balanced, and I am sorry to say that I proved right; but what beats me is that the Chancellor in his speech, and other members of the Government in their speeches, continue to take great credit for having balanced the Budget. It was understood that a balanced Budget was one of the essentials of this nation. In fact, it was to obtain a balanced Budget that the Prime Minister and Lord Snowden worked so hard against their old colleagues. But this Budget is not balanced. It appeared to be balanced last year by the omission of any provision for payment to the United States. In the course of the year that payment had to be made. It was unbalanced, also, because no adequate attempt was made to provide for the unemployed. We had to have Supplementary Estimates, and £18,000,000 out of £21,000,000 went for unemployment. When it is remembered, also, that, quite fortuitously, the Chancellor was able to save £15,000,000 by having to put a less amount to the Sinking Fund, it is seen that actually he was £50,000,000 down. And yet we have these constant references to a balanced Budget.

Another curious thing is that it has always been a strong point that the National Government had given up the vicious old practice of borrowing for the unemployed. The present Chancellor said he had stopped it. He reminds me of a prodigal son who swears to live within his allowance and never resort to moneylenders. He does not go to the moneylenders, but at the end of the year he presents his father with a mass of unpaid bills. Why is it so very wrong to borrow for the unemployed and so right to make no adequate provision for the unemployed, leave yourself with an unbalanced Budget and a heavy deficit, and then borrow to meet that deficit? It is an extremely roundabout way of doing things. The Chancellor had this year a deficit of £32,000,000, which, despite all the canons of financial rectitude, is going to be added to our debt. He has to add to that a sum of £2,500,000 for interest on National Savings Certificates, and he has the expenses of his Conversion Loan, another £23,175,000, making a total of £58,110,000 to be added to the debt; and yet we congratulate ourselves that we are meeting our outgoings by our incomings. To carry things one step further—in this Budget the right hon. Gentleman is going to make no provision for the Sinking Fund. He has to borrow another £7,600,000 for the Statutory Sinking Fund. Then he has taken another capital windfall of £10,000,000 for the present Budget.

So, altogether, we get the sum of £75,000,000, in these two Budgets; which the right hon. Gentleman is not going to meet out of revenue but is going to add' to our borrowings or take from capital funds. It seems rather a poor result, does it not? It was hardly worth while the Prime Minister betraying all his old colleagues for that. It was hardly worth while for Lord Snowden to have sacrificed his dear Free Trade for that. I admit that the right hon. Gentleman goes about things in a very quiet and businesslike manner. There are no high lights in his Budget speeches, there is no subtlety in his robbing of hen roosts, but, looking back, I am bound to say that a great injustice has been clone to the right hon. Member for Epping (Mr. Churchill). I call him a financial purist compared with the present Chancellor.

But if we want to grasp the seriousness of this situation we must turn to the revenue figures, because they give us some indication of the prosperity of the country. Take the Income Tax returns. Last year the Chancellor said lie had to expect a fall in the Income Tax figures, because they were based on the previous year, a year which saw a climax of depression unprecedented in our experience. It has proved not to be a climax, because now we come to an Income Tax which is going to be based on very different conditions from that disastrous year—is going to be based on a full year of National Government, with a great policy of economy on the one hand and Tariffs on the other to restore the prosperity of the country. The estimate of Income Tax, it will be noted, comes down. Last year it was estimated to produce £260,000,000 and realised £251,000,000. Now the Chancellor expects only £240,000,000. It looks as though, with his usual honesty, the Chancellor had confessed to the entire failure of the policy of the National Government to restore prosperity.

Mr. DENMAN

Will the hon. Gentleman tell us how much of that is due to conversion?

HON. MEMBERS

Sit down!

Mr. ATTLEE

Last year the Chancellor budgeted for £174,000,000 from Customs and got £167,000,000 and, as he has admitted, £4,500,000 of that came from additional duties. We had a continual increase of indirect taxation going on throughout the year and yet the Customs failed to fill the gap. The right hon. Gentleman fell back not very hopefully on the suggestion that perhaps the fall in the Customs revenue was a tribute to the tremendous success of the new duties in keeping out foreign goods. If his tariffs had been so successful in keeping out goods and getting new industries started one would have expected to see that reflected somewhere on the other side of the account. We find it nowhere. The fact is that all these activities can only kill trade. The surprising thing about the Chancellor of the Exchequer is that he takes great credit and derives very great encouragement from facts which point only to a terrible condition of trade and business in this country. He was very pleased at the high prices of Government stocks, at the very low rates of interest, and at the increased deposits in the savings banks and trustee savings bank. All that, he seemed to think, was a most encouraging sign. That might be so, under some other dispensation than the capitalist regime, but the lifeblood of Capitalism is profit and the real reason why there is an accumulation in the savings banks and in the joint stock banks and why there are higher prices of Government securities, is that there is a mass of money that cannot find profitable investment. It is merely a reflection of trade stagnation.

The right hon. Gentleman was correct, of course, when at the end of his speech, he said that what we looked for most was world trade revival. He encouraged us to hope that the Prime Minister might be successful in the United States and that thereafter we might have a World Economic Conference and that something might happen to revive trade in the world. That, at all events, is a sign of grace from a previous economic Nationalist or at any rate an economic Imperialist, and is some recognition of the importance of foreign trade to be set off against his action, and the action of this Government, which has been a constant flogging of foreign trade. I wonder whether the right hon. Gentleman, in the estimates that he laid before us, has estimated the loss that is going to take place as a result of the last stoppage of trade, the stoppage of trade with Russia. We are moving to economic isolation; we have stopped trade with Ireland, as much as we can, and we have stopped trade with Russia. It looks as if this might be known as the "stop trade Government."

I should like to ask one or two questions with regard to matters on which the right hon. Gentleman dealt very lightly. One is the question with regard to the United States of America and the Gold Standard. Last year we had a very long discussion on the Gold Standard, and the right hon. Gentleman the Member for Hillhead (Sir R. Horne) took a prominent position in those Debates. In the course of the Debates he told us that it would be a very great disaster to this country if the United States of America went off the Gold Standard. Well, they have done so, and we have not heard anything about it. I am a child in these matters of high finance, but I comfort myself with the reflection that everybody who prophesies on these things seems to be as wrong as I am. We have had terrible prophecies about going off the Gold Standard. It was to be a most appalling disaster. But when we got off it, there was general rejoicing about it as the first sign of trade revival. There actually was a slight trade revival, which the Government very promptly killed by their tariff. We had another prophesy, which was that when the United States went off the Gold Standard there was to be a very great disaster at once. We did not hear anything about that from the right hon. Gentleman. In fact, the whole Press is full of rumours of what a terrible disaster there might be if, as a result of the conversations with America, we all got back on to the Gold Standard. We ought to have a little more light from the right hon. Gentleman on that point.

There is another matter on which I want to touch lightly; others can deal with it more in detail; the Committee would like to know more about the Exchange Equalisation Account. It was a very exceptional measure, placing very great power in the hands of the Chancellor of the Exchequer. In his Budget speech he just said by the way that we shall want more money for it, but we do not know whether he is working to put sterling up or bring it down, or what he is doing. Incidentally, we know that the whole country is flooded with bad money. This floating mass of bad money which goes round the world, upsetting the docile financiers in all the States, has come round again to us. We have had a little more light thrown upon the crisis which preceded the formation of the National Government, in another of those awkward outbursts of frankness that we get from the right hon. Gentleman. He said that it was this bad money. He had not the weapon with which he is now armed to meet this danger of bad money. Now this bad money, owing to a great confidence in the National Government, is flowing in here again, and is liable at any moment to upset our whole position, and She right hon. Gentleman's hand has to be strengthened. That is one of the matters that perhaps might be discussed at the World Economic Conference. This bad money had better be impounded by someone to prevent it from floating round the world. We are getting new light every year on the crisis. It was that bad money floating about that was the immediate cause of the crisis.

The next point I take is how the right hon. Gentleman gets his surplus. He gets part of it by putting the Sinking Fund on to a loan basis. That is one saving. He reduces the Social Services by some £6,750,000. There is some £30,000,000 of reduction by means of the operation of the means test. I should like to know how many unemployed the right hon. Gentleman is counting on this year. He under-estimated last year. We ought to have, before these Debates are closed, some kind of an estimate. Then I would like to know what he has taken into account in his provision in the estimates for the Social Services. Recently, the Minister of Health told us that -he was going to help the distressed areas in this country. That is no party matter, because hon. Members in all parts of the House are agreed upon it, and quite a strong case was put up for the relief of those areas. One gathered that the better-off areas were to pay for the poorer ones. To sweeten the matter somewhat, the Minister of Health told us that he was going to put up 50 per cent. I do not know exactly what that amounts to and whether it is £4,000,000, £5,000,000 or £6,000,000, but we find no provision for it in this Budget.

We also had a lot of talk by the right hon. Gentleman to the effect that, at some time or other, the Government might possibly do something towards trying to recover the economic position of this country by the encouragement of industry but there is no provision for that either. The right hon. Gentleman is obviously budgeting fairly closely, and he manages to arrive at a surplus by rather curious means. Once again the American Debt is ignored, and our possible receipts that might come from our debtors are ignored. I daresay that is all that the right hon. Gentleman can do, but he has ignored them both. There is something, however, that we cannot ignore, and that is what he did last year. Last year he told us that he hoped there was going to be a settlement of the American Debt, and, in the new language of finance that is in use to-day, apparently settlement means that you do not pay, because the assumption was that nothing was to be paid. That encouraged me when I found that the right hon. Gentleman was hoping to come to a settlement with the co-operative societies, because I thought that possibly that meant. that they also were not going to pay. Then the right hon. Gentleman has taken a convenient £10,000,000 from the henroost, and so he gets the amount which he is able to distribute.

Before I deal with that question, I should like to notice some of the right hon. Gentleman's tactics. He is, after all, proposing to get £750,000 from the co-operative societies, by hook or by crook. At one time it was quite certain that there was going to be a settlement, but now it is not so certain. What is quite certain is that the Raeburn Committee's Report is not entirely satisfactory. The right hon. Gentleman set up a committee, whose personnel we examined at some length, and he gave the committee a fairly strong hint that they were to try the co-operative societies and to find them guilty. The question then arose as to exactly on what count they should find them guilty. The committee made a very curious report, and came to a decision which, as I gather from experienced lawyers, no lawyer thinks is worth anything. It had a more serious inconvenience than that, and that was that, if such a principle were once applied to co-operative societies, it might begin to hit Conservative clubs also. Therefore, apart from the pressure of the co-operatives themselves, there was a fairly strong desire to avoid that particular method.

The co-operative societies have always maintained that they paid their just taxes, and more than their just taxes. They are, I gather, prepared to meet the Chancellor of the Exchequer, and, if he can show them that there is any way in which they ought to be taxed and in which they are not being taxed, they are willing to pay; but they say that they see no reason why co-operative societies should be singled out for exceptional taxation. When, however, one looks at this tax apart from these abstract questions, from whom is it that the Chancellor of the Exchequer wants to take the money From the savings of poor people—small savings which are utilised mainly for buying such things as clothes, boots and so forth. He is going to tax a large number of small people, and he is going to tax a great mutual trading organisation—for whose benefit? He is going to take £750,000 from them, and he is going to give £600,000 to the company promoters. When the boom comes, what an advantage that will be for the floaters of bubble companies. Those are the people whom the right hon. Gentleman delights to benefit. It is a truly capitalist touch.

When we come to Income Tax relief, we find that a large sum is to be handed over to the hard-hit Income Tax payers. I should like to know what is behind this Income Tax relief from the point of view of the community. Does the right hon. Gentleman expect the Income Tax payers to save this money, or to spend it? If they are to save it, if he thinks that the nation should make increased savings, surely he might have used this money for the repayment of debt, which is one of the ways of saving. Does he really think that the country is short of money for investment? He knows perfectly well that there is any amount of money awaiting investment, but that people say they cannot find a profitable use for it. If, on the other hand, he expects them to use it for purchasing, why have they a better claim than numbers of people who are suffering to-day and unable to get the necessaries of life? This is an extraordinary example of false social economy.

I now want to touch for a moment on what, after all, is the chief feature of this Budget in the minds of most people, namely, the Beer Duty. You can look at the Beer Duty from various points of view, and those points of view differ. The point of view of the right hon. and gallant Gentleman the Member for Burton (Colonel Gretton) is different from the point of view of the Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor). I want to look at the matter from two points of view, the revenue point of view and the social point of view. Taxes of this nature are ultimately paid by certain people. The effect of the Beer Duty is to induce certain people to spend money on beer in order that the Exchequer may extract a certain amount of taxation from it. In order that taxation may be extracted from it, the purchase of beer has to be made more attractive—beer has to be made cheaper and of a higher gravity; and, therefore, the effect is to say that what the nation needs to-day to get it out of its difficulties is that people should drink more beer. That, indeed, is the social view of this Government. They think it is waste to spend money on housing, that education must be cut down, that you must increase the price of foodstuffs—primary products, bread, meat, and so on —but you must cheapen the price of beer.

How differently these things appear to Members of Parliament in their capacity as Members of Parliament and in their capacity as, say, members of a public assistance committee. Suppose that a working man came to a public assistance committee for relief, and that, on making the usual inquiries, they found that his rent was unpaid, that his family got very little food, and that they were very badly clothed, but that he spent a great deal of money in the public house round the corner, they would deal pretty stringently with him, and they would be very self-righteous over the matter. But, when they come to consider affairs collectively in this House, they say, "Oh, no, it is an excellent thing to spend more money on beer." I venture to suggest that there would not have been this relief for the working man's beer unless there had been a big vested interest behind it.

Mr. PIKE rose—

The DEPUTY-CHAIRMAN

The hon. Member for Limehouse (Mr. Attlee) has not given way.

Mr. ATTLEE

The hon. Member will have his chance. It is rather interesting to notice the way this industry is dealt with. We have a gentleman's agreement with the trade. I notice that when our Government go in for these agreements, while what we have to do is always definite, it is left to a gentleman's agreement on the other side. They are only to try to induce the general public to get the advantage of these duties, it reminds me of Mr. Bennett and Ottawa. We had to promise everything definitely, and what they were to give was left vague. The real issue that arises on this Beer Duty is not the moral question, whether it is good or bad to drink beer, but the attitude of the Chancellor of the Exchequer towards revenue, the Budget, and the whole organisation of this country. We have here the revenue point of view. It is looking at the channel through which a certain part of the wealth of individuals is taken for communal purposes and not looking at the source of that wealth or how it is produced.

In a Budget like this we get estimates of one kind and another, the amount to be derived from Income Tax, from Beer Duty, Estate Duty and so forth, but one never gets any real statement of the national wealth, and that is really the essential point that ought to be before us. If we want to know what amount of the national wealth should be spent on education, on health, on this or that class of the community, we ought to have before us some computation of the national wealth, and then we should consider what is the source from which this taxation can be drawn and we should consider how to increase it and how it is distributed. Every now and again we get little side lights on the mind of the Government. The Chancellor of the Exchequer said that Surtax was depressingly low. He was very sorry that there had been a decrease of 12,000 in the number of Surtax payers. You see at once what his idea of society is. He wants an unequal distribution of wealth. He wants a large amount in Surtax. He wants a large number of Super-tax payers.

Sir FRANCIS FREMANTLE

So would you if you were Chancellor.

Mr. ATTLEE

The hon. Gentleman is making precisely the point that I am making. That is exactly the point that is taken by one who looks at it from the orthodox revenue point of view. He wants to have very rich men, because he gets the money from them. He wants to get taxation from people who drink beer. But the real point for the Committee to consider is what is best from the point of view of the nation. From the point of view of the nation, the fact that you have a large number of Super-tax payers and have an enormous proportion of people below the poverty line is a matter which should give cause to the greatest consideration. When you look at it from the revenue point of view, it is, of course, deplorable that you should have fewer Super-tax payers. We suggest that that reflects the complete failure of this Government to deal with the situation that is before us. There is no real suggestion here that anything that the Government are doing is going to increase the wealth of the country, which is the source from which taxation must come. We complacently continue to have millions of our people unemployed, bringing nothing to the wealth of the country. It is not a party point. It is a point that is made by Lord Snowden, a Free Trader, and by the Chancellor of the Exchequer, a Tariff Reformer. They all make the point that, from the revenue point of view, is is better to pay some people for doing nothing. That is because of the false view as to the source of the wealth of the country. It can only come from the work of the people and the natural resources of the country, and a certain small amount that is contributed from overseas.

See what the right hon. Gentleman is doing with his surplus. He is handing a large part of it back to Income Tax payers, without the slightest idea what it is going to do and what it is going to stimulate. He has some very vague idea that it will give a fillip to trade. He is handing the rest of it back partly to the people who drink beer and partly to a very wealthy industry. No one is going to suggest that that will increase the sum of wealth in the country. It is obvious that the right hon. Gentleman would have done far more good if he had done away with the cuts in unemployment pay —if he had given it to those with the greatest need. From the point of view of getting industry going again, he could have acceded to the demands which have been made from all over the House and have initiated a policy of providing work. From the point of view of internal development, the Government are doing very little. There is no attempt to do what is needed, and what indeed is really the logical thing to do if you are going to follow a tariff policy. They do not, on the other hand, seriously make an endeavour to widen our trade and restore the world. They have delayed their World Economic Conference. It is supposed to be coming off now, but it has been coming off for the last 15 months.

No one will say that the Chancellor's speech was very cheering or encouraging. The most one can say is that we are just about holding on. He showed no real hope for the future. The Budget is a confession of the bankruptcy of the capitalist system. That system can only flourish on the basis of profit making. There is not sufficient opportunity of making profits to tempt capitalists to set industry going. That cannot occur without a great revival of purchasing power among the masses of the people here and abroad. The Budget is not merely an expression of the right hon. Gentleman's own views, but an expression of the views and policy of the Government. Although they practise tariffs, their attitude towards the community is really eminently Victorian. They are looking on. They are not doing what is needed in planning society on an intelligent basis in order that the people of the country can take advantage of the abundance of supplies in the world. That is the real condemnation of the Budget. They are merely playing about with the resources that there are. Neither in this Budget nor in anything else that they are doing is there any attempt to bring world prosperity by making use of the abundance that exists.

3.50 p.m.

Sir HERBERT SAMUEL

The hon. Member for Limehouse (Mr. Attlee) has engaged in many criticisms, with some of which I agree, but others seem to me to be patently unjust to the facts of the case and to the Budget as presented by the Chancellor of the Exchequer. One most important question with which he dealt at the outset of his speech was the matter of the balancing of the Budget, and there, in particular, he seemed to me to have arranged figures in a manner which was patently unfair. What is meant by a balanced Budget? It is that the revenue of the year must cover the expenditure of the year. But when the hon. Member sought to prove that the finances of last year were unbalanced to the extent of £75,000,000, he debited the Budget with the cost of the War Loan Conversion—£23,000,000. Clearly, that is properly a capital charge. It is a set-off to the very large saving which was effected by the conversion, and in all the circumstances it is to be regarded as a capital charge and should not be taken into account in the balancing of the Budget in the particular year in which the conversion happens to take effect. Although the hon. Member took into account several possible debit items which could be quoted against the Chancellor, he did not allow for the £18,000,000 paid off from Debt during the year which was a credit item which ought to be set off on the other side. And again, as far as the payment to America, has been a repayment of debt, that also should be set off in the calculation which he has made. So that his total of £75,000,000 can only be regarded as fantastic.

On the contrary—although I shall have many criticisms to make a little later—I would wish to begin my observations by congratulating most warmly the Chancellor of the Exchequer in having stood firm against those evil advisers who would deliberately unbalance the Budget and, gambling upon the prospects of the future, relieve the Income Tax payer out of funds which he has not got in hand. I was surprised that from weighty and responsible quarters in the Press this advice was urged upon him. I was not quite so much surprised that the right hon. Gentleman the Member for Hillhead (Sir R. Home), whose absence to-day through indisposition we all greatly regret, should have been one who urged this policy upon him, because frequently, in the matter of silver rehabilitation and other matters, his advice seems to me to be more plausible than wise. But the Chancellor of the Exchequer gave reasons yesterday against such a course which, I think, must have convinced the Committee in general that they were conclusive.

When the Labour Government were overthrown it was largely for the reason that it was recognised to be of supreme importance to the finances of the country that the expenditure each year should be covered by the income tax of that year; and that was when we were still on the Gold Standard. Now that we are off the Gold Standard and our currency is not firmly attached to any basis, deliberately to budget for a deficit—to borrow to meet the annual expenditure—would be an exceedingly unsafe course to pursue. If it were right for a Conservative Chancellor of the Exchequer in a Government predominately Conservative to borrow in order to relieve the Income Tax payer of his burdens, would it not be claimed to be right for a Socialist Chancellor of the Exchequer to borrow to meet the same purpose which his Government had roost closely at heart? To gamble upon an improvement which may or may not occur would be exactly to take the course which we sometimes read of in the police courts, when a shop assistant, previously of good character and regarded as honest and reliable, takes some money out of the till with the confident expectation that by investing it in some enterprise which has been strongly recommended to him, he will be able in a very short time to replace it, and when he finds that events have not fallen out as he had been given reason to anticipate, and he is brought before the magistrate, he at once explains that never for a moment did he imagine that he would find himself in such a position. If the Chancellor of the Exchequer had taken this course, and if, as is not improbable, the anticipated improvement had not occurred, he would have been precisely in the position of such an individual and his previous good character would have been wholly forfeited. Furthermore, would it really have given confidence to industry to have reduced Income Tax by, say, 1s. or 1s. 6d. in the £ at the expense of budgeting for a deficit of £50,000,000 or £60,000,000 this year, knowing possibly that when next April came round there would have to be a replacement of the whole of that burden of taxation and perhaps even a greater burden, for there could be no certainty that the Budget in such circumstances would in fact be found to balance?

There is this further point to be taken into account. When the National Government was first formed and found the colossal deficit which faced us, we asked the whole country to bear a burden of sacrifice by taxation, by cuts of pay, and by cuts in unemploment allowances. I for my part never used the term "equal sacrifice," because there could not in the nature of things be any equality of sacrifice. When you go to an unemployed workman whose whole income is 17s. a week and you take 10 per cent. off, the sacrifice is inevitably far greater than 20 per cent. or even 30 per cent. off the large incomes of the country. But we did say to the working-classes in general that all were expected to share in this national emergency. If now the Chancellor of the Exchequer had come forward and had taken the advice given to him by some of the newspapers, and by some Members of this House, and had deliberately put aside all those considerations and had devoted a sum of tens of millions to the Income Tax payer, and had made no return to the other classes who had simultaneously been called upon to make a sacrifice, it would have evoked a most violent and fully justified protest. It would really have been in the nature of a breach of faith.

There is this last point which it is not possible for the Chancellor of the Exchequer himself to make but which other Members can bring forward. This country is engaged at the moment in most delicate and difficult negotiations with the United States with a view to remission of debts which are legally due, and to have seized that moment to make a large remission of taxation in this country, at a time when the American taxpayer is faced by a colossal deficit, would have been the worst form of negotiating anyone could possibly conceive. In fact, there is every reason against that course and hardly any reason in favour of it. If the Chancellor of the Exchequer had adopted it, he would have been in the position of a board of directors of some company which distributes a dividend that has not been earned, and, although occasionally if there are large reserves and certain prospects of improvement that course may be legitimate, it is undoubtedly not so in the present case with the national finances.

Let me mention very briefly a few specific points. The first is one which has been referred to by the hon. Member for Limehouse—the charge for the able-bodied unemployed. That is a matter which has come into the forefront of late. We who belong to the Liberal party have advocated for several years that the charge for the able-bodied unemployed should be removed from local authorities and assumed by the State, and with it the administration, as the two must go together, and now there has been an active demand for such a change voiced emphatically here in the House of Commons. The Government, immediately before the Easter Recess, agreed that that should be done, and that it should be done in the very near future. It does not involve, of course, an increase of burdens upon the citizens in general. It is a readjustment of charge as between the ratepayer on the one hand and the taxpayer on the other. But the Chancellor of the Exchequer said not a word with reference to it in his Budget statement. If the whole of the charge were to be assumed by the State, it would involve, as we were told, a sum of about £4,750,000. It is possible, by readjustment of the block grant formula, that part of this might be put upon the rates of the more prosperous districts, but those districts, and the distressed districts, have a right to know what is going to be done, and I think they will both view with some concern the fact that no reference was made to this matter in the Budget speech. Last night, in the few brief observations I made, I raised the point. I did not expect the Financial Secretary to reply yesterday evening, but, as he is going to reply to the Debate to-day, I hope he will give a substantial answer on that point.

The next point relates to the Exchange Equalisation Account. The Chancellor of the Exchequer tells us that he proposes to continue that Account, and to come to Parliament to increase the sum involved. I think that we should be told why it is necessary to increase the sum involved. The idea was that this was to be in the nature of a revolving Fund. It was not to be locked up, but was to be used when required in the purchase, and afterwards restored by the sale, of foreign currencies, or it might be of gold, with a view to levelling out the minor fluctuations of exchange, although never did it from the beginning pretend to secure complete stability irrespective of the economic forces which pull sterling this way and that. But the right hon. Gentleman has told us nothing as to the present state of the fund, except that there are assets in his possession to that amount. Are we to understand from that, as I presume we are, that the fund so far has not been worked at a loss? If the Chancellor would give us that assurance, I think it is one which the House of Commons, as guardian of the public purse, has the right to invite. Further, we would ask him why it is necessary for the fund to be increased unless the money has been locked up in foreign currency that cannot be realised or for purchases of gold? I know that the Comptroller and Auditor-General, who is, of course, the officer of this House and not of the Government, will have the right to audit the accounts of the fund, but his task is only to see that its operations have been conducted in accordance with the Statute, and he has no right to go into the profit or loss that may have been incurred.

My third point is with reference to the beet-sugar subsidy. The right hon. Gentleman, in his Budget speech last year, referred to this, and said that he proposed to appoint a committee to inquire into that matter before any new financial arrangement was made. We have heard nothing further of that committee, although a year has elapsed. The taxpayer has provided already over £30,000,000 for this experiment, much of which has been absolutely squandered, and although a certain amount of employment has been given in the Eastern counties and elsewhere, a careful calculation shows—it has been published, and I do not think has been challenged—that every day's work for every man employed in the sugar-beet industry, either in the factories or the fields has cost the taxpayer 25s.—a rather expensive way of employing people in a new industry; that is, 25s. per day per man in the form of subsidy or in the form of rebate of taxation. This matter ought to be impartially, carefully, and searchingly examined by a committee before the House of Commons is asked to spend another shilling upon this experiment, and I trust that the right hon. Gentleman in any negotiations with the industry will not commit us to any further payment when the subsidy lapses in the course of next year, and certainly that he will not commit us without having had the strong and impartial inquiry which was promised 12 months ago.

With regard to the particular proposals in the Budget, we on these benches regret the tax upon kerosene, which is a commodity of wide consumption, and although the tax is not nearly so heavy as previously proposed, it is open in proportion to the same objections which were raised against it when originally suggested. The question of new duties on heavy motor vehicles will demand careful consideration and debate, and I know that several of my hon. Friends on these benches have some strong views on that point. With regard to the vexed question of the taxation of co-operative societies, there is now no proposal at all before the House, and we must wait until some proposal is made before we are called upon to express our views with regard to it.

Beer is undoubtedly very heavily taxed now, but other commodities and other interests are also very heavily taxed, and it is well to remember, as was stated in answer to a question in the House of Commons two or three weeks ago, that while in the last year before the War the profits of the brewery companies amounted to £10,000,000 a year, in spite of the enormous increase of taxation, or, indeed, apparently in consequence of it, for reasons I need not go into, the profits of the breweries in the last year for which figures are available were not £10,000,000 but £23,000,000, and although in this current year they will, no doubt, show a shrinkage, that fact has to he taken into account when we consider the very large number of other industries which are now being conducted at a heavy loss, before we lightly accept the precise proposals which have been put before us. In any case, I, for one, hold, and I believe my hon. Friends hold, that the first claim to any benefit, if there is money available from the Exchequer, should be on behalf of the families of the unemployed. In particular, the children's allowances are really inadequate, and there is genuine privation in hundreds of thousands of homes on account of the smallness of those particular allowances. No very large sum would have been involved in a concession under that head, and I am sorry the Chancellor did not give it the first place.

There is a great omission in the Chancellor's speech to which, again, the hon. Member who has just addressed us re- ferred towards the end of his remarks. Nothing whatever was said with regard to measures for the provision of work. It is true that those measures ought not to involve a budgetary charge, and therefore the Chancellor was strictly under no obligation to deal with the point; but, if he had attached importance to the matter, he would not have omitted it from his speech. We have had very frequent debates in this House on unemployment, debate after debate, day after day, sometimes on Votes of Censure and sometimes non-party debates to which each section has brought its own contribution to the common stock, and from every quarter of the House in those debates there have been the most urgent appeals to the Government to undertake with vigour and energy a constructive forward policy. The whole House sees it is a scandal that there should be all this idle labour and all this idle capital while there are very urgent needs of the nation for housing and other purposes not fulfilled. All that the Government have done has been to throw upon the local authorities the burden of slum clearance, and to urge that that should be quickly accomplished, although everyone knows that slum clearance must depend upon house provision, and, with regard to that, their proposals are quite inadequate. I deeply regret that the Chancellor of the Exchequer did not refer to that matter, although unemployment is the real source of the whole of our budgetary troubles, for if there were not this enormous charge through unemployment, the Budget task would be easy. Although this problem is uppermost in the minds of the people, the right hon. Gentleman did not give it even a passing mention from the point of view of the provision of work, and all that the Government have said is that they will be prepared to consider schemes that may be put forward by others, and, as the Prime Minister has said, to tabulate them—

Sir F. FREMANTLE

The right hon. Gentleman says that the proposals for slum clearance are totally inadequate. Does he suggest that the Government ought to give a higher subsidy, or what does he mean by "inadequate"?

Sir H. SAMUEL

I mean that the positive housing proposals of the Government are regarded by us as inadequate. The Housing Bill which has been passed will not, in our view, result in the provision of a sufficient number of new houses to make it possible for the residents of slums to be cleared from them and the slums to be rebuilt. That, in our view, is why the housing policy of the Government is inadequate.

Having dealt with these particular points, let me ask the Committee to step back for a moment and view the Budget picture as a whole. We are bound to confess that it presents the appearance of a somewhat gloomy landscape. The year just closed has involved the maintenance of all the additions to taxation previously imposed as a matter of emergency during the crisis; it has involved the maintenance of all the cuts that were made during that crisis, and yet has ended in a deficit in the national accounts. That deficit may be calculated at different figures, as the Chancellor said, according to whether you take into consideration or omit consideration of certain items, but certainly there has been a deficit which has to be added to the National Debt. And now for the present year all that immense burden of taxation has still to be kept upon the shoulders of people, all those cuts have still to be kept in force, and the Chancellor of the Exchequer is just able to pay his way, omitting any possible provision for the American Debt.

The Sinking Fund has been suspended in order to reduce the Beer Duty. That is really what the Budget amounts to. All the other items are unimportant. The two important items are that the Sinking Fund has been suspended in order to reduce the Beer Duty. One might express it in this way: The fixed charges have been reduced in order to increase the liquid assets. That is the only substantial change effected this year. The January to July postponement of a quarter of the Income Tax payment is not, of course, a real relief to the taxpayer. It enables the burden to sit a little more comfortably on his shoulders, but it does not reduce by one iota its weight, and the most serious aspect of the Budget is the further shrinkage in revenue from Income Tax and Surtax.

I do not propose to trouble the Committee with statistics, but I would ask the Committee to note these particular figures under that head which are drawn from the White Paper circulated to hon. Members. The receipts from Income Tax and Sur-tax together in 1931–32 were £364,000,000. For the following year, the estimate was £326,000,000 — an enormous fall. But although the rates were increased, the receipts were actually not £326,000,000 but £312,000,000. In the White Paper the receipts for next year on the basis of existing taxation were only £291,000,000. Therefore, in the very centre of our national finance, Income Tax and Surtax, the great stand-by of the Exchequer, there has been a reduction of £73,000,000 in the short period of two years. The figure has been reduced by one-fifth in two years. That is one reason for the formidable aspect borne by our national finances. The Chancellor of the Exchequer has been able to meet that to some extent by the large savings due to cheap money. For cheap money there are two causes. The first cause is that the country has confidence in its own financial stability and in the credit of the Government. I only wish that the hon. Member who has just spoken had made at least a passing reference to that point, because it is of fundamental importance in this connection. If that goes, everything goes. The hon. Member opposite seemed to attach singularly little importance to financial stability and the maintaining of national credit. Cheap money is also the consequence of a second cause, and that is the stagnation of industry and commerce. In that respect we are not able to feel the same or any satisfaction. The country would be the better and the Treasury would be the richer with dearer money if it were combined with active trade, as it would be. Therefore, we can only take a very qualified comfort in the fact that the situation has been somewhat eased this year by the extraordinary cheapness of money and the ease of Government credit.

When we take a picture of our national finances and of the economic situation as a whole we see that the hopes of immediate recovery which were held out to us by members of the Government during last autumn and winter have not in fact been fulfilled. The Chancellor of the Exchequer himself in more than one speech, although he did not make any rash promises, said that he thought the country had every reason to expect that the corner was being turned and that brighter times were in prospect in the near future. The Prime Minister in his letter to Bethnal Green, that famous letter—I am not sure that famous is the right word. [Interruption.] My hon. Friend the Member for Bethnal Green, South-West (Sir P. Harris) describes it as an infamous letter, but I should not go quite so far as that—said that there was a remarkable recovery in progress and that the deterioration in the economic position had been stayed. Even so cautious a speaker as the Lord President of the Council, speaking last December, said that: Although he had never been able to say it before he did say it then, that he believed that the turn was coming. As for the Financial Secretary to the Treasury, who is nothing if not flamboyant, in the stimulating atmosphere of the Junior Constitutional Club, last February he spoke of the majestic nature of the recovery this country has made; one of the most miraculous rehabilitations ever recorded in history. That is an example of the use of rich rhetorical superlatives, which are his only resemblance to the Disraeli whom he so much admires. As a matter of fact, we have this year the highest unemployment figures ever known. In addition, we have a quarter of a million more people who have been forced to have recourse to the Poor Law than in the previous year, while the local authorities of the distressed areas are all in active revolt. In this House the President of the Board of Trade, the Minister chiefly concerned, on the 12th April, said that so far as our great exporting industries are concerned, coal, shipping, iron and steel and textiles, we have sunk to a degree of depression such as has never been known in the history of this country.''—OFFICIAL REPORT, 12th April, 1933; col. 2632, Vol. 276.] Two things have been unprecedented in the history of this country. According to the Financial Secretary to the Treasury we have had a majestic recovery, a miraculous rehabilitation, the most miraculous ever recorded, but, according to the President of the Board of Trade, we have had the deepest degree of depression in our staple export trades that has ever been known. The fact is, as we all know, that the depression continues absolutely unabated. So far as the cotton trade is concerned, speaking as one of the representatives of the cotton districts, I am informed by manufacturers there that the depression is at its very worst, that at no time has it been more severe than it is now, and that it seems likely to continue. It is this state of trade and this unemployment which is responsible for the character of the Budget that has had to be presented to Parliament this year.

On the expenditure side, the actual cost of unemployment to the Exchequer, over £80,000,000 a year, is equal to an Income Tax of 1s. 6d. in the £, while on the revenue side the shrinkage of Income Tax and Surtax alone, due to depression of trade, is equal to another 1s. 6d. in the £, so that 3s. of the 5s. Income Tax is directly due to the present depression, the cause of which is perfectly well known to everyone. The British Chambers of Commerce, the International Chamber of Commerce, the British Chamber of Shipping and the experts drawn together by the League of Nations in preparation for the World Economic Conference say precisely the same thing, and with unanimity, that the depression is due to the fact that world trade is blocked and has diminished by two-thirds in the last three years. Now, at last, the Government are beginning to realise that that is the essence of the whole matter. When the Prime Minister left us the other day to go to America his last words were that he was going there convinced that the chief purpose of the World Economic Conference must be to restore the freedom of international trade, and that he went to America with that object in view.

The Chancellor of the Exchequer, in words which have been quoted already in this House, but which must be quoted again because they are of supreme importance, coming from him, holding his position and with his past political record, said, on the 8th March: We ought always to remember that in this country have been, in the past, a great exporting nation. We have a large number of our people who earn their living by making goods and selling them to foreign countries. In the last few years our foreign trade has shrunk until it is half what it was. The idea that we can replace what we have lost in foreign trade by any artificial stimulus, applied in this country, appears to me one doomed to disappointment."—[OFFICIAL, REPORT, 8th March, 1933, col. 1302, Vol. 275.] That, from the right hon. Gentleman, the arch-Protectionist, who said not very long ago in this House, only a year ago, in introducing his tariff: We propose, by a system of moderate Protection, scientifically adjusted to the needs of industry and agriculture, to transfer to our own factories and our own fields work which is now clone elsewhere, and thereby"— These are the words to which I wish to draw the special attention of the Committee— decrease unemployment in the only satisfactory way in which it can be diminished." —[OFFICIAL REPORT, 4th February, 1932; col. 287, Vol. 261.] The only satisfactory way in which unemployment can be diminished! That was the cry of hon. Members throughout the country for years past. "British work for British hands." "Produce our own goods here." "Shut out the foreigner." "Exclude foreign imports by tariffs and you will have an abundance of work for everybody." "By a tariff on goods you will be able to reduce the Income Tax by shillings in the £." What has become of all that vain mirage? Does the Chancellor of the Exchequer stand by those words to-day, that by a system of moderate Protection…to transfer to our own factories and our own fields work that is now done elsewhere is the only satisfactory way in which unemployment can be diminished?

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The right hon. Gentleman is not quite correctly interpreting what I said. Obviously, what I said then was that to provide work in our own factories was the only satisfactory way of reducing unemployment.

Sir H. SAMUEL

No. I must recall to the notice of the right hon. Gentleman what he actually said. He said: We propose, by a system of moderate Protection, scientifically adjusted to the needs of industry and agriculture, to transfer to our own factories and our own fields work which is now done elsewhere. Obviously, the only way to secure redress of unemployment is to give employment in our own factories and our own fields, but as to the way in which that can be done, the right hon. Gentleman has at a later date made a statement which is in flat contradiction to that which he previously made, because he says that the cause of our unemployment and the prevalent distress is that our foreign trade is now half what it has been—not that our home trade is less than what it has been, but our foreign trade—and that anyone who thinks that by an artificial stimulus—Protection is an artificial stimulus—we can make good that unemployment is doomed to disappointment. Only yesterday the right hon. Gentleman in his Budget Speech spoke is own better mind when he said: I have not concealed my own feeling that the most hopeful prospect for any considerable advance towards prosperity lies in collaboration with other nations."—[OFFICIAL REPORT, 25th April, 1933; col. 64, Vol. 277.] "Collaboration with other nations." That is the very opposite of declaring that the right way to cure unemployment is not to collaborate with other nations but to exclude them.

The right hon. Gentleman says that, after all, he has got revenue from these tariffs, and that, if there were no such tariff duties, it would have been even more difficult to balance the Budget than now. He estimated that the revenue would be £33,000,000, but in fact it is under £20,000,000. That is very different from the hundreds of millions that were expected by Protectionists, which they declared in the country, as being likely to be drawn from tariff duties, in order to enable Income Tax to be largely reduced by making the foreigner pay. So far as this system has conduced to the general shrinkage of world trade, and unquestionably it has so conduced—[HON. MEMBERS: "No!"]—it has undoubtedly cost us far more revenue than it has brought. That is a very dear way of getting revenue.

When we are in discussion with the United States and they say: "We are in deficit, our taxpayers are heavily burdened, you owe us money and we cannot afford to release you," we say to them, "You are buying these Debt payments very dearly; you are suffering from them. You are upsetting international world standards, checking international commerce, and, if you were to do without them, you would be much richer." That is what we are saying to them; we are declaring that they are blind in insisting on having the money which is due to them in fixed sums rather than depend upon a general restoration of trade and prosperity. It is just the same with tariffs, which only block the channels of trade and check the commerce of the world.

What has been achieved by the use of the bargaining weapon? We have had only the trumpery results of the Ottawa Agreements, and the results of the agreements which have now been negotiated with other countries. The President of the Board of Trade in this House, before the Easter Recess, made a statement about these agreements, but he gave no specific point except one. He mentioned that the Germans would be prepared to buy twice the amount of coal which they had been buying hitherto. I had an opportunity of speaking later in that Debate, and I pointed out that the German restriction on our coal supplies was being used as a measure of retaliation against our tariffs imposed on their goods; and that the Germans themselves connected the two together when opening up negotiations with us. The Foreign Secretary rose later in the Debate, and, with that air of complacent tolerance of persistent foolishness which he so often adopts in debate, brushed my objections aside and said that the two were not in any way connected, and that it was due to the depreciation of the £ that these measures had been adopted. They may have been begun about that time, but they were reinforced and increased month by month as a measure of retaliation against our fiscal policy. The Foreign Secretary had hardly made his statement in the House when the Mining Association of Great Britain published a statement to the effect that the agreement made public by the President of the Board of Trade with Germany— can only be described as bitterly disappointing. Germany has been permitted to destroy the greater part of our coal trade with her and now apparently the Government expect the industry to be grateful because the meagre imports permitted under licence are to be doubled. They also pointed out that our coal exports to Germany had been reduced, by the action of the German Government, from 420,000 tons in the month of September, 1931, to 100,000 tons a month, and declared—this is not a person making a speech in the House of Commons, but the Mining Association— The restrictions were originally imposed by Germany by way of retaliation for our tariff policy. Later on, they said: The Government's trade policy with regard to Germany which, in the first place, put British mine workers on the dole will now assist in keeping them there. That is what usually happens in the use of the bargaining weapon. You impose your tariffs; the other party retaliates and destroys some of your industries. You negotiate; and, if you remove some of your tariffs, the other side buys a little more of your coal. But at the end you have half the trade you had before, and, in the meantime, tens of thousands of miners have been deprived of their employment.

Contrast this Budget with the expectations that were aroused at the time of the General Election, only a year and a half ago. The country then said to us—I was a Member of the Government at that time—adopt any measures you like if you, men drawn from all parties, can agree upon a common policy for relieving the country from its present grave distress; discard all old theories if you wish, but show vigour, enterprise, initiative and resourcefulness; choose your course, produce your results, but, above all, this is what the nation said: "We cannot bear this enormous burden of taxation, we cannot carry this immense mass of unemployment." That was a year and a half ago. A majority of the Cabinet chose their course. We dissented; and we resigned. The Government pursued its policy; it has produced its results. Unemployment has been increased, taxation is undiminished. That is the picture presented by this Budget.

4.37 p.m.

Sir ARTHUR STEEL-MAITLAND

Every hon. Member must have realised the extraordinary amusement which the right hon. Member for Darwen (Sir H. Samuel) must have had in his detailed and careful study of the speeches of various Members of the Government in order to pick out here and there a sentence which might be put in a particularly amusing juxtaposition. It must have been the work of hours on the part of the right hon. Gentleman to prepare his speech, and it must have given him great satisfaction when he found two sentences which could be put together to produce the effect he has produced this afternoon. As might have been expected, he kept his sharpest barbs for his former colleagues of the Liberal party. I do not wish to follow him in his fiscal argument, because I desire to make a few remarks about the Budget, but I should like to ask him one or two questions. He has said that many tariff reformers have proclaimed throughout the country that hundreds of millions of pounds would be obtained, annually I presume, from tariffs. I have made perhaps as many tariff reform speeches as anyone, and I cannot call to mind a single speech in which I claimed that a tariff would produce hundreds of millions of pounds annually; and I do not believe there is a single responsible Member of the Conservative party who has ever said so. Perhaps the right hon. Gentleman, who has been so meticulous about the actual words which have been used in speeches, will be good enough to furnish us with some quotations which will support this general charge, and then, and not till then, will we give him full credence. He also called attention to the fact that the foreign trade of this country had fallen to half the amount in value—

Sir H. SAMUEL

I was quoting the Chancellor of the Exchequer.

Sir A. STEEL-MAITLAND

The right hon. Member for Darwen surely will not pretend that this was in itself a measure of the failure or success of any policy at the present moment. I am sure he will be the first to admit that you have to view these figures against the general background of international trade. You cannot consider it in isolation. It is perfectly obvious that you must compare it with what has been happening in regard to international trade throughout the world; and, when the right bon. Gentleman has done that, I am quite sure he will find that the detrimental inference which he drew with regard to our fiscal policy are not substantiated. Again, if the drawbacks of a tariff policy are so obvious as the right hon. Gentleman declares, then surely they must have been obvious all the time to such a student as himself, and, if it was obvious that such a policy would produce results so overwhelming and so terrible as he makes out, it is amazing to think that he should have remained in the Government after the duties were put on.

Sir H. SAMUEL

I was a Member of the Government at the time.

Sir A. STEEL-MAITLAND

He was eager to wound but afraid to strike.

Sir H. SAMUEL

The right hon. Gentleman is doing me less than justice. He is aware that we resigned our office, and that it was only at the urgent request of the Prime Minister and all sections of the Cabinet that we consented to stay on the clear understanding that we were absolutely free to oppose the duties by speech and vote—as we did.

Sir A. STEEL-MAITLAND

I do not want to do the right hon. Gentleman any injustice. Let me then merely say, that we have the history of that time fresh in our memories, and his case is not quite fully proved to the conviction of others as it is to himself. Let me pass to the speech of the hon. Member for Limehouse (Mr. Attlee). I have the greatest admiration for the ingenuity of the hon. Member, but, great as it was on this occasion, it was not so great as his inconsistency. He said that one great proof of the failure of the present Government was the fall in the productivity of the Income Tax. It was significant, and doubly significant, because it had occurred during the present year in relation to income which was not earned during the period of that reckless and prodigal Socialist Government but while a National Government was in office. Therefore, he said a fall in the produce of the Income Tax was all the more significant and was to him a proof of the entire failure of the Government.

The hon. Member is extraordinarily inconsistent. Last year he criticised the Chancellor of the Exchequer because, he said, he would not look at facts against the background of the international situation. If the hon. Member had done this himself, he would never have made his statement about the Income Tax. If he had looked at the yield of taxation and at the results of the Budget, against the background of the international situation, he would have found that the budgetary situation in this country compares favourably indeed with that of those countries with which it can be most profitably compared, whether the United States or France or any other country. The figures of production compare favourably for this country. Though they have fallen, the fall is less pronounced than in any of the other great manufacturing countries. In the figures of foreign trade precisely the same fact is obvious. With reference to beer, both the speakers this afternoon were sarcastic. The hon. Member for Limehouse was particularly so with regard to the brewers.

Viscountess ASTOR

Hear, hear.

Sir A. STEEL-MAITLAND

I hear an echo from the far distance. Perhaps the Noble Lady will repeat it from her place.

Viscountess ASTOR

Hear, hear.

Sir A. STEEL-MAITLAND

One thing was noticeable about the speeches of both speakers this afternoon. They talked quite cautiously about the reduction of the Beer Duty. Agag might have envied the delicacy of their treading. I could not be sure whether the hon. Member for Limehouse was going to oppose or support the reduction of the Beer Duty. It would be interesting to ascertain that from him. Otherwise, in the end he may be found supporting the reduction. His attitude seemed to me to recall lines which may be familiar to many here: It may be that we are meant to mark with our not or our rest, God's scorn for all men governing; but it may be beer is best. I must pass to some of the points of the Budget which are peculiarly interesting. One was mentioned by the right hon. Member for Darwen—the suggestion of a, three years' Budget. I would like to assure him that I am entirely in accord with him in thinking that the Chancellor of the Exchequer was very wise in not accepting that suggestion. From some points of view it is extraordinarily attractive. It is indeed only a proposal to do on a national scale what men of business often do in their own concerns. I fancy that the Chancellor must have found it attractive. He gave me the idea of some Ulysses who was coasting along and heard the voice of the siren; felt the force of her blandishments, but was able to pass by; and perhaps the vigour of his denunciation afterwards was some measure of the allurement that he felt. At any rate, it seems to me that, attractive as the suggestion may be, when the whole of the considerations are weighed they are decisively against the adoption of the suggestion.

There is another item of financial policy which involves international considerations, and I would put it before the Government. A year ago a most interesting speech was made by my right hon. Friend the Member for Hillhead (Sir R. Horne), who called attention to the urgent need for a rise in prices. Events have moved very far since then, and now to state the need for a rise in prices is to state a platitude to which everyone assents. Equally admitted to-day is the need for some inflation in order to cause that rise in prices. It is also a platitude to say that if a rise in prices is to be of any lasting value it must be a rise in world prices and not a rise of prices in any one country. I hope that the Government will never attempt forcibly to raise prices in this country irrespective of what may happen in other countries. I hope that they will never take artificial measures to this end, or get out of step with other great countries. It is a course that is being frequently advocated to-day, but I believe it is one that would be foredoomed to failure and disaster.

I ask the Committee to look at the position as it is to-day. In this country we have in fact inflated. There are two parts always in inflation. One is the creation of an amount of money; the other its active use either voluntarily or by force on the part of the Government. In this country we have inflated to a very large extent. Money has been created to the tune of £250,000,000 or £300,000,000. At the present time it is not much used, but it is being used to a certain extent, more at any rate than in other countries, and there is every evidence of readiness to use the money created, provided that people are not made more timid, not by affairs in this country but by the course of international affairs. I ask the Committee to compare what we have done with what has been done by other countries. I take the case of the United States as an instance. In the United States there has been no inflation in the sense that there has been any increase in the amount of money. A certain amount has been put out by the Federal Reserve Banks, but even before the last banking trouble it was off-set by the hoarding and the withdrawals from the banks. Practically speaking, there has been no creation of money up to the present time in the United States.

I ask the Committee to consider the present situation, with the dollar off gold. There has been a great rise in Stock Exchange prices. That is speculation. There has been no rise up to date in commodity prices, which is the really sound rise that must take place if there is to be any lasting improvement. It may be that the United States Government will determine to put fresh money into the financial structure, and may also go ahead and undertake large public works in order to force the money into active circulation. In the absence of some such measures, however, there will in fact be no inflation there at all. What is true of the United States is, broadly, true generally. Therefore I trust that, while the Government will vigorously co-operate with other countries when they are willing to take action, we shall not see any attempt at isolated action here, particularly in the case of expenditure of large sums of money on what are believed to be works which will increase employment.

Suppose that we go in for such a policy, in order to try to force up prices in this country by expenditure on objects which are not reproductive. What would be the result? In the first place it would burden our future with further taxes. One disquieting feature of this Budget, on a general view of the whole situation, is that it has not been possible to reduce expenditure more. If taxation is added to, it will probably mean that any reduction of taxation in future will either be postponed or the reduction will be less in amount, and that will have a prejudicial effect both on industry and employment. That is one result. Another is this: I do not believe it would have any permanent effect in appreciably raising the general level of prices throughout the world. So far as we take such action, and as far as it has any effect at all, it means only that we spend ourselves in breaking the force of the bowling, and we leave it to others to take advantage of our action and make the runs later on. So I put it to the Government that when they are pressed, as they are pressed, to take action of this kind in creating additional money, or in forcing it into circulation by public loan expenditure, they should realise that there are many quarters which would view such action as not in the least degree in the real interest of this country either for the present or for the future.

It may be said that what I have stated hitherto has been negative. I ask for caution on that score. But I have positive suggestion to make. In another direction I believe that a bolder policy in this Budget would be very desirable in one respect. Anyone surveying the position of the country to-day would agree that there are three prominent features which stand out. One is the fall in the profits of industry. That is reflected in the vast totals of unemployment. But there is another effect. It is not only that the profits distributed in dividends are reduced. It means also a reduction of the main fund on which industry relies for being maintained at its present level or for being modernised where necessary. It is known to everyone in industry that, while there may be big subscriptions to new issues, yet by far the greater amount of the maintenance and modernising of industry is done by the reserves accumulated out of profits which have not been distributed. As these profits have been falling, so the power of industry to maintain its present equipment and to improve it has been prejudiced during recent years.

There are two other things which coexist with that state of affairs. The first is that there is a very large amount of money idle in the country at the moment. Despite heavy taxation and despite the effect of the conversion of the War Loan has been felt, the money is there. As was shown by the subscriptions to the Danish loan the other day there is a large amount of money available. That is one thing. The other is this—and with this I do not think my right hon. Friend opposite will so readily agree. While unemployment is extraordinarily acute, and affects at this moment very nearly a quarter of the industrial population, yet those who are in work are to-day better off than has ever been the case in this country's history. [HON. MEMBERS: "No!"] I thought hon. Gentlemen opposite would not be so sure about that, but I ask them to examine the statistics. There has been a fall in wages, but the fall in the cost of living has been three times as great as the fall in wages. [HON. MEMBERS: "Rent!"] I am referring to the cost of living generally, including rent. The fall in food prices without rent has been more than three times as great as the fall in wages. While conditions vary from one trade to another, yet we find that the average level of wages to-day is 65 per cent. above the pre-war level.

Mr. LANSBURY

There are masses of people in East London—unskilled workers—whose rent alone to-day exceeds the whole amount of the wages which they received in 1914.

Sir A. STEEL-MAITLAND

That observation is really not material to the argument. The question is what is their situation, on the whole, to-day as compared with what it was in 1914? On the whole, the situation of those who are in work to-day is, without doubt, much better. The average level of wages is 65 per cent. higher and the cost of living has fallen. The cost of food has fallen even more than the general cost of living and wholesale prices of food are in many cases well below the pre-war level. These circumstances have all to be considered together. We have the co-existence of these three facts; that the fund out of which industry is maintained and brought up to date is greatly depleted; that there is a great deal of idle money, and thirdly, that among the three-quarters of the consuming population which is in work there is a greater degree of prosperity than ever before. All these result from the depression and the fall in prices, and I think that anyone who was looking for a way towards the future prosperity of this country would say that the present dislocation ought to be remedied, that a better relation ought to be restored between these factors, that there should be a rearrangement of taxation, particularly in regard to consumption duties—such as the restoration of the sugar duty to its previous level in order to redress the balance.

Means should be found to ease the pressure on industry by giving some relief to industrial reserves. I believe that if there could be an arrangement which would give relief to industrial reserves it would be of immense benefit to the country as a whole. It would replenish the fund for maintenance and improvement of plant; it would give employment in trades which need it most; it would of itself help to raise the price level, and it would leave us, when the depression had passed, better equipped and not less well-equipped to face the competition which we shall have to meet in the future. I know that I shall be met with the objection that I am urging yet further mechanisation which will cause yet further unemployment. I am not insensible of the dread which exists of unemployment created by the improvement of machinery, and I know as well as many hon. Members opposite the hardships suffered by the individual who is thrown out of employment in that way. I read the other day some very striking words on this very subject: Formerly the labour thrown out of employment by the introduction of machinery has been absorbed by other trades, but now the case was widely different … Thousands and tens of thousands, complaining of machinery, testified that when workmen were flung out of one employment they could not find another ready to receive them. Addtional mechanical power … was likely to throw many others out of work. That is a statement of the case as many feel it to-day, but, for one thing, necessity drives us in this matter. When other nations are improving their machinery we must, if we are to maintain our trade, keep abreast of the newest developments. I believe however that a great deal of that apprehension is not in fact well founded. I believe that the lessons of history show that we have not yet reached saturation point, and that we need not fear mechanisation to the extent to which some fear it to-day. I may mention as a proof of that statement that the quotation I have just used is not a modern one. Those words were used by Lord Brougham over 100 years ago of the state of affairs in his own day. Yet it was after that pessimistic forecast that we had all the development and prosperity of the Victorian years. Similar pessimism to-day will, I believe, prove equally unfounded. It may also be objected that what I have urged is not novel. I do not think it is necessarily the worse for that. What is needed is to feel that there is no ground for pessimism, but that there is a need for trying to forecast the future and to analyse the present as carefully as we can. If we do that then perhaps we shall find that some other words which were used over 100 years ago in the aftermath of a former great war, are still in place. To abstain from hazardous innovations and experiments; to probe with a tender hand real grievances with a view to practical remedy; to foster the resources of the country; this is the course which Parliament has to pursue and which … painful and laborious as it may he, will I have no doubt enable us to look back in the future with self-congratulation at the gloomy phantoms by which we are now discouraged and appalled. The stamina of the nation I am persuaded is sound and I cannot and will not believe that the brilliant destinies of England are closed. I believe that those words of Canning, spoken 115 years ago are as true and as applicable to-day as they were when he used them.

5.9 p.m.

Mr. CROSS

May I put in the customary plea for the indulgence of the Committee on an occasion of a maiden speech. We all listened with anxious and attentive interest yesterday as the Chancellor unfolded his Budget proposals upon which the hopes and fears of so many persons in the country were centered. I should like to say how glad I am that the hopes of a vast body of persons were on this occasion realised in one respect, namely in the reduction of the beer tax. It was all I had hoped for, and indeed in the difficult financial circumstances of to-day it was all I could have wished for, though let me confess now, that it was not nearly as much as I had asked for. But in these hard times we all recognise that we must feel most grateful for these mercies. I know that in the division of Rossendale which I have the honour to represent thousands of working men and scores of club committees and scores of licensees will most gratefully appreciate what the Chancellor has done.

The high level of the beer tax is one of many evidences of the extraordinary difficulties which confront the Chancellor at the present time. No one can envy the right hon. Gentleman as he is on the one hand faced with the stern realities of a dwindling national income and a shrinking tax revenue, and on the other hand, with a vast volume of fixed and semi-fixed items of expenditure. There seem to be only two ways out of the dilemma, namely borrowing for budget purposes or the possibility of a trade revival. With regard to borrowing, I, for my part, welcome the fact that my right hon. Friend has resisted the pressure, inevitably put upon him, to take the line of least resistence and balance the Budget by that method. But there is one direction in which, it seems to me, borrowing in a very different form might well in the present circumstances prove advantageous. I should like to see a new Trade Facilities Act, not as part of a programme of credit injection but, frankly, as a palliative suited to a period of falling income and surplus capital.

There must be many sound forms of enterprise in this country which would be established if only timid capital could be encouraged into investment. At the present time the Government would get in at the bottom of the market and could, I believe, do sound and beneficial business. Before I acquired the label of "politician," when I was a normal man, I used to eke out my existence by means of acceptance which as many hon. Members know is, in short-term finance, comparable to what the Government would undertake under a Trade Facilities Act in long-term finance. It is a most difficult and dangerous business as I know, but it can be a sound business. In my experience it involves the lending of large sums of other people's money to third parties upon the perfection of one's own responsibility. In return one obtains some exiguous commission and, what is more important for my present purposes, one earns and deserves the blessings of mankind. Could anything sound sweeter in the ears of a Government than that? Quite seriously I commend this course to the Government as one who can do so, speaking from personal experience in a parallel business.

This, however, could only be a small contribution towards easing the situation. There remains the problem of the possibility of trade revival. It is generally conceded that the pivotal point in the world's difficulties is the disparity between primary commodity and retail price levels. Indeed, so generally is this recognised that hardly a month passes without some new proposal being brought forth with a great blare of trumpets for forging a link between consumer and producer. To my mind, the vast majority of these self-appointed link-forgers are public dangers. They offer tempting short cuts to prosperity which I believe are far more likely to land us in an even deeper bog of depression than that in which we are already sunk. There are the technocrats from America, perhaps the most foolish of them all, who wish to issue energy certificates in place of dollars. It makes one wonder whether in those circumstances it would be possible for the American system of government to carry on.

Then there is Mr. Keynes, who says that if only enough people would pretend that enough paper represented enough gold, there would be enough work for everybody. As somebody else has said, "Cave canem." Then there are the bimetallists, who, now that the central banks have recently had a somewhat unhappy experience of marriage with gold, are urging them to rush into bigamy with silver, apparently with the faint hope that silver will prove less susceptible to the powerful attractions of Frenchmen and Americans than gold did. I am told that. it is quite contrary to human experience. Then there are the inflationists, who always break down at the point of telling us how they are going to get all their expanded credit and currency into circulation, and, what is much more important, how they are going to keep it there.

Last in the list worthy of mention are some of the 40-hour week people. I say "some" advisedly, and I believe they are in the main identified with hon. Members opposite. These persons appear quite sincerely to believe that it would be possible for vast bodies of workers covering perhaps whole nations to reduce their output of goods by one-sixth and then to arrange for some miracle in the shape of nominal wages to intervene which would enable those self-same persons to consume exactly the same quantity of goods as they did before. That seems to me to be the most fatuous possible piece of simplicity, and I am glad to have this opportunity of lending a hand in discrediting all these quack remedies.

But if the pivotal point in the world's difficulties to-day is the gap between the raw commodity and the retail goods price levels, then its principal manifestation is the disequilibrium between creditor and debtor countries; a disequilibrium which has caused most parties to impose those abnormal tariffs and to establish those quotas and exchange restrictions with which we are all so familiar. It seems to me that each country appears to be, in desperate self-defence, engaged in trying to strangle its neighbour, and is in return getting strangled itself. But this process is perhaps not so entirely and wholly foolish as it appears. There it at least the extenuating circumstance that in certain directions production, potential production, or surpluses are so much in excess of any consumption that anyone can reasonably look for, that there must inevitably be, in certain industries, further bankruptcy in the weakest spots up and down the world. It is here that our great importing strength is going to be and is indeed already of such value, because there is no country better placed than our own to escape with a minimum of liquidation of industry. I am convinced that the Government policy of complementary trade offers by far the best approach to a solution of our difficulties in this direction.

A new factor has entered upon the world dilemma in the course of the last week or 10 days. The United States of. America have gone off gold. America, with 4,000,000,000 dollars' worth of gold in her vaults and with a favourable trade balance, has, as a deliberate act of policy, suspended normal gold shipments, and it seems to me that it needs emphasising how very different this is from what occurred to us in this country. We, who had a huge adverse trade balance and only enough gold to meet our commitments to foreign central banks, were indeed forced off the Gold Standard. The President of the United States of America says that he has taken this step with a view to raising the commodity price level, in itself undoubtedly a most praiseworthy objective, and I think it is true in the main that at the present time dollar prices for American exports and imports are rising in proportion as the dollar falls in terms of foreign gold currencies, but it appears to me most unlikely that this impetus could possibly carry the dollar commodity price level beyond the point which is warranted by the depreciation of the dollar. I see nothing in dollar inflation which will inevitably and of certainty raise American domestic prices, nor do I see anything in dollar depreciation which is going to raise American money incomes to any appreciable extent. It follows, therefore, that if dollar depreciation is to lead to some rise in commodity prices, further steps have still to be taken and definite, direct, inflationary measures will have to be embarked upon. Presumably this is what will occur.

But there is another aspect of this matter with which we in this country are much more intimately connected, and that is the international aspect. The United States of America have a deep interest in world trade, and as a corollary they have a great responsibility towards the rest of the world in international monetary matters. For generations we shouldered this responsibility alone, and it seems to me to be fitting to recall at the present time that we did so with some considerable sense of duty and a recognition of our responsibilties towards the rest of the world, but it is a regrettable fact that the United States of America, which may perhaps be excused as a fledgeling country, has not yet fully realised its international responsibilities in this way. I will say nothing about American banking policy in recent years, but since America became a creditor country her foreign lending, both on short-term and long-term account, has been marked by ignorance, by inexperience, and by some measure of irresponsibility; and the mistakes thus made have played a not unimportant part in creating the present world situation. The people, not only of America but of the whole world, are paying a bitter price for those errors.

It was unfortunate that the suspension of normal gold shipments should have taken place at a time when our Prime Minister and M. Herriot were both in mid-Atlantic on their way to discuss matters of monetary policy with the American President, but it appears that the President should be exonerated on the ground that he was pushed into this by a group of Congressmen. He has now got to take the responsibility for the position in which he finds himself, and face up to the issue. It has been suggested that this suspension of gold shipments will strengthen the American hand in the forthcoming negotiations at the World Economic Conference, but there is reason to fear that some countries may take the view that the President's hand has already been too heavy. After all, it is undeniable that in effect he has issued a clear invitation to other countries to raise their tariffs still higher and further to tighten their quotas and their exchange restrictions; and he has done more than that. As the men of Moscow would say, he has indulged in a piece of deliberate sabotage of a very important part of the machinery of international trade.

This is the new American contribution to the world's affairs, and it seems to be incontestable that it now rests with America to put a very substantial contribution into the other half of the scales. The American President needs to be very conciliatory. It is undeniable that he has, by his action, delayed and damaged the prospects of international solution, and I should welcome some indication from this side of the water that we take the view that a very much larger contribution to international solution is now due from America than formerly could have been justified. Dollar inflation may help or it may conceivably hinder world recovery. At the moment it certainly gives us no definite prospect of a solution of the trade problem, and we cannot sit back and wait for dollar inflation to restore our trade to us. In my belief, the Government will in any case have to continue their policy of freeing and enlarging our channels of trade, and it is still in this direction that we shall have to look for that increased volume of business which may ease the position of the Chancellor of the Exchequer in years to come.

5.27 p.m.

Mr. KIRKWOOD

A very pleasing duty falls to me, and that is, on behalf of the House, to congratulate the hon. Member for Rossendale (Mr. Cross) upon his maiden speech. I think it was a very good effort that he made, and I can assure him that we on this side at any rate will await with interest the next time he makes a speech here, in order that we may be in a better position to controvert the statements which he has made to-day. I will not follow him, although his speech was quite interesting and really original in a number of the ideas that he put forward. I would like, before starting on the Chancellor of the Exchequer, to say a word to the right hon. Member for Tamworth (Sir A. Steel- Maitland), who said that the conditions in the workshops, that is, the conditions of the working-class who are working, were much better to-day than they were in 1914. As one who comes direct from the workshops, I want to tell him that his statement is absolutely without foundation. The conditions in the workshops to-day are worse than ever they were before, because the conditions that appertain outside the workshops determine the conditions that hold good in the workshops. The fact that we have a greater number of unemployed to-day than ever we had in the history of the world is an indication that they force the conditions that obtain in the workshops. Ask anyone in the workshops what their conditions are. Ask the foremen, ask the managers, and they will tell you that they have to put on the screw to-day as they never had to do it before. Yet we have Members rising here in the House of Commons, such as the right hon. Member for Tamworth—I would forgive ordinary Members, but the right hon. Member for Tamworth was Minister of Labour for four years—with whom we have had so many dealings, and making such statements. I am astonished at him. He quoted what a certain Lord said a hundred years ago. But what has happened since then? What is the difference between to-day and a hundred years ago? Have we not built all the great railroads and the great steamships since then, and have not all the cities of America been built since then? Have we not produced a great powerful machine, which is world-wide in its ramifications, to produce everything that mankind requires in superabundance? All the work has been done, and we shall have to start on Mars or somewhere outside the earth if we want to do any more. We have tapped the earth and the fullness thereof belongs to the people.

Sir A. STEEL-MAITLAND

I am sure that the hon. Member does not want to misrepresent me, but perhaps he misunderstood me. My point was that Lord Brougham thought that by his day they had done all that there was to do and that there was nothing more to be done. The facts of history subsequently proved him to be wrong, and my point was that if we think the same to-day facts will prove that we are wrong also.

Mr. KIRKWOOD

That is the point of view of the right hon. Member for Tam- worth. We hold that man's ingenuity is eternally active in tapping the resources of nature and making nature do men's work so that we can eliminate everything that is being done to-day. It is not a case of creating work. Everything that is being done to-day is done with a view to eliminating work. We on this side of the Committee are all out for that. We Socialists have struggled all along to do what we can to eliminate work, to do away with hard monotonous toil, and to introduce a different system and to train the working class which has been taught to do nothing else but work. To-day we are living in a different era where work is being eliminated, and we have now to educate the people how to employ their leisure.

I am sorry that the right hon. Member for Darwen (Sir H. Samuel) has left the House. He and the right hon. and gallant Member for Caithness and Sutherland (Sir A. Sinclair) are about the two most brass-faced men that I know in the House. They have the audacity to stand up on every occasion and pour ridicule on the National Government which they joined, and of which they were part and parcel. They were also part and parcel of the agitation which created the atmosphere that made it possible for the National Government to be returned under false pretences, and nobody more so than the right hon. Member for Darwen. One would think, to hear the right hon. Member for Darwen to-day, that under the Liberal party and under Free Trade all would be better than well. Does the right hon. Member for Darwen think that we forget what happened under a Liberal dispensation? Was my class, the working class, any better off under the Liberals than under the Tories? My reply, on behalf of the working class, is that it was no better.

The worst conditions that ever prevailed in this country, the harshest and the most brutal conditions, were under a Liberal dispensation. Under the Liberals the working class has gone on strike and it has been locked out, and under a Liberal dispensation workers in this country were shot dawn. The Home Secretary on that occasion was the late much lamented Lord Oxford. They shot down the miners in Featherstone. That was done under the Liberals, and then they come here and set up the pose before Christendom that if they held the reins of government in this country nil would be better than well for the working class. I would remind them again that the great outstanding Liberal, John Bright, opposed the Factory Acts in this House. The greatest exploiters of labour in this country have always been Liberals. They are not going to come here and "kid" us that everything would be well if the Liberals were in power. I want to ask the right hon. Member for Darwen how much better off the workers were when he was Secretary of State for Home Affairs? What outstanding idea did he propound at that Box for the benefit of the working class? What did he do to fulfil his promises that, if returned to the House of Commons under the guise of a Member of the National Government, prosperity would be brought about in this country? He propounded nothing. He is prepared like the National Government to carry on capitalism. There is no man born or any body of men born who are able to carry on capitalism and give the working class a fair deal. It cannot be done.

I have sat in this House for years and listened to Chancellor after Chancellor introduce his Budget from 1922 when the present Lord President of the Council was Chancellor under Mr. Bonar Law's Government. I admit that all these Chancellors are very capable and sincere men. I have listened to them propound the way in which we were to reach prosperity, and I believed at the time that each one of them really thought that the ideas he propounded were the way out. After 1920 an atmosphere was created that wages were too high. I can remember the Secretary of State for Dominion Affairs coming back from America at that time and telling a Labour party conference that it was impossible for us to carry on with the wages that were being paid and that Britain was faced with bankruptcy. The workers in this country accepted reductions in wages so that that atmosphere was created very effectively. Then we heard the Prime Minister propound the idea that what was required was peace and tranquility—

The CHAIRMAN (Sir Dennis Herbert)

I have listened to six-sevenths of the hon. Member's speech, but I have not yet heard anything applying particularly to the Budget Resolution.

Mr. KIRKWOOD

Every hon. Member who has spoken before me has taken as wide a range as I am taking now. Before I go any further I want to put a point of order. Am I not in order in mentioning instances of former Budgets that have been laid before this House?

The CHAIRMAN

The hon. Member will certainly be in order in doing that, but I was only reminding him that he was taking a rather long time to get to the comparison. I did not hear the first three minutes of the hon. Member's speech, but I am bearing that in mind when I ask 'him to keep his subsequent remarks in order.

Mr. LANSBURY

I put it to you, Sir Dennis, that a Budget Debate ranges over the whole economic system of the country. We have had to-day a speech from a right hon. Gentleman who dealt with what certain people said on various occasions; we had a speech from the right hon. Member for Tamworth (Sir A. Steel-Maitland) which covered a wide field; and we had another speech—a very able speech—from the hon. Member for Rossendale (Mr. Cross) which roamed from the United States to this country and from this country back to the States and all over the world. He was not stopped and told that he must relate it to the Budget.

The CHAIRMAN

I think the hon. Member for Dumbarton Burghs (Mr. Kirkwood) will now be able to continue his speech.

Mr. LANSBURY

Oh, but I beg to point out to you, Sir Dennis, that in stopping the hon. Member you interrupted the sequence of his speech, and I would like a Ruling whether an hon. Member is not entitled to deal with previous Budgets, to point out what other Chancellors have said, and the futility of their prophecies and of their policy.

The CHAIRMAN

Yes, that would be in order.

Mr. LANSBURY

Well, that is all he was doing.

Mr. KIRKWOOD

I want to go back to the action of the Chancellor of the Exchequer in 1923, when he gave to the big industrialists, after they had reduced the wages of the workers, £32,000,000 in order to stimulate industry. I am recall- ing the different remedies tried by different outstanding men to show the futility of the whole lot, including the present Chancellor. In 1926 the idea was abroad in the country that the miners were not working long enough hours, and under the dispensation, as Prime Minister, of the present Lord President of the Council, the working hours of miners were increased, against all the advice of the miners. The then Home Secretary made a statement, when introducing the Bill, that he would not be doing so unless he believed that by the miners working longer hours the wheels of industry would be set humming. That was no use; it had no effect.

Then we come to more modern times. This Government said that the standard of life of the workers was too high, and it was necessary to reduce it. Cuts were the order of the day. They created in the country an atmosphere of fear to spend. The principal influence at work to-day not only in our own country, but throughout civilisation, as a result of that, is fear. They cut all the Social Services. At last the Prime Minister had to make a speech and say that it was a mistake not to spend wisely. That was done after they had created that atmosphere and made those who were in work and were getting any money starve instead of spending their money. They took their money to the savings banks, and then that fact was used as evidence that the working class are well off, whereas the truth was that fear had been engendered in the working class. Now we come to the present Chancellor of the Exchequer. According to all the rules of present-day capitalist society, he is one of the ablest men we have. He has come forward with his Budget to-day after great preparations, after going away 'mid Nature's wildest grandeur and taking the advice of the Psalmist: I will lift up mine eyes to the hills. He had it, all his own way. He has had all the best that education and opportunity could give him, yet with all that education, with all the care that has been bestowed upon him, with all the advantages of life, with every opportunity given him to do something to eradicate the awful conditions prevailing in Britain today, what does he produce? What is the Budget to millions of people in this country? Is there a ray of hope in it? Not one ray of hope. What about the millions of unemployed, what about the mothers, what about the children? What has been done for them? Nothing. The well-fed at my back may laugh. A man may smile and smile and be a villain all the while. The workers outside will not forget. We may be quite complacent here, and think it is all right, but will this House take no heed to what is going on all over the world? Do you think the working class of this country will sit down under all these troubles and trials and tribulations while all over the world crowns and coronets are being rent? Do you think this is having no effect on the working class? If so, this House never made a bigger mistake. A Budget such as this, this trivial way of handling the situation, is of no use to the working class.

I have put before the House, under difficulties, what has been done by different Governments since I came to this House, what remedies they have tried to meet the situation. It is a situation not due to famine, but to a superabundance. If there were a shortage of anything, if the Chancellor knew of any article necessary to the well-being of mankind that is not already made and stored away in abundance, he would have had something to justify his position, but neither he nor anyone else can name it, because we have everything in abundance. The situation in this country is that we have poverty in the midst of superabundance. What is the present Chancellor's contribution to this vexed problem? He gives £14,000,000 to the brewers. That is his contribution. There is a contribution for you. Nothing to the unemployed. Think of it! Men who are well fed, well clad and well educated calmly sit down and decide to reduce the income of the unemployed to 15s. 3d. a week. I can well the remember the speech of the Lord President of the Council when that was done. He said they would not make that cut from the unemployed unless they believed it to be essential to enable us to get round the corner.

Here we are, supposed to be round the corner, according to the Chancellor of the Exchequer—if we look at it in the way in which he wants us to view it, that is, by comparing our position with that of other countries. They say we are in the best position of any country in the world. He has got his surplus of £19,000,000, and we on these benches say that the first claim on any surplus is the relief of the unemployed. Fancy men like us, occupying the position we do, passing an Act of Parliament condemning men to a standard of life measured by an allowance of 15s. 3d. per week. A big employer of labour on the Clyde—I will not name him now—has suggested that that is now the standard of life. If he "comes over with it" again, I will name him. That is his idea—forcing the workers down to that wage, 15s. 3d., because millions of the working class have submitted to a, standard of life of 15s. 3d. The Chancellor of the Exchequer never mentioned the matter on this occasion. He did not even apologise for condemning men to such a standard of life. They are men as good as himself. They are bone of my bone and flesh of my flesh. The unemployed men are as good as me, and I am as good as the best in here. Yet here is the situation: yesterday, when all those who take an interest in politics in this country had their minds turned to this House because of the Budget, could have been a great day for the working class, and a great opportunity, if we had had a Chancellor of the Exchequer of the calibre suggested by the Lord President of the Council when he stated, on first becoming Prime Minister that he would hew his way through private interests in order to see that the workers of this country got a square deal. Her Ladyship says that they are getting a square deal.

Viscountess ASTOR

No, the brewers.

Mr. KIRKWOOD

My colleague who opened this Debate stated that if it had not been for the powerful vested interests behind them—

Viscountess ASTOR

Hear, hear.

Mr. KIRKWOOD

—the brewers would never have obtained the concession.

Viscountess ASTOR

Never.

Mr. KIRKWOOD

That is scientifically arranged in order to deceive the Tory working-men all over the country.

Viscountess ASTOR

What about the Labour working-men?

Mr. KIRKWOOD

This is a Tory Government, and it is to deceive the Tory working-men. I am sorry to say that there are Labour men who take more than they should.

Viscountess ASTOR

No, no; I did not mean that.

Mr. KIRKWOOD

The fact remains that, as my colleague says, if it were not for the powerful private interests and if beer had been a national, State-owned monopoly, there would have been none of this concession. It would have been tapped in the same way as the Post Office has been. The Chancellor of the Exchequer, as far as that is concerned, is not to pose as being clean and above suspicion, from our point of view on these benches. The great power of the brewing interests had more influence on him than the children of the poor—not simply one or a few, but millions of children. It would not be so bad if the Chancellor of the Exchequer did not know about those conditions. He is the only man in the Government who is able to assist every other Department. He has to find the money. Where is the money that he has allocated for housing, after the terrible indictment of housing conditions by his own brother, the Member for another division of Birmingham? One of the most terrible indictments that has ever been delivered in this House was by his brother. He knows all about those terrible conditions, and he knows that it needs money to eradicate them. He has made no provision, none whatever.

He suggested making no provision in respect of paying America the War Debt. I do not know; it is always the judicious, the very careful, man who makes the most injudicious statements. That was a very injudicious statement for him to make, but it suits my purpose all right, because I want to ask the Government why we should ask America to cancel the Debt. What about the boys that are in the Government? What about the Members of Parliament? What about the great financiers of this country who own the War Loan? Let them come forward and say: "We will forgive the War Debts." That would be quite intelligent. [Laughter.] Again, they are laughing. There were boys who gave up their all, yet hon. Members laugh. What about those, who have been maimed body and soul? What about the men for whom we have stood in this House and pleaded with the Minister of Pensions? Think of the sacrifice that the great working-class made during the War. But those who own the War Loan are to continue for ever and aye to draw, as they are at the moment, nearly £1,000,000 a day as interest. Yet it is suggested that we are to have the hardihood to suggest to America—I do not like to use the phrase "repudiation of the National Debt" for which I have been pulled up several times in this House, so I will not suggest that we should repudiate the National Debt.

The Chancellor of the Exchequer paid a great tribute to the Income Tax payers: How loyal they were. How they all rushed, beyond his wildest dreams of expectations—that was the sense of what he said. They have toed the line much better than he anticipated. They could afford to do that. All those who pay Income Tax can afford to do it. I wish I could afford to do it. They can afford to pay Income Tax, and, if they are as loyal as the Chancellor of the Exchequer suggested, why does he not ask them to hand in their War Bonds I It would not be such a sacrifice as was made by the man who sacrificed his limbs. The Government commandeered all the youth of this country and made them go and fight for their country, but they never commandeered wealth. It went free, and we are shackled now. The Chancellor of the Exchequer is shackled with this terrible load—not the load of the unemployed because that load, terrible as it is, is a bagatelle compared with the War Debt. Out of every pound of income that the Chancellor of the Exchequer has, 14s. 7d., or nearly 75 per cent., goes for past wars and the preparation for future war. Out of every 20s. collected in taxation, 7s. 6d. goes in interest.

That is the situation. All the Chancellors of the Exchequer that this or any other Government have produced will never get us out of the trouble that we are in, unless they are prepared to face that trouble not from an individualist or capitalist point of view but from a Socialist point of view. There is no other way whereby this country and civilisation can be saved. Governments can go on tinkering in this fashion until the workers rise in open revolt because they are not going to continue. I have never seen the area from which I come in such a state. The recent affair of Russia is throwing out of employment thousands of engineer- ing workers who have been steadily employed. The Government and the Chancellor of the Exchequer are making no provision to mitigate that situation. You would think that to-day there was behind civilisation some infernal individual who, instead of trying to smooth things out and make the rough places smooth was trying to make the smooth places rough, and worsen the conditions of everybody concerned. The expenditure of the nation is maintained to-day by people who have been crushed into destitution by the operation of your industrial system.

6.13 p.m.

Mr. JOHN RUTHERFORD

It is some consolation to me, in rising for the first time to address the Committee, that I am now enabled to do so in, a name for many years associated with the Darwen Division of Lancashire and very well known, it may be with some respect, by the older Members of this House. The best service that one can do to this Government and this Parliament, in my opinion, is to speak as seldom and as briefly as possible, and not, like so many hon. Members, as often and as long as possible. For that reason, I will take but two brief points. The first is the subject of Death Duties.

I was sorry that the right hon. Gentleman, in his Budget Speech yesterday, appeared to derive some satisfaction from the fact that the Death Duties had exceeded his estimate by over £1,000,000. Death Duties are a direct tax upon capital, and that means that the capacity to employ is to that extent diminished. It should, therefore, be no satisfaction whatever to the Chancellor, in present circumstances, that Death Duties should yield £1,000,000 more than he expected. If the proceeds of these duties were taken solely for redemption of debt, it might he that in themselves they would not be such a bad tax, for, if someone succeeds to some money, perhaps the State is entitled to take some commission for enabling him to succeed and to keep possession. But the evil of it is that the proceeds of these duties are used as ordinary current revenue, as income, and are spent during the year. Many moons ago, before the right hon. Gentleman had found it necessary not to anticipate his Budget statement, I managed to extract from him an answer on this subject to the effect that in 1929 the Death Duties formed 9.8 per cent, of the whole national revenue, while only 5.7 per cent. of debt was redeemed in that year. In 1930, the Death Duties were 9.6 per cent. of the revenue, and the percentage of debt redeemed was 7.5. In 1931, when, of course, it is comprehensible that things were difficult, the Death Duties yielded 7.6 per cent. of the revenue, and only 3.3 per cent. of the debt was redeemed. That cannot go on. We are living on our capital to the extent of the difference between those figures, and, for my part, I was bitterly disappointed that the Chancellor did not make some mention of this matter in his Budget statement. If the Financial Secretary would suggest to him that consideration might be given to it before the next Budget statement, I think the country would be under a great debt of gratitude to him.

The second point that I would mention, although I have no doubt that the right hon. Gentleman is sick of beer, has to do with the Beer Duty. I would humbly congratulate him upon a belated, small, but nevertheless welcome remission in the taxation on beer. It is obvious, of course, to anyone who knows anything about the subject, that nothing short of a reduction of 2d. a pint in the price of beer will restore the habit and capacity to our people, in these hard times, for even a modest consumption of ale such as they are surely entitled to, but this, after all, is a step in the right direction, and, as such, much to be welcomed. I trust that we may be spared in future the hopelessly inaccurate estimates, as they have proved to be for the past seven years, of those who advised the Chancellor of the Exchequer on the subject of the yield from the Beer Duty. In each case in the last seven years the yield has fallen short of the estimate by, on the average, something like £3,000,000 a year. Let us hope, also, that those of us who, knowing something of this subject, last year, in spite of the lamentable presentation of our case, took our courage in our hands, and, while supporting the Government on almost all other subjects, voted in favour of an Amendment which sought to reduce the Beer Duty—let us hope that in future we shall be spared the gibe that we were seeking to get cheap popularity at the expense of our neighbours, for have we not been proved to be right? Has not the Chancellor himself been com- pelled to recognise that he was fast ruining a once prosperous industry, and, further, was in process of drying up a valuable source of revenue?

I wish humbly to congratulate the Chancellor of the Exchequer upon his Budget, apart from my criticism about the Death Duties, for, after all, he has wisely resisted the quack remedies, as they were called by the right hon. Gentleman the Member for Darwen (Sir H. Samuel), which have been pressed upon him—remedies which, perhaps, superficially, were attractive, but which fundamentally were quite unsound. The right hon. Gentleman's Budget, although it has been said to be unimaginative, is a great one. It is great because it reflects the splendid determination which still exists in the whole British people that our Budget shall be balanced, that British finance shall not return to the pre-1931 methods, but that it shall be strong, as it were a rock amidst the swirling waters of financial anarchy which at present are to be found everywhere else outside this country, and that it shall stand as a rock until such time as the efforts of the Governments of the world, and, particularly, of our National Government, shall have induced those waters a little to subside.

6.22 p.m.

Major NATHAN

The Committee as a whole will, I am sure, allow me to be its mouthpiece in congratulating the hon. Member for Edmonton (Mr. Rutherford) upon his interesting contribution to this Debate. Let us hope that, as time goes on, he will participate frequently in our discussions. Even before the Chancellor of the Exchequer introduced his Budget yesterday, everyone, both within and without the House of Commons, who had followed the course of events was all too profoundly conscious of the precarious state of the national finances. We knew that we should have to expect a Budget that was grim, and even Draconian, but I cannot refrain from the reflection that the House, in that situation, was entitled to expect from the Chancellor of the Exchequer a measured and considered survey of the facts and the situation as it must be known to him, from his commanding position and with all the sources of information available to him. Such a survey of the state of the country and of its trade and industry was necessary in order that there might be found in it some explanation, from the lips of the Chancellor himself on behalf of the Government, as to how it came to be that it was necessary for him to present such a financial statement to the House and to the country. We might also have expected from the Chancellor of the Exchequer, following the habit of past occasions such as this, some estimate of the future course of events, and some statement as to what is the policy of the Government in relation both to our own financial affairs at home and to the world situation at large. In those hopes and expectations we were sadly disappointed.

I cannot help commenting on the fact that the Chancellor's statement seemed to me to be singularly restricted in scope and narrow in vision. It was, indeed, more like the turning over of ledgers, and a muttering of the figures of a current expenditure and revenue account, than the presentation of a great and important financial statement. Indeed, I believe it would not be a misdescription to say of the Financial Statement of the Chancellor of the Exchequer that it was a parish pump Budget. The right hon. Gentleman has tried to be at the same time orthodox and popular. I cannot help feeling that he has got the worst of both worlds. Last year we had a Budget with one single policy, the policy of tariffs. They were to achieve miracles of revenue expansion; they were to restore prosperity to the country. Now we know that that policy has obviously and demonstrably failed, and to-day we have before us a Budget with no policy at all. The fact of the matter is that the Chancellor's plans for this year have been damned by the legacy of the failure of the year which has just passed. The right hon. Gentleman was constrained to admit yesterday that his new tariffs have yielded £22,000,000, or £9,000,000 less than was expected.

Hon. Members will recollect the attitude struck by the Chancellor of the Exchequer when he was opening his Budget from that Bench last year, when he said: "£33,000,000 of revenue. Where else can you obtain a revenue such as that? Look what tariffs will give you!" Yesterday the Chancellor of the Exchequer stood there, as it were, in sackcloth and ashes. He was forced to make apologies and excuses. And the excuse which he gave was that his tariffs had been unexpectedly successful in stopping imports. We always said that he could not have both revenue and trade, and, when he said yesterday that he derived this consolation from the short-fall, that his tariffs had been unexpectedly successful, I felt that I should have preferred to use a less euphemistic phrase, that I should have preferred to state the plain, stark fact that the Chancellor was taking consolation because his policy had helped to kill foreign trade. That is the plain English of it. On the thesis of the Protectionists, the fact that foreign trade was reduced and imports were diminished should have resulted in a marked recovery in internal trade. That should have been reflected in reduced unemployment; it should have been reflected, not in diminished, as is the plain fact, but in increased returns from Income Tax and Surtax; it should have been reflected in increased traffic returns in the railway receipts, which are the surest rough index of the state of our national affairs. On 20th March last there were nearly 300,000 more registered unemployed than a year ago. Up to 16th April the traffic receipts on British railways show a drop of £2,250,000, or 5 per cent., compared with the corresponding period a year ago and the Chancellor of the Exchequer did not hide from us the calamitous drop in the Income Tax and Surtax returns. These are the inevitable results of the policy of the Government, a policy which has no objective other than the contraction of foreign trade. The Chancellor of the Exchequer has, almost in terms, been forced to admit that. He has done nothing by constructive measures to stimulate public works, housing, and the revitalisation of the industries of the country.

Such a policy has presented the Chancellor this year with the formidable problem of balancing another £700,000,000 Budget in the face of a shrinkage in the national income which, as the Chancellor pointed out, and as the White Paper all too clearly discloses, inevitably reflects the shortfall in Income Tax, Surtax, Customs and Excise. The Chancellor of the Exchequer, with some complacency as I thought, claimed that he had managed to secure a balance. But what sort of a balance is it? It is certainly one which will not satisfy financial purists. He has taken an unduly optimistic view of the prospective yield of Income Tax and Surtax. He has raided a capital asset in the shape of the £10,000,000 from the War Loan Depreciation Fund. He has made no provision even for the £7,000,000 obligatory Sinking Fund. He has left himself, it is true, with a provisional surplus of just over £1,000,000, but even that surplus depends upon the problematic receipts from the so far entirely indefinite tax upon co-operatives. He has made no provision for the contingency of some payment to the United States. He has made no provision for the probable extra cost to the Exchequer of transferring from local authorities the charge of assistance for the unemployed in the distressed areas. Even if trade remains so depressed throughout the whole of the coming year that the right hon. Gentleman's expectations of inordinately cheap money throughout the year are realised, it is more than a little doubtful whether he can claim to have made a certainty even of balancing current expenditure and revenue, and that without any provision for the reduction of debt at all.

On the other hand, it is true, as he claimed, that he has done nothing to frame a Budget on expansionist lines. I am not referring to the suggestion which he denounced on such high moral lines that the Budget should be deliberately unbalanced. I believe he is right in keeping the Budget balanced as far as one is able to foresee the future. The gain to be obtained from unbalancing the Budget is little enough. It would be dangerous. When I say he has done nothing to frame a Budget on expansionist lines, I mean that there is no hint in the Statement that the Government have yet in the least appreciated that, unless the trade depression is broken by the mobilisation of our national resources through loans for works and for public purposes, and by a recovery of internal economic activity which by that means would be stimulated, we can expect nothing next year or the year after but a dreary repetition of falling revenue and increasing and recurrent deficits. The Chancellor claimed that, but for the Government's economic policy, we should be spending £61,000,000 a year more than in fact we are spending. The economy policy has cost the Country very dear. In my view, it would have been better to have the increased expenditure and at the same time to have less of the depression created by deflation. I am not at all sure that the Chancellor's difficulties in balancing his Budget have not been created just as much by his economies as by his expenditure. Economy has psychological effects. Economy in a Government Department is reflected by economy in the municipalities. That, in its turn, finds its reflection in economy in the great industries, and finally by the private taxpayer himself. It is a great mistake to believe that the influence of an economy circular is restricted to its effects upon Government Departments. It percolates through every grade and every class of society. It wilts enterprises and withers courage.

Mr. DAVID MASON

Is the hon. and gallant Member opposed to economy?

Major NATHAN

I am opposed to the economy unduly practised by the Government. The effects of that economy are reflected in the high rate of taxation which the Government find themselves under the compulsion of inflicting upon the already over - burdened taxpayer. Had this economy been relieved in the right method and in the proper time, taxation would have been reduced to-day. It is true that the Chancellor has slightly eased the burden upon the taxpayers next January, but only at the cost of increasing his burdens in July of next year. It is a very small present indeed. For the rest, he has given, or, perhaps it would be more correct to say, he has been forced to concede £14,000,000 to the beer drinker. Here is a case not merely of high taxation reaching the point of diminishing returns, but I do not think the Chancellor showed that he fully realised that there is a change in social fashions which is drying up one fruitful source of revenue. Just as the position of the railway companies is being encroached upon by road traffic in view of changed economic circumstances, so the brewing industry and beer drinking are being encroached upon by changed social habits. I, as an investor, would never from this moment hold a share in a brewery. I think it is a prize method for losing your money if you take the long view. The Chancellor himself has shown that he expects no extra, consumption of beer, and he expects no extra employment to be given in the brewing industry. I agree with the hon. Member who spoke last that, if he reduced the tax by 2d. a pint in the hope of bringing about a greater yield, he might possibly, by offering what I might call that bribe, have been successful, but be would have been far better advised to use the £14,000,000 of his precarious surplus for some reproductive purpose, probably best of all by ameliorating and restoring some part of the cuts to which this Government are committed to devote such surplus as may be available.

The Chancellor has achieved not so much a balanced Budget as an uneasy balance between the deflationary effects of an unrelieved, and indeed somewhat increased, burden of taxes and the dubious popularity of a concession of sorts to the Income Tax payer, aided by the slogan of cheap and better beer. I am not even sure that the consumer himself will be very grateful for that concession. The consumer of every kind, including the beer drinker, wants most of all a Government policy which will give him more to spend on pints and on other things, too. For that policy we look in vain to the Budget statement. There is no hint to be found there of peace with Ireland. There is no hint of anything but trade war with Russia, to the detriment of our engineering industry. There is nothing to be found in the Budget but a few further small doses of the Protectionism which has already so pitiably and obviously failed. There are 3,000,000 unemployed, and not a word was said bout them or their situation, or a policy to deal with them in the whole of the two hours speech of the Chancellor yesterday. How are the Government proposing to solve that problem? Is it by increasing the taxation of matches and automatic lighters? Is it to be by clapping a small duty on heavy oils in the hope of benefiting the coal industry, or is it to be by clearing the way for higher duties on silk, real and artificial? The Chancellor may claim that he has done his best in difficult circumstances. I will concede that it is, in fact, the Government, and not the Chancellor of the Exchequer so much in his capacity of honest book-keeper, who must bear the blame for a Budget which gives no hope for the future. What the country requires is that the Government should be the master of circumstance and not that they should plead difficulties s an excuse for the absence of any constructive policy. There was in to-day's "Times" a very remarkable and a scathing leading article upon the position of the Government. I adopt its concluding words. They were to the effect that the Chancellor of the Exchequer afforded the edifying picture of a just man in adversity, but that that was not enough, and it was his business to overcome difficulties. Of that he shows no sign in the proposals now before the country.

6.45 p.m.

Viscountess ASTOR

I am certain that the Committee will not be surprised or disappointed if I have something to say on the subject of the Beer Duty. I want to take the Committee back to the question of why we, the Members of the National Government, are in the House of Commons. We were elected during a national crisis. We were elected when the country was in danger, and we were sent here to do what was best for the nation as a whole, and not to think of any private or vested interests or party grievances. I am not in the least emotional, but I do not think that I have ever been more moved than I was when I came back to the House after the National Government had been elected and saw Members like our Prime Minister and Lord Snowden seated in opposition to the party to which they had given their lives. It was most moving, and inspiring in a way. We know that in the national emergency Conservative, Labour and Liberal leaders, and everybody, came to the help of the nation. I would remind Members of the House of Commons that many of us are here because all sorts and conditions of men and women of all parties voted for us. We are here because we were elected by Labour, Liberal and Tory votes. There is nothing more misleading than to take the view of certain Members who represent what I call fool-proof constituencies. I will tell the Committee what I mean by fool-proof constituencies. I mean constituencies which, no matter what kind of candidates are put up, will send back a Tory, or a Labour Member as the case may be. Those constituencies never change.

Members representing fool-proof constituencies talk about the Conservative Government, and ask, "What is this great Conservative party going to do?" The Conservative party is not in office to-day. We have a National Government backed up by the nation as a whole. I deeply regret that some of the Members who were with the National Government at the beginning are with it no longer. I deeply regret the absence of the right hon. Gentleman the Member for Darwen (Sir H. Samuel) and the absence of Lord Snowden. If Lord Snowden had been a Member of the National Government they would have taken a national view at this moment, and would not have yielded to the pressure which has been put upon the Government by the organised drink trade. [An HON. MEMBER: "Oh!"] It is all very well saying "Oh." I will prove it. The hon. Member represents a fool-proof constituency. He can talk any nonsense he likes about Russia, India and the rest, as he is perfectly safe. Here we have a national crisis, and this is the first time, I suppose, in the history of any Government when, on the occasion of a Budget speech, the Prime Minister has been absent in a foreign country. Why is the Prime Minister over there? Because of a national and a world crisis. We have heard on every side that the crisis is not over. We are in the midst of a national financial and world crisis, and we have a national Budget which is a brewers' Budget. The only people the Government please in the country are the brewers. An hon. Member behind has congratulated them. The House of Commons is well represented by the brewers. I do not suppose that the House of Commons has ever before been represented by brewers who have done their work more efficiently.

Our iron Chancellor—he seems to be getting a bit rusty though—in many ways has done remarkably well. I am not going against the Budget as a whole, but I think that he might have shown a little more imagination. Perhaps if we had had a woman in the Cabinet he might have said, "If it is true that high taxation is ruining industry, let us take 6d. off the Income Tax, but, in the meantime, let us raise the school-leaving age to 15. Let us do something drastic both ways." If he had done something like that, he would have shown more imagination. However, I am not complaining on that score. He has the most difficult job of any man in the Government. I have been so long in politics that I should be the last to cavil at politicians when I knew that they were doing their level best. We ought to be grateful to anybody who takes on the office of Chancellor of the Exchequer, although—and it is a funny thing—every one of you would take it if you had the chance. That is something which I do not understand. It is amazing that people would take on the most difficult task in the whole country. Last year the Chancellor of the Exchequer said that if 31s. per standard barrel was taken off it would cost £10,000,000. He said that in his opinion beer was over-taxed, but what industry, what individual, was not overtaxed. I would like to ask the Chancellor of the Exchequer, Are industries not just as much overtaxed now as they were last year? He also said that there would have to be a 40 per cent. increase in drinking to make up the loss of revenue. Does the Chancellor of the Exchequer or the National Government really want an increase of 40 per cent. in drinking in order to help the national finances? I cannot believe it.

I do not believe that hon. Members who represent industrial constituencies, poor men and women and the unemployed, who, God knows, are having struggle enough to keep their homes together, want to see an increase in beer or spirit drinking of any kind. I do not believe the Chancellor of the Exchequer wants it either. I think that the brewers want it. Why should not they want it? They are the only people who want an increase in beer drinking. I just remarked to one of them when he said, "Ours is an honourable trade," that it is true that it may be an honourable trade, but it is the only trade in the country besides theme drug trade which has to be penalised by the Government. Ever since there has been drink it has had to be taxed, watched and controlled, in fact, as far back as Cleopatra's day. And certainly nobody thinks that Cleopatra was a kill-joy. Sometimes hon. Gentlemen say that we who wish to control the drink trade are kill-joys. Not at all! We are really thinking of the joy which lasts, and not of the "joy" which brings such devastation to the homes of the people throughout the land.

When I hear the House of Commons laugh lightly about beer and speak of what it has done, I think of the other side of the picture. There is not a Member of the House of Commons who has not seen the horrible and devastating effects of drink upon some member of his family. Every one of us has a tale to tell. [HON. MEMBERS "No!"] Yes, every one. And now that we have a National Government in a national emergency, those they are letting off are the brewers. Do the brewers really deserve it? Let us see what they have done. During the Great War they did not do badly, and since the Great War they have not done badly. They are the only industry in the country who have made from £9,000,000 to £16,000,000 more in profits since 1913 than they did before. I could tell the tale of the brewers during the War when we had the Liquor Control Board set up, and of how they behaved. It was not set up by the Pussyfoots, but because of the need for national efficiency. You had to control drink in order to secure an efficient nation. Do not we now require an efficient nation? But, instead of trying to control drink, we have the Chancellor of the Exchequer saying that we are to have a better, a heavier and a cheaper drink. Why? Because the drink trade is the most highly organised trade in the country. It spends £1,000,000 a year in advertising in the Press with great results. There is the "Daily Herald," which had a picture of a beautiful lady. What do the brewers spend on posters? How interesting are those posters! There used to be a sailor swimming for a bottle, but we all know that if he had got the bottle he would not have been swimming.

There was another beautiful picture. It was of a snowstorm, but there was one bright spot, and that was the public house. Alas, that is too true. In many a poor area the one bright spot is the public house. Why is it? The money which should go to the women and children to provide food and clothing goes to the public house. The latest picture—and it is the most amusing of all—shows a working man with a house toppling down upon him, but Guinness is good for him. That reminds me of the Government. They will be tottering to their downfall if the only thing that they can do is to help the drink trade. You can see posters everywhere. What an amount they must have spent in order to bring pressure upon the Government! We all know how the Government have been pushed. The Chancellor of the Exchequer has given in to the tune of £14,000,000. He has not even given in to the co-operators. I would far rather see the co-operators get off than the drink trade.

I ask Members of the House of Commons if they really think that in a national emergency they are wise in congratulating the Government upon giving £14,000,000 to the drink trade? Do they think that it is a patriotic and a right thing to do? One right hon. Gentleman said that it is going to help industry. Let us see if it really is going to help industry. Barley only amounts to about 3 per cent. of our agricultural products. The Chancellor of the Exchequer says that the brewers are to try to use British barley. They may be going to try, but they know perfectly well that they may not be able to use it. It depends upon the quality of the barley. If the drink trade was so patriotic they would all along have used British barley. They have not cared about British barley, but about their profits. They say that they are going to try British barley. If the Chancellor of the Exchequer really wanted to help the nation he would have taken that £14,000,000 which he is giving to beer and devoted it to milk. And I will tell you how he could have done it. Milk is far more important as an agricultural product than barley. Milk is worth almost 14 times as much to us as barley. He could have looked round the devastated areas. Nobody knows of the conditions better than the Chancellor of the Exchequer. He would have seen mothers and the unemployed going short at this moment in order to feed and clothe their children. People should be encouraged to drink more milk instead of more beer. The right hon. Gentleman's great father would never have done what he has done. He knew the drink trade and the devastating effect it had in politics and in the homes and lives of the people. I do not want to be emotional like hon. and right hon. Members above the Gangway, but it is a little disappointing to me to hear such hurrahing on the part of National Members because we have a beer Budget. They know as well as I that it is almost impossible for the unemployed to live on what they receive. Hon. Members—certainly those who visit the devastated districts—know how hard it is.

We are going to make beer cheaper and stronger. In my own constituency there was a Labour woman who was so courageous that they turned her out of the party for that reason. She said to the unemployed: "When you get your money you are too apt to spend it in the public house." That certainly is a danger, and is it not making it, much harder for the unemployed to resist that danger if beer is made cheaper and stronger? It seems a blind and most unimaginative thing to do. It is absolutely unworthy of the National Government who have behind them the will of the best people in the country. There is nothing you cannot get England to do in a crisis, but you are here doing nothing to appeal to any spiritual side of the people of the country. You have suspended the Sinking Fund and created a drinking fund. I shall be deeply disappointed if, between the present time and the Finance Bill becoming law, hon. Members do not go back to their constituencies and ask the opinion of the social workers and mothers as to how dangerous this thing is. Do not ask your club members. The Press cannot speak against the brewing trade, but ordinary people can speak for themselves. They expect us to do something for the welfare of their wives and children; they do not expect us to spend £14,000,000 in making drink cheaper and heavier.

The drink trade is powerful and organised. It fights a horrid fight. I have had to fight it all my life. England, like every nation, is built up by men and women with spiritual and moral qualities. If drink helped us in that, I should say nothing, but none of us wants his or her children to drink. It is not for a nation at this time to encourage more drinking and heavier drink. This country will simply do it because it has been pressed by a great brewing industry and its powerful propaganda. It would be better if the Chancellor of the Exchequer would tell us of the increase of drinking clubs throughout the country. Mr. Balfour brought in a Bill to decrease the number of licences. What has happened lately? We have had a most appalling increase in drinking clubs throughout the country. Nobody dares touch them. The Labour party is full of them, and so is every party throughout the country. Every party has got this trouble in its midst. We, however, ex- pect the National Government to do things. We do not expect them to be frightened by the Press. Not to act is unworthy of the Chancellor of the Exchequer and of the Government. I believe in the National Government, and hope that it will go on for years. But it will not go on for years if it listens to the most reactionary men in the country. They have fought education, housing and every progressive reform. They have fought a winning fight, but this time I pray God it will be the last. It will be the last if Members of the National Government do their duty now. We will fight to the last ditch. We want the £14,000,000 to go in something else than pulling down the homes of the people. We want it to build up these homes, and not to go to vested interests.

7.5 p.m.

Colonel WEDGWOOD

The House hears all too rarely speakers who really want to get something done. Although the large majority of this Committee do not approve of the views expressed by the Noble Lady, I do not believe there is any more popular speaker in the Committee. She shows courage. She knows what she wants, and she misses no opportunity of putting her views forward. There are few people in this Committee who really want to get something done. A drawback always is that, when one feels keenly on any subject, one is so obsessed by it that one fails to make one's points clear. On this occasion the Noble Lady has "put it across." I also want to get something done—the taxation and rating of land values. I only wish I had the Noble Lady's courage and youth to get on with that.

This Budget has been, I think, a disappointment to nearly everyone who has listened to it. It is realised that the Chancellor of the Exchequer does not believe that he, or his Department, is in any way responsible for the recovery of trade in this country. He is frankly a little Micawber—annual income £20, annual expenditure £19 19s. 6d.—result happiness. That is not the sole duty of the Chancellor of the Exchequer. He cannot dissociate himself, and his office, from the prosperity of the country and from the recovery of trade. He not only omitted to mention the 3,000,000 unem- ployed, but it did not occur to him to do so. That is the tragedy. The Chancellor of the Exchequer in this country holds the keys to recovery of trade. But he does not believe it; he does not understand, and he does not act upon it.

My chief reason for pessimism about the recovery of trade in this country is the impervious cuticle of the Chancellor of the Exchequer and the impossibility of ever persuading him, and his Department, that currency and the balancing of Budgets have anything to do with the recovery of trade. I would like the Committee to observe for one moment the diametrically opposite character of the argument put forward and the policy outlined by the Chancellor of the Exchequer yesterday, and the policy advocated and the argument put forward in America at the same time. Not merely put forward, as you will observe, by the American Government, but by our own officials now in Washington. They are doing their best to make the relative value of the £ to the dollar as low as possible. They are being asked by the Americans to stabilise at four dollars to the £. Our people are standing out for 3.50 dollars to the £. They are perhaps being driven to compromise at 3.75 dollars to the £. The whole of the British argument is to keep the £ down. The first thing to understand is why the Chancellor of the Exchequer's own officials in America are trying to keep the £ down. The real reason is that it is of vital importance to our export trade. Every fall in the value of the £, relative to the dollar, has helped our export trade.

Anyone connected with the export trade in this country knows that the one thing which has helped us during the last year and a-half has been this fall in the £ relative to the dollar. It has enabled us to export to America on better terms than other countries remaining on gold. It has enabled Americans to buy more British goods. The one advantage we have had is the fall in the value of the £. The one thing our people and our officials in America are asking for is: "If we must go back to gold, let us stabilise our gold currency on such a low gold content as 3.50 dollars to the £ instead of four dollars, or the higher figure naturally enough asked for by America." While the policy of the right hon. Gentleman's staff over in America is to keep down the £, the right hon. Gentleman has made on his imperfect Budget an impassioned speech for keeping the £ up. This is so contradictory—so mutually destructive. There is on the one hand, his official's policy for lowering the value of the £ relative to the dollar, and his own policy of sending up the £. The Chancellor of the Exchequer introduces his Budget and does his best to force it on the country. It is a Budget of which Mr. Gladstone might possible have been proud. It is a Budget directed to restoring sterling to its gold value, thus strangling the trade of the country, and killing the export trade. It is irrational.

Might I put before the Chancellor of the Exchequer the arguments which have led America to go off gold? It is perfectly true that we were driven off gold, and the taxpayer paid pretty heavily for that. America has gone off voluntarily. The Americans, having seen the advantage to us, have gone off that standard without being driven, without borrowing francs. They are talking there of revaluing the dollar at 85 cents. to the dollar. That is a discount of 15 per cent. on the gold content arid, consequently, on all debts 'Paid in American dollars. They are proposing 15; we had more like 25 per cent. Incidentally they are doing it intentionally. It cuts both ways, whether it is this country or America. What will be the effect of the drop to 85 cents, if the Americans do drop the dollar to that level? In the first place, the American export trade will, pro Canto recover. In the second place, prices in America, everything else being equal, will rise by 15 per cent. I say, everything being equal. That is to say, the actual price will remain the same but the price in dollars will rise by 15 per cent. As the price in dollars rises by 15 per cent. the purchasing power of all those who draw their interest from dollar loans will drop by 15 per cent. In other words, America is deliberately reducing the value of all fixed rents and of all dollar securities, and reducing the purchasing value of all the interest on loans in America or dollar loans outside America by 15 per cent.

Mr. HALES

Like France did.

Colonel WEDGWOOD

Yes. France did it by 80 per cent. America is making that very heavy tax upon all interest upon loans. It might be regarded, if hon.

Members, prefer to put it that way, as a capital levy of 15 per cent. on all loans or debts in America. It affects, of course, all loans abroad in dollars, provided those dollars are not guaranteed to be paid in gold. There you have a very heavy tax shouldered by the American people. We paid the tax here when we came off gold, but as prices were falling all over the world while the £ dropped from 20s. to lbs. there was no rise in prices here, and consequently there has been no actual capital levy upon sterling loans or sterling investments. We dropped the £ without suffering a loss in purchasing power or a loss in value on our sterling bonds or sterling investments. In America this dropping of the dollar value by 15 per cent. will mean a direct loss to the holders of dollar securities. That is not a thing that we need complain of any people doing lightly. It is a serious sacrifice for any people to make. Why are they making it? They are making it partly in order that their export trade shall recover. It will enable them to sell their motor cars cheaper abroad and will enable us to buy from them cotton at cheaper prices. But that is not all.

They are really making this cut because they realise, what I think we ought to realise, that all these debts, these dollar bonds, these loans to Germany, or these loans to themselves, that have been incurred since the War are strangling the possibility of the recovery of trade, are making more and more bankrupts. They all represent debts contracted when prices were twice what they are today. Consequently, they are now such a burden upon trade, whether in America or here, that it is impossible for trade to recover unless a cut is made in the weight of that dead-weight debt, not merely national debt but private debt. They have made that sacrifice. We can judge if they are wise. We cannot perhaps yet judge the effects of it or see whether we ought not in the interests of the trade of this country to call for a similar cut and a similar contribution from the bondholders, in the interests of the money users and the producers of this country? It is a very unpleasant thing to know that your interest is being cut. To feel that prices are rising while your income remains steady is unpleasant, but if it is, as I think it is, the only hope for the recovery of trade then I think the Chancellor of the Exchequer ought to face that issue and not to put his head in the sands and try to avoid having to make up his mind and to decide on the question.

It is perfectly obvious that as things are either costs have to come down or prices have to go up. Bringing costs down, as everyone knows who has anything to do with industry, has gone as far as possible. We have cut everything to the bone. Wages now are so low that any further cut will make it almost preferable to be on the means test than to be at work. Salaries have been cut down, foremen have been sacked—unfortunately the foreman has not the benefit of the dole—overhead charges have been cut in every direction, and I defy anyone who is connected with business to say that it is possible any further to reduce costs. We could, of course, bring down wages, and one occasionally sees letters in the papers to that effect, because the trade unions are so weak to-day and the power of the workmen to resist cuts in wages is so weakened by the fact that an army of unemployed are clamouring for any job that they can get; but do hon. Members think that that is the best way of solving the problem? You must either bring down costs or send up prices. To bring down costs to-day is impossible, but if it were possible it would be cruel to the workers of this country. The alternative is to send up prices, as they are trying to do in America. It is not a question of international prices but the sending up of domestic prices.

I do not think that there is anyone here, who, if they thought that it was possible to raise prices by 15 per cent. all round would not infinitely prefer that method of restoring our trade rather than resorting to a further cut in wages or in costs. The real difficulty is that they do not believe that it can be done. If we made the pound worthles, instead of 15s. that must have the immediate effect of a rise in prices by precisely that percentage, namely 333 per cent.

Mr. O'CONNOR

That did not happen when we came off the Gold Standard.

Colonel WEDGWOOD

No, prices did not rise here. Everywhere else they fell. Therefore, the rentier did not suffer here. The rentier was very lucky that the very moment when we came off gold coincided with a fall of 33⅓ per Dent. in prices elsewhere, so that prices here merely remained steady and did not show the normal effect of the fall in the price of the pound.

Lieut.-Colonel KERR

Is not the effect of raising prices the same as reducing wages to the workers?

Colonel WEDGWOOD

That is perfectly true. It is another way of getting at the poor worker, but it is an infinitely better way than directly reducing wages.

Mr. O'CONNOR

The right hon. and gallant Member's argument is extremely interesting, but has he not disconnected the fall in prices from the fall in sterling? Is there not a strong cast. to be made that the fall of sterling was itself the cause of the fall in world commodity prices?

Colonel WEDGWOOD

My argument would be that the fall in prices had begun before we went off gold. The possible effect of our going off gold on world prices is really a secondary question into which we need not go when we are discussing the mathematical question of an inflation of currency which must correspond to an absolutely equal rise in prices. As prices rose by 33⅓ per cent. the purchasing power of wages would go down to a corresponding extent. That is an argument that has been used by everybody who has been lecturing the Labour party for the last three years, but wages can go up if the cost of living goes up, while interest on past loans and rents do not go up. There is reason in what some people call madness when America believes that it is possible to raise internal prices by "tinkering with the currency." In America they are proposing to do it by fiat. It will not be done by the price of the dollar gradually falling, but by fiat, by altering the gold content of the dollar.

The Chancellor of the Exchequer yesterday ridiculed the idea of unbalancing the Budget, and I am bound to say that two years ago I should have been criticising this Budget solely on the ground that it was not balanced, as the hon. Member for Bethnal Green, North-East (Major Nathan), speaking from the Liberal Bench behind me, did. I could not quite make out whether he wanted the Budget balanced or unbalanced. If the Government want the £ to go lower, as their officials want it to be stabilised lower in America, then much the best way is not to balance the Budget. If you devalorise by Act of Parliament you get no benefit. If you do it as we imagine they are doing it in America by the fiat of the President, waving a wand and saying, "Henceforth 85 per cent. of the original dollar shall be its value," then you get no benefit. But if you unbalance your Budget, leave the taxation as it is to-day and spend another £50,000,000 or perhaps £200,000,000 on public works, in clearing the slums, reorganising the transport industry and all those hundred and one publicly important works which the local authorities are only too anxious to carry out you would get what I might call the Housmanising of England, and you would get the pound falling to 85 per cent. of its value. What America is missing is the value to be got out of the unbalancing—a capital levy which might be used productively for the employment of the people in this country. Is that quite clear? Let me put it again. You can unbalance in a hundred ways. You can unbalance by remitting 6d. in the £ off Income Tax, and if you remit 6d. there will be £25,000,000 unbalanced in the Budget and £25,000,000 fructifying in the pockets of the taxpayers. If that £25,000,000 which the taxpayer will have in his trouser pocket were reinvested in Government stock there would be no change in the economic situation, but if the taxpayer spent that £25,000,000 royally on a night-out then the £ would go down; and the taxpayer would have pleasant recollections of the night-out. In the same way, if the Government really wanted to unbalance the Budget, they might as well have a night-out, and use the money by which the Budget is unbalanced on public works, which would be of permanent benefit although they would not be an economic benefit in the way of bringing a return on the investment.

It has been said that the best way of bringing the £ down, of raising prices and improving trade, is for the Government printing press to be put at work and that every Saturday every honest working man should have a brand new £5 note on his breakfast table. It would have an immediate effect. It would un- balance the Budget; it would send the £ down, money would circulate, trade would improve, and prices would go up; but if you carried it on long enough the £ would go down to wherever you liked to leave it. I do not advocate that method. I want to get something for my money; and I should get it if the Chancellor would borrow on as short terms as possible, preferably from Ways and Means, large sums of money and employ the people of this country on making improvements. That is the best way of inflation if you want inflation. My difficulty is that the Chancellor of the Exchequer does not see that it is his business to inflate, and that he can improve things if he did so. He has not yet come to the point of view of President Roosevelt. The press has done its best, the economists, the "Times" they have all done their best, and still, being an optimist, I think a day must come when a great light will dawn upon Birmingham, when the trade of Birmingham and of this country will be restored, and the last of the Chamberlains will be canonised.

I want to put one further point to the Chancellor of the Exchequer. For many months the Exchange Equalisation Account has been a widow's cruse to a Government pressed for debt. They have been selling sterling for gold when sterling was about 3.95. They have been selling sterling ever since, and when sterling fell and dollars rose the profits of the Exchange Equalisation Account mounted up by leaps and bounds. But, of course, we do not know the true position; a veil of secrecy has been drawn over the transactions, but I imagine that there must have been a time when the book profits of the Exchange Equalisation Account amounted to at least £30,000,000 sterling. That was when sterling was down at 3.25. Since then sterling has been rising, and the dollar has been falling. Since then the Exchange Equalisation Account, or the mystery men who control it, have been doing their best to keep sterling down, and naturally, because their book profits of £30,000,000 depend on a lower value of sterling.

What do you do when you want to keep sterling down? You sell it; an unpatriotic thing to do. But the only way to keep sterling down is to sell it, and if you do you must buy something in its and gold and francs, and every day they have made a loss on it. What is the loss? We do not know. I am certain that at the present standing of dollars and sterling the profit must have vanished and its place taken by a loss; that is if the selling of sterling has gone on in order to keep the value of sterling down. We have been told by a City man, not a member of this House, that directly the Government went in for bill broking they would probably, with their inexperience, come a cropper. They have. We have asked what has happened to the Exchange Equalisation Account. The Government have never told us—and they dare not tell us now. When we paid the instalment of our debt to America last December, it was paid in gold. I do not know how the Exchange Equalisation Account accounted for it. Possibly it was written off against the profits of the Exchange Equalisation Account, just as the losses on dollars and francs borrowed were written off against the big appreciation in the sterling value of the gold in the Bank of England. I am certain that the loss which the Exchange Equalisation Account must have suffered must be a big charge on the Chancellor of the Exchequer when he is contemplating his next instalment of debt to America.

Then suppose France goes off gold. What is to happen to those £180,000,000 of gold we have, when gold suddenly assumes a commodity value? The dead loss we shall have to face will be gigantic. Unfortunately that danger means that we and America will go back on gold. We shall go back on a lower parity it is true, but all the countries of the world in future will know that the best thing they can do to revive trade is to go off gold again. We shall have one country after another, after an international conference has decided to go back on gold, slipping back in order to benefit themselves and their trade and their unbalanced Budgets. How can people now talk about establishing an international currency? We all know that it depends on the government of each State how long they will remain on a gold parity with other countries. Do you think that Australia will go back on the same basis that we may go back on gold? I doubt it; and I doubt whether foreign countries, once back on gold, will stop there for a minute directly it is to their interest to get off gold. I deplore what is going on in America, but only that part of it which is concerned with the re-establishment of a tottering gold standard. That cannot be in the interests of world prosperity, and is intended solely to safeguard the interests of those countries which have large stores of gold on hand in reserve. A gold standard is far less useful for international trade than an automatic balance of exports and imports which comes from being off gold and on a natural basis.

7.41 p.m.

Sir WILLIAM DAVISON

I am not going to follow the right hon. and gallant Member in his speculations as to what has been happening to the Exchange Equalisation Account, or in his speculations as to what has been happening in America. With regard to the latter, it will be more profitable if we wait until we have some more definite information which will enable us to discuss the matter with authority. There is only one point in the Budget statement upon which I desire to address the Committee, and that is the continuance for yet another year of high direct taxation, which in my opinion is crippling industry and enterprise and is also a direct cause of unemployment. Speaking as I do as the Chairman of the society which represents the Income Tax payer of Great Britain, I need scarcely say how much we deplore the continuance of direct taxation on a war basis. Taxation of this kind is not only a burden on the individual but checks initiative, and without initiative in business there is little chance of providing further employment for our people. Having regard to the fact that the great saving in War Loan interest, and other interest to which the Chancellor of the Exchequer alluded in his statement, which amounts in all to £52,000,000, was for the most part provided out of the pockets of the Income Tax payers of this country, we had naturally some reason to hope that there would have been some amelioration in the heavy burdens which have been borne by these people with such fortitude for so many years.

Year after year Chancellor after Chancellor has told us that the limit of direct taxation has been reached, if not exceeded. Each year the Income Tax payer, struggling along in the deep waters of his financial difficulties, has had tied upon his back what I may describe as the Ark of the Covenant of sound finance, and has been asked to bear it a little longer. Now again, when he thought that he was nearing the shore, he finds that the harbour lights have once more receded and the port for which he was making is still far distant. When I addressed the House on Budget Day last year I pointed out that the springs on which the Chancellor of the Exchequer relied for national refreshment were gradually drying up, and his Budget statement yesterday proved the truth of that prophecy. Not only has the yield from Income Tax and Surtax shrunk, but no fewer than 12,000 persons have fallen below the Surtax level. The hon. Member for Limehouse (Mr. Attlee) rejoiced at that fact [Horn. MEMBERS: "Hear, hear"]—and the cheers which greet my remarks show that his colleagues associate themselves with that rejoicing.

Mr. TINKER

It is equalisation we are after.

Sir W. DAVISON

That shows how far apart we are. Hon. Members opposite associate themselves with the Russian ideal of pushing everyone down to the lowest level, while we believe in raising everyone to the highest level. That, I believe, is the only principle upon which any nation can survive and prosper. The more people there are with £2,000 a year the better and more prosperous a nation is. Do not try to take away any of the £2,000 a year which a man has made by his energy and industry. He can only spend that money in encouraging other people in the industry in which he makes his money. Here we have an example of what is wrecking Socialism throughout the world. Socialists in this House rejoice in the fact that 12,000 fewer people are paying Surtax this year.

But I want to ask the Chancellor of the Exchequer what of the future? We have borne this burden now year after year. What chance is there of any revival of trade, with this millstone of war taxation tied round the neck of industry? It is essential that the burden should be lightened if trade is ever to revive. What is true of the family is equally true of the State, for the State is but all the families of the country bound together. When a family finds that it cannot pay its way the only thing that it can do is to reduce its expenditure, and that it at once does. I say to the Chancellor that just as the family must reduce its expenditure so too, as he very properly has discarded inflation, the only course to follow in order to remove this millstone is to reduce the expenditure of the State.

In his Budget speech the Chancellor invited suggestions from private Members. He has had the reports of a number of committees. He has had the report of a private Members' committee on economy. He has had the report of the committee presided over by the hon. Member for Richmond (Sir W. Ray) on economy in local government expenditure. That report, showed economies of nearly £40,000,000 a year, nearly half of which represented grants from the National Exchequer. Very few of the recommendations of these committees have been adopted. With all respect, I submit to the Chancellor that he is a little too timid, that he forgets the last Election and how nobly all classes of the community responded to the call which was then made. We even see him hesitating and negotiating with the co-operative societies, who have squealed at the paltry sum of £750,000 a year which is proposed as taxation on their ever-increasing millions of reserves. I shall not go into that matter, for I believe that my hon. Friend the Member for Barnstaple (Sir B. Peto) is to speak upon it. It is an example of the timidity of the Government in not going forward on the only way to secure employment. They ought not to be daunted because a body like the co-operative societies, who for many years have escaped taxation which they ought to have paid, are now squealing because to some extent they are to be put on a level with their competitors in trade.

As I said just now, the springs of direct taxation are drying up. The total revenue from taxes in the Budget of 1933–34 is £652,000,000. This sum is almost identical with the revenue derived from these taxes four years ago, in 1929. Since that year a shilling has been put on the Income Tax, there has been a 35 per cent. increase of Surtax, and 9 per cent. increase of the Estate Duties. With these additional burdens of the last four years we are to-day getting only the same revenue as we got four years ago. The Chancellor of the Exchequer has recognised the facts in the case of beer. The Noble Lady the Member for Sutton (Viscountess Astor) in her speech just now regretted that there was no lady Member of the Government. The whole burden of her speech was that taxation was to be used in order to further a particular private sentiment. It is not the business of the Chancellor to consider his own private opinions as to whether a particular industry is or is not good for the country, so long as it is being carried on legally. With regard to beer, the Chancellor has been practically forced to recognise that the goose which laid so many golden eggs for the Exchequer in the past is being killed. The estimate of £10,000,000 which he gave us last year as the product of the increased duty, has had to be reduced by no less than £6,000,000. He has been forced to see that if he is to maintain any revenue from beer the duty must be substantially reduced.

But when, I ask, will the Chancellor realise that what applies to beer applies also to the Income Tax payer of the country, and to the starting of the wheels of industry? I beg him, when he replies, to give some indication as to how the stranglehold of taxation is to be released, if not this year at any rate in years to come. Let me change the metaphor of the overburdened swimmer striking out for the ever-receding port, to that used in one of the leading London daily papers this morning. Will he tell us what fate awaits the patient oxen—the direct taxpayers—who have already toiled so long?

7.55 p.m.

Colonel SHUTE

I wish to take this opportunity, whilst the Chancellor of the Exchequer is present, of drawing attention to what we who come from Liverpool think is an omission from the Budget statement. That is the omission of reference to the taxation that is to be allotted to heavy vehicular traffic along the line of docks at Liverpool. Before dealing with that subject let me, as one who is daily engaged in commerce and industry, pay my tribute to the sterling honesty of the Budget statement of yesterday. Whatever disappointments we may have felt, however some of us may have fancied that there might have been something different in the Budget, I am sure that the statement when it is thoroughly appreciated will do much to generate a feeling that continuance of such a sound financial policy on the part of this country will materially help to bring about that general world confidence on which improved trade—for which we have been so long waiting—must ultimately depend. The point which I wish to ask the Chancellor to reconsider before reaching a final decision, is the problem about which he has doubtless had comments from those concerned with the method of transport along the line of docks at Liverpool. I happen to be, among other things, chairman of the United Trades association of Liverpool, which deals with these matters. Immediately the Salter Report was issued we took a certain amount of comfort with regard to increased taxation on these heavy vehicles, because in paragraphs 87 and 88 of that report there appeared these words: The revised rates are not suitable for this specialised and limited character of transport, nor is it desirable that these large vehicles should be replaced by smaller lorries or horse-drawn transport. We were anxious to hear from the Chancellor of the Exchequer that special taxation would apply to vehicles of this type. We have to remember the geographical position of Liverpool, and the transportation of goods from the docks to the seven miles of warehouses which have been created during the last 40 to 50 years to deal with imports. The transportation from the quayside to the warehouses has necessitated a certain style of road built primarily by the ratepayers long before motor transport came into being. It is surely a fair proposition that there should be some differentiation made in the case of these vehicles, seeing that this transportation is not in any way detrimental to the railroads but is really ancillary to them. I am hopeful of hearing that the Chancellor has been able to go further even than the Salter Report, which suggested that.25 per cent. rebate should be given to vehicles of this type. We believe that no extra charge at all should be made for these particular vehicles, because the only result of such an extra charge would be further "on-costs" in Liverpool, an unfair burden as against ports where the traffic along the dock roads is not of so much material consequence. In these hard times we in Liverpool do not desire further on-costs to be added to those which are already difficult for us to bear.

It may interest the Committee to know that over 50 per cent. of the cargoes ported into Liverpool are dealt with by means of steam or electrically driven wagons. I have figures here showing the enormous difference which it would make to us if any heavier taxation were imposed. It might even involve the elimination of this style of transport. I will only trouble the Committee with one item in these statistics. The total imports into Liverpool last year were 6,600,000 tons and of these there were removed by car, lorry and motor lorry to warehouses and railway goods stations over 3,300,000 tons. I ask the Chancellor to consider this matter carefully. A concession such as that for which we ask will not cost very much but will make an enormous difference to us. We feel 'very strongly on the subject and we most earnestly ask the right hon. Gentleman, when he is finally summing up the details of the Budget—a Budget on the soundness and honesty of which I venture to compliment him—to look into this matter and to see whether he cannot meet the claim which I have submitted to him.

8.2 p.m.

Mr. TINKER

I wish at the outset on behalf of the Committee to extend a greeting to the hon. and gallant Member for the Exchange Division of Liverpool (Colonel Shute) who has just addressed us. We have listened to him attentively and I think we all recognise the business ability which he has brought to the service of the House of Commons. I fought against him at his election, but having done so I desire to express what I think is the feeling of hon. Members in welcoming him here and I trust that we shall have the opportunity of hearing him on many occasions. I think the Chancellor of the Exchequer will recognise that the point which he has put forward so well has an important bearing on the Budget proposals. I wish to deal, however, with the question raised by the hon. Member for South Kensington (Sir W. Davison). Indeed I had not intended to intervene this evening had it not been for the hon. Baronet who stood up so strongly for the Income Tax payers. I recognise in him the chairman of the Income Tax payers organisation from which we all get circulars from time to time and whose object is to reduce Income Tax payments. One recognises therefore the hon. Member's feeling in trying to prevail upon the Chancellor of the Exchequer to reduce Income Tax but throughout his speech he never indicated where the Chancellor was to find the money.

The right hon. Gentleman has a right to expect that anyone who asks him to reduce taxation should show him an alternative method of getting the revenue. The hon. Member for South Kensington pointed out that last year there were 12,000 fewer Super-tax payers than the year before. Because hon. Members on this side cheered that statement he seemed to resent our attitude and talked about Russian methods. No such thing entered our minds. But we have an idea about the equalisation of wealth and about trying to bring people who are now on a lower standard up to that standard to which the hon. Member belongs. We shall never rest content while there is so much wealth on one side and so much poverty on the other as there is at present. While there are 12,000 people who have fallen below the Super-tax level, I ask the hon. Member to remember on the other side the vast and growing army of unemployed who have practically nothing on Which to exist.

We were concerned to find whether the Chancellor intended in this Budget to give back to the unemployed people the cut taken by Lord Snowden and in the succeeding Budget. We expected the right hon. Gentleman to deal with that matter before considering any question of reducing Income Tax or Super-tax. The first step, we thought, would be the restoration of the cuts taken away at a time when there was so much talk about the country going to the dogs. One would have expected that even the chairman of the Income Tax Payers Association would have urged on the Chancellor to try to lift up the poor people before there was any attempt to relieve the rich. I support the Chancellor on one point. I agree with him in the relief which has been given in respect of the Beer Duty. I advocated that step several times. I know that many of my hon. Friends do not agree with me lout I speak thus, because I know that many of my friends and supporters, many who helped to return me to the House of Commons, are fond of a glass of beer. I speak of the mining community and the workers generally. It is one of their forms of entertainment and no one can say that it is wrong for the working man to enjoy his glass of beer at the end of his day's work or at the end of the week. The taxation on beer has been excessive and I am glad that the right hon. Gentleman has reduced it.

I am sorry however that the Chancellor has not given some of the surplus which he had available to the unemployed instead of devoting it to the alteration of the Income Tax payments. I would have allowed the payments to remain as they are. There was a big outcry at first against the payment of the three-quarters in one instalment but there is an outcry against all taxation at first. The people who have had to make this payment have got over it and I think everybody was reconciled to paying the three-quarters in the first instalment. By returning to the original position the Chancellor has sacrificed in this Budget about £12,000,000 which he might have retained and used for some other purpose. For instance, the aged people who have passed out of industry might have been given some reward more than the 10s. pension. Wherever one goes one finds old people asking whether anything is being done for them. I do not think anybody can say that the 10s. per week is enough.

I know men who have passed the age of 65 but have remained in employment and have not dared to let the employer know their age. They have kept on working until they were discovered, simply because the 10s. a week was not enough for them. But when the employer discovered that they were over 65 they had to go. The employer in effect said: "The State is now looking after you and I have younger men to take your place. I have kept you on mainly out of charity, but now that the State will give you something I must get rid of you." Men and women in that position have not been able under present conditions to save anything. All they have to live on is the -old age pension, and the Chancellor, if he had any surplus to dispose of, might have turned in that direction or towards the unemployed. Instead he has turned to the rich people. I used the word "rich" in a comparative sense. I do not mean the ultra-rich, but the person who pays Income Tax is fairly well off. He cannot be said to be in want of anything. The Chancellor said yesterday that many Income Tax payers were in a very straightened condition, but I could hardly agree with him in view of the kind of poverty which exists among other people in the country. Therefore, I say that the Chancellor, having a surplus, might have utilised it to better purpose.

This Budget has been called safe and steady and unexciting. It is all three, and, as such, it could not be in better hands than those of the right hon. Gentleman. He is not one who goes in for flights of oratory. He brings a practical common-sense mind to bear on his problems, and yesterday when he was speaking one realised the extreme difficulty in which he was placed. I think we all realise in time of such difficulty the responsibility of the right hon. Gentleman's position, but I would have been better pleased if he had shown more thought for the poor victims of industry who are suffering intensely at the present time and who have been looking to the House of Commons for some assistance. When we go back to our constituencies they will ask us why we have not been able to prevail on the Chancellor of the Exchequer to do something for them.

8.13 p.m.

Sir BASIL PETO

I wish to deal with three points only which arise out of the Chancellor's speech. The first is the present state of what can only be termed negotiation, which, the right hon. Gentleman tells us, exists between himself and the co-operative societies as to whether they should be taxed or not. The right hon. Gentleman told us that interviews had been taking place with the societies. He said: I met the representatives of the cooperative movement again in order that I might see whether it was practicable to arrive at some solution which would … meet their views on the subject of mutual trading."—[OFFICIAL REPORT, 25th April, 1933, col. 49, Vol. 277.] Surely, that is a rather strange statement. It seems to me that it is for the law courts to determine the law and not for taxpayers to enunciate principles, with regard to mutual trading, under which they claim to escape taxation. I find that there has been a very recent and authoritative statement bearing on this point by one of our most distinguished judges, Lord Macmillan, in the case of the Municipal Mutual Insurance Company, Limited,versus Hill, in the House of Lords. Lord Macmillan said: The cardinal requirement is that all contributors to the common fund must be entitled to participate in the surplus, and that all the participators in the surplus must be contributors to the common fund; in other words there must be complete identity between the contributors and the participators. If this requirement is satisfied the particular form which the association takes is immaterial. On that statement I have the opinion of very eminent counsel, on this question of co-operative liability, as follows: Now co-operative societies not only do business with their members, but with nonmembers, and the amounts returned to customers do not represent the excess expended by those customers in respect of their individual purchases, but the division of the society's surplus according to the totality of its operations during the year. Moreover, such societies do not distribute the whole of the excess, but carry on the greater portion of it with a view to developing their business, and, in my opinion, such societies do not comply with the definition of mutuality, but do carry on trade with a view to profit. That being so, and having the advantage of these very clear pronouncements on this question, surely it is a little unnecessary for the Committee to be told that the Chancellor of the Exchequer must needs meet the co-operative societies in order to try, in negotiation with them, to get their agreement to taxation to which, if the law of mutuality goes, undoubtedly their trade ought to be subject.

But surely the question of the taxation of co-operative societies in one form or another should by now be regarded as settled policy. The Chancellor of the Exchequer mentioned yesterday the Royal Commission which sat in 1920, and told us that in effect its finding was that undistributed income ought to be taxed at the full rate, and that that would mean an additional revenue of £1,200,000 in a full year. He also told us that the committee which he specially set up after the last Finance Bill was introduced, with a view to clearing up the whole matter authoritatively before the next Budget, had reported, and as we know from that report, which formed the subject of a White Paper, it agreed with the Royal Commission and, as the Chancellor yesterday made quite clear: The effect of their report was, broadly, that the undistributed income of the societies should be taxed at the full rate, while the distributed income should continue to be taxed in the hands of the recipients."— [OFFICIAL REPORT, 25th April, 1933; col. 48; Vol. 277.] In those circumstances it seems very strange that it should still be necessary to continue these negotiations, but I would remind the Chancellor of the Exchequer of one thing more, and that is that as far back as 1920 his own brother, the right hon. Member for West Birmingham (Sir A. Chamberlain), when Chancellor of the Exchequer, said: The effect of the movement"— that is, the co-operative movement— is to withdraw from taxation a great field of revenue which formerly contributed a large share … It thereby casts a heavier burden on those who do have to contribute. The greater the success of the movement the more intolerable that position becomes for everybody else, the more impossible it becomes for the revenue authorities, and the more certain it becomes that in some form or another the co-operative societies must contribute their share to the common necessities of the State."—[OFFICIAL REPORT, 27th July, 1920; col. 1285, Vol. 132.] That is 13 years ago, but going back a further three years, to 1917, the late Mr. Bonar Law, when he was Chancellor of the Exchequer, said: I believe these societies have done a great deal of good in the country, but they are doing an exceedingly large share of the retail trade of the country, and although they do not make profits in the ordinary sense, it comes to this, that that immense share of the trade is done without paying the share to the revenue which is borne by other traders."—[OFFICIAL REPORT, 17th July, 1917; col. 2777, Vol. 96.] What is the present position? I will give the Committee one 'or two broad facts. We hear of this question as if it was a little struggling effort at mutual trading between a few poor people, but the real position is that the share and loan capital and reserve of the co-operative societies exceeds £160,000,000, that the annual trade exceeds £300,000,000, and that they are placing to reserve every year something between £2,000,000 and £3,000,000. In the face of that huge trading, it is idle to suppose that we can go on allowing the whole of this volume of trade entirely to escape assessment except under Schedule A, which is a very small contribution to the taxation under the Income Tax law of the country. It is also worth reminding the Committee that that clearly is not the limit, and that it is not the limit of ambition of the co-operative movement, but that through the director of the Co-operative Wholesale Society, they make no secret of the fact that we are out absolutely to do away with private individual trade and production. These societies are free under the present law to place any portion of their surplus to capital account and to depreciate their assets by any percentage they choose. Their present policy is to place large sums to reserve, on which no taxation falls, and to depreciate their buildings by 2½ per cent., their stock and plant by 10 per cent., and their rolling stock by 20 per cent., so that in the aggregate the money invested in this form of real estate will disappear from the balance-sheet altogether, on, the average, in about 10 years. An individual trader who is doing a business with an ascertained surplus at the end of the year of, say, £20,000, which he wishes to use in the development of that business, would only have, after paying Income Tax and Super-tax, £12,000 left to place to reserve for the development of his business, but a co-operative society doing exactly the same business and with the same surplus, desiring to acquire the premises of other businesses, would be able to put the whole £20,000 to reserve without one penny of deduction for taxation from it. That is all that I want to say with regard to the general question of the taxation of co-operative societies. It is a question that has agitated various Chancellors of the Exchequer for the past 15 years and, I believe, longer, and it has been constantly brought up in this House. We were led to suppose that it was really going to he settled, and I beg the Chancellor of the Exchequer not to allow himself to be deflected from what is, I think, a perfectly obvious duty, particularly at the present time, but to hold the fiscal scales fairly between the two parties and without fear or favour.

I want now to refer to one other aspect of the Budget. There is no question about it that, although a very sound Budget, it was a very gloomy Budget, and except in one or two isolated directions it did not hold out a ray of hope of relief anywhere. It seems to me a Budget of lost opportunities. I believe it might so easily have been made a brilliant Budget. The Chancellor of the Exchequer, when he was speaking yesterday of the possibilities of the three years budgeting principle with a shilling remission of Income Tax, said that that would cost him £50,000,000. From whence could he get that £50,000,000? I suggest to him that he has a method very ready to his hand. It is the deliberate policy of the Government that, in order to save the livestock industry of this country, the wholesale prices of meat must be raised substantially. They have taken steps to raise these wholesale prices. They have proceeded on the principle of a quota and by licences. They have refused to proceed by the method of the tariff. By the method that they have adopted a very large proportion of the total wholesale price of meat in this country is handed over to the foreign producer or buyer of meat for export. If we take the figure of 3d. a lb. as a desideratum for the increase in the wholesale price of meat, it means an increase in the price of all the meat consumed in the country of £79,000,000; of that, £48,000,000 is, under the present system, handed over to the exporter of foreign meat.

Why we adopt this particular method when we find that revenue in other directions is shrinking, and when everybody admits that a substantial remission of Income Tax would be an immense boon to trade, is, I think, clear. It is because we have not a Government of one opinion, but of very varying shades of opinion, and at the time when this decision had to be arrived at the right hon. Member for Darwen (Sir H. Samuel) and his friends were members of the Cabinet. They are not members now. We always understood that the taxation of meat or wheat by a tariff was a thing that would mean a complete split and a break-up of the Cabinet. But there are in the Cabinet other Free Traders, particularly the President of the Board of Trade, who, I believe, is equally opposed to that method of dealing with the question. I have the greatest respect for the President of the Board of Trade and his intellect, but I cannot say that I think that he or any man is worth £50,000,000 a year of the taxpayers' money.

Apart from the revenue which is thrown away and poured into the pockets of the foreign meat exporters instead of into the lap of the Chancellor of the Exchequer to enable him to hand it out in turn to the over-taxed Income Tax payer, there is the question of sugar. The right hon. Gentleman the Member for.Darwen to-day spoke about sugar. He extremely dislikes the subsidy. So do I. But what is the history of the subsidy? It was a Free Trade device and was granted when the Chancellor of the Exchequer of the first Socialist Government decided to drop the Sugar Duty from 25s. 8d. per cwt. of 98 degrees to 11s. 8d., at which level it has been ever since. That necessitated, as the policy of having beet-sugar production in this country had definitely been started, the giving of a subsidy to beet-sugar produced in this country. I am not suggesting that the Chancellor of the Exchequer should go back to the 25s. 5d. per cwt.; that would not be necessary, but sugar has never been so cheap as it is at the present moment. Our own West Indian colonies are suffering and would be immensely benefited by a more substantial preference on their sugar to enable our demand to go to the West Indies instead of to foreign countries.

The Chancellor of the Exchequer has to arrive at a decision as to what he is going to do with the subsidy in future. The payment of the subsidy has been going on for years. If he increased the duty on sugar from foreign countries by 4s. 5d. per cwt., or one halfpenny per lb., making it 16s. 4d. instead of 11s. 8d., and gave a preference to the West Indies of one-half of the increase, he would collect substantially more revenue. He could leave the home-produced sugar tax free so far as excise is concerned, except perhaps for a few pence in order to give a little advantage to the refining of sugar in this country rather than in the Dominions and Colonies, and he would be able to put more revenue into his Budget and also be able to solve the problem of the beet-sugar subsidy in future. He did not however do anything of the sort, and there again I consider that an obvious source of revenue has been neglected.

I will mention one other source, though as a West Country Member I do so with some trepidation. Why when dealing with beer did the Chancellor entirely forget that other most attractive drink which is now ousting beer to a large extent as a luxury drink in a bottled form for the middle classes and the well-to-do. I refer to cider. When the Cider Duty was taken off in 1924 the situation was entirely different. It was taken off because it was a very small tax which was very troublesome to collect, and there was a large amount of rebates and remissions for home-produced cider. The home brewing of cider is dying out, but the manufacture of cider in the luxury bottled form has enormously increased. I am told, for instance, that in the luncheon car on the Great Western Railway that goes down to Devonshire daily it is found that five bottles of cider are asked for by the passengers for every three bottles of beer. It is cheaper, of course, and I am told—though I am not a judge of these things—that if you want to arrive in a moderate state of hilarity and good fellowship, you can do it much more quickly as well as more cheaply on cider than on the beer which has recently been brewed. There is an enormous increase in the importation of cider from France, which is competing with the product of our own orchards, and all of it goes tax free. That is a considerable field for moderate and reasonable taxation. It is really a remarkable thing that we should have had all this agitation about the abnormal, excessive and destruction taxation that has been on beer, and have entirely overlooked the fact that a new industry has grown up, that a new luxury drink has become extremely popular; and, while I do not wish to do anything to injure the production of anything in this country, I think that it could undoubtedly stand a small and moderate tax.

There is another feature of the Budget which undoubtedly causes disappointment. In balancing accounts one has to look at both sides, to see how much has been spent and how much can be collected. In the case of this Budget the spending remains lamentably the same. All the talk of economies, of searches and of committees advising the Chancellor of the Exchequer have apparently produced no effect at all. Yesterday the Chancellor of the Exchequer had to point to what had been done in the past, in 1931 and so forth. He could not tell us of any definite substantial economy to be achieved in the current year, and I cannot help feeling that that will be a reason why the public generally, those who are the greatest contributors to the taxes, will feel that this is a Budget of lost opportunities—lost opportunities for immense savings on the one hand and on the other for collecting revenue which I consider is being thrown away.

8.36 p.m.

Mr. RHYS DAVIES

I have been in this House long enough to witness at least 12 Budgets introduced, but I must confess that this is the Budget which provides the dullest details of all. Not only is it a tame and a dull Budget; it is a very biased one, as I shall hope to show later. It seems to me that when a Chancellor presents his Budget he brings to this Table, metaphorically speaking, all the fruits of the labours of the Government for the previous 12 months, and I ask the Committee to test the work of the Government by the simple question whether under this Budget the people of this country are better off to-day than they were when this Government assumed office. After all, the comfort and the well-being of the population constitute the test of the capacity of statesmen and of Governments. What is the situation after 18 months of the present Government? I am sure nobody on the Treasury Bench will dispute this very simple statement, that the wages of the workpeople are on the whole lower today than they were 18 months ago, the hours of work are longer, and the burden of unemployment is heavier. As an old workman myself I measure the capacity of a Government by these three simple tests—what are the wages coming into the homes of the people, what are the hours they are called upon to work, and is their occupation steady and regular? On those three tests I think we can say definitely that the Government have failed in respect of at least 75 per cent. of the population. They have failed because their policy is wrong. A Budget after all is nothing more nor less than a mass of statistics which are the positive outcome of the policy of the Administration, and as a member for a Lancashire constituency I would ask the Chancellor whether he can show the 6,000,000 or 7,000,000 people resident in Lancashire—the county that provides the largest single export item of trade in this country—any ray of hope for their great textile industry. There is none whatever. There is nothing in this Budget which will provide hope for the hundreds of thousands of textile operatives —or their employers—in this great county of Lancashire. Further, what hope is there for the coal mining industry?

It would be well if statesmen could sometimes be brought down to earth and see the result of their handiwork in some districts in our country. Let me try to picture conditions in a small town in my own division, with 6,500 inhabitants, where there were once flourishing ironworks, coal pits and some textile factories. For three and a half years not a wheel has turned there. It is as difficult to find in that township to-day a person who is employed as it was to find an unemployed person there during the War. What is there in this Budget for anyone living in such a town? Nothing; no hope. What hope is there for shipbuilding? The tariff policy of the Government has struck shipbuilding and the overseas transport trade probably more severely than anything else. Look at conditions in Liverpool and the port of Manchester. If the tragedy that has come upon those communities slowly and gradually, over a period of years, had been brought about in a week people would have been so alarmed that I am afraid they would have committed suicide.

I am sorry the hon. Baronet the Member for Barnstaple (Sir B. Peto) is not here, because I have a word to say in reply to his arguments for taxing cooperative societies. I hope, however, the Financial Secretary to the Treasury will bear this point in mind in connection with the matter. Complaint has been made that the Chancellor of the Exchequer and the Treasury have dared to consult the Co-operative Movement as to whether they should pay taxation—additional taxation, of course. On that score let me say, as an individual, that, whatever negotiations the Co-operative Movement may enter into with the Treasury, I trust they will not for one moment agree to the imposition of a penny piece of additional taxation; because I apprehend something else as a consequence. If this proposal for taxing even some of the reserves of the co-operative societies is admitted, and the economic depression continues, I can very easily see a Chancellor of the Exchequer, especially the present one, if he is in office next year, saying: "Well, you never protested against our proposal in 1933 to tax these mutual reserves, and consequently we shall now find out whether it is not possible to tax the investments of trade unions." Therefore, as a co-operator and as a private individual, I trust the Cooperative Movement will not for one moment agree to submit to any additional taxation.

What is the Co-operative Movement? The hon. Baronet the Member for Barnstaple seemed to think that the Co-operative Movement, with its millions upon millions of pounds, was a great and mighty institution. Let me explain. These huge sums of money must be related to the number of persons who participate in the movement. What is the use of talking of the £100,000,000 reserves in the National Insurance Fund without relating that sum to the 17,000,000 people who participate in the scheme? When he talks of £100,000,000 reserves in the Co-operative Movement he has to remember that there are 6,000,000 members, or thereabouts, in that Movement and he will see that it works out proportionately to a very small sum indeed. It is commonly known that the average purchase in the Co-operative Movement is not more than 10s. per week per member. The hon. Baronet should not complain that the Treasury has asked the Co-operative Movement to come into consultation. Strangely enough, he did not complain about the Treasury's negotiating with the brewers. So far as I understand the procedure, the Treasury have done with the co-operative societies' representatives exactly what was done with the representatives of the brewers. The Chancellor of the Exchequer, speaking last evening, actually read a letter from the brewers which was tantamount to saying, "We will allow the Government to tax us, provided that they do it in a certain way."

I have said in this House before, and I will repeat it now, that the Tory party and the drink traffic are one and the same. An hon. Gentleman smiles. I think I have at least one Member of the Tory party who agrees with me, and that is the Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor). Whatever I may think of her politics I will say that she is a very plucky lady to say what she said this afternoon. It is a strange anomaly that while members of all parties, economists and statesmen of every country are complaining that the economic depression is getting worse and worse—unless I am mistaken we are not yet at the end of it—the Chancellor of the Exchequer in the country in Europe that is still the most influential of all, is handing over £14,000,000 per annum to appease the desires of the brewing industry. That is an amazing thing. I wish the right hon. Gentleman the Member for Tamworth (Sir A. Steel-Maitland) were here, because I would like to take him to task on one point. Representatives of the Government have challenged us on this specific issue more than once. They have said that although the depression weighing heavily upon the working-people of this country, by reductions in wages and cuts in unemployment benefit, as well as by deductions in the social services, our working-people are still the best-off in Europe. That is the argument. Let me combat that argument by saying that, while I am not disputing that statement, here is somehing which has to be put up against it. If there is anything that I profess to know a little about, it is this subject. There are working-people in Europe, especially in Scandinavian countries, who have not felt the economic depression upon their standard of life to the same degree as our working-folk have felt -;t. PG is quite possible, therefore, that our standard of life may still be the best, but that, judged by the standard of life enjoyed by our working-people at the end of the War, their standard has since been reduced more in proportion than is the case in France, Sweden, Holland or Denmark. Hon. Gentlemen must bear that point in mind.

Let me add another word on that point. I would very much like the Government to take a wider view than they do, not only in relation to the agreements that they enter into to get a little bit of extra coal sold in Germany, or Denmark and other Scandinavian countries. I have travelled a little recently to find out for myself the trend of events in Europe. The British Government would do the human race a good turn if they declared for a bold policy in international trade relationships. Let me give a case which was brought to my notice by an authority the other day. I had better not name the country, except to say that it was one of the Scandinavian countries. A month ago the farmers in that country agreed with their Government, so I am told authoritatively, to slaughter 100,000 young pigs in a week in order, forsooth, to keep up the price of pork, and that Government paid them 5s. per pig by way of indemnity. They are now killing 1,500 cows per month, and their Government pay them an indemnity of 35s. per beast. When we have reached a stage like that, some Government somewhere ought to break through the terrible condition of affairs that is called "Restriction of Trade and Customs' Duties" throughout Europe. It is not commonly known that in Central Europe about 100,000,000 people are living more or less on the land; they constitute a great potential market for an industrial country like ours.

Although I am a Socialist and a critic of our home institutions, I am still certain that our country, with about five centuries of political democracy and nearly a century of free elementary education behind it; with its organisations, freedom of speech and culture could, if it liked, through some Government, go forth and strike a blow against all these Customs' barriers that are absolutely throttling the trade of Europe. I am sure that somebody has to do it soon3r or later. I have actually seen treaties made providing, for instance, for a frontier between two countries to run right through the main street of a village, 10 that a woman on one side of the street in one country has to walk half a mile to the bottom of the village to get through the Customs' barrier in order to do her shopping on the other side of the same street. This Budget is a reflex not only of our home policy but of our policies at Geneva and at Ottawa. I would plead above all things that the Government should take into account the very important effects which would ensue from reducing those Customs' barriers and, if possible, eliminating them altogether. I am confident that Europe will not redeem itself until those Customs' barriers are broken down by all the countries concerned.

I was very interested in the speech of the right hon. Gentleman the Member for Darwen (Sir H. Samuel). Of course, we are both Lancashire people, and like Lancashire people we cling together, but I must confess, although we belong to the same county, that his speech puzzles me. I have never heard in this House, not even from the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) any criticism so vehement, so vitriolic, as we heard this afternoon from the right hon. Gentleman the Member for Darwen, of the very Government that he supports. Really, if his speech means anything at all, he ought to translate it in the Division Lobby by doing all he can to make this the last Budget presented by this Government. As I have said, I was a little amazed, and his attack on my hon. Friend the Member for Limehouse (Mr. Attlee) was, I think, rather undeserved. I would like, with due deference, personally to congratulate my hon. Friend on the way in which he opened the Debate to-day. I thought he made an excellent contribution to it.

I should like to ask the Financial Secretary to the Treasury if he will be good enough to explain a detail which has bothered me in this Budget. In 1926 the right hon. Gentleman the Member for Epping (Mr. Churchill) was Chancellor of the Exchequer, and he delivered a deadly blow at the National Health Insurance scheme in this country; he reduced the State subsidy by £3,500,000 per annum. I notice, tucked away in a little column of this Budget, some figures about which I should like an explanation. The Budget shows a reduction of £404,000 in the State grant towards the National Health Insurance scheme. I do not know how the benefits that are now paid are going to be continued if there is to be a £404,000 smaller contribution from the State every year. I thank we are entitled to an explanation to why there should be this reduction. On the other hand, while there is that reduction in the State grant towards the health Services, we see that there is an increase on the fighting Services of £4,470,000. That is a good old Tory policy—

Mr. MACQUISTEN

We do all the fighting.

Mr. DAVIES

The hon. and learned Gentleman has not been able during the last few months to follow our Debates at all. We are glad to see him back, and we are always very happy to hear any contributions that he may make, especially on the Beer Duty, and possibly on the Whisky Duty too. There:3 another very small point upon which, perhaps, the Government will be able to enlighten us, and that is as to what is meant by the reduction of £13,000 in the grants for health services. I think we are entitled to ask why the Government attack these two Health Services in the same Budget in which they give £14,000,000 to the brewers, and increase the amount for the Fighting Services by over £4,000,000. As I said at the beginning, I trust that the co-operative movement will not be drawn into the net of the Government at all; I hope they will keep away from it. As a co-operator, I trust that they will not give an inch to the Government, will not give away a penny piece by any agreement. I am as I stated very disappointed with this Budget, particularly in relation to its gift of £14,000,000 to the brewers. I had hoped, in spite of my partisan prejudice, that, after 18 months of a Government with the greatest majority, I think, in the history of this country, our people would have received better treatment than has been meted out to them in this Budget.

9.0 p.m.

Mr. MABANE

Perhaps this quiet hour is the best in which to discuss this quiet Budget, but, before I embark on a few remarks about the Budget, I feel that, even in his absence, I must congratulate the Chancellor of the Exchequer on the extremely orderly and lucid way in which he presented his estimates for the coming year. There was nothing omitted, there was no undue emphasis on particular points, and, although there were points that invited controversy, it seemed to me that. he avoided it. But, although he avoided controversy on the controversial points, I do not propose to do so, and perhaps the right hon. Gentleman and the Financial Secretary to the Treasury will pardon me, as one who desires to see them succeed in their ultimate policy, if I pass by the points on which I agree, and concentrate rather on the differences that I wish to express.

There can be no doubt that the financial prestige and authority of this country have been restored by the action of the National Government, and I should not like to see the Chancellor of the Exchequer embark on any course which would endanger that financial authority and prestige. Yet, within the limits of that qualification, I feel that there is considerable ground within which criticism might be made of the present proposals. The main ground for my criticism is that, while financial recovery has now been achieved, there is no evi- dence in the Budget proposals at present before us that the efforts of the Chancellor of the Exchequer are now to be directed to the further object of industrial recovery. It seems to me that the centre of gravity of our financial thought is still the City of London, and not the industrial North. Before, however, I develop that criticism I should like to make some more general comment.

The Chancellor of the Exchequer yesterday was very virtuous in his statement that he would never be a party to 'an unbalanced Budget. There has been much play recently with that phrase, "an unbalanced Budget," and I think that to any careful man it is clear that the phrase needs closer definition before it is capable really of being discussed. If the phrase "an unbalanced Budget" merely means a reckless disregard of the probabilities of income and expenditure, then, surely, it has nothing to commend it, but if, on the other hand, an "unbalanced" Budget intends a nice adjustment of taxation, deliberately directed to secure 'a consequential decrease of taxation which might not be capable of exact estimation, then it seems to me that the phrase has a good deal to commend it, however verbally unfortunate it may be. But, while I listened to the Chancellor's disavowal of having any truck with an unbalanced Budget, I was at a loss to reconcile that disavowal with the estimates that he placed before the House, because, surely, by no rigid standard can the present Budget estimates be considered to be balanced. I do not complain of that at all; I am merely pointing it out for the benefit of those hon. Gentlemen like the hon. Member for Central Southwark (Mr. Horobin) who were so jubilant yesterday that the shadow of financial chastity had been preserved, while they failed to observe that its substance had gone.

We were told, for example, that the Budget estimates show a surplus of £1,291,000, but I think that by any rigid standard that cannot be maintained. A financial purist might calculate that there was a deficit of £67,040,000 in the estimates; a pernickety man might make that deficit £93,000,000. Let me endeavour to show how I arrive at that figure. First of all, there is £7,000,000 which is to be borrowed for the Sinking Fund, as was pointed out by the hon. Member for Limehouse (Mr. Attlee). The Chancellor of the Exchequer airily dismissed the borrowing of that £7,000,000. He said: I do not think that even the strictest financial purist will quarrel with me for borrowing that small sum to meet my purposes in the present year."—[OFFICIAL REPORT, 25bh April, 1933; col. 54, Vol 277.] Borrowing, if you please, for the Sinking Fund. Surely that is the one kind of borrowing to which the financial purist would first of all object. Or is the objection not to be sustained because the sum is merely a small one? Then there is the £10,000,000, caught like a ram in the thicket, which is clearly a capital sum but which is taken in this Budget into the yearly income. There is the matter of the £51,000,000 for the American debt. The Chancellor told us that that is the amount that we are due to pay in the current year at the current rate of exchange. That is omitted, but surely it should be taken in. Is there a peculiar virtue in optimism about debt settlement and a peculiar vice in optimism about industrial recovery. If you can unbalance a Budget because you think you are going to get rid of the American debt, can you not employ a similar process to help industrial recovery? Three weeks on Friday we are due to make the first payment in the present year to America, and as yet, as far as I know, there is no move towards the avoidance of that payment. Or is the payment omitted from the account because we choose to call it capital? Surely the nature of a debt cannot be altered merely because the debtor chooses to call it by a different name. Until the United States agrees that this sum, which we have so far paid as interest, is not interest, surely we are not justified in calling it capital. Thereby we reach a deficit of £68,000,000. I agree that, to be accurate, one ought to deduct from the debt that part of the payment which, according to the terms of the original agreement is capital, but that is a relatively small matter. We are thus left with a deficit of £67,000,000.

It is clear that there is another loss in prospect made reasonably certain and brought appreciably nearer by the events of the last 10 days. That is the loss on the Exchange Equalisation Account which, as far as I can ascertain with the limited information at my disposal, is likely to be a loss of about £26,000,000. I thus reach a deficit of £93,000,000. Again, I want to make it plain that I do not complain. I do not object to such methods being employed, but I object to them being accompanied by homilies on the virtue of balanced Budgets and the condemnation of those of us who wish to employ somewhat similar methods for purposes which we consider more laudable and which touch more closely the life and well-being of the people for, as the hon. Member for Westhoughton (Mr. Davies) says, the ultimate test of a Budget is its effect on the material prosperity and happiness of the general body of the people. I argue, therefore, that it is not a question at present as to whether we should have a balanced or unbalanced Budget at all. The only question is what measures we shall adopt to secure that the deficit is as small as possible and what measures we shall adopt to veil that deficit so that it may appear as a possible surplus, because there is going to be a real deficit in the eyes of any financial purist, such as the hon. Member for East Edinburgh (Mr. Mason) anyhow.

I want to turn aside to the Exchange Equalisation Account because that is likely to be a prospective loss of about £26,000,000. Last year I disliked the etsablishment and the purpose of the Exchange Equalisation Account. We were told that it was to prevent fluctuations in the value of sterling. Although we pressed the Chancellor, we were not told in terms of what it was desired to prevent undue fluctuations. As far as I can see, the Treasury were given unlimited powers. They could, if they so desired, prevent sterling fluctuating in terms of the tides. Nothing was defined. That is the sort of power that Departments are more and more inclined to get from this House. There are two aspects of this account: First, the purpose. Second, the question of profit and loss. These aspects are separate, but it may be argued that the purpose of the account may justify any loss. The Chancellor defined the purpose again yesterday. He said it was to smooth out the 'day-to-day and hour-to-hour fluctuations of sterling. It has never aspired to do anything more, and it is quite certain that even if we attempted to alter the long-term trend of the Exchange, we should not succeed. That … is my answer to the critics who are disposed to suggest that the Account has been used to secure an under-valuation of sterling."—[OFFICIAL REPORT, 25th April, 1933; col. 45, Vol. 277.] That may be the answer, but it is, surely, not a satisfactory answer, because it has done nothing of the sort. In practice, it has been used to peg sterling in terms of the dollar; in other words, to keep us on gold at second-hand. It would, surely, be a truer representation of the facts to say that the Exchange Equalisation Account has not smoothed out the day-to-day and hour-to-hour fluctuations of the exchange, that there have been day-to-day and week-to-week fluctuations to a very considerable extent, but that it has prevented the long-term natural movement of sterling by keeping the £ at 3.40, dollars; by closing the safety valve until at last the boiler burst when the United States went off gold 10 days ago. It is true to say that the Exchange Equalisation Account has not done the things it ought to have done and has done the things it ought not to have done and, consequently, that there is no health in it.

The Chancellor objected that, if there had been no such account, there would have been violent fluctuations in the value of the pound sterling, and moreover, we would not have been able to cope with these vast movements of capital during the year. Surely the reply to that is simple. The capital movements took place because of the Exchange Equalisation Account. The very fact that the Exchange Equalisation Account was in operation was the reason why capital was coming to this country in such large amounts, because it was known that, so long as the account remained in operation, sterling would be kept at something like a level figure.

Furthermore, we should remember, when the Chancellor speaks of violent fluctuations in the value of the £ sterling, that, while looked at from our point of view, a movement may be a fluctuation in the value of the £ sterling, looked at from the point of view of the American or the Frenchman, or any other national, it is equally a fluctuation in the value of the dollar or the franc or any other currency, and it would not be ourselves who would be suffering any more than they. Rightly or wrongly, I believed a year ago, and I believe still, that it would have been better to let the exchanges take their course, and to let the £ sterling take its natural course in order that by the experience of the consequences of financial madness, the world might more easily be persuaded to financial sanity. The Exchange Equalisation Account, it seems to me, was never more than a strait jacket for the exchanges, and the strait jacket is never likely to effect a cure. But the account has this loss in prospect. The position of the account depends upon the price of gold. It has been used to purchase gold or foreign exchange, presumably convertible into gold. If the sterling price of gold rises, the account makes a profit and, if it falls, the account makes a loss. I see no prospect in the immediate future of anything but a fall in the sterling price of gold. The United States and France are directly concerned, and I cannot see that they are going to allow an undermining of their industrial and financial position merely for the fun of allowing us to make a profit on the Exchange Equalisation Account. Surely, the real work of the World Economic Conference cannot begin until a satisfactory basis of exchange is arranged.

I am glad to see that the Conference has recovered its pristine title of "The International Monetary and Economic Conference." It is only recently that it has lost that title and been referred to as the World Economic Conference. Surely, the problem of money and exchanges is fundamental to that Conference. The one thing which it must do is to establish a, new parity for the exchanges. Until that is done or very nearly done the Conference cannot begin its real work. What is to be the new parity? Is there the slightest hope of America or France agreeing to the parity which has been common in the quotations of the last year, that is £1 equals 3.40 dollars equals about 88 francs. There is not the slightest of such hope. The best we can hope is that we shall be able to establish a new value of the £ lower than that which, existed before September, 1931, but we, should remember that any definitive-settlement of the European War Debt to America and the consequent ratification of the Lausanne Agreement will make America and France demand a higher value on the R. The right hon. Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) suggested a figure which has been under discussion that the new parity should be £1 equals four dollars equals, I presume, about 102 francs. That would mean that unless we abandon gold, which does not seem to he the least likely, a fixation of the gold content of the pound at a new point and the sterling price of gold would consequently be altered. At the parity I have suggested—£1 equals 4 dollars equals 102 francs—the price of gold would be about £4 15s. If we have used the greater part of the £150,000,000 of the Exchange Equalisation Account in the purchase of gold or gold equivalent, and I gather that we have done so because the Chancellor of the Exchequer tells us that he wants some more money, if we have spent that money at an average price—I do not know, I merely estimate it—of say £5 15s. to the ounce of gold, the resulting loss from this new parity which must be established before the World Economic Conference can be begun would involve a loss of about £26,000,000. The only way which I can see for such a loss to be avoided would be the complete failure of the debt negotiations with America and the complete breakdown of the World Economic Conference. Therefore, it seems to me to be better that the Treasury should now recede from its present position and not ask us to grant any more money to the Exchange Equalisation Account but let the exchanges take their own course.

I should like to ask this specific question of the Financial Secretary to the Treasury if it is possible for him to answer it for the benefit of the Committee. Am I right in suggesting that if a new parity is established which would give the pound a higher value than the 3.40 dollar value it has had on average this year it would result, when the Exchange Equalisation Account was wound up, in a loss to the Exchange Equalisation Account of something like the figure which I have mentioned?

But my principal criticism of the Budget is the absence of any stimulus to any general spending or industrial development by a lightening of direct taxation. Those of us who have urged the lightening of taxation have been misrepresented as advocates of financial lightheadedness. I do not think that it is at all justified to abuse those who plead for the reduce- tion of taxation as being merely financially frivolous.

An examination of the national accounts reveals clearly that the controlling factor is the cost of unemployment. On the expenditure side most of the items can be estimated with a very considerable degree of accuracy. Grants to local authorities, cost of national debt, defence and tax collection are exact for practical purposes. Under the heading "National pensions and insurance," the items of old age pensions, widows and orphans pensions, war pensions, health insurance and so on are again reasonably accurate, but when you come to the last figure of all —the cost of unemployment—it is perfectly plain that you are not, faced with an accurate estimate at all, but with something which is really a guess. In view of some of the speeches that some of us have regretted to hear from the Front Bench recently, it is particularly emphasised that this is a guess because we have almost been led to believe that the Government are inclined to regard unemployment as an act of God outside their conscious control and that therefore you might as well put down any figure. It is depressing to find that the cost of unemployment for the current year is not merely a guess but a pessimistic guess, I might almost say a defeatist guess. It is a confirmation of the speech made by the Chancellor of the Exchequer on the 16th February, for in this Estimate the Government say here and now that there will be no reduction in unemployment during the current year. That is the message of the Government in this Budget to the depressed areas and to the hard-pressed business men, and to the anxious artisans of the North. For the cost of unemployment last year was £78,500,000 and the cost estimated for the current year is only £76,500,000, a negligible decrease. And unemployment is the central problem of domestic politics. I believe that there is no reason why unemployment should be so high.

The Chancellor of the Exchequer referred to the fundamental pessimism of those who have been called expansionists. Surely no stone was ever thrown from any house so completely made of glass. I should prefer to see the cost of unemployment in this Budget boldly estimated for a considerable decline of not less than £16,000,000. I should like to see both financial and general policy directed to a justification of that decline. For a decline of £16,000,000 in the cost of unemployment would mean an average decrease in the number of men unemployed for the year, as compared with last year of about 330,000. Is that too much to expect after two years of a National Government especially returned to cure the problem of unemployment? I am convinced that it is not too much to expect and that such a decline in the number of those unemployed can be secured, primarily in my view by a lightening of the burdens of the people and particularly of direct taxation. I disagree with the hon. Member for Leigh (Mr. Tinker) who rather rejoiced to see 12,000 fewer people paying Surtax. He went on almost in the next sentence to say that there have been more people unemployed. It is a case of post hoc propter hoc. If fewer people pay Surtax and Income Tax there will be more people unemployed. That is the fundamental difference between the point of view which I take and the point of view which the Socialists take, but I think that the facts prove my point of view rather than theirs.

A straight cut of 6d. in the Income Tax would, I believe, have produced the improvement in employment I have indicated. Such an improvement would more than justify the cut. It would provide the means for it. Let me briefly indicate how that would be. Suppose we estimate £16,000,000 less for the cost of unemployment, that gives us £14,000,000 by reason of the £2,000,000 already estimated to be saved. Then there is the £10,000,000—the ram caught in the thicket—and the £1,291,000 surplus making a total of £25,291,000. The cost of a cut of 6d. in the Income Tax would be £25,000,000. You could make that cut and leave a surplus of £291,000. That, surely, is the best way to justify the phrase of the Prime Minister who said that the work of this Government was in two parts, first of contraction and then of careful and scientific expansion. Were I to suggest a complementary measure it would be to employ the £14,000,000 devoted to beer in the restoration of some of the cuts made in 1931. That would, I am convinced, do more for the country and be more appreciated. I had hoped that in this Budget; we should have seen evidence that the change from contraction to careful and scientific expansion would take place. I am sorry that it gives me no ground for that belief. I am quite satisfied that the Government have done noble and sterling work in stopping the rot and in its work of contraction. I had hoped that this would be a Budget of expansion and recovery. I am very sorry that have been disappointed.

9.26 p.m.

Mr. PIKE

The hon. Member, who has just sat down, reminds me of a mother scolding her child who has been unquestionably naughty and she rather hesitates to strike the blow on the ground that at some future time the child might be naughtier still and deserving of more severe punishment. From the speeches previously made to-day on the Budget, I have come to the conclusion that those who are opposing the Chancellor of the Exchequer in the statement he has pat before the House are doing so more for the purpose of finding some ground on which to base an argument against him than of persuading him he could have improved on the Budget he has presented to the House. The hon. and gallant Member for Bethnal Green, North-East (Major Nathan) described the Budget s a parish pump Budget. That might have been true if he had added that it was at least a parish pump Budget with a handle to it for the first time for a long period. A pump is very little use without a handle, and in this case those of us, who have been pressing for a reduction of the Beer Duty, are glad to think that it is a handle which will produce not only water but beer of a better quality and at a cheaper price. On the one hand, we were told by the Noble Lady for the Sutton Division (Viscountess Astor) that it was a brewer's Budget and that the Government's hand had been forced by the overwhelming power of the brewers. On the other hand, the hon. and gallant Member for Bethnal Green, North-East said that, no matter how much wealth he possessed, no one could persuade him to sink a penny in breweries as he was convinced they were all losing money and would lose more in the immediate future.

The whole opposition to the Chancellor's statement is nothing more or less than an endeavour to find something, no matter how small or how foolish, on which to base an argument against the National Government either in the House or in the country in the Recess. Personally, I believe the Budget will be received throughout the country—certainly in industrial areas such as that which I represent—with a very large measure of enthusiasm, especially among the hardest hit industrial workers. Members of the Socialist party will agree with me that one of the matters on which Members of this House have been bombarded by their constituents more than anything else during the past year has been the unanimous appeal of all industrial centres for an early and substantial reduction in the Beer Duty. The fact that the Chancellor of the Exchequer has found means to grant that relief will be received in the country with acclamation and will ultimtely justify him in any difficulty with which he has been confronted in making the concession. The Chancellor said that the thing that had struck him most was the continued diminishing returns in the revenue from beer. He said that when he looked before him and saw nothing but a continuation of those diminishing returns immediate action was demanded.

I would like to point out that diminishing returns, as far as taxation is concerned, is not the only diminishing return dangerous to the Minister responsible for the nation's annual Budget. We have taxation to-day on certain items, which, while not showing a diminishing return so far as the revenue from taxation is concerned, are showing a very effective diminishing return in so far as the people from whom the taxation is collected are concerned. Let us take the Entertainments Duty. We have definite proof, as anyone can obtain from the cinemas in his own constituency, that, while the number of persons who are attending cinemas is slowly but surely diminishing, the amount of money they are called upon to pay in taxation is slowly but surely increasing. In one cinema in my own constituency, where the cinema is the only means of social enjoyment which through the cheaper seats the workers can to-day afford, for 10 weeks prior to the Entertainments Duty imposed by Lord (Snowden the net receipts were £747 11s. 3d. upon which a tax of £11 16s. 8d. was paid. For the 10 weeks ending 5th November, 1932, the total receipts were £554 4s. 1½d., on which the net tax paid was £108 12s. 2d. I am convinced that, had the Chancellor looked around, he could have afforded to have made a concession which would have given great relief and have enabled a larger number of people to enjoy that moderate amount of pleasure through the cheaper seats of the cinema by relieving that unfair burden of taxation. The cheaper seat is unquestionably unfairly taxed compared with the dearer seat, and, as far as the poor industrial area is concerned, it is an unfair tax compared with cinemas in the richer and more prosperous areas in any of our cities.

I would also have liked to have heard from the Chancellor that he had decided to remove from the Income Tax law the anomaly which affects a man who has secured a divorce from his wife and has been given the custody of the children but who, through having to maintain a home and educate those children, is compelled to keep a housekeeper. I should have hoped that, out of the small surplus which the Chancellor had, he could have granted relief to those persons in respect of a housekeeper. After all, a single man, if he is looking after an infant brother or sister or relative of any description, is given relief in respect of a housekeeper. It is an unfair anomaly that a father should be refused relief in respect of a housekeeper while the bachelor should be allowed it. While I know there is no great possibility of securing relief now, I hope that the Chancellor will bear the matter in mind next year when he realises the successful position which his speech led us to believe he would secure. I would also like to ask that the position of the English resident in India or tropical countries, who is compelled for reasons of health to maintain a home here for the education of his children, should be reconsidered. Such a man has a great claim for relief from direct taxation. I should have liked to have heard an announcement from the Chancellor of the Exchequer to the effect that the Government had decided definitely to repeal the Land Value Tax, as that would have been a vast improvement on the present position. We ought to know what the Government propose to do in regard to the land taxes in future. No one will doubt that the mere existence of that Act on the Statute Book is holding back investment and is preventing a great deal of money from being put into new buildings and new industry which would otherwise find an avenue in that direction. Anything that does that is preventing productive enterprise from taking place and holding back productive employment, which the country so much needs. I ask that that matter should be considered.

The Chancellor of the Exchequer might have found one source of revenue had he looked sufficiently deeply into the position that I brought to his notice six weeks ago. Just prior to the Ottawa Agreement being signed, the baker and confectioner in this country in his requirement of frozen eggs and egg pulp was practically dependent upon Chinese importation,.and the average price that the confectioner was paying for the commodity was between £9 and £10 per ton. An English firm established itself at Melbourne, Australia, in order to supply eggs not only of a better quality than the Chinese importation but of a guaranteed better quality and, if possible, at a price that would more than favourably compete with the price at which the Chinese egg was offered. The firm was established under the watchful eye of the Australian Government and under its continued supervision. Within a few months the English firm had successfully established itself on the British market and was supplying eggs to the British confectioner 100 per cent. better in quality and at the same price that was being charged by the Chinese combine.

The moment the British firm established itself on this market the Chinese combine automatically dropped the price of their eggs by £10 per ton in one sweep. The result was that many contracts given to the British producer were swept on one side, and since that first reduction, which took place seven weeks ago, there has been a further reduction of another £1 per ton, making £11 per ton reduction below the price at which the British competitor could afford to produce it.

Mr. LOGAN

The hon. Member stated in the first place that the price was £9, and then he says that the price was reduced by £10. Will he explain the position?

Mr. PIKE

I am sorry. I should have said hundredweights, when I said £9 or £10 was the cost.

Mr. MACQUISTEN

That does not explain it. You said that the price was £9 to £10 a, ton. Now you say that £9 to £10 per cwt. is the price, and that the price has been reduced by £11.

Mr. PIKE

I think the explanation is understandable to the hon. Member opposite.

Mr. LOGAN

What I was not able to understand was the statement of the hon. Member that an English firm was established, that the original price was £9 to £10 per ton and that to get rid of competition the Chinese combine reduced the price by £10. I cannot understand how they could reduce it by £10 from £9.

Mr. PIKE

As I explained in reply to the first interjection, I misstated the position in regard to the difference between pounds weight and tons, but it does not alter the point I wish to raise. I should have said pound weight, and nine pence and ten pence as the price to the consumer. I will explain it in full detail to my hon. Friend afterwards if he cares. The whole position is this, that by virtue of competition the Chinese producer is placing in the hands of the British confectioner and baker something which is worth between £1,000,000 to £1,250,000, a concession which he previously did not possess, and which he cannot pass on to the consumer by virtue of a reduction in the price of the ultimate commodity produced from the egg pulp. This source of supply is untaxed and it gives no possible encouragement or power to the British competitor to take his stand against it in the markets of the world. I would ask the Chancellor of the Exchequer, when he is reviewing the position, if he will look into the subject.

So far as the general position of the Budget is concerned, although I am not an expert in financial matters, I am convinced that in all trading quarters and certainly in financial centres it will be regarded, whilst not of a very spectacular nature, as a Budget that is sound in its principles and one that will retain for Great Britain that position of financial solidarity which, despite all criticism, this country has established during the past two years and still retains in the eyes of the world.

9.42 p.m.

Mr. McCORQUODALE

Before making a few observations on the Budget I should like to call attention to two remarks which were made from the front Opposition Bench about an hour ago by the hon. Member for Westhoughton (Mr. Rhys Davies), who is not in his place. He said that the public well-being of the people of a country was the test of the efficiency of the Government of that country. He went on to define what he meant by the public well-being of the people in a country as being the standard of wages, the hours of labour, and the amount of employment available. He criticised the Government under these three heads. If ever a man in a glass house began throwing stones of an enormous magnitude surely the hon. Member began throwing them about, because by every test by which he wished to judge the present Government his own Government failed ten thousand-fold.

I should like also to ask if any hon. Member from the front Opposition Bench who is going to speak to-morrow will clear up another point which is of great importance. Last night the Leader of the Opposition in discussing the proposed taxation of co-operative societies made these remarks, as reported in the OFFICIAL REPORT: I hope that the right hon. Gentleman will continue his discussions and that when he brings a proposal forward it may be an agreed proposal."—[OFFICIAL REPORT, 25th April, 1933; col. 71, Vol. 277.] That was the opinion, evidently, of the Leader of the Opposition, but the hon. Member for Westhoughton said that he hoped that the co-operative party would refuse to budge an inch, or to discuss anything with the Chancellor of the Exchequer, and that they would refuse to interview him. I want to know whether the Leader of the Opposition or the hon. Member for Westhoughton, who sits so close to the Leader of the Opposition on the front Opposition Bench, is speaking for his party, or whether they are speaking for themselves, because they are expressing diametrically opposite views. I hope that point will be cleared up.

Let me add my humble congratulations to the Chancellor of the Exchequer on the matter and manner of his Budget statement. He presented his financial statement in a style suitable to a financial committee of a great company or financial house. He did not indulge in garish melodrama which some of our morning and evening Press seemed to desire. A cold statement of the financial position of this country is what is needed in a Budget statement, and I congratulate him on sticking to facts and not letting his fancy run riot. As to the matter, may I define his Budget statement as sound, sensible and sane? He resisted the optimistic, the almost lunatic, suggestions which have come from certain quarters in regard to an unbalanced Budget, but as this point has been dealt with so admirably in his maiden speech by the hon. Member for Rossendale I need not carry it any further.

In regard to the position of the Exchange Equalisation Account the hon. Member for Huddersfield (Mr. Mabane) claimed, by a series of arguments which I could not quite follow, that we have lost £27,000,000 on this account. We had a definite statement from the Chancellor of the Exchequer yesterday that no such loss, indeed no loss at all, had been made. The Chancellor of the Exchequer said that the fears of those who felt that a loss would be made had proved to be unjustified. This afternoon the right hon. Member for Darwen (Sir H. Samuel) pressed the point as to whether there had been any loss. He said that he understood from the statement of the Chancellor that there has been no loss; and the Chancellor indicated his assent. The Chancellor of the Exchequer who has the facts must be more accurate than the hon. Member for Huddersfield, who was merely speculative.

I was one of those who at first expressed some misgivings at the efficacy of the Exchange Equalisation Account, and as to whether a good deal of money might not be lost through mal-handling. I appreciate and recognise that the account has been of enormous, almost incalculable, benefit to the traders of this country by stabilising the exchange. The right hon. Member for Darwen pressed the Chancellor of the Exchequer to give further reasons why he needed an addition to the fund, and why he was bringing in proposals to add to its resources. I ask the Chancellor not to give the right hon. Member for Darwen, or this House, any further reasons than he gave in his speech. He has given a perfectly natural reason, and if because of America going off gold, and the possibility of repercus- sions, he may wish to have further resources in order to deal with an unforeseen occasion it would be most unfortunate if he was limited by any statement he might now make. I hope he will resist making any further statement on that matter.

As to the proposed taxation of co-operative societies, I was happy yesterday to hear what the Chancellor said upon that subject. I was a little anxious about the conclusions to which the Raeburn Committee had come, and I can imagine no more admirable solution of this vexed problem than an agreed solution between the Chancellor and the co-operative societies. I trust that the co-operative societies will not be led in this matter by the extreme Socialist wing but by those co-operative members, especially those in the north of England, who have grown up in the co-operative movement and Who are co-operators first and may belong to any party afterwards. I hope they will discuss their problems with the Government and arrive at an agreement, and will not listen to those hon. Members on the Socialist Front Bench who are merely trying to stir up party feeling in this matter.

Sufficient emphasis has not been laid on the great advantage which will accrue to the small Income Tax payers by the Income Tax rebate the Chancellor of the Exchequer has given. Under Schedules B, C and E Income Tax is only going to be collected up to three-quarters of the full amount during the current year. The Income Tax payer, under these three heads, is going to escape a quarter of his Income Tax during the current year. That is going to be an enormous boon to the smaller Income Tax payers of this country; and on their behalf I thank the Chancellor of the Exchequer for the concession. He could not have spent £12,000,000 in a better way.

With regard to the motor duties, I am delighted that the great juggernauts, which now go up and down our roads, are going to bear a little more of the cost of the upkeep of roads which they so rapidly destroy. I am not quite sure whether the scales are correct, and why a steam wagon should get off with a lighter payment than a coal gas wagon. But as to the increase in these motor duties all fair minded people will rejoice that these great heavy wagons are to pay more towards the upkeep of the roads. I join with the hon. Member for Barnstable (Sir B. Peto) in urging the Government to consider a tax on cider, especially cider made from foreign apples. A tax of that sort, upon a luxury article, would go towards making up for the reduction in the Beer Duty. I do not think the Government have been done justice in regard to the Beer Duty. The Chancellor of the Exchequer made it quite clear that he was reducing the tax mainly to fortify and protect the revenue; that if he did not reduce the tax the trade would rapidly go under altogether and there would be no tax to collect. By reducing the tax now he is hoping to increase and fortify the revenue obtainable from that duty in the future. Since he is also giving us stronger beer I notice that the brewers, who are supposed to be closely allied to the Conservative party for reasons which I can never understand, are not too pleased with the Government; but I hope that as the Government are going to give the people stronger and better beer, at a 1d. per pint less, that it will encourage the working men of this country through their period of long and arduous unemployment and consequent privation.

I would like to touch on one other point which has scarcely been mentioned throughout the Debate. A year ago and again last summer there was a tremendous cry for economy. Economy seems to have disappeared from this Debate on the very day on which I should have thought that the advocates of economy would have been up in arms. The Chancellor has shown what economies he has managed to make in the past, and we would say to him, "Well done; go forward with your good work. Do not stop. There are still economies to be made." In view of the falling off in the yield of Income Tax and Surtax the right hon. Gentleman will have to look for further economies this year if he hopes to balance his Budget next year. There are many small items which have not yet been brought under his survey. I have no doubt that there is an explanation, for example, why the Office of Works employs 200 or 300 architects and architects' assistants, but I do not know the reason. I hope that someone has inquired into a little point of that kind. There are still economies to be made, and I trust that the Chancellor will not rest on his laurels, but will go forward and prove that the Government of the country is carried on not only efficiently, but in a manner that is suited to these hard times. I do not want to prevent the hon. Member for Argyllshire (Mr. Macquisten) from getting a chance of addressing the Committee in his inimitable way, and I would only say finally that I congratulate the Chancellor of the Exchequer upon the excellence of his Budget.

9.57 p.m.

Mr. LOGAN

I did not intend to speak, but there have been so many eulogies passed on the Budget statement that I am left wondering what we have been talking about the whole of the day. If this House of Commons had been doing its work in a business-like way it would have gone home at about 6 o'clock and would have said, "We have finished our business." I have heard balance-sheets read and listened to Budget statements before, but I have never found so much water in the beer in any Budget statement before. I do not want to say anything derogatory to the brewing industry, because in regard to that particular trade I am convinced that although £14,000,000 may be lost by the reduction of the beer duty the employment of many men in the industry who had been discharged will be one result of the reduction of the duty. As regards the quality of the beer, I am not going to say anything, and as regards the specific gravity any man passing a beerhouse might as well be satisfied with a whiff of the beer, because there is nothing in the beer itself to satisfy anyone.

Nor am I affected, as the representative of the Scotland Division, by the Death Duties. In my neighbourhoood if a person dies there is no question of anyone coming forward and saying how heavily the Death Duties fall on the relatives who take over an estate. Very often in our neighbourhood the question is how to remove the body and not how to deal with the estate that is left, because where there is a corpse what is left is generally a debt. When a person dies there is real grief amongst his neighbours, because they remember how much he owed them. But we have been told to-day of the terrible loss to the next of kin of those who have died, because they have to meet the Death Duties. The Chancellor of the Exchequer, who is not very optimistic ordinarily, has said that he has made a 10 per cent. reduction in his estimate of the yield of the duties from the estates of those who are to die in the coming year.

The brewers, like those in every other industry, have a right to live. I am not grumbling about the concession that has been made to them, but I do grumble because £600,000 is to be given as a concession to company promoters. In the name of common sense, what do company promotors do for the welfare of the nation? I had no money to invest, but I read with interest the other day that subscriptions to a new issue were to begin at 10 o'clock in the morning, and that at five minutes past 10 that issue was over-subscribed. If in five minutes company promotors can make money so easily I do not see why a benevolent Chancellor of the Exchequer, in a time of distress like the present, should come forward and grant them a 50 per cent. reduction. Eighteen months ago the present Prime Minister, who used to sit on the Labour benches with one who has since gone to the Upper Chamber, reminded us of the sacrifices that had to be made to save the nation. It was dramatically stated in this House that 1s. 9d. had to come off the payment of 17s. a week to the unemployed man. We were told that a national sacrifice had to be made, and that no one could make it better than the unemployed man. We were reminded by a most humanitarian Prime Minister that nothing was to be taken from the children, and that their allowances were to remain at 2s. a week. To-day we are told that no concessions can be made to these people, that the nation is still in a state of emergency and that nothing can yet be done for the destitute and unemployed.

I often wonder why I am here, and I am sure that the people who sent me here must also wonder why I am here. [HON. MEMBERS: "Hear, hear!"] They do not wonder why hon. Members opposite are here; they know that. They wonder why I am in this House, when I go back and try to explain to them the concessions that have been made in regard to Income Tax—that in future they have not to pay nine months' tax in January and three months' tax in July, but that they can pay half and half in January and July. I might as well be speaking to them in a foreign language. I believe that one of the Egyptologists found a tablet the other day, and that he has not yet succeeded in deciphering it. Ancient Greek would be just as explainable to my people as any reference to the two six monthly payments of Income Tax. Death Duties are an equally unexplainable problem. In the industrial areas they know nothing about the subject.

They are not able to eulogise the Budget statement, as the last speaker eulogised it. But what they are able to do is to say that in the Great War they sent their sons to fight for the country. They can point to the records of the sailors of the Mercantile Marine who went out five and six times. They are now able to tell you that coolie labour, black labour is taking the place of British seamen and that on ships under the British flag men are sailing who are aliens to our nation, while Britishers are unemployed. When I go back to those who fought in the Great War, what explanation can I make of a Budget such as this, and of what avail are any bursts of eloquence in regard to this Budget, when one considers the poverty of their homes and the fact that they are destitute even of proper food supplies.

We speak of this as a Christian country. It is un-Christian. The present system is chaotic. The present condition of society would not be tolerated in any properly organised Christian State, but apparently the more highly civilised we become, the more gifts we get from the earth and the workshop and the factory, the more destitute we are of the knowledge of how to distribute the goods which have been provided for us. If a man had to face his Maker to-day and complained of the poverty and the malnutrition and the suffering which is rife in this world the answer would be, "Why have you not made use of what has been gig en to you?" No doctrinaire of any school of thought or any form of religion can deny that the whole system is immoral. When the hon. Member who spoke recently deals with the Equalisation Fund and with other problemmatical things, he had better read a little further on in the Chancellor's speech and he will find that the Chancellor did not say definitely that there was no loss on the Exchange Equalisation Account, but in subtle language, in the language of a Minister, he made it quite clear that there was a loss.

Mr. McCORQUODALE

I think that when the right hon. Gentleman the Member for Darwen (Sir H. Samuel) was speaking, he asked the Chancellor of the Exchequer whether it was the case that there was no loss, and the Chancellor nodded his head.

Mr. LOGAN

I remember that once the Prime Minister nodded his head but it did not mean anything. That was when I asked him whether the Government were prepared to give any assistance to the distressed areas. We got a nod of the head but no assistance. I asked the hon. Member to read further in the OFFICIAL REPORT of the Chancellor's speech yesterday and to tell me if there is anything definite in what the right hon. Gentleman said. He said in a subtle mariner that there was not any appreciable loss or something to that effect but he did not say definitely that there was no loss. When the Prime Minister was on his voyage to America and when the financial crisis arose in regard to America recently, can anybody contend that the Equalisation Fund had not a strain put upon it? There is not a Member of this Committee who can get a direct answer from the Chancellor of the Exchequer as to what has been the loss or gain on the Equalisation Account.

Mr. McCORQUODALE

The hon. Member is making an extraordinary argument and perhaps he will allow me to read exactly what the Chancellor of the Exchequer said: One of the principal features of the last Budget was the establishment of the Exchange Equalisation Account, a new departure which was very generally approved, although I think a certain amount of alarm was expressed lest very heavy losses should he incurred on the working of the account. I am happy to say that those fears have proved to be unjustified. I cannot see how the Chancellor could be any more explicit than that.

Mr. LOGAN

But the Chancellor also said: I think I am entitled to claim that the Exchange Equalisation Account has stood the test of experience, and that in spite of some rather severe financial storms…the Exchange rate has remained comparatively steady."—[0PviciAr, REPORT, 25th April, 1933; col. 44, Vol. 277.]

Mr. McCORQUODALE

He does not mention losses or profits.

Mr. LOGAN

I should like to know exactly what the Chancellor of the Exchequer means by that statement. I remember not very long ago the Chancellor of the Exchequer speaking of the depression in trade said that in his estimation it would be for 10 years. Three weeks later, he had to come back to the House of Commons and explain what he meant. I am told that the first 10 years under a National Government will be the hardest. The unemployed have been the hardest hit. They have to live and I put it to the Chancellor that the necessitous poor have the first call on any surplus. I put it as a matter of Christian principle. For those who already have, there can be no question of serious sacrifice. Those who are in actual want have a moral right and a justifiable claim to the benefit of any balance that there is, and it is not going outside the ambit of proper discussion to say that the most unfortunate classes in this nation have the right, at any rate, to proper food supplies. This Budget makes no provision in regard to the "cuts" imposed on the unemployed. As to other services to which pensions are attached I am not going to deal with them. Those who have regular rates of pay and other advantages are well able, when it is a question of sacrifice, to bear some share of the sacrifice for the common good but when I find the casual worker and the unemployed having to suffer, then, I think, it is time to call on the Chancellor and the Government to pay some attention to them.

The welfare of the nation does not depend upon 12,000 Super-tax payers, or on the wealthy classes. I am fully convinced that the danger for society rests in a discontented and unfed population, and when I see the seething mass of unemployed men, who were honest artisans and most anxious to do a day's work, who were never anxious to stand at the Employment Exchange and who to-day regret having had to do so, I want to know what provision the National Government, that superseded a Labour minority Government and made such definite promises, are making with regard to industrial areas such as my hon. Friends on these benches and I represent. The cry of the poor is continually going up, and discontent is rampant in our great cities. Men are denouncing the system of government as organised to-day, and men of all schools of thought declaim that the whole system has broken down. Either you must listen to that cry in the House of Commons, or people must run mad outside. I prefer by constitutional means to see a sober body of men inside the House of Commons realise that the question must end in a settlement of our industrial problem, and that no longer can we cater for the rich but that we must make provision for the poor.

I am not concerned with those who have wealth; I am concerned with those who are not able to help themselves, who appeal for assistance and are unable to get it. When I see men and women dying of starvation before me as I walk along the main streets of my great city, I come to this House and want to know what provision you have made for them with your Budget after being in power for 18 months. I remember well how you denounced a minority Government that had no power, and how you told us that unless we balanced the Budget we should he degraded and that our prestige among the nations of the world would go down. You told us that if our pound was not able to look the Almighty Dollar in the face, our prestige would be gone and our nation ruined. You told us that, as in Germany, paper money would be the order of the day and that as far as finance was concerned we were a ruined nation. What have you done with your tariff policy? I go along the streets of Liverpool and down to the dockside, and what I see there makes me say that your policy is madness. You have depleted our docks, you have ruined our shipping, and you have left our docksides and quays as mere playtime places for the children.

There is not a Parliamentarian who represents Liverpool in this House, who knows his business, who dare get up here and say that the policy of the last 18 months has been of any benefit to the city of Liverpool. We have there a dockside and a navigable river with two tides in 25 hours, one of the finest waterways in the world, but our shipping has been practically destroyed, and our sailors are walking the streets and are not able to get food or shelter—men who fought for us in the War. We come to a House of Commons to-day that wants in a few short hours to have an eulogy in regard to a magnificent Budget. I never heard a more dismal story. I never heard of or read such a balance-sheet of a nation worked by a powerful Government, the most powerful Government of modern times and supposed to have the brains of the nation, yet not able to manage a chip potato shop. As to understanding finance, I am afraid the financiers are not to be found in the British House of Commons. Rates of exchange, Death Duties, interest, and all those things seem to be the only things that count, but I want it to be known that, as a. Member of the Labour party, my interests do not lie in that direction. I am not anxious to make any man poorer, but the school of thought to which I belong holds that no man has the right to possess wealth which is too great for him to lose, but that we have the right to see that every brother is protected.

It may be said that that is a policy only fitted for a Sunday, but to me the seven days of the week are all alike. Every day is a Sabbath day to me. This nation can never be powerful, great or glowing until it is able to make provision for every person. Every man, woman and child in this land who is a Britisher has a right to food, clothing and shelter. If he is not able to earn it and not able to work, he has a right to live and to the things that God gives to ordinary mankind. Because of that I do not see anything about which to burst any blood vessels in eulogising the oration given yesterday. It was more like a funeral oration, and there were no cheers over it. The House went dead about it. The Budget might as well be buried with solemnity so that we can get on to something more like business. Let us have a declaration from the Government—this greatest Government of modern times—that they intend to do something to provide work for our people, to provide better houses, to give work to the unemployed, and to get rid of the degrading system of men and women standing outside Employment Exchanges; and let them use the money of the nation to get men into work instead of coming into this House and patting each other on the back, and then putting more water in the beer and thinking 4d. a pint is a wonderful achievement.

10.22 p.m.

Mr. MACQUISTEN

I have not been speaking much here lately; in fact, I feel almost like a maiden speaker. I have listened to the last speaker with a good deal of interest. I do not think that he has anything really critical to say about the Budget. In fact, I have never heard a Budget subjected to less criticism. I would like to say to the hon. Member and to those who hold his compassionate views—which we all share, but about which we do not make so much noise—who has the greatest interest in a balanced Budget? Who has the greatest interest in the national finances being sound? Surely the poorest of the poor. They are the people who would suffer most if the national resources were dissipated and if we went over the precipice, as we so nearly went when right hon. Gentlemen opposite had such a feeble control of the affairs of government. It was not because they were a minority Government; they fell because they were an incompetent Government. I have never seen much intelligence displayed on either side of the House when speeches are made about unemployment. Each side gets up and says the Government ought to do this, that and the other, and when they are in Opposition they say: why do not the Government put it right? It is an extraordinary thing because there are simple illustrations all around us.

When Kemal Pasha smashed the Greeks in Asia Minor and rendered 2,000,000 of them homeless, the Greek nation, with the assistance of the League of Nations, repatriated them to the soil of Greece. The Greek nation numbered 6,000,000, and it was as if 12,000,000 were suddenly to come into Great Britain. There they grub-staked them for a period of about six months, at the end of which time they were self-supporting. They had no dole. Why cannot we do something like that with so much land lying derelict in the British Empire? The ordinary man does not want to go to the Employment Bureau. He wants work, and if he only had a chance of doing something on the land he would be glad of it. In that way lies a solution. In America there is a great return to the land, for they realise that a civilisation built on industrialism is a ramshackle and unhappy civilisation.

The hon. Member for Huddersfield (Mr. Mabane) made some remarks about the parity of the £ and the dollar and about gold. What is really wrong with the world is that for a considerable time gold has commanded too poor a price. The Mint has paid only £3 17s. 10½d. an ounce for what was really worth £7 in terms of commodities. That had its natural effect on the production of gold. Lately gold has been selling for about £6 an ounce. What the country needs, and what the world needs, is more gold, because the wealth and the trade of the world depend on an expanding gold supply. The supply has not kept pace with the demands of the world, because the price has been too low. It has been said that every sovereign taken out of the ground has cost five sovereigns to produce. I say to the Chancellor of the Exchequer that if he and the Americans will keep up the price of gold at its present figure, so that it will fetch £6 per ounce at ale Mint, in a very few years time we shall have the larger supplies of gold which the world needs.

Without the foundation of a sound metal currency all civilisation is impossible. We cannot depend upon paper notes. No country could ever sufficiently trust another country. There would always be the possibility of some Hatrified Chancellor of the Exchequer or some Portuguese in some other country managing to substitute false notes for real ones. Therefore, let us get the gold, and if we keep the price at £6 an ounce all the poor mines which have found it impossible to sustain operations of late years will come into working again. I have come from a country where two years ago there were only 150 small producers of gold. Now there are nearly 700, and supplies of gold are coming from mines which were formerly unpayable propositions. That is the way in which civilisation will restore itself—by getting a proper supply of the precious metal which is so necessary for the organisation and development of trade.

It is said that there has been no criticism of this Budget. I have a very severe criticism to advance. The hon. Member for Westhoughton (Mr. R. Davies) said the Tory party represent the brewers. At any rate, they do not represent the distillers or the whisky people. He made the extraordinary statement that the brewers were getting £14,000,000 from the Government. They are not. It is the customers of the brewers, the constituents of the hon. Member, who are getting that money. Why should these frothblowers get this reduction of taxation while the poor distillers and the growers of barley in Scotland are getting no help at all? There are 30 or 40 distilleries in the County of Argyll which have contributed millions to the British revenue. Their workers are now unemployed. If the Scottish farmer produces barley he is taxed at the rate of £350 to one acre of barley. That is a shocking state of affairs. The Chancellor of the Exchequer actually is aware of the state of the whisky trade for he budgets for a decrease. He seems to think he is in America where there is prohibition. If there were a substantial cut in the whisky duty, I can promise him that we in Scotland would make up any loss by increased consumption.

Mr. KIRKWOOD

You are only speaking for yourself on that point.

Mr. MACQUISTEN

I am speaking for Clydebank, where there are a good many of the largest public houses in the world. The hon. Member for Dumbarton Burghs (Mr. Kirkwood) is a great favourite there, even among those who vote against him. On the question of the taxation of co-operative societies we have been subjected to a perfect bombardment of propaganda. Every hon. Member has had tons and tons of post cards. I would say, for the benefit of the younger Members of the House, who are not so old in these things as some of us, that whenever there is an enormous, organised campaign of that kind they may be sure that it represents a minority, that it is a fictitious affair, an engineered thing. I do not mean to cast any discredit on the profession of the hon. Member for Dumbarton Burghs when I say it is engineered. It is a worked up thing, and it is not genuine. I happen to know hundreds and hundreds of working men who are members of co-operative societies. They are good Conservatives every one of them, and they are very indignant at the machinations of the so-called political representatives of the Co-operative party. Every one of them is willing that the cooperative societies should pay their share of taxation. Who are opposed to it? Only an official gang at the head. I can give you an interesting sidelight into that. After the passing of the Shop Hours Act, that infamous Measure which killed the small shopkeeper for the benefit of the co-operators and the multiple stores, a friend of mine offered the Cooperative Wholesale Society 4,000 automatic machines to help to defeat that wretched Act. He offered them at £18 a machine. Immediately after that, a gentleman waited upon my friend who said he was a commissioner collector for the heads of the Co-operative Wholesale Society. He had my friend's tender with him, and he suggested that my friend should take the tender back, put in an offer of £25 per machine and give the collector a commission note for the difference.

Mr. LOGAN

Was that in Scotland?

Mr. MACQUISTEN

No, I can give the hon. Member the address of the place. It was not very far from the city of Liverpool. There was to be £28,000 which these fellows were going to divide up among them. This collector was to get per cent. on the amount collected. My friend said: "If I give £7 out of the £25 as commission it will look as though I were a party to this arrangement. If you have the placing of the order, I have to give you a reasonable commission. I will reduce my offer to £22." That was £16,000 to be divided up among them. I can give the Chancellor of the Exchequer the name of the gentleman from whom I got this information. The information was not given out of malice at all nor was it done to try to put a hair on the neck of the co-operative societies. He told me about it on a ship casually when I was going to South Africa and we were discussing the co-operatives. He told me that they were a corrupt lot. If you want to get particulars, go to Balloon Street, Manchester, where the whole thing was carried through.

Mr. LANSBURY

Does the hon. and learned Gentleman think it is possible for British people to take a bribe?

Mr. MACQUISTEN

Oh, yes, they are very corrupt. It is not only the Russians who give bribes. I myself have professional experience of it. When the first Prevention of Corruption Act was passed a client called upon me and said that the demand was made upon him for a commission by a co-operative official buyer of large quantities of goods. My client said that he was afraid of breaking the new Act. I replied: "Oh, you may break the Act, but I will tell you how to break it and not be found out. Draw your money in gold to account of profits, and pay it over in some public-house. You are breaking the law, but you will never be found out." These instances are going on through the movement. That is why the Co-operative Movement do not want taxation. The moment they have to carry it into their books, too many of them will be found out.

Mr. LEONARD

The hon. and learned Gentleman must be aware that even in the Co-operative Movement there are a considerable number of people who believe in private enterprise, and perhaps in that type of private enterprise to which he has referred.

Mr. MACQUISTEN

I do not see the relevance of the hon. Gentleman's interruption. I am pointing out why these gentlemen have marched in a solid army to intimidate the Members of the House of Commons. They are like the silversmiths of Ephesus. [Interruption.] The "graft," and not the craft, is in danger. I say to all members of the co-operative societies, I mean the ordinary members, that they will be far better served if the Inland Revenue takes note of these transactions. They will gain a great deal more than they can possibly lose. The ordinary members of co-operative societies are thoroughly sound, honest citizens who greatly demur to the antics of the men who manage the societies. I will give the Committee an instance. I gave an opinion in 1918 that the Barrhead Cooperative Society had no right to subscribe to the funds of the Labour party, and I took an injunction against them and succeeded. Then they called their members together to alter the rules, and make it, as they thought, legal, but I told them at once that I should take another injunction against them if they did, and the mass of the members were so delighted at the victory of the real co-operatives against the politicals that they turned out en masse to show their approval and voted down the proposed alteration. There is very little of the Labour party in the Co-operative Movement in Scotland, but here it is the other way about. Apart from corruption, every co-operator seems to think it is his duty to make something for his society.

Mr. LOGAN

Is it not a fact that the hon. and learned Gentleman has been made an honorary member for life of a co-operative society?

Mr. MACQUISTEN

Not to my knowledge; I have never even got a knighthood let alone that. Every member of a co-operative society seems to think he is all right if he gets a public office of any kind to do something for his society. I would like to ask the present First Lord of the Admiralty how long the First Lord of the Admiralty in the Labour Government was before he turned over the contracts for margarine and butter to the Co-operative Wholesale Society? I do not know that I might not have done the same thing if I had been in the same position. These provident societies, started to help the working man, have grown into great trading organisations which are putting scores of other decent people out of business, and are not giving the working man any better goods than he was getting before. It is only fair, if they get the protection of these great organisations, that they should contribute substantially to the revenue, and the Chancellor of the Exchequer may take it from me, as one who knows the working man as well as any Labour Member that ever sat in the House of Commons, that the mass of the members of the co-operative societies are, like the working man himself, splendid citizens, that they are willing to carry their share of the burden of the State, and that these officials who have stirred up all this row, and sent all these postcards, and made up this petition, do not represent their own members. I hope that the Chancellor of the Exchequer will pursue his course without failing or flinching, because I have expressed what is really the motive at the foot of this false and flagitious opposition.

10.39 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha)

It is evident that every Member of the House is delighted to welcome the return of my hon. and learned Friend the Member for Argyllshire (Mr. Macquisten). He has returned from his travels to enliven the end of a somewhat dead Debate. I do not suppose that within living memory there has ever been, in times of peace, a Budget which has evoked so little hostility as this one, and to the proposals of which so few alternatives have been forthcoming. I except, of course, the alternative proposals of my hon. and gallant Friend the Member for North-East Bethnal Green (Major Nathan), which might be summarised as suggestions for reducing every single tax, and increasing every single item of expenditure, while adhering, of course, to the principle of a balanced Budget. Apart from his constructive contribution, I find myself in the embarrassing position of having very little to answer.

I shall endeavour to reply immediately to the three specific questions that were put to me by my right hon. Friend the Member for Darwen (Sir H. Samuel). His first question related to the Exchange Equalisation Account. He wanted to know, quite properly, whether there was a profit or a loss upon that account in the course of a year. The answer is that there has been a profit. He wanted to know why my right hon. Friend desired to increase the sum at our disposal. The answer to that is that we have now had a year's experience of the account, and from that experience we have a better knowledge of the amount that we require to effect the purpose for which the account was instituted. In any event, the Chancellor will be laying a specific proposal before the House, when he will give my hon. Friends a full explanation upon any further doubts that they may have in their minds. My right hon. Friend next asked me about the scheme for the relief of the distressed areas. He was perplexed that no provision had been made in the Budget under that head. If he will refer back to the announcement made by the Minister of Health on 12th April, be will find that the scheme proposed for 1933–34 is one under which the more fortunately situated local authorities will be asked to agree, as a purely emergency measure, to make a contribution from their share of the block grant to help the hard hit areas In these circumstances, my right hon. Friend is hardly in a position to announce what specific sum is at stake until the result of the negotiations take shape. The third question related to the beet-sugar subsidy, which does not expire until 1st October, 1934. He pressed to know whether the Government will carry out an inquiry into the working of the present subsidy before deciding what to do in future. My right hon. Friend may be assured that no con- clusion will he reached until an investigation has been made on behalf of the Government into these matters.

Sir H. SAMUEL

Will that be a public inquiry by a special committee?

Mr. HORE-BELISHA

It will not necessarily be a public inquiry, but it will be an investigation directed to ascertaining the full facts to the full satisfaction of my right hon. Friend. Those are the specific questions that have been put.

The main theme of the discussion has been upon the principle of a balanced or an unbalanced Budget. I propose to give the Committee an account of the task with which my right hon. Friend was confronted and the manner in which he has met it. Compared with what my right hon. Friend had to do the problem before Lord Snowden was straightforward. Great Britain, which had been the principal creditor power hitherto, had been refused accommodation abroad except upon the condition that she balanced her Budget. Nor was the condition unreasonable, however unfortunate the circumstances may have been. The principle of a balanced Budget had been enjoined upon us by experience and had been recommended to us by a committee of experts appointed by the last Government to scrutinise the national accounts, and it had itself been made a condition of any advances that we made to foreign Powers. Therefore Lord Snowden knew that he would not be challenged when he said to the House, as he did, that an unbalanced Budget is regarded as one of the symptoms of national financial instability. He was followed in Debate by the late Mr. William Graham, who, speaking on behalf of the Opposition, avowed that: We have always recognised that an unbalanced Budget in this country will not only expose us to very great difficulty in our international trade but will, in fact, defeat the object of the industrial change for which this movement stands."—[OFFICIAT, REPORT, 10th September, 1931; col. 314, Vol. 256.] What Lord Snowden had to do in the prevailing mood and determination of the time was to discover how, within the principle of a balanced Budget, he could reduce expenditure on the one hand and increase taxation on the other. There might have been controversy about particular items which he chose, and in fact he decided to make economies of £70,000,000 and extra taxation of £81,500,000. But the principle of the balanced Budget was not contested. My right hon. Friend recognised last year the fortitude with which these sacrifices had been borne; nevertheless, he was supported in obtaining a prospective increase of the revenue from Customs Duties to meet a deficiency, and no one then disputed the principle of the balanced Budget. Now while he has been preparing his Budget this year he has not only had the usual diversity of counsel about the particular items which should appear in this Budget, but the principle of the balanced Budget has itself been called into question. I ask the Committee to notice that last year no one denied it from any quarter of the House. Indeed, my right hon. Friend the Member for Hillhead (Sir R. Horne) enjoined it upon him, and my right hon. and gallant Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood), who has pleaded for an unbalanced Budget this evening, told him last year that once you unbalance your Budget you will never balance it again. The principle of the balanced Budget being accepted, what was my right hon. Friend's problem? It was pointed out to him last year that two duties in particular were calculated to produce a diminishing yield with very deleterious effects upon industry. That was the attitude last year. The Beer Duty and the Income Tax were both too high and were calculated to injure industry. That point of view was not only expressed from the National benches; it was expressed with the greatest force from the benches opposite. My hon. and learned Friend the Member for East Bristol (Sir S. Cripps), speaking on behalf of his party, said: I say that as far as I am concerned, and as far as this party is concerned, we are anxious to see that penny taken off beer."—[OFFICIAL. REPORT, 21st April, 1932; col. 1749, Vol. 264.] One hon. Member on the same side of the House took the trouble to make an investigation, and he said: I have been all over my constituency and in different parts of the country and good citizens who believe in the welfare of the country think that the tax is in the wrong place."—[OFFICIAL REPORT, 8th June, 1932; col. 2028, Vol. 266.] My hon. Friend the Member for Spennymoor (Mr. Batey) brought to the beer drinkers the impartial support of a teetotaller and told the House that he "would vote for reducing the price of beer by a penny a pint in order to help those men who were receiving such low wages." That was the attitude of the party opposite, and those were the suggestions they made to my right hon. Friend last year. They did not confine themselves to the Beer Duty. The most practicable suggestion with regard to the Income Tax came from them also. The hon. Member for Caerphilly (Mr. Morgan Jones), with a foresight I commend, moved a new Clause to the Finance Bill suggesting that, in the future, the Income Tax be paid in two half-yearly instalments. In a powerful peroration he said that the case he had made was sufficiently overwhelming to invite the cordial assent of the House. The prognostications then forthcoming from the party opposite with regard to these two taxes have unfortunately not proved incorrect. The revenue we derived from beer was £75,700,000 in 1930 with the lower rate of tax and it has fallen to £73,700,000 under the higher rate of tax. I would remind the Noble Lady for the Sutton Division of Plymouth (Viscountess Astor) that we are not concerned here with the welfare of the brewers, but with the welfare of the Exchequer. No one who has the interests of the revenue at heart can regard those figures with anything but alarm. Similarly with regard to the Income Tax, the yield has fallen from £287,000,000 to £251,000,000, and, as a result from those two sources, and from others the Chancellor of the Exchequer finds there is a deficiency of £22,000,000. Nevertheless—and here I correct my hon. Friend the Member for Limehouse (Mr. Attlee) —he has balanced his Budget.

Mr. ATTLEE

This one or the last one?

Mr. HORE-BELISHA

The last one. He has balanced them both. My hon. Friend raised some confusion by the use of a multiplicity of figures. The Chancellor of the Exchequer has paid the instalment on our American Debt. When the instalment was paid it was expressed to be upon capital account and it was stated that it would be taken into review in relation to any final settlement. If, however, you add the American Debt you have an apparent deficit of £32,279,000. If you subtract the American Debt, as you are entitled to do, you have an apparent deficit of £3,323,000. But we have paid off debt of £14,595,000 net. It is a great triumph and a great achievement, and has the additional merit of being a fact. If you deduct the apparent deficit of £3,323,000 from the sum paid off the debt of £14,595,000, you have a true surplus of £11,272,000. There is no question whatever about these figures.

Nevertheless my right hon. Friend had on the existing basis of taxation for the last year a prospective short-fall in the revenue for this year of £32,000,000. If his task had been the same as Viscount Snowden's he would have risen in his place yesterday and told the Committee that that prospective short-fall must be remedied by an increase of taxation on the one hand and by additional cuts on the other. That would have been his position and that was the position in which any Chancellor of the Exchequer was thought to be in the circumstances of last year. That was the reason why certain hon. Friends of mine in this House constituted themselves into an Economy Committee with the intention of proposing to the Chancellor of the Exchequer drastic further cuts in expenditure, because they felt that the only way of reducing the taxes, to which so much exception was taken on the other side of the House, was to reduce expenditure.

What was the position? Several hon. Members asked me to indicate the facts. The Supply Services for 1933, that is, for the current year, total £463,000,000. They show a saving compared with the forecast for 1932 of £63,000,000. Taking the Estimates as a whole, the estimate for ordinary expenditure for 1933 is £697,000,000, a figure which compares with the forecast for 1932 of £810,000,000, representing a reduction of £113,000,000 achieved by this country in two years. If you examine the accounts with a microscope you cannot, unless you cut down most essential services, find a sum greater than £38,500,000 which might still be subject to reduction, but that small sum also relates to essential services of tax collection and miscellaneous outgoings. Therefore while we are most indebted to that committee and while we have adopted many of their administrative recommendations it is impossible to achieve further large economies unless you take the knife of Lord Snowden once again out of its shield—[HON. MEMBERS: "Sheath!"] "Sheath" if you like.

Another section of hon. Members, realising the difficulty of obtaining economies, except by resorting to the same method once again, proposed a short cut. They said to my right hon. Friend: "Deliberately unbalance your Budget and reduce the Income Tax by ls. in the £.I submit to the Committee that my right hon. Friend has found another and a better way of fulfilling the most optimistic anticipations of the Economy Committee, on the one hand, and of the hon. Gentlemen who believe in the short cut, on the other, that is by restoring the credit of the country through balancing the Budget. These are the direct advantages which have accrued to the State from balancing the Budget. On the interest and management of the National Debt we have saved £52,000,000. My right hon. Friend was able to suspend provision from current revenue for the statutory Sinking Funds, which now fall to a small amount, to the extent of £32,500,000. Ten millions was provided by the 5 per cent. War Redemption Fund which is no longer needed because of the Conversion, and an increased estimate for Stamp Duties of £1,800,000. The total of these sums is £96,300,000 saved to the taxpayer in the current year directly from balancing the Budget. There are no other means by which so large an economy could have been reached. Having reached it, and having subtracted from it the appropriate items, my right hon. Friend found a prospective surplus at his disposal. How did he use it? He used it as my hon. Friends opposite would have desired, and as the whole Committee desired. He used it first to remit what is equivalent to ls. 3d. on the Income Tax—

It being Eleven of the Clock, the CHAIRMAN left the Chair to make his Report to the House.

Committee report Progress; to Sit again To-morrow.